Democrat Questions Catholic Group’s Tax-Exempt Status After Bishops Pressed for Ban on Abortion Funding
The Catholic League was responding to a Democratic lawmaker, who questioned whether the U.S. Conference of Catholic Bishops (USCCB) violated federal law by lobbying for an amendment banning federal funding of abortion.
Rep. Lynn Woolsey (D-Calif.), in a November 9 op-ed on the Politico Web site, said that in light of heavy pressure from USCCB against federal funding for abortion, the Internal Revenue Service should investigate whether the organization exceeded the limitations of its tax-exempt status – a move that could lead the Internal Revenue Service to revoke that status.
Woolsey’s comments came after USCCB lobbied pro-life Democrats to support the efforts of Rep. Bart Stupak (D-Mich.), who sponsored an amendment prohibiting federal funding of abortion through any of the health insurance subsidies created by the House health care bill.
Stupak said if House Speaker Nancy Pelosi (D-Calif.) didn’t allow his amendment to come to a vote, he would block the entire bill from coming to the floor. After lobbying by Stupak, USCCB, and other pro-life groups, Pelosi allowed the amendment to come to a vote, and it passed with bipartisan support.
USCCB made it clear that it would not support any health care bill that allowed federal funding of abortion in any way. “Abortion is not health care,” the bishops insisted.
Woolsey – who co-chairs the Congressional Progressive Caucus – said the USCCB should have stayed out of the legislative process: “The role the bishops played in the pushing of the Stupak amendment, which unfairly restricts access for low-income women to insurance coverage of abortion, was more than mere advocacy,” she wrote in the Politico piece.
Woolsey said the IRS should treat the bishops’ lobbying efforts with the same scrutiny it applies to religious groups that involve themselves in elections. Non-profits, including religious groups, are prohibited from taking sides in political campaigns and can lose their tax-exempt status if they do.
“The IRS is less restrictive about church involvement in efforts to influence legislation than it is about involvement in campaigns and elections,” Woolsey admitted. “Given the political behavior of USCCB in this case, maybe it shouldn’t be.”
Under federal tax law, Woolsey’s threat could mean trouble for the bishops’ group. According to the IRS’ Tax Guide for Churches and Religious Organizations, tax-exempt organizations may not engage in “substantial lobbying activity.”
“In general, no organization, including a church, may qualify for IRC [Internal Revenue Code] 501(c)(3) [tax-exempt] status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying). An…organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status.”
To determine if an organization has engaged in “too much” lobbying activity, the IRS can use one of two tests – the Substantial Part Test or the Expenditure Test.
The Expenditure Test simply involves examining the organization’s budget to see if it has spent more than is allowed on lobbying, including grass-roots activity. Under federal law, a tax-exempt organization may spend no more than 20 percent of its budget on lobbying, up to $1 million. If it goes over this limit, it must pay a tax of 25 percent of the amount exceeding the limit.
For example, if an organization spent $1.5 million on lobbying -- $500,000 more than is legal – they would have to pay $125,000 in taxes. If this happens over a four-year period, the organization can lose its tax-exempt status.
The Substantial Part Test, however, is not as clear cut. For this test, the IRS considers both the organization’s lobbying budget and the time devoted to lobbying by the organization’s paid staff and volunteers. If an organization violates this standard in any year, it can lose its tax-exempt status, a harsher penalty than called for under the Expenditure Test.
“Whether a church’s or religious organization’s attempts to influence legislation constitute a substantial part of its overall activities is determined on the basis of all the pertinent facts and circumstances in each case,” the IRS says. “The IRS considers a variety of factors, including time devoted (by both compensated and volunteer workers) and the expenditures devoted by the organization to the activity, when determining whether the lobbying activity is substantial.”
It is this amorphous standard that could lead to an investigation into the USCCB – an investigation which the Catholic League calls harassment.
“I think they [the USCCB] were perfectly within their rights,” Catholic League spokeswoman Susan Fani told CNSNews.com on Wednesday. “However, I can see that there would be harassment in the form of having an unjustified IRS investigation, so yes that concerns us.”
Fani said the Bishops did nothing wrong and would continue to press Congress to prevent abortion funding from becoming a part of health care reform.
“Did the bishops do anything wrong? They clearly did not, and for [Rep.] Woolsey to insinuate otherwise is just absurd. This is just plain old intimidation and harassment and an attempt to chill free speech.
“The bishops made it clear that they plan to also work with the Senate on their version of the health care bill, so they definitely plan on staying involved,” Fani added.