Are you part of a church or religious organization in Nevada? If so, the subject of how ‎far, or even whether the church can become involved in political activity may have crossed your ‎mind. As we head into the Fall 2014 electoral season, Nevada religious institutions need to ‎know what they can, and more importantly, cannot do under state and federal law. The stakes ‎are high, as a violation of the governing rules risks a challenge from the IRS and your tax exempt ‎status.‎

Many scholars believe that campaign and lobbying laws are an unconstitutional ‎abridgment of freedom of speech, freedom for the free exercise of one’s faith, and freedom of ‎association. Others argue the separation of church and state provide no place in religious ‎organizations for political speech.‎

Both state and federal law give Nevada churches tax exempt status. However, under ‎both systems, churches must curtail political activity to maintain their exempt status. How can a ‎religious institution exercise its freedom of speech? Does there remain room for churches to ‎contribute to the political arena without losing their special status?‎

Federal Law:‎

Churches, along with other forms of charity organizations, are exempt from federal taxes ‎under Internal Revenue Code § 501(c)(3). Unique from other exempt organizations, churches are ‎protected from audits unless the IRS can show it has a reasonable belief the church should not ‎have § 501(c)(3) exemption. Churches can, however, lose exemption for improper political ‎activity. Improper activity includes substantial efforts to influence legislation, and any campaign ‎activity. ‎

Substantial Efforts to Influence Legislation:

The IRS can revoke a church’s tax exempt status if a substantial portion of the church’s ‎activity consists of attempts to influence legislation (“lobbying”). In certain circumstances the ‎IRS has considered the following actions as lobbying: (1) contacting members or employees of a ‎legislative body to encourage the body to support or oppose proposed legislation; (2) encouraging ‎members of the public to contact members or employees of a legislative body for the same ‎purpose; and (3) contacting, or encouraging members of the public to contact, a legislative body ‎to propose new legislation.‎

However there is no clear cut definition of what constitutes a “substantial” part of a ‎church’s activities. To determine if the activities are substantial, the IRS considers both the ‎amount of employee and volunteer time the church devotes to lobbying, as well and the church’s ‎spending on lobbying. Neither Congress nor the IRS has defined “substantial activity” in this ‎context, but a court overruled the IRS when it revoked exemption from a church whose lobbying ‎efforts were only 5% of its time and effort. “Substantial activity” in another section of the tax ‎code means that an organization’s expenditures constitute 10% of its total revenue. It should be ‎noted, however, that some courts have declined to adopt the 10% rule and scholars have ‎proposed alternative tests such as whether the amount of lobbying is enough that government ‎officials might be improperly motivated to participate in the church’s interests.

Pitfalls A Church Can Encounter With A Candidate For Public Office

The general rule is that tax-exempt churches cannot participate in campaigns for public ‎office. This ban prohibits contributing funds and making written or oral public statements in ‎support or opposition of a candidate. The IRS has applied this ban in revoking tax-exempt status ‎from an organization that funded a political action committee, from an organization that placed a ‎full-page advertisement in a newspaper attacking a candidate’s moral character (even though the ‎church claimed it was trying to warn Christians about the candidate for religious reasons), and ‎from a church that used its publications and broadcasts to attack liberal candidates and ‎incumbents.‎ 

Churches can, however, participate in public forums and provide educational voter ‎guides, if they do so in a non-partisan manner and adhere to a complex set of guidelines. Voter ‎Guides published by churches can often run afoul of the rules and can create serious trouble if ‎not constructed properly. Legal counsel should be consulted before any Voter Guide is prepared ‎and distributed.‎

Additionally, no materials can be produced in coordination with a particular campaign. ‎Individual clergy members acting on their own behalf can participate in elections, endorse ‎candidates, and speak on issues of public policy, but they cannot do so in church publications or ‎at church events. However, creating and maintaining the separation between a clergy’s church ‎authority and personal beliefs is often difficult. Frequently individual clergy cannot separate ‎their private persona from their position within the church. A church itself cannot be involved ‎in any way, including financing the message, using the church’s facilities to promote a specific ‎candidate or issue, using the church’s website to broadcast an individual clergy’s political belief, ‎or use of the church’s membership lists, social media links or other means to promote specific ‎candidates. Again, legal counsel should be consulted for guidance in navigating this terrain.‎

Nevada Law

Religious organizations Nevada enjoy an exemption from Nevada property taxes, ‎business taxes, and the state’s sales and use taxes. But if a church’s exemption is challenged, the ‎church has the burden to prove its right to the exemption. If there is reasonable doubt as to an ‎exemption, at least one Nevada court has held it “must be construed against the taxpayer.” Thus, ‎churches must take special care not to compromise their Nevada tax exemption status.‎

One of the ways a church an jeopardize its tax exemption is to allow use of its property ‎and facilities in connection with a political campaign. Church property and facilities must be ‎primarily used for religious purposes. A church should avoid the sub-lease or donation of a ‎portion of its building or classrooms to be used as a candidate’s campaign office or a political ‎party’s administrative center. ‎

Nevada also has a state business tax, and a sales and use tax from which churches are ‎exempt. However that exemption is limited and contingent on church activities. If a church is ‎not complying with the statutory restrictions, it can lose its exemption or may not have its ‎exemption renewed. Churches can protect their business tax exemption by simply complying with ‎‎§501(c)(3) of the federal tax code. Similarly, the sales and use tax exemption is available to ‎churches that do not engage any prohibited political activity. Like the federal tax code, Nevada ‎law prohibits churches from making substantial efforts to influence legislation and from ‎participation in any political campaign. ‎

Best Practices

To avoid losing tax-exempt status under the federal and state taxation systems, churches in ‎Nevada should look to the federal statutes for guidance on their actions, but must also remember ‎that their state tax exemptions are likely more vulnerable. Nevada places the burden on the ‎churches to show they deserve exemption rather than on the government to prove the church ‎does not deserve exemption. Churches should consider contacting legal counsel to discuss how ‎their tax exemptions can be preserved through compliance with the regulations governing ‎political activity by religious organizations.‎

Some questions to ask your legal counsel are:‎ 

• Are there any circumstances when a political campaign can use church facilities and property?‎ 

• Are there any regulations regarding the soliciting of campaign contributions or fundraising on ‎church property or through the use of church membership lists?‎ 

• Can church clergy, over the pulpit, endorse individual candidates or attack certain candidates?‎ 

• Can church clergy, over the pulpit, endorse certain campaign issues, ballot questions, or issue ‎specific referendums?‎ 

• Can church clergy, outside of normal worship services make partisan public statements either ‎favoring or opposing a particular candidate?‎ 

• Does your church Voter Guide meet the statutory requirements imposed by law?‎ 

• ‎How does a church, while providing a platform for ministers or guest speakers, insure that their ‎discussion of ongoing campaigns is either non-partisan, or done in a manner that distinguishes the ‎capacity of individual clergy to express their individual beliefs?‎

• What other church activities can endanger its tax exempt status?‎ 

As a member of the faith community, it’s important to know where you stand in the ever-‎changing legal landscape applicable to religious persons and entities.