LOS ANGELES: Pasadena parish receives vindication from IRS

Episcopal News Service. December 10, 2007 [121007-07]

All Saints Church in Pasadena, California, announced December 10 that the Internal Revenue Service (IRS) has confirmed that it has closed its investigation of the parish, and that it will not be subject to excise tax in connection with any alleged political campaign intervention.

"We are pleased with these concessions from the IRS and hope that the agency now recognizes that it both initiated and pursued this examination in violation of its own procedural requirements and without proper grounds to do so," the Rev. J. Edwin Bacon, All Saints' rector, said in a media advisory.

"All Saints continues to support the principle underlying the federal tax prohibition against campaign intervention but is also passionately committed to defending the freedom of the pulpit and to continuing to address the critical and moral issues of our day, such as war, poverty and society's responsibility to care for its least fortunate members," Bacon said.

The advisory said that, in light of its experience in defending against its own examination, and "to support all churches, synagogues and mosques who speak truth to power in the prophetic tradition," All Saints plans to seek changes in federal law and administrative rules "to increase the legal protections available for freedom of the pulpit from ill-founded or politically motivated tax investigations."

In early June 2005, the IRS notified All Saints that it was investigating the parish's tax-exempt status because of a sermon its former rector, George Regas, preached on October 31, 2004, the Sunday before the 2004 presidential election.

The IRS alleged that the sermon may have been an "implicit" intervention in the 2004 presidential election because it contained references to the two candidates' positions on certain moral issues, and it reminded parishioners of the need to consider their values when voting.

It is against federal law for organizations with tax-exempt status to directly or indirectly participate in or intervene in any political campaign on behalf of or in opposition to any candidate for political office. The law went into effect with the Revenue Act of 1954 and has been upheld as constitutional.

"I don't intend to tell you how to vote," Regas said early in his sermon.

The parish received an IRS letter in September 2007 saying the federal tax-collection agency had closed its examination without challenging the parish's tax-exempt status and without a threatened audit ever taking place. However, the letter said without explanation that the IRS had concluded that a sermon preached in October 2004 constituted intervention in the 2004 presidential election.

All Saints then said that it has referred what it called "the numerous procedural and legal errors of the exam" to the agency's commissioner and demanded more information about its decision.

The IRS responded October 22 to the parish's inquiry by informing the parish that the "examination is now closed and no further enforcement action, including imposition of taxes…will be pursued in connection with Dr. Regas' sermon delivered on October 31, 2004 or any other activities involving" the parish in 2004, the media advisory said, quoting from the letter.

All Saints had also asked the Treasury Inspector General for Tax Administration to review the propriety of certain aspects of the IRS investigation of All Saints and the IRS agreed in the October 22 letter that the "review is appropriate," the advisory said.

The parish is confident that the Treasury Inspector General's review will "only further validate" its concerns about the course of the examination.

The advisory said the parish intends to work with its Congressman, Rep. Adam Schiff (D-CA), who represents the district which includes All Saints, to achieve what it sees as needed legislative and administrative changes, adding that it is "optimistic the enactment of additional statutory provisions can provide further clarity regarding the scope of the rules and safeguards as to the IRS's enforcement mechanisms."