Why the IRS Has Stopped Auditing Churches—Even One that Calls President Obama a Muslim
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Why the IRS Has Stopped Auditing Churches—Even One that Calls President Obama a Muslim

"Vote for the Mormon, not the Muslim! The Capitalist, not the Communist!" read the sign outside Church of the Valley in Leakey, Texas. Beyond its inaccuracies, it was a clear violation of federal tax code, which prohibits nonprofits from doing anything that might support a candidate running for office.

But a revocation of the church's tax-exempt status isn't likely to come soon—if ever.

The Internal Revenue Service (IRS) has officially halted tax audits of churches until it can adopt rules that clarify which high-level employee has the authority to initiate them.

"We are holding any potential church audits in abeyance," Russell Renwicks of the IRS's Tax-Exempt and Government Entities division told BNA.com this week.

While this is the first public announcement of the moratorium, the IRS hasn't been auditing churches since 2009, said Erik Stanley, senior legal counsel with the Alliance Defending Freedom (formerly the Alliance Defense Fund).

That's when a federal court found that the IRS wasn't following its own regulations.

An IRS official at the level of regional commissioner or above is required to approve any church audits before they are initiated, according to a law passed in 1984. But in 1996, Congress reorganized the IRS from geographical regions to national practice groups—a move that eliminated the office of regional commissioner.

"The IRS designated an official within [its] exempt organizations section to be the one to approve the church audits," Stanley said.

But that position did not rank high enough to be adequate, the court decided after a Minnesota church challenged the legitimacy of their audit in 2009.

"The IRS shut ...

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