Order Code RL32973
CRS Report for Congress
Received through the CRS Web
Campaign Activity by Churches:
Legal Analysis of Houses of Worship
Free Speech Restoration Act
June 14, 2005
Erika Lunder and L. Paige Whitaker
Legislative Attorneys
American Law Division
Congressional Research Service ˜ The Library of Congress

Campaign Activity by Churches: Legal Analysis of
Houses of Worship Free Speech Restoration Act
Summary
In recent years, there has been increased attention paid to the participation by
churches and religious organizations in political campaigns. Under current law,
churches and other IRC § 501(c)(3) tax-exempt organizations are prohibited from
engaging in such activity and risk losing their tax-exempt status if they do. While
this outcome is rare, it is possible. For example, in Branch Ministries v. Rossotti,
211 F.3d 137 (D.C. Cir. 2000), the U.S. Court of Appeals for the D.C. Circuit upheld
the authority of the Internal Revenue Service to revoke the tax exemption of a church
that participated in political campaign activity.
Since the Branch Ministries decision, several measures have been introduced
in Congress that would allow churches to participate in political campaign activity
without jeopardizing their exemption. They are the Houses of Worship Free Speech
Restoration Act, H.R. 235 (109th Congress) and H.R. 235 (108th Congress); a
provision briefly included in the American Jobs Creation Act of 2004, H.R. 4520
(108th Congress); the Houses of Worship Political Speech Protection Act, H.R. 2357
and S. 2886 (107th Congress); and the Bright-Line Act of 2001, H.R. 2931 (107th
Congress).
This report provides an overview of the current tax and campaign finance law
relevant to this legislation, a discussion of how each bill would amend current law,
and a chart that compares the bills. The report will be updated as developments
occur.

Contents
Current Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Campaign Finance Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
How Legislation Would Change Current Law . . . . . . . . . . . . . . . . . . . . . . . . 4
H.R. 235 (109th Congress) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
H.R. 235 (108th Congress) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
H.R. 4520 (108th Congress) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
H.R. 2357 (107th Congress) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
H.R. 2931 (107th Congress) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
List of Tables
Table 1. Comparison Among the Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Campaign Activity by Churches: Legal
Analysis of Houses of Worship Free Speech
Restoration Act
Churches can lose their tax-exempt status under Internal Revenue Code (IRC)
§ 501(c)(3) if they participate in political campaign activity. This prohibition, which
applies to all IRC § 501(c)(3) organizations, has been in the law since 1954. It has
received increased attention in recent years, in part because of the decision in Branch
Ministries v. Rossotti
, 211 F.3d 137 (D.C. Cir. 2000), which upheld the authority of
the IRS to revoke the tax-exempt status of a church that intervened in a campaign.
Since the Branch Ministries decision, several measures have been introduced
in Congress that would allow churches to participate in political campaign activity.
They are the Houses of Worship Free Speech Restoration Act, H.R. 235 (109th
Congress) and H.R. 235 (108th Congress); a provision briefly included in the
American Jobs Creation Act of 2004, H.R. 4520 (108th Congress); the Houses of
Worship Political Speech Protection Act, H.R. 2357 and S. 2886 (107th Congress);
and the Bright-Line Act of 2001, H.R. 2931 (107th Congress). This report will, after
providing an overview of tax and campaign finance law, discuss and compare these
bills.
Before continuing, it should be noted that while the prohibition against engaging
in political campaigns applies to all IRC § 501(c)(3) organizations, including
charities and educational organizations, the bills discussed in this report would only
exempt churches and religious organizations from the prohibition.
Current Law
Tax Law.
Churches and religious organizations are among several types of organizations
exempted from federal income taxes by IRC § 501(c)(3). Under that section, one
requirement for tax-exempt status is that the organization must not
participate in, or intervene in (including the publishing or distributing of
statements), any political campaign on behalf of (or in opposition to) any
candidate for public office.
This is viewed as an absolute prohibition and an organization that violates it
can lose its tax-exempt status and its eligibility to receive tax-deductible

