The House Ways and Means Committee will vote Monday June 14 on a bill that would give religious organizations a huge margin of error when they "unintentionally" engage in illegal partisan election activity. Section 692 of the bill, American Jobs Creation Act of 2004 (HR 4520), reduces penalties for "unintentional violations" of the IRS ban on partisan activity by religious groups. Religious groups with no more than three violations in one calendar year will be shielded from revocation of their tax-exempt status and instead be charged minor fines. OMB Watch opposes Section 692 of HR 4520 because it:

• Unfairly (and unconstitutionally) discriminates against non-religious groups exempt under Section 501(c)(3) of the tax code by limiting the safe harbor to religious groups.
• Makes religious groups vulnerable to pressure from politicians and office holders, especially if they operate programs that depend on government funding;
• Opens the door for churches to become soft money conduits;
• Opens the door to regulation of churches by the Federal Election Commission or state election authorities;
• Sends the wrong message to clergy by excusing ignorance of the law;
• Does not define "unintentional" violation; and
• Assumes people don't learn from their mistakes, and don't have an obligation to learn or change illegal behavior.

Because this bill is moving quickly (it may be scheduled for a floor vote in the House next week) we are asking you to take two quick action steps- click on the action alert in this message to take action. BACKGROUND INFORMATION ON SECTION 692 The request by House Speaker Dennis Hastert (R-IL), to Ways and Means Chairman Thomas to insert Sec. 692 into the jobs bill is timely with President Bush's new campaign tactic that involves churchgoers to contact "Friendly Congregations" where people can register to vote and pick up Bush campaign information as the election nears. The first part of the bill restates existing law by noting that religious leaders can make public statements endorsing or opposing candidates in elections if they do so as individuals, and do not use a congregation's resources, such as a newsletter. The second section reduces the penalty for violations of the ban partisan activity by 501(c)(3) organizations from revocation of exempt status to fines (excise taxes) if there are no more than three violations in any calendar year. There are no limits on how many years a religious organization can violate the rule. Intentional violations are not protected, but there is no definition of "intentional." The bill would require religious organizations to file Form 990 in order to report their unintentional violations. Currently religious organizations are exempt from this filing requirement. The first violation would result in a tax of 35% on 1/52 (one week) of the congregation's annual gross income. If there are two violations the tax would be 35% of half the annual gross income. Three violations would result in a tax of 35% on the entire gross income for the year. There is no process for determining when a violation has occurred. Use of the Form 990 filing requirement appears to make the provision self-policing, creating a contradiction between an "involuntary" violation and enough knowledge of tax rules to understand a violation has occured and should be reported. See http://thomas.loc.gov/cgi-bin/query/z?c108:H.R.4520:"> Section 692 of HR 4520 for the full text. Scroll down to Sec. 692. "Safe Harbor for Churches." The IRS has recently published guidance for churches in order to help distinguish what constitutes as illegal politicking. It states: "Under the Internal Revenue Code, all section 501(c)(3) organizations, including churches and religious organizations, are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violation of this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise tax." Internal Revenue Service, February 2004.