Leading television ministers assured a congressional subcommittee last month that new steps toward self-regulation will prevent financial abuses similar to the ones that plagued the PTL ministry under Jim and Tammy Bakker. At the same time, members of the House subcommittee quizzed Internal Revenue Service (IRS) and Treasury Department officials about strengthening government scrutiny of religious broadcasters.

Gordon D. Loux, president of Prison Fellowship Ministries and chairman of the Evangelical Council for Financial Accountability (ECFA), defended that group’s effectiveness as a monitoring organization. “What you would like to see done is already being done,” he told subcommittee chairman U.S. Rep. J. J. Pickle (D-Tex.). ECFA, a voluntary, 400-member organization, stresses compliance with standards of full financial disclosure, board membership that is not dominated by family members or ministry employees, annual independent audits, and strict fund-raising guidelines.

ECFA has been criticized as ineffective because PTL was a member in good standing from 1978 until December 1986. Beginning last March, abuses of donor funds and tax-exempt status by PTL have been under examination. Loux conceded that ECFA relied on assurances of financial integrity by PTL and its accounting firm. “Hindsight shows that this reliance was misplaced,” he told the subcommittee. He added that the ECFA board would meet before the end of October to consider instituting a nationwide network of volunteer accountants and attorneys to conduct random audits of member organizations.

A second attempt at self-regulation comes from the National Religious Broadcasters (NRB). Executive director Ben Armstrong told Pickle’s subcommittee that before the PTL troubles came to light, NRB leaders had developed a code of ethics concerning board structure, money management, disclosure, and fund raising. The code will be implemented by a new NRB panel called the Ethics and Financial Integrity Commission (EFICOM), and it is expected to become mandatory for all NRB members after a vote at the organization’s annual convention in February (CT, Oct. 16, 1987, p. 44).

Armstrong acknowledged that the new standards, which closely resemble ECFA rules, may cost NRB some of its members. Also, required public disclosure invites “the possibility of public criticism whenever one of our members fails to live up to the policies that we have established,” Armstrong said. “The alternative to proclaiming such principles is to remain silent in the face of impropriety—and, worse, to imply by silence that such misconduct is condoned.”

Article continues below

Oliver Thomas, counsel for the Baptist Joint Committee on Public Affairs, said he hopes EFICOM is ratified by NRB’S membership. If so, he said, “it will take a lot of pressure off Congress and the IRS to move hastily to change existing law. It may be that we don’t need any change.”

Government Involvement

Religious broadcasters at the hearing, including Jerry Falwell and John Ankerberg, expressed embarrassment over the PTL scandal, while government officials expressed frustration. They said tax laws constrain their efforts to police organizations that flout the law, but no specific recommendations for changing the law were offered. IRS Commissioner Lawrence B. Gibbs said the vast majority of churches and religious groups operate within the law. The few that violate the law are difficult to catch, he said, because laws protecting religious liberty hinder IRS access to financial information.

Gibbs explained that according to the tax code, churches and religious organizations are exempt from paying federal income tax if they are organized and operated exclusively for religious purposes. In addition, individuals who support these groups financially may deduct their contributions from their income tax. Tax-exempt status calls for the organization to serve a public purpose, avoid substantial lobbying efforts, and refrain from political campaign activity. Its earnings may not enhance the wealth of any private individual. And any earnings from business enterprises not related to the group’s religious purpose are subject to taxation.

A group that is classified as a “church” enjoys more favorable tax treatment than one classified as a “religious organization.” Churches are not required to apply to the IRS for tax exemption, receive explicit IRS notification of tax exemption, or file annual information forms, known as Form 990. Because of the favorable tax status accorded to churches, individuals masquerading as “ministers” for tax purposes have been prosecuted in court for tax avoidance.

Most television ministries would be classified as religious organizations, rather than churches, but some confusion on this point is evident. In his testimony before Pickle’s subcommittee, Oklahoma evangelist Oral Roberts said, “I have always thought of the Oral Roberts ministry as a church. Our ministry organizations perform all of the traditional functions of a church. We hold religious services on a regular basis, we perform marriages, baptisms, and funerals.” However, the IRS classifies the Oral Roberts ministry as a religious organization.

