Lieberman Challenges IRS's Investigation into Church's Political Activities

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On February 20, 2007, the Internal Revenue Service (the "Service") sent the United Church of Christ (the "UCC") national office a letter, stating that, based on Sen. Barack Obama's June 23, 2007, speech at the UCC's 50th General Synod in Hartford, Connecticut, the Service has formed a "reasonable belief" that the UCC violated the Internal Revenue Code's ban on partisan electioneering by churches. I write to express my concerns about that letter and to ask the Service to (1) explain the specific process by which it establishes the statutorily required "reasonable belief" of improper activity and (2) clarify its public guidance on the permissibility of candidate appearances at churches.

Under Section 7611 of the Internal Revenue Code, the Service may initiate a church tax inquiry only if "an appropriate high-level Treasury official reasonably believes (on the basis of facts and circumstances recorded in writing)" that a church may not qualify for tax exemption or may be engaged in taxable activities. As I understand it, before sending the February 20 letter, the Service at no point contacted the UCC to seek any information concerning Sen. Obama's speech. But as has been widely reported in the Connecticut media, the UCC took significant precautions to ensure that Senator Obama's appearance at the Synod satisfied all legal requirements. For instance, UCC leaders told Synod attendees, on several occasions and in advance of Senator Obama's speech, that the UCC had invited him before he launched a presidential campaign, and also that Senator Obama was invited to speak on a topic of interest, rather than his candidacy. UCC leaders also directed attendees to refrain from bringing signs and campaign paraphernalia into the Synod facility. Based on those precautions, I would expect that had the Service contacted the UCC before sending its letter, the Service's concerns would have been addressed. This absence of communication with the UCC is what spurs my request that you explain, in detail, the Service's procedure for satisfying its statutory obligation of forming a "reasonable belief" that a church has engaged in improper political activity.

Moreover, I find the Service's inquiry especially troubling because of the Service's inadequate guidance in this area. Publication FS-2006-17, which the Service issued in February, 2006, and posts on its website, states that candidates may be invited to speak at churches in their individual capacity, and that depending on the circumstances, such invitations can be granted "without jeopardizing its tax-exempt status." A subsection of that publication elaborates that:

Candidates may . . . appear or speak at organization events in a non-candidate capacity. For instance, a political candidate may be a public figure who is invited to speak because he or she: (a) currently holds, or formerly held, public office; (b) is considered an expert in a non political field; or (c) is celebrity or has led a distinguished military, legal, or public service career. A candidate may choose to attend an event that is open to the public, such as a lecture, concert or worship service. The candidate's presence at an organization-sponsored event does not, by itself, cause the organization to be engaged in political campaign intervention.

This guidance implies that an individual who is well-known to be a candidate can become a "non-candidate" for the purpose of a church appearance. But the guidance does not explain how such a candidate can be transformed into a non-candidate for purposes of the appearance. Therefore, I ask you explain to me, and to the public, how this transformation occurs. In the context of the UCC Synod, it appears that inviting a well-known member of a denomination to speak satisfies standards (a) and (c). A logical inference to the issuance of your letter, therefore, is that if a speaker, invited in a non-candidate capacity, slips into "candidate" mode, then the Service will still hold the sponsoring church liable -- even if the church took significant precautions to prevent political discourse. I request that you confirm whether this inference accurately characterizes the Service's position.

Throughout my career in the Senate, I have supported the strong and fair enforcement of our nation's tax laws, including laws applicable to religious institutions. But I am concerned about the chilling effect on legitimate activity by religious organizations that results from initiating a church tax inquiry without first satisfying the reasonableness standard, and I am further concerned by the lack of clear guidance in this area.

I look forward to your prompt and thorough reply.