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]
[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).