Annise Parker has been a decent mayor of Houston. She has a reputation for being generally fiscally responsible and, save some beautification and biking programs, she has mostly just managed the city. This is Houston. We like detached overseers.
Last week, that all changed. The City of Houston subpoenaed all sermons and communications from some of Houston’s pastors. Brian Lee covered the background for the mayor’s office subpoena for sermons here, so I will proceed with an update and outlining the method to the mayor’s supposed madness.
Friday afternoon, due to public outcry, and after telling Houston she had not read the subpoena and would have instructed the lawyers not to be so zealous in their search for information, the city issued a revised subpoena, which narrows the information sought. From the City of Houston’s filing on Friday:
Request No. 12 originally read: All speeches, presentations, or sermons related to HERO, the Petition, Mayor Annise Parker, homosexuals, or gender identity prepared by, delivered by, revised by, or approved by you or in your possession.
Defendants hereby revise Request No. 12 as follows: All speeches or presentations related to HERO or the Petition prepared by, delivered by, revised by, or approved by you or in your possession.
But even with this revision, much of the American public is incredulous because they believe that First Amendment protections for freedom of religion and speech mean the City of Houston, or any government authority, has no power over sermons or religious speech. But the public is wrong. The authority is there, it has just rarely been used.
What’s Really Going On Behind the Houston Sermon Subpoenas
One has to be a lawyer or involved with tax compliance for charities or religious institutions to know. I’m friends with our church’s world ministries coordinator. When I posted an article last week looking for more information (the move shocked everyone in Houston—it was aggressive and seemed out of character for Parker, but more on that in a moment), my friend replied in moments and knew exactly what was at issue.
[T]he mayor or city’s legal representatives might pursue subpoenas against churches/pastors is because most churches are exempt from local, state and federal taxes as US 501c3 organizations. To qualify for tax exemption, organizations must meet the following criteria: ‘To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.’
The language she quoted comes from the Internal Revenue Service (IRS) guidelines to 501(c)(3) entities for keeping their tax status. The City of Houston is looking for evidence that the pastors spoke out against a recent anti-discrimination city ordinance, that is, they “attempt[ed] to influence legislation.” The pastors and other groups had organized a petition against the ordinance in large part because they foresee what I will call “the Erica problem.” (See video below.) The petition garnered more than enough signatures to have the ordinance placed on the ballot this November, but the City of Houston threw the petition out, alleging irregularities. The petition groups sued. It is in that suit that the City of Houston issued the subpoenas.
The City of Houston plans to try to invalidate the petitions by showing that the pastors tried to influence city legislation and then, I suspect, will turn the communications obtained in a court proceeding over to the IRS hoping it will revoke participating churches’ tax-exempt status, which would also expose the churches to property taxes in Harris County. (IRS speech restrictions apply at both the federal and local level because Texas Tax Code requires federal exemption status for local exemption status.)
This is the Left’s goal against religion: open them to tax attacks. Contrary to popular belief, those IRS guidelines that prohibit political speech have root in the law.
A Brief Overview of 501(c)(3) History
When the federal tax code was written, that the government couldn’t tax churches was assumed. For one, at the beginning of the union, only the federal government was prohibited from establishing a religion. The state governments could and did establish churches. They didn’t tax churches, but collected taxes for the church. This stopped after the Civil War and the ratification and subsequent case law of the Fourteenth Amendment incorporated the federal proscription against an established religion to the individual states.
For another, McCullogh v. Maryland, one of a series of foundational Supreme Court opinions Chief Justice Marshall wrote, held that the Constitution does not provide federal institutions with structural defenses against possibly ruinous state tax regimes and, therefore, the federal government had no basis for confidence that the state governments would not destructively tax churches. In that opinion, the Chief Justice explained that the “power to tax is the power to destroy.” His expression simply gave Americans a shorthand phrase for that bit of our cultural DNA that has Americans so wary of taxation.
I posit, based on such history and the scant legislative history of 501(c)(3), that religious organizations were included as common-sense prevention to challenge of the tax code—“obviously religion is exempt, you anti-New Dealers, so don’t bother with a Constitutional challenge to taxation on First Amendment violations”—and to bolster secular charities claim to the exemption. But in the intervening decades we’ve forgotten that religious institutions’ exemption from taxes is not a matter of legislative grace. We’ve come to think of it as exempt only if it complies, as secular charities must do. Among religious institutions, churches, in particular, have unwittingly encouraged this view by “rendering unto Caesar,” which was basically the reasoning of Lee’s piece. Essentially, churches have complied with the exemption requirements of the tax code rather than asserting the right to be free from taxation.
Some might wonder why these issues are only coming to a head now, in 2014, when 501(c)(3) has been on the books since the New Deal. There are many, progressively dire reasons for that.
To start, the political speech prohibition did not exist until 1954. To punish and prevent political opponents from speaking out against him, then-Sen. Lyndon Johnson, who was in a contentious re-election campaign, pushed through an amendment to the tax code which prohibits “political activity” by 501(c)(3) entities. It is called the Johnson Amendment. Since the prohibition passed, it has only been lightly—and selectively—enforced. Various test cases have appeared in the courts trying to figure out just what political activity is prohibited, without much success. From a note in the Cornell Law Review discussing the three consistent objections to 501(c)(3) (footnotes omitted):
Perhaps the most troubling constitutional concern relating to § 501 (c) (3) revolves around the IRS’s ‘haphazard’ pattern of enforcement. By ignoring a number of high profile cases of political involvement by exempt organizations, the IRS has placed itself in a position in which any crackdown on the political activity of exempt organizations appears to result from political motivations or expediency. For instance, Humberto Cardinal Medeiros, the Archbishop of Boston, publicly encouraged Catholics not to vote for pro-abortion candidates the day before the Democratic primary without drawing any response from the IRS. Similarly, during the 1988 presidential campaign, a number of prominent black ministers endorsed Jesse Jackson and took part in a well-publicized tour of 500 churches, raising as much as $300,000 in campaign contributions from offering plate collections. Even President Clinton has been a party to these questionable campaign activities, preaching a Sunday morning sermon in a Los Angeles church in which he ‘weave [d] scriptural references into his standard campaign speech.’ Despite the extensive political involvement by churches and other exempt organizations during this period, however, the IRS chose only to reprimand Jimmy Swaggert Ministries for its endorsement of Pat Robertson.
