Moroni Torgan, Yeah Samaké, and Political Neutrality

As a result of its political neutrality policy, the Church is not going to endorse Mitt Romney in his bid to become President (or, for that matter, Harry Reid in his bid to be reelected to the Senate). There are probably a number of reasons for the Church’s desire to avoid endorsing a candidate but, as I’ve said previously, one reason may well be the tax consequences of such an endorsement. (Short refresher: technically, if the Church were to endorse or oppose a candidate in an election, the IRS could revoke the its tax exemption, meaning the Church would owe taxes on all of its income other than donations, and that Church members who paid tithing or other offerings could no longer deduct those donations in calculating their taxes.)

But Kent’s recent series of (translated) posts regarding Brazil’s Moroni Torgan got me thinking: could the Church endorse a candidate in a non-U.S. election without risking its tax exemption in the United States?

The Church (or any other charity exempt under section 501(c)(3) of the Internal Revenue Code) could not recreate itself as an international political force, of course. If any substantial part of an organization’s activities don’t further an exempt purpose, it will not qualify as tax-exempt.[fn1] And politics does not count as an exempt purpose.

But for the Church, endorsing Torgan (or Samaké or any other non-U.S. candidate) wouldn’t (or, at minimum, needn’t) comprise any substantial part of its activities. So, again, could the Church endorse Torgan?

The answer isn’t completely clear.[fn2] The Internal Revenue Code prohibits a public charity from “participat[ing] in, or interven[ing] in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”[fn3] That doesn’t seem to differentiate between U.S.- and non-U.S. candidates.

But the Treasury regulations, which function largely as a legally-binding midrash on the tax law, muddy up the picture a little. The regulations define “candidate for public office” as “an individual who offers himself, or is proposed by others, as a contestant for an elective public office, whether such office be national, State, or local.”[fn4] The language of the regulation sounds like the campaigning prohibition is concerned solely with U.S. elections; if that’s right, for U.S. tax purposes, the Church could endorse candidates in foreign elections to its heart’s content (as long as its endorsement activities remained insubstantial).

There’s essentially no official legislative history underlying the campaigning prohibition, meaning it is next to impossible to evaluate the scope of the prohibition in relation to Congress’s intent in enacting the prohibition. It’s possible that Congress just didn’t want money that had been deducted by donors and not taxed by the recipients from flowing into U.S. electoral politics. It is also possible that Congress thought that endorsing candidates was improper conduct for public charities. If its purpose was the former, it would make sense that public charities could endorse foreign politicians. If the latter, the prohibition should be interpreted as being absolute.

And what does that leave us with? Ambiguity. Given the enormity of consequences, I’d personally err on the side of not endorsing foreign candidates, but there is at least a non-trivial argument that the Church could endorse Torgan without losing its U.S. tax exemption.[fn5]

[fn1] Treas. Reg. § 1.501(c)(3)-1(c)(2).

[fn2] I confess that I didn’t put a ton of time into researching it (though I did spend more time than a blog post probably warrants); if you have a more definitive answer, I’d love to have you provide it in the comments.

[fn3] I.R.C. § 501(c)(3).

[fn4] Treas. Reg. § 1.501(c)(3)-1(c)(3)(iii) (emphasis added).

[fn5] A lot of caveats to end: first, I’m not addressing what would constitute a Church endorsement. Specifically, I don’t know offhand if a bishop’s speaking about Torgan’s virtues in a temple recommend interview would be attributable to the Church or not (though, frankly, again I’d recommend against it).

Second, I’m only dealing with U.S. tax law here. There may well be consequences in other countries, including Brazil.

Third, to the best of my knowledge, the Church’s political neutrality policy applies worldwide. (If I’m wrong, please let me know, but I don’t see anything that suggests it’s U.S.-only.) That would suggest that something beyond merely U.S. tax rules constrain the Church in its political participation (or, to put otherwise, even if the campaigning prohibition were to go away, it looks like the Church would maintain its political neutrality).

6 comments for “Moroni Torgan, Yeah Samaké, and Political Neutrality

  1. How actively does the Catholic Church in Bavaria participate in the activities of the Christian Democratic Party there? My hunch, although I’ll defer to someone much more familiar with German politics (or with other European countries with similar parties), is that the links between organized religion and certain political parties is much closer there than anything that goes on in the U.S.

    Is it possible that the answer to your question lies in the IRS’s approach to Catholicism and its political activities elsewhere? The Catholic Church in the U.S. hasn’t lost its tax exemption due to activities in Europe. It’s of course also possible that the activities are carried out through a different corporate entity, similar to the U.S. Conference of Bishops, which insulates the church from the political activities and possible tax consequences.

  2. Oh, and Harry Reid’s term doesn’t end until 2016. So we’ll have to wait four years to see what kind of support he gets from the church. Or not.

  3. All I really know is that I’d like the Mormon candidate running for a state legislative seat around here to stop posting his campaign signs with little “BYU” bumper stickers on them opposite the exit driveways of every meetinghouse in his legislative district.

  4. Generally, US statutes are assumed to NOT have extraterritorial effect unless Congress makes that intent explicit in the statute itself. The notion that the IRS could regulate activities outside the US that do NOT affect its interest in collecting revenue is in my opinion sort of incredible. On the other hand, the current administration in Washington has demonstrated a tendency to see no limits to its exercise of power, statutory or constitutional.

  5. “the current administration in Washington has demonstrated a tendency to see no limits to its exercise of power, statutory or constitutional.”

    Hmm, Ray, I think this has been true to some extent of most administrations over the last 20 years or so. They don’t call it the “Imperial Presidency” for nothing.

  6. RTS, I can’t for the life of me see what this has to do with the current administration. These rules have been in effect since 1954, and are virtually unchanged since then. Moreover, this doesn’t implicate extra-territorial impact: it’s regulating US tax-exempt entities. They. Clearly can’t, e.g., run active businesses overseas and not pay th UBIT just because the income is derived from another country.

    (Note, too, that this isn’t the IRS regulating anything. People like to blame the IRS, and politicians are happy to let the IRS take the fall, as it were, but 501(c)(3), which contains the prohibition, was written and passed by Congress.

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