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May 15, 2013 3:46 PM Camel’s Nose Under the Tent

By Ed Kilgore

In news that didn’t get much attention in Washington (other than as one of the thirty-six articles on “scandals” that I counted on Politico’s front page earlier today), but which will soon roil conservative evangelical circles, Franklin Graham piggy-backed onto the IRS “scandal” involving 501(c)(4) organizations by complaining directly to the President that the Bill Graham Evangelistic Association and an adjunct group, Samaritan’s Purse, had also been “targeted” by the IRS. In question was a “review” recently conducted by the IRS of the two organizations’ activities during tax year 2010.

Graham’s organizations are not 501(c)(4)s; nor were they applying for tax-exempt status in the year in question. They are 501(c)(3) “charitable organizations,” which means not only do they not have to pay taxes or disclose donors, but contributions to them are tax-exempt, which is a huge difference representing a massive tax subsidy aimed at sheltering religious organizations and charities.

So the IRS has always been very interested in making sure that groups—church-related or not—benefitting from (c)(3) status don’t get involved in electoral politics, and the rules governing them are much stricter than for (c)(4)s. After Graham very conspicuously used his father’s legacy organizations to heavily support a anti-gay-marriage ballot initiative in North Carolina last year, it would have probably been a dereliction of duty for the IRS not to take a closer look, which is apparently all the agency did.

I think nearly all of us agree the IRS selective scrutiny of groups with words like “tea party” in their titles who were part of a massive expansion of (c)(4) applications in and after 2010 was inappropriate (though probably not as menacing as we’ve been led to believe). But investigation and remedial action on this issue should not get turned into some effort to give the huge universe of 501(c)(3)s, including religious organizations, a blank check for political activities. But that’s precisely what we can expect the Christian Right, of which Franklin Graham is a leading member, to do, exploiting a camel’s nose under the tent.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • c u n d gulag on May 15, 2013 4:01 PM:

    I'm going to say something that will surely get me in a boatload of trouble:
    Sorry, but NO religious group should be tax exempt.
    Not one!

    The 1st Amendment gives people the freedom to follow any religions(s) they want (though not really, since polygamy is no legal) - but there's nothing that says that they have to be tax-exempt.

    A lot of religions have political agenda's - or, at least individual churches do - which is why the Founding Fathers insisted that the state(s) be separated from church(es).

    Do churches do a lot of what is called "social welfare" work?
    Yes.
    But, where's the "social welfare" in The Westboro Baptist Church, and its opposition to gay rights? Usually, "social welfare" advocates inclusion, not hatred to the point of monomania.

    We need to end the tax exemption for churches. Especially now, when the Jesus-grifters in this country don't have to travel in wagons and preach in tents, but have their own TV and radio shows - if not their own stations.

  • MuddyLee on May 15, 2013 4:05 PM:

    Franklin Graham also invited Sarah Palin to come have lunch with his father and him. Is it a coincidence that Palin has been a big critic of President Obama? I think not. I think it's an effort to influence how people vote and how they try to influence members of Congress about issues. It has certainly influenced me and some other non-conservative Christians I know to pledge that they would never again contribute to any of Franklin Graham's ministries.

  • Denis Gordon on May 15, 2013 4:12 PM:

    Ed, I must disagree on one count. Based on what I have seen so far, I don't think it was at all "inappropriate" for the unit screening 501(c)(4) applications in the deluge that followed Citizens United, to look hard at applications whose titles or descriptions suggested political activity as a goal. That is precisely what that unit was charged with doing! In that context, how can it be argued that "Tea Party" in the title ought not merit a close look. The Tea party movement was, and is, primarily a political one, with a principal, if not the principal, goal of electing candidates who espouse the Tea Party view of things. Why are you, and a lot of other good people, so quick to concede that something bad happened here?

  • boatboy_srq on May 15, 2013 4:50 PM:

    a massive expansion of (c)(4) applications in and after 2010

    This to me is the key here.

    The Teahad may be more-than-usually scrutinized under this, but it's important to remember that when there's a behavioral change, that change ought to attention. We said nothing - and were rightly silent - when economists started questioning mortgage-backed securities, and demanded answers when those questions proved valid. We tried to ask lots of questions prior to 9/11 when we saw activity that could threaten us, and a lot of questions were raised since then about why prior to the event so few questions were asked and so little attention paid. Oversight and skepticism are valid tools of the public sector, and we've seen only recently what two terms of Shrubbery can accomplish when those tools aren't used appropriately.

