IRS Commissioner John Koskinen has sent a letter to Oklahoma Attorney General Scott Pruitt explaining that, as far as the IRS is concerned, the First Amendment guarantee of religious freedom is not threatened by the U.S. Supreme Court’s ruling in Obergefell v. Hodges, which requires states to recognize same-sex marriages. But for how long?
General Pruitt sent Koskinen a letter in July seeking clarification with regard to Obergefell and the tax-exempt status of charitable organizations, including churches. Pruitt observes:
During the oral arguments in that case, Solicitor General of the United States Donald Verrilli, Jr., made comments to the effect that charitable organizations—including religious and educational institutions—may face loss of tax-exempt status if they refuse to violate their religious beliefs prohibiting approval of same-sex marriage.
Solicitor General Verrilli’s comments nonetheless raise the possibility that your agency may revoke the tax-exempt status of the thousands of organizations that disagree with same-sex marriage.
Pruitt wanted to know “whether you [the IRS] plan to revoke the tax-exempt status of charitable organizations that refuse to recognize same-sex marriage because of their religious beliefs.”
In fairness to Koskenin, I don’t think he has ever implied churches’ tax-exempt status was in question that would affect millions of Americans if it does gain traction.
The vast majority of churches are classified as 501(c)(3) organizations, which exist for “religious, charitable, scientific, testing for public safety, literary, or educational purposes” under the U.S. tax code.
Contributions to those organizations are tax deductible. In addition, the organizations do not typically pay income, sales or property taxes (though they do pay the employer’s portion of the payroll tax). And while they can address political and policy issues and engage in educational efforts, they are prohibited from supporting or opposing specific political candidates or legislation.
If the IRS concludes that such an organization has engaged in specific political activity, it may revoke its tax-exempt status, which can be a huge economic blow, especially if the organization owns developed property—e.g., a downtown museum or a sprawling mega-church—and had to start paying property taxes.
Shortly after the Obergefell ruling, questions began to be raised whether churches and religious schools might lose their tax-exempt status if they refused to perform or accept same-sex weddings. After all, that issue had already emerged with private sector businesses, including a florist, a wedding-cake bakery and a non-church-affiliated wedding chapel.
Fortunately, Koskinen does not see a change. In his response to Pruitt he wrote:
The IRS does not view Obergefell as having changed the law applicable to section 501(c)(3) determinations or examinations. Therefore, the IRS will not, because of this decision, change existing standards in reviewing applications for recognition of exemption under section 501(c)(3) or in examining the qualification of section 501(c)(3) organizations.
Koskinen’s response appears to mirror Justice Anthony Kennedy’s stated position in his majority opinion in Obergefell. So that solves the issue, right? Maybe not.
First, several Republican congressional leaders have urged President Obama to remove Koskinen because of the ongoing scandals at the IRS and Koskinen’s unwillingness or inability to do anything about them. Plus, he has made numerous statements to Congress that, under a generous interpretation, could be described as misleading.
Obama is not known for doing what Republicans ask—only Iranians—so Koskinen may be safe. But new revelations, perhaps from the IRS’s Office of Inspector General, about false statements or illegal or unethical actions taken by the commissioner or the IRS could force Obama’s hand.
Would a new IRS commissioner take the same position Koskinen has?
The more likely driver behind a changing government position would be successful lawsuits—and popular opinion. If discrimination cases were filed against churches that won’t perform same-sex marriages and the courts find for the plaintiffs, that would likely trigger another Supreme Court challenge. And one or two new justices could make a big difference in the court’s decision either way.
But even though the issue has quieted down a little, conservative churches are preparing for a fight they think is coming. Losing their tax-exempt status would be difficult, losing their ability to say no based on the First Amendment and long-held religious grounds would be devastating.