Louis E. Michelson, A Professional Corporation

Senate Finance Committee member Charles Grassley staff has released a staff report on the results of his three-year inquiry into the financial practices of six media-based Christian ministries.  Senator Grassley is known for his focus on the financial practices of high-profile nonprofit organizations.  See the following link.

This staff report contains appendixes.  Appendix A sets forth the background for the creation of the Evangelical Council for Financial Accountability (ECFA).  Appendix B summarizes the Jim and Tammy Faye Bakker Case.

Appendix C contains a list of these issues specific to churches and religious organizations.  These include:  advisory committee for churches and religious organizations, parsonage allowances, IRS filing requirements, church tax inquiries and section 4958 excise taxes.

Appendix D contains a list of issues raised by the staff review of churches and religious organizations but are actually applicable to all 501(c)(3) charitable organizations, and in the case of excess benefit transactions, to organizations exempt under sections 501(c)(3) and 501(c)(4) of the tax code.  The issues include:  governance and self-dealing and excess benefit transactions

Appendix E is captioned: “Eliminate or Circumscribe Electioneering Prohibition.”   The following is the staff description of this appendix:

“The electioneering prohibition imposed on charities puts the IRS in a very difficult position as it juxtaposes tax-exemption requirements with freedom of speech limitations. With respect to churches and religious organizations, many may view such free speech limitations as a violation of constitutional principles. IRS enforcement of this prohibition can never be effective as IRS agents rarely witness violations of the prohibition. As a result, the IRS has to rely on third party referrals. Auditing violations of this prohibition essentially boil down to the IRS refereeing who said what, when. While political activity was not a central issue raised in the review of the media based ministries, it is one of the greatest sources of tension between the IRS and religious organizations. As a result, we thought it appropriate to consider this issue and seek input on how to amend these rules while seeking input on the other tax issues. Appendix E contains a description of the current law.

For the tax issues presented, a discussion of the present law and a description of the issue also are included. The questions we raise are not exclusive or comprehensive, as we expect those responding to the issues to raise further questions.”