The Internal Revenue Service has told a prominent Pasadena church that it has ended its lengthy investigation into a 2004 antiwar sermon, church leaders said Sunday.
But the agency wrote in its letter to All Saints Episcopal Church that officials still considered the sermon to have been illegal, prompting the church to seek clarification, a corrected record and an apology from the IRS, the church's rector told standing-room-only crowds of parishioners at Sunday's services.
The church also has asked the Treasury Department, which oversees the IRS, to investigate allegations that officials from the Justice Department had become involved in the matter, raising concerns that the investigation was politically motivated.
"To be sure, we are pleased that the IRS exam is over," the Rev. J. Edwin Bacon Jr. said in his 9 a.m. sermon, which was interrupted several times by applause. "However, the main issue of protecting the freedom of this church and other religious communities to worship according to the dictates of their conscience and core values is far from accomplished."
For The Record
Los Angeles Times Wednesday, September 26, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 41 words Type of Material: Correction
All Saints: A caption with Monday's Section A photograph and article about All Saints Episcopal Church in Pasadena said the Rev. J. Edwin Bacon Jr. was embracing a parishioner. That man was the church's former rector, the Rev. George F. Regas.
Bacon predicted that the vague, mixed message from the IRS after its nearly two-year investigation of the All Saints case would have a continued "chilling effect" on the freedom of clerics from all faiths to preach about moral values and significant social issues such as war and poverty.
Although the church no longer faces the imminent loss of its tax-exempt status, All Saints has "no more guidance about the IRS rules now than when we started this process," the rector said. He said the church would continue its struggle with the IRS, which he said so far had cost the 3,500-member congregation about $200,000.
One of Southern California's largest and most liberal congregations, All Saints came under IRS scrutiny after a sermon two days before the 2004 presidential election by a guest speaker, the Rev. George F. Regas. In his sermon, Regas, the church's former rector, imagined Jesus participating in a political debate with then-presidential candidates George W. Bush and John F. Kerry.
Regas did not endorse either candidate, saying that "good people of profound faith" could support either one. But he strongly criticized the war in Iraq and said that Jesus would have told Bush that his preemptive war strategy in Iraq "has led to disaster."
A letter from the IRS arrived in June 2005 stating that the church's tax-exempt status was in jeopardy. Federal law prohibits tax-exempt organizations, including churches, from intervening in political campaigns and elections.
The letter said the agency's concerns were based on a Nov. 1, 2004, article in the Los Angeles Times, which included three paragraphs about Regas' sermon in a lengthy national roundup of rhetoric from the pulpit on the Sunday before the election.
In its latest letter to All Saints, dated Sept. 10, the IRS said the church continues to qualify for tax-exempt status, but said that Regas' sermon did amount to intervention in the 2004 presidential race. The letter offered no details or explanation for either conclusion.
An IRS spokesman said Sunday that in keeping with the law, the agency could not comment on specific investigations. However, a top IRS official later issued a statement in response to questions about the All Saints case.
"The IRS is committed to ensuring that tax-exempt organizations understand and comply with the law," said Steven T. Miller, commissioner of the agency's Tax Exempt and Government Entities Division. "We will continue to work with charities and churches during the 2008 political season about the federal law's guidelines on political activity. Our goal is to ensure that charities meet their responsibilities under the law and avoid becoming involved in campaign activity."
Along with its requests to the IRS, All Saints has asked a top Treasury Department official to investigate what the church called a series of procedural and substantive errors in the case, including allegedly inappropriate conversations between IRS and Justice Department officials about the investigation.
Those conversations, documented in e-mails obtained by the church through Freedom of Information Act requests, appear to show that Justice Department officials were involved in the All Saints case before the IRS made any formal referral of it for possible prosecution, an attorney for the church said. The discussions raise concerns that the IRS' investigation was politically motivated, church officials said. One e-mail, for example, appears to show coordination between IRS and Justice Department officials about a request to the church for documents. Others discuss the timing of the request and news coverage about the case.