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contributions.1 While this outcome is rare, the fact that it can happen was shown in
Branch Ministries v. Rossotti, 211 F.3d 137 (D.C. Cir. 2000). In that case, the U.S.
Court of Appeals for the D.C. Circuit upheld the authority of the IRS to revoke the
tax-exempt status of the Church at Pierce Creek in Binghamton, New York. The
church and its pastor had placed a full-page political advertisement in two national
newspapers four days before the 1992 presidential elections. The advertisement
opposed one of the presidential candidates and included a solicitation for tax-
deductible contributions to pay for the advertisement.
While the Branch Ministries case underlines the point that a church can lose its
exempt status for participating in a campaign, there is a distinction in the tax laws
between political campaign activities and simple political activities.2 Political
campaign activities include those activities that are specifically linked to election
periods and support or oppose particular candidates. Examples of prohibited
activities include endorsing or opposing particular candidates; evaluating candidates
and supporting a slate of the best-qualified candidates; preparing and distributing
voters’ guides during an election where the questions asked or the presentation of the
information indicate a bias on certain issues; rating of candidates; and making
contributions to a political campaign.3
Examples of permissible political activities under the tax laws, so long as no
candidate is endorsed or opposed, include educational activities, such as conducting
public forums at which political questions are considered or conducting candidate
forums on a range of issues; compiling a guide consisting of the voting records of
Members of Congress on a variety of issues; compiling a guide consisting of the
voting records of Members of Congress on selected issues so long as the guide is not
widely distributed to the general public during an election campaign; publishing
candidate responses to a questionnaire on a variety of subjects; issue advertising or
lobbying; nonpartisan public opinion polling; non-partisan voter registration drives;
and lobbying for or against the appointment of nonelective officers, such as judges.4
While these non-campaign political activities are not prohibited, some may cause the
organization (and possibly its managers) to be subject to one or more taxes on its
political or lobbying expenditures.5
A question that frequently arises is whether a church may invite political
candidates to appear at its services or other events. The answer is yes, so long as
1 IRC § 170(c)(2).
2 For further information, see Kindell, Judith E. and Reilly, John Francis, Election Year
Issues,
Exempt Organization Continuing Professional Educational Technical Instruction
Program for Fiscal Year 2002; and IRS Publication 1828, Tax Guide for Churches and
Religious Organizations
. Both are available on the IRS website at [http://www.irs.gov].
3 See 26 CFR § 1.501(c)(3)-1(c)(3)(iii); Rev. Rul. 78-248; and Kindell and Reilly, Election
Year Issues
.
4 See Kindell and Reilly, Election Year Issues; Rev. Rul. 78-248, Rev. Rul. 80-282, Rev.
Rul. 86-95; and IRS Notice 88-76.
5 IRC §§ 527(f), 4911, 4912, and 4955.

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certain criteria are met.6 If the individual appears in his or her role as a candidate,
then the other candidates must be given equal opportunity to appear, the church or
organization must make clear it is not endorsing or opposing any candidate, and no
political fundraising may occur. If the individual appears in a role other than as a
candidate (e.g., in the position the candidate currently holds), then it should be made
clear in what capacity the individual is appearing and there should be no mention of
his or her candidacy or the election.
Finally, the tax laws do not prohibit religious leaders from participating in
political campaign activity as individuals.7 Religious leaders may endorse or oppose
candidates in speeches, advertisements, etc., in their capacity as private citizens. The
leader may be identified as being from a specific church or organization, but it should
be clear that he or she is speaking as an individual and not as a representative of the
organization. A leader may not make the political statements in the organization’s
publications, at the organization’s events, or in any way that uses the organization’s
assets (e.g., in a newspaper advertisement paid for by the organization). This is true
even if the leader pays for the costs of the publication or event (e.g., the leader pays
the publishing costs of the organization’s newsletter in which he or she endorses a
slate of candidates).
Campaign Finance Law.
The current Federal Election Campaign Act (FECA),8 which governs the raising
and spending of campaign funds, does not perfectly parallel the tax law. FECA
generally prohibits corporations from directly making contributions and expenditures
in connection with federal elections.9 Unincorporated organizations, however, are
not prohibited by FECA from making such contributions and expenditures. The
“Bipartisan Campaign Reform Act of 2002” (BCRA), P.L. 107-155, which amends
FECA, further bans corporations, including tax-exempt corporations, from funding
“electioneering communications,” which it defines as broadcast communications that
“refer” to a federal office candidate within 60 days of a general election and 30 days
of a primary. The constitutionality of this new provision of law was upheld by the
Supreme Court in 2003 in McConnell v. FEC.10 The new Federal Election
Commission (FEC) regulations promulgated under BCRA carved out an exception
6 See Kindell and Reilly, Election Year Issues, at 380-82; IRS Publication 1828 at 8-10.
7 See IRS Publication 1828 at 7-8.
8 2 U.S.C. § 431 et seq.
9 2 U.S.C. § 441b(a)(2002). Corporations may make expenditures to communicate with
stockholders and executive or administrative personnel and their families, to engage in
nonpartisan voter registration or get-out-the-vote campaigns aimed at stockholders and
executive or administrative personnel and their families, and to establish, administer, and
solicit contributions to a separate segregated fund for political purposes (also known as a
political action committee or PAC), 2 U.S.C. § 441b(b)(2).
10 124 S. Ct. 619, 688-89 (2003). For further discussion regarding this decision, see CRS
Report RL32245, Campaign Finance Law: A Legal Analysis of the Supreme Court's Ruling
in McConnell v. FEC
, by L. Paige Whitaker.

