Richard Hammar is editor of Church Finance Today and Church Law and Tax Report, both CT sister publications. An expert on church law and tax, Hammar has written more than 100 books for churches and clergy. CT associate editor Rob Moll e-mailed Hammar about the Senate Finance Committee's investigation into the spending practices of six churches.
Why would the Senate Finance Committee be interested in the finances of these six churches? How unusual is this step?
Senator Grassley's letter to the six religious ministries pits the constitutional protection of religious liberty against the legitimate interest of the federal government in ensuring that religious organizations are in compliance with the tax code. Section 501(c)(3) of the tax code exempts public charities, including religious organizations, from federal taxation so long as they comply with five requirements. One of those requirements is that the charity does not pay unreasonable compensation. This is the main concern that Senator Grassley is addressing. Let me add that another requirement of section 501(c)(3) is that public charities may not intervene in political campaigns. This limitation clearly applies to religious organizations, and all attempts to challenge its constitutionality have failed.
Congress has broad authority under the Constitution to "make all laws which shall be necessary and proper" for carrying out the powers "vested by the Constitution in the government of the United States or in any department or officer thereof." Implicit in the power to make laws is the power to conduct investigations to determine the need for legislation, and it is in this context that Senator Grassley issued his request for financial information. Senator Grassley has stated ...1