Batts Morrison Wales & Lee - News & Resources - Nonprofit Special Alert

President Trump Issues Executive Order on Religious Freedom

Instructs Federal Agencies to Be Tolerant of Political Communications by Religious Organizations

By Michael E. Batts, CPA

May 5, 2017

Yesterday President Trump issued an Executive Order instructing federal agencies to allow more latitude in certain areas of importance to religious organizations.  The Order sets forth broad, principles-based expectations for federal agencies, stating:

Federal law protects the freedom of Americans and their organizations to exercise religion and participate fully in civic life without undue interference by the Federal Government. The executive branch will honor and enforce those protections.

The Order, signed in the presence of religious leaders, also addresses two specific areas of policy – political expression by religious organizations and the contraceptives mandate which is part of the Affordable Care Act.

Political Expression by Religious Organizations
Mr. Trump’s Order directs federal agencies to practice tolerance in the area of political expression by religious organizations. Federal tax law currently prohibits churches and other 501(c)(3) organizations from intervening in political campaigns by endorsing or opposing candidates for elected office. The IRS has taken the position that a sermon in a church service in which favorable or unfavorable comments are made about one or more political candidates is a violation of the law that can result in revocation of the church’s tax-exempt status.
The relevant portion of the Order addressing the issue of political expression by religious organizations states:

All executive departments and agencies (agencies) shall, to the greatest extent practicable and to the extent permitted by law, respect and protect the freedom of persons and organizations to engage in religious and political speech. In particular, the Secretary of the Treasury shall ensure, to the extent permitted by law, that the Department of the Treasury does not take any adverse action against any individual, house of worship, or other religious organization on the basis that such individual or organization speaks or has spoken about moral or political issues from a religious perspective, where speech of similar character has, consistent with law, not ordinarily been treated as participation or intervention in a political campaign on behalf of (or in opposition to) a candidate for public office by the Department of the Treasury. As used in this section, the term “adverse action” means the imposition of any tax or tax penalty; the delay or denial of tax-exempt status; the disallowance of tax deductions for contributions made to entities exempted from taxation under section 501(c)(3) of title 26, United States Code; or any other action that makes unavailable or denies any tax deduction, exemption, credit, or benefit.

Practical Implications
There is no publicly-known case in the United States of the IRS ever revoking the exempt status of a church for political expression in the context of a worship service. In the opinion of the author, President Trump’s Executive Order essentially describes the current practical stance of the IRS in this arena. The IRS has issued official guidance (Publication 1828 and Revenue Ruling 2007-41 are examples) in which it takes the position that endorsement of a candidate in the context of a worship service is a violation of the law punishable by revocation.  In reality, there is no evidence that the IRS enforces the law to such an extent.Even though the practical implications of the Order in this area are not immediately clear, they could become more clear if the IRS were to modify the provisions of its official guidance. In the meantime, it is reasonable to expect the IRS to continue its hands-off approach to this area of enforcement for the foreseeable future.

Not a Substitute for Legislation
While the Executive Order may represent movement toward allowing more freedom of political expression for religious organizations, it is not a substitute for legislation. Executive Orders can be rescinded by subsequent administrations. And even this Executive Order describes the new tolerance to be practiced “to the extent permitted by law.” Bills in both the House and Senate would establish the “Free Speech Fairness Act,” a change in the law that would clearly permit churches and other 501(c)(3) public charities to engage in political communications, so long as such communications occur in the ordinary course of an organization’s customary exempt activities and do not involve significant spending of funds. The prognosis for such legislation is unclear, but many believe it will be part of a larger tax reform package expected to be approved by Congress later this year.


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