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to this prohibition for IRC § 501(c)(3) nonprofit corporations11 on the theory that the
tax code already prohibits such organizations from funding such advertisements.12
In addition, in the 1986 decision, FEC v. Massachusetts Citizens for Life, Inc.
(MCFL),13 the Supreme Court held that the prohibition on corporations using their
corporate treasury funds to make contributions and expenditures in connection with
federal elections could not constitutionally be applied to certain non-profit
corporations. Under MCFL, certain nonprofit, nonstock corporations are permitted
to spend treasury funds to make contributions and expenditures in connection with
federal elections if: (1) the corporation is formed for the purpose of promoting
political ideas and does not engage in business activities; (2) the corporation has no
shareholders or other affiliates with an economic incentive to remain associated with
the corporation when they disagree with its political activities; and (3) the
corporation is not established by a business corporation and does not accept
contributions from business corporations.14
How Legislation Would Change Current Law
H.R. 235 (109th Congress). Under section 2 of H.R. 235, churches, their
integrated auxiliaries, and conventions or associations of churches would
not fail to be treated as organized and operated exclusively for a religious
purpose . . . [or] deemed to have participated in, or intervened in any political
campaign on behalf of (or in opposition to) any candidate for public office . . .
because of the content, preparation, or presentation of any homily, sermon,
teaching, dialectic, or other presentation made during religious services or
gatherings.15
The bill specifies that this rule applies not only for the organization’s treatment under
IRC § 501(c)(3), but also for purposes of eligibility to collect tax deductible
contributions [IRC § 170(c)(2)], various estate and gift tax provisions [IRC §§ 2055,
2106 and 2522], and the excise tax on political expenditures [IRC § 4955].
Section 3 of the bill provides that no church member or leader would be
prohibited from expressing personal views on political matters or election for public
office during regular religious services, so long as these views are not disseminated
beyond the attendees at the service. Dissemination would include a mailing with
11 11 C.F.R. § 114.10 (2003).
12 However, it is not clear that the Internal Revenue Code or current IRS regulations would
necessarily treat all broadcasts that meet the definition of “electioneering communications”
as campaign intervention. It may be that the future IRS regulations will be informed by the
FECA regarding what activities constitute campaign intervention, but there is no
requirement that they do so.
13 479 U.S. 238 (1986).
14 Id. at 264.
15 While the focus of this report is on political campaign activity, this language is not limited
to such activity.

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more than an incremental cost to the organization and any electioneering
communication. Section 3 also provides that nothing in section 2 of the bill would
permit any disbursements for electioneering communications, or political
expenditures, prohibited in the Federal Election Campaign Act.
The bill would preclude a church from making campaign contributions or
paying for full-page endorsement advertisements such as that sponsored by the
Church at Pierce Creek. However, this language would permit any activity that could
be deemed part of a sermon or other presentation during a religious service. As such
the bill would appear to permit activities such as express endorsement or opposition
to a candidate for public office during a sermon; requests that contributions be made
directly to the candidate’s committee or other political organizations; directions for
individual contributions of services to political campaigns; and exhortations to vote
for particular candidates.
H.R. 235 (108th Congress). The version of the Houses of Worship Free
Speech Restoration Act that was introduced in the 108th Congress was also numbered
H.R. 235. It was identical to the version introduced in the 109th Congress, although
it did not include IRC §§ 2055, 2106, 2522 and 4955 in the list of affected sections
and it did not include the language concerning church leaders expressing and
disseminating personal views.
Since this version of H.R. 235 did not include the provision dealing with
dissemination, it is possible that the bill would allow an incorporated church to
reprint the sermon or minutes of the gathering and mail them to church members as
corporations are permitted to communicate with stockholders under 2 U.S.C. §
441b(b)(2).16 Broadcasting sermons by incorporated churches containing
endorsements would appear to be prohibited under the language of BCRA as an
“electioneering communication,” but the FEC regulations have interpreted broadcasts
by § 501(c)(3) nonprofit corporations as exempt from the definition of
“electioneering communication.” It is unclear how this could impact the
interpretation of the bill.
H.R. 4520 (108th Congress). The provision in H.R. 4520, former section
692 (Safe Harbor for Churches), was only briefly in the bill. It was struck by the
Committee on Ways and Means by unanimous consent on June 14, 2004. The
provision would have done several things. First, it would have codified existing law
so that churches and religious organizations would not have been treated as
participating in a political campaign solely because of private statements made by
their religious leaders. Second, churches and religious organizations that
unintentionally intervened in a political campaign would not have lost their tax-
exempt status or eligibility to receive deductible contributions unless the organization
or its religious leaders had done so on more than three separate occasions during the
calendar year. Third, the provision created a new excise tax on the unintentional
violation of the prohibition on political campaign activity. If the church had at least
three violations during the calendar year, then the sanction would have equaled the
highest corporate tax rate multiplied by the church’s gross income. If the church had
16 Unincorporated churches are not subject to the FECA restrictions on corporations.

