What our Minneapolis readers probably believe is that when a legal precedent-setting case is decided, that it affects laws and law enforcement moving forward. There are dozens, perhaps hundreds of cases such as this — the most notable perhaps being Roe v. Wade, or the ruling which led to the Miranda warning.

However, it appears that a precedent-setting case that was ruled on in Minnesota in 2009 has lead not to the strengthening of enforcement, but instead to the non-enforcement of a portion of the U.S. tax code. The tax code has put religious institutions and the Internal Revenue Service at odds with each other after the ruling and the IRS is not doing much about it.

According to the U.S. tax code, a non-profit organization such as a church or synagogue can express views on any issue, same-sex marriage for example, but the non-profit tax-exempt status is forfeited if the non-profit speaks in favor of or against any political candidate.

In 2009 a precedent setting case was settled in Minnesota when the IRS took action against a pastor who endorsed a candidate for U.S. Congress. The IRS challenged the audit procedure of the church and lost. Since then the IRS has not taken action against the non-profit status of similar institutions.

Today, there exists a group of pastors and others who some claim are attempting to provoke the IRS by holding Pulpit Freedom Sundays. These Sunday sermons clearly advocate for or against political candidates and in an unusual move several churches videotape the sermons and send them to the IRS.

Since 2008, the IRS has not been pursuing any action on this front; although the agency’s latest annual report indicates that challenging the non-profit status is on their near-term agenda.

A Washington-based organization, Americans United for Separation of Church and State that monitors and informs the IRS about tax-code violations, is urging the IRS to pursue these violations. It appears that Pulpit Freedom Sundays is urging the same thing, for different reasons.

When any organization or individual has a question about the tax code or non-profit exemption status, it would be wise to consult with a seasoned legal and tax professional. Mistakes could be costly.

Source: Reuters, “Hundreds of pastors back political candidates, defy tax rules,” Nanette Byrnes, Oct. 7, 2012

  • At our Minneapolis law firm we represent clients with the full range of federal and state tax issues including tax disputes such as an audit or challenge to non-profit exemptions.