    In this case, there was a marked increase in 501(c)(4) entities. That's a significant behavior change from the years before Citizens United, and as such was worth looking at. In this case, too, the IRS was probably the least bad agency to do the investigating. The volk complaining the loudest here, in contrast, are opposed to Big Gubmint in principle (and taxation and thus the IRS in particular), so any heightened scrutiny by any public body would have been more than unwelcome, and that the IRS was doing the investigating was especially, excruciatingly nasty (from their perspective).

    Shorter version: an anti-tax, anti-government entity files necessary paperwork with the government to keep from paying taxes, and the tax collector takes interest in them for that. This on its face should not be especially surprising. Likewise, the anti-tax, anti-government entity would be expected to respond with displeasure when the IRS comes calling, because it embodies all the things about government they claim to hate.

    Bear in mind that the Teahad is, at its base level, whatever tax evasion that can be made legal and therefore somehow honorable. That's a big red flag when it comes to taxation. And when the tax authority looks at that, it screams for heightened scrutiny, since it isn't especially clear whether the Teahad doesn't want to pay for things they don't think they get, or just that it doesn't want to pay for things period.

    And the fact that these are smaller fish in the Teahad madrasa may not be especially relevant, either. Bernie Madoff wasn't the biggest fish in the investment pond, but he did far more than his share of damage; and with that painful lesson learned, Internal Revenue would be encouraged to take a good hard look at outfits whose stated aim is to find any way possible to reduce their obligations.

    The volk who have joined the Teahad, it's worth remembering, said little if anything when the Quakers were infiltrated by the FBI as possible terrorist cells, or when ACLU, Greenpeace and other contributors were shortlisted for the modern equivalent of "unAmerican activities." They have no qualms about investigating people and organisations they don't like. And if, as I expect, the IRS behavior turns out to be a minor item, I see more harm in citizens willing to accept warrentless searches and wiretaps and declaration of their neighbors as "enemy combatants" to strip them of their rights than I do groups who oppose government on principle having that government look at them a little more closely.

  • N.Wells on May 15, 2013 10:13 PM:

    Like Denis, I fail to see why "nearly all of us agree the IRS selective scrutiny of groups with words like 'tea party' in their titles who were part of a massive expansion of (c)(4) applications in and after 2010 was inappropriate". The Tea Party began as bogus paid-for astroturf, and it seemed to me that it had more than its fair share of "sovereign citizen" and anti-tax protesters, so special scrutiny seems warranted.

  • PEA on May 15, 2013 11:01 PM:

    I'd like to see exactly how these big-spending 401c4's spent over half their income (tax-exempt) on social welfare. Let's see the evidence that they deserve that status even under the most generous policy version of 50+% ("primarily"). I am skeptical about how, for ex, Rove's Crossroads GPS did anything to promote "social welfare" (defined to exclude political goals), let alone spent many many MILLIONS on it... Where are all the folks they helped?

  • jpeckjr on May 16, 2013 12:01 AM:

    I have a cumulative total of over 30 years on the boards of various nonprofit tax-exempt corporations, including three times as a founding director. I've prepared applications for IRS tax-exempt status several times.

    Section 501 of the Internal Revenue Code covers tax-exempt organizations. Religious organizations are not tax-exempt under the 501(c) 4 social welfare section. They are exempt under the 501(c)3 religious, charitable, and educational institutions section. Another section covers chambers of commerce and business associations, another covers credit unions, another covers cemetery associations. While certainly not the longest section of the IRS code, it has to cover a fairly wide range of organizations.

    Nonprofit is a category of corporation under state laws. Corporations are incorporated at the state level. Nonprofit does not mean an organization has no money. It means it does not distribute excess money to individuals -- it has no investors. Tax-exempt is both a federal and a state designation. Usually, an organization that gets a federal exemption also gets a state exemption.

    In the past, the IRS has presumed an organization applying for tax-exempt status is qualified, granting a provisional determination for three years (I am recalling from one of those applicaitons.) If in those three years, there are no problems, complaints, or issues regarding the organization, a permanent tax-exempt designation is given. The IRS is required by law to investigate complaints to assure the organizations are continuing to meet the requirements of the law. The IRS generally does not investigate an organization without a complaint. One of those requirements is not to engage in political activity intended to influence the outcome of a partisan election.

    If an organization wants to be tax-exempt, it should abide by that requirement. Otherwise, it should pay taxes on its income and then it can influence to its heart's content.