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two violations, then the sanction would have equaled that amount divided by two.
If the church had one violation, then the sanction would have equaled the full amount
divided by 52. The amount of tax owed would have been reduced by any amount
imposed for the existing excise tax.
H.R. 2357 (107th Congress). The Houses of Worship Political Speech
Protection Act, H.R. 2357 and S. 2886 (107th Congress) would have excepted
churches and church auxiliaries from the absolute prohibition on participation or
intervention in a political campaign and added language which would have measured
churches’ political campaign activities by the same “no substantial part” test that is
used for lobbying activities of all IRC § 501(c)(3) organizations. That is, “no
substantial part” of churches’ activities could be “participating in, or intervening in
(including the publishing or distributing of statements), any political campaign on
behalf of (or in opposition to) any candidate for public office.”
Since the bill did not include a numerical test, each church or religious
organization would have been judged on a case-by-case basis as to whether or not its
campaign activities were a substantial part of its activities as a whole. Although “no
substantial part” is a flexible standard, that test would prevent a church from being
organized to conduct political campaign activities.
H.R. 2357 received a floor vote on October 2, 2002, and failed to pass by a vote
of 178 to 239 (Roll no. 429).
H.R. 2931 (107th Congress). Under the Bright-Line Act of 2001, H.R. 2931,
a church would only have participated in political campaign activity if it normally
made expenditures for such purposes in excess of 5% of its gross revenues. The bill
also created a numerical test for the lobbying limitation. Under current law, churches
and other IRC § 501(c)(3)organizations may only conduct an insubstantial amount
of lobbying. The bill would have allowed churches to lobby without risking its
exemption so long as its lobbying expenditures did not normally exceed 20% of the
church’s gross revenues. The church could not have spent more than 20% of its
gross revenues on political campaign and lobbying activities. The bill did not define
the term “normally.”

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Table 1. Comparison Among the Bills
H.R. 235 (109th Cong.)
H.R. 235 (108th Cong.)
Former section 602 of
H.R. 2357 (107th Cong.)
H.R. 2931 (107th Cong.)
H.R. 4520 (108th Cong.)
Allows
No, permissible activities
No, permissible activities
Yes, although activities
Yes
Yes
unlimited
are limited to those in
are limited to those in
must be unintentional
types of
“the content, preparation,
“the content, preparation,
violations of the
activities
or presentation of any
or presentation of any
prohibition against
homily, sermon, teaching,
homily, sermon, teaching,
political campaign
dialectic, or other
dialectic, or other
activity.
presentation made during
presentation made during
religious services or
religious services or
gatherings.”
gatherings.”
Allows
Yes, but types of activities
Yes, but types of activities
No, churches may only
No, the political activity
No, the political activities
unlimited
are limited.
are limited.
unintentionally violate the
can not be more than a
could not exceed 5% of
amount of
prohibition three times
“substantial part” of the
the organization’s gross
permissible
before risk losing exempt
church’s activities.
revenues.
activities
status and being subject to
penalty taxes.
Addresses
Yes
No
Yes
No
No
personal
speech by
religious
leader

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H.R. 235 (109th Cong.)
H.R. 235 (108th Cong.)
Former section 602 of
H.R. 2357 (107th Cong.)
H.R. 2931 (107th Cong.)
H.R. 4520 (108th Cong.)
Explicitly
Yes
No
No
No
No
affects IRC
sections
dealing with
estate and
gift taxes
Adds a new
No
No
Yes, on unintentional
No
No
penalty
violations of prohibition.
Addresses
No
No
No
No
Yes, church could only
lobbying
lose exemption if it
normally spent more than
20% of its revenue on
lobbying (political and
lobbying expenditures
could not exceed 20% of
the church’s revenue).
Outcome
Referred to the Ways and
Referred to the Ways and
Struck by the Ways and
Received floor vote in the
Referred to the Ways and
Means Committee.
Means Committee; no
Means Committee by
House of Representatives
Means Committee; no
further action.
unanimous consent on
on October 2, 2003 and
further action.
June 14, 2004.
failed to pass by a vote of
178-239.