Read the text of OMB Watch's letter to the House Ways and Means Committee, asking them to take out a provision that would allow religious organizations to violate the ban on partisan electioneering for 501(c)(3) organizations up to three times a year.

June 11, 2004

Dear Representative,

OMB Watch, a nonprofit organization that promotes civic participation and government accountability, urges you to strip Section 692 from the American Jobs Creation Act of 2004 (HR 4520). Section 692 would give religious organizations a huge margin of error when they unintentionally engage in illegal partisan election activity, but leave nonreligious organizations subject to the current sanction; loss of tax exempt status. Section 692 would also create a new soft money loophole, allowing donors to get tax deductions for giving to partisan activity by religious groups.

Section 692 is not needed to enable religious or other organizations to publicly speak out on the issues of the day. The law clearly allows groups exempt under Section 501(c)(3) of the tax code, including houses of worship, to lobby, comment on regulations, file lawsuits, march, rally, publish and otherwise engage in public policy debates.

We oppose Section 692 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. If there is a need for an intermediate sanction- something short of revocation of exempt status- for small scale, inadvertent violations of the ban on partisan activity by 501(c)(3)s, then all groups, not just churches, should be covered.

• 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 with tax deductible dollars

• 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 what is an "unintentional" violation and assumes people do not have an obligation to learn or change illegal behavior;
• Lacks an adequate enforcement mechanism.

The first part of Section 692 is an unnecessary restatement of existing law, since all individuals, not just religious leaders, can make public statements endorsing or opposing candidates in elections if they do not use organizational resources, such as a newsletter.

The second section reduces the penalty for violations of the ban partisan activity by religious 501(c)(3) organizations from revocation of exempt status to fines 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. This encourages ongoing violation of the law.

Section 692 appears to create a more lenient sanction for partisan electioneering, a prohibited activity, than excess lobbying, which is permitted. Under Section 501(h) a charity can choose to have its lobbying limit measured purely in terms of expenditures, based on a sliding scale formula that applies to their budget. If the charity exceeds this limit in any one year it pays a 25% excise tax on the amount overspent. However, if this happens four years in a row the charity could lose its exempt status. Intent is not a defense.

Because the tax code applies to activities at the local, state and federal level Section 692 would open up religious organizations to pressure to get involved in elections at all levels of government. This could make them regulated political committees under federal or state law, or both. Even if a house of worship did not lose their tax exempt status, the consequences of campaign finance regulation could be severe. For example, a church subject to Federal Election Commission rules could not get donations from corporations, including foundations, or accept individual contributions of more than $5,000.

Section 692 is not needed to enable religious or other organizations to participate in public debate on issues that concern them. It is discriminatory and poorly thought through. The nonprofits we work with tell us the ban on partisan electioneering protects their 501(c)(3) organizations from pressures from political parties and candidates that would be harmful to their organizations. In fact, the world of 501(c)(3) organizations is the only segment of society that can be safely described as nonpartisan in elections. Please keep it that way.

Yours truly,

Kay Guinane
Counsel and Manger, Community Education Center