"I think obviously we were a bit shocked and dismayed," said Bob Long, senior warden for the church's oversight board. "We felt somewhat targeted."
Bacon said the church had retained the services of a Washington law firm with expertise in tax-exempt organizations.
And he told the congregation: "It's important for everyone to understand that the IRS concerns are not supported by the facts."
After the initial inquiry, the church provided the IRS with a copy of all literature given out before the election and copies of its policies, Bacon said.
But the IRS recently informed the church that it was not satisfied by those materials, and would proceed with a formal examination. Soon after that, church officials decided to inform the congregation about the dispute.
In an October letter to the IRS, Marcus Owens, the church's tax attorney and a former head of the IRS tax-exempt section, said, "It seems ludicrous to suggest that a pastor cannot preach about the value of promoting peace simply because the nation happens to be at war during an election season."
Owens said that an IRS audit team had recently offered the church a settlement during a face-to-face meeting.
"They said if there was a confession of wrongdoing, they would not proceed to the exam stage. They would be willing not to revoke tax-exempt status if the church admitted intervening in an election."
The church declined the offer.
Long said Bacon "is fond of saying it's a sin not to vote, but has never told anyone how to vote. We don't do that. We preach to people how to vote their values, the biblical principles."
Regas, who was rector of All Saints from 1967 to 1995, said in an interview that he was surprised by the IRS action "and then I became suspicious, suspicious that they were going after a progressive church person."
Regas helped the current church leadership collect information for the IRS on his sermon and the church's policies on involvement in political campaigns.
Some congregants were upset that a sermon citing Jesus Christ's championing of peace and the poor was the occasion for an IRS probe.
"I'm appalled," said 70-year-old Anne Thompson of Altadena, a professional singer who also makes vestments for the church.
"In a government that leans so heavily on religious values, that they would pull a stunt like this, it makes me heartsick."