Article continues below

Roberts said IRS rules should be uniformly applied. “If the Oral Roberts ministry is required to file these reports, then should not the Catholics, the Mormons, the Baptists, the Methodists, and all other churches also be required to file these same reports?”

Part of the problem, according to Gibbs, is that there is no statutory definition of “church” anywhere in the tax code. “Congress has left it to the IRS, the courts, and the organizations themselves to make this determination. Herein lies the first and most basic problem in administering the tax laws in this area.” IRS guidelines include 15 criteria that distinguish a “church.” Two of the most important factors, Gibbs said, are whether the organization has a membership not associated with any other church or denomination, and whether it holds regular meetings.

Because of the constraints placed on government inquiries into church matters, Gibbs said, the IRS finds itself in the position of reacting to highly publicized accounts of abuse by religious groups, rather than initiating investigations. He has formed a tax-exempt-organization advisory group and is seeking input from church leaders about administering tax laws relating to churches.

Maintaining Separation

Keeping church and state from becoming entangled as these laws are reviewed was a clear concern of both the House subcommittee and the religious broadcasters who testified. Pickle, in announcing the hearing, said, “The subcommittee is not undertaking to investigate any specific television ministry or tax-exempt organization. We are not questioning religious practices or beliefs.”

Nonetheless, some religious broadcasters feared the congressmen were setting a bad precedent. D. James Kennedy, pastor of Coral Ridge (Fla.) Presbyterian Church and president of Coral Ridge Ministries, told the subcommittee, “It is axiomatic that the power to tax is the power to destroy, and I think what we are seeing here is a dangerous intermeddling” of state and church. Kennedy added that this nation’s Founding Fathers believed church and state were “two separate spheres, both under God. However, today there are those in this country who would like to change that and would like to put the church under the state.”

Article continues below

Falwell commended the committee, saying, “It’s your job to do what you are doing.” He criticized television ministers who rely on gimmicks such as telling viewers to place their hands on the television set to make contact with the power of God, or who send handkerchiefs or bottled holy water through the mail. “Everybody has a right to say what they want to,” he commented, “but somebody’s got to have a right to question whether it is so.”

A sense of cooperation and common purpose was evident throughout most of the hearing, but that was threatened late in the day when Pickle received a copy of a letter mailed July 15 by NRB. The undated letter went out over Ben Armstrong’s signature shortly after he received information about plans for the hearing. It solicited contributions toward a $1 million “war chest” to defend religious broadcasters against government encroachment, warning specifically about the Pickle initiative. Armstrong’s letter warned that Pickle’s subcommittee planned to “delve into personal ministry business that is protected by the U.S. Constitution.… Truthfully, we see this move by Congressman Pickle and others as another sly way to harass ministries one by one until we are forced out of existence … one by one.”

The letter invited recipients to send $25 so NRB could oppose “the enemy forces amassed against us.” In exchange for the contribution, donors were to receive tapes of speeches by Vice President George Bush and evangelist Jimmy Swaggart. A spokesman for Pickle said the congressman was surprised and angered by the letter. “He is at a loss to understand how such a letter could be going out at the same time Ben was saying he wanted to work with us.”

In response, Armstrong said the letter was mailed before he met personally with Pickle on July 21 and was assured that the subcommittee was not investigating religion per se. Armstrong said Pickle’s first letter about the hearing, mailed in early July, was “ominous” and threatened “a departure from what Congress has been doing for 200 years.” A follow-up letter explaining Armstrong’s change of opinion is scheduled to be mailed to NRB members, and the November issue of NRB’SReligious Broadcasting magazine contains an article by Armstrong assessing the hearings and the subcommittee’s purpose. Armstrong said Pickle has been invited to address NRB members at the group’s annual convention in Washington, D.C., early next year.

By Beth Spring.

Have something to add about this? See something we missed? Share your feedback here.

Our digital archives are a work in progress. Let us know if corrections need to be made.