The Internal Revenue Service is warning churches and nonprofits that improper campaigning in the upcoming political season could endanger their tax-exempt status.
The agency also launched a program to expedite investigations into claims of improper campaigning, prompting an advocacy group to charge this month that the program could restrict the free speech of nonprofit groups and churches.
Such investigations came to light last year when the IRS warned All Saints Church in Pasadena that it was reviewing the Episcopal church's tax-exempt status because a priest criticized the Iraq war shortly before the 2004 presidential election. Church leaders say they have no intention of scaling back their criticism of the war.
The IRS' new enforcement program -- the Political Activity Compliance Initiative -- was first announced in February and again in June through news releases and notices to more than 15,000 tax-exempt organizations, numerous church denominations and tax preparers.
Under the program, the IRS will no longer wait for an annual tax return to be filed or the tax year to end before investigating allegations of wrongful campaigning. A three-member committee will make an initial review of complaints and then vote on whether to pursue the investigation in detail.
"While the vast majority of charities and churches do not engage in politicking, an increasing number did take part in prohibited activities in the 2004 election cycle," IRS Commissioner Mark W. Everson said in a statement. "The rule against political campaign intervention by charities and churches is long established. We are stepping up our efforts to enforce it."
The IRS has investigated more than 200 organizations nationwide since 2004. Of the 62 cases with violations, three lost their nonprofit status (none were churches) and 59 received warning letters. Some of those that were warned also were ordered to pay an excise tax.
Federal law prohibits the IRS from releasing the names of those under investigation, but the agency said it has more than 100 cases pending -- 40 of them churches.
An advocacy group's report criticizing the IRS enforcement program predicts a chilling effect on free speech and accuses the agency of using vague standards and lacking deadlines to complete inquiries.
"I don't think this is a case of bad faith," said Kay Guinane, author of the report. "I just think it's a poorly structured program."
