1979 EO CPE Text

F. CHURCHES AND OTHER RELIGIOUS ORGANIZATIONS

Introduction IRC 501(c)(3) exemption for "religious purposes" has always been a sensitive matter, because the First Amendment sets strict limits on government regulation of religion in any form -- church, sect, denomination, ministry, etc. Some self-proclaimed churches may use the administrative and judicial limitations on Service regulation to hinder our review of their activities. We have always been aware of the possibility of abuse, i.e. hiding non-charitable, non-religious activities under privileged church status. See the 1978 EOATRI textbook topic on Churches, pp. 1-29. Public interest in religious groups (exempt or not) is very keen. There is an increase in the number of "religious" tax-avoidance schemes, e.g., mail order ministries, family churches, vows of poverty, etc. Congress has been investigating Reverend Moon's Unification Church and related organizations for illegal activities. The recent mass suicide at the People's Temple in Jonestown, Guyana, drew international comment and much Congressional interest. And, the press is filled with reports of "brainwashed" disciples and parents "re-kidnapping" their children. The 1978 EOATRI textbook topic on Churches is a good summary of the major problems we encounter in administering the IRC 501(c)(3) "religious purposes" exemption. This discussion is meant to supplement that topic. We intend only to highlight new developments and the increased interest in the area. 1. Inurement and Tax Avoidance Schemes IRC 501(c)(3) clearly precludes exemption for all organizations (churches and religious organizations too) whose net earnings inure to the benefit of a private shareholder or individual. The Founding Church of Scientology v. U.S., 412 F.2d 1197 (Ct. Cl. 1969). Equally as clear is the Federal income tax principle that a taxpayer's assignment or