This inconsistent pattern of enforcement culminated in Branch Ministries, Inc. v. Richardson. Four days before the 1992 presidential election, Branch Ministries placed full-page advertisements in the Washington Times and USA Today that described Bill Clinton’s views on abortion, homosexuality, and condom distribution in public schools and urged Christians not to vote for him. The IRS subsequently revoked Branch Ministries’s tax-exempt status, prompting Branch Ministries to bring suit. Relying on United States v. Armstrong, the court found that Branch Ministries had presented a colorable claim of selective prosecution and opened IRS records for discovery. In particular, the court cited the involvement of the Catholic Church in the abortion issue and the black churches’ activities during the 1988 election as examples of the IRS’s failure to revoke the exempt status of other politically active churches. The court felt that the IRS’s past enforcement efforts indicated a disparity in treatment of those similarly situated and that the rare and ‘draconian’ measure of revocation provided some evidence of discriminatory intent.
That was the state of play back in 1999, but since Branch Ministries, the IRS has been reluctant to push the political speech prohibitions for 501(c)(3) entities, so much so that organizations trying to challenge the Johnson Amendment have had a hard time finding a test case even while a collection of churches actively flout the political speech prohibitions on a publicized schedule. Most churches, however, tend to err on the side of caution lest the IRS decide to prosecute, either on a whim or as part of a larger political intimidation program much like the one they have run in the past few years against conservative secular organizations.
But never fear (she wrote ironically): the IRS has been working on clarifying its guidelines for 501(c)(3) enforcement so when it starts prosecuting exempt organizations again, it can go after religious organizations. (The IRS has a temporary moratorium on exemption enforcement now due to the service’s extensive problems.) From a July press release from the Freedom from Religion Foundation (FFRF):
The Freedom From Religion Foundation and the Internal Revenue Service reached an agreement today (July 17) that resolves for the time being an ongoing federal lawsuit over non-enforcement of restrictions on political activity by tax-exempt religious organizations and churches. …FFRF filed suit against the IRS shortly after the presidential election in 2012, based on the agency’s reported enforcement moratorium, as evidenced by open and notorious politicking by churches. …The IRS has now resolved the signature authority issue necessary to initiate church examinations. The IRS also has adopted procedures for reviewing, evaluating and determining whether to initiate church investigations. While the IRS retains ‘prosecutorial’ discretion with regard to any individual case, the IRS no longer has a blanket policy or practice of non-enforcement of political activity restrictions as to churches.
The IRS has not complied with Freedom of Information Act requests to disclose those new guidelines. If the press release from FFRF is true, the IRS has new guidelines for enforcement, but just isn’t telling the public what they are.
Back to Houston’s Sermons Subpoena
The Houston subpoena is a test of the new active strategy against religious organizations: revoke their exemption and control or destroy them through taxation. The IRS has the guidelines ready for as soon as they start enforcing again. Parker is simply providing a test case. (For brevity, I’ve not discussed the “excessive entanglement” problem. Based on another line of cases, governmental authorities can’t just go and record sermons and gather up pamphlets to determine 501(c)(3) compliance. That would be “excessive entanglement” of government in religion. They need an excuse to gather the information, and the City of Houston is providing one.)
It makes complete sense that Parker would make such a politically aggressive move. She is term limited. This is her lame-duck year in office. This national-news-attracting subpoena is base outreach, and I must compliment her because it is a much savvier move than any Wendy Davis has made. Davis is done. She had flash-in-the-pan popularity among a vocal minority on a widely unpopular issue, which she has long since squandered in issue ignorance and gross insensitivity. Parker is looking to replace Davis as the “It” Woman of the Progressive Left. She has the story, the polish, a better political resume, and intelligence. She just needed name recognition and Progressive cred outside of Houston. Facing off against churches will work for her.
So What Should Houston’s Churches Do?
Gird their loins. Whether they refuse to comply with the subpoena or comply and the City of Houston finds any incidence of prohibited political speech, the battle is coming.
But the outlook is not grim. The Supreme Court’s reasoning in Citizens United struck down precedent and rationale for regulation of political speech. That should take care of the Johnson Amendment, which implicates two First Amendment freedoms—speech and religion. More fundamentally, the IRS’s recent history has reminded us of the wisdom of Chief Justice Marshall’s opinion in McCullogh v. Maryland. The power to tax does involve the power to destroy, and the IRS has given We the People little confidence that it would not use its power destructively. While religious institutions are subject to the taxing power of the government, they are vulnerable.
We need to remember that religion is not exempt from taxation because Congress granted it an exception. Religion is one of the fundamental freedoms enshrined in the first item of the Bill of Rights. It is not subject to taxation. As Chief Justice Marshall wrote of Maryland’s argument that it had a right to tax a U.S. bank: “The right never existed, and the question whether it has been surrendered cannot arise.”