Prop 8 & Tax Exemption

Gay activists are now threatening to go after churches who supported California’s Proposition 8 to remove their tax exemption. The New York Times agrees; Barry Lynn of Americans United for Separation of Church and State does not.

“They almost certainly have not violated their tax exemption,” said Barry Lynn, executive director of Americans United for the Separation of Church and State, the leading advocacy organization on the issue. “While the tax code has a zero tolerance for endorsements of candidates, the tax code gives wide latitude for churches to engage in discussions of policy matters and moral questions, including when posed as initiatives.”

Generally speaking, churches, schools, and nonprofits that are 501c(3) organizations are prohibited from spending more than 20 percent of their budgets on political activities, Lynn said, noting that his organization is held to the same standard.

The 20 percent threshold means that the Catholic or Mormon churches, whose organizations span the globe, would have had to spend hundreds of millions of dollars – if not billions – to violate their tax-exempt status.

Despite common perceptions, the Church of Jesus Christ of Latter-day Saints gave relatively small amounts of money to Prop. 8. The church’s sole filing by Nov. 4 was for $2,864.21, according to the California secretary of state’s office. The church said that was an in-kind donation to pay for plane fare for its members. More in-kind donation filings are expected from the church, though the total probably will still be far below the threshold.

It was individual Mormons who contributed up to $20 million toward the Yes on 8 campaign, possibly totaling up to half of the campaign’s contributions. The U.S. Conference of Catholic Bishops, the leading Catholic body in the nation, gave $200,000, while the Knights of Columbus, a Catholic fraternal group, gave $1.25 million to the effort.