News and analysis
December 05, 2012

Religious Leaders Tell Congress No New Laws Are Needed to Curb Abuse

Religious leaders sharply rejected any federal efforts to impose new laws or regulations on them, saying in a formal report to Sen. Charles Grassley that more effective administration of today’s rules and donor education would be the best way to curb any possible wrongdoing.

The report came after Sen. Charles Grassley asked a panel of religious leaders to examine concerns he had about possible tax abuses by television evangelists.

“We cannot allow the behavior of a few outliers in the religious and nonprofit sector to threaten the freedoms of those who are not the problem—those who are doing the good work,” Michael Batts, an accounting expert who headed the commission that prepared the recommendations, said in a statement. “Federal policy should continue to encourage the public to financially support such organizations and it should not burden them with harsh or excessive legislation or regulation.”

But Senator Grassley suggested that the report had sidestepped some of the tougher issues that he had raised about how to curtail problems like excessive spending on salaries and perks.

The Commission on Accountability and Policy for Religious Organizations said some proposals that had been floated by the senator’s staff—such as relaxing rules that exempt churches from filing tax documents or specifying who can qualify for clergy tax-free housing allowances—could violate constitutionally protected religious freedom, while others were simply unnecessary.

Report Fails to Deal With 'Thornier’ Issues

The commission was set up by the Evangelical Council for Financial Accountability, a group that represents religious organizations that agree to meet certain standards, following a three-year investigation by Senator Grassley into six Christian media ministries. Mr. Grassley requested information about their expenditures, compensation practices, and board structures—a response to news coverage and complaints from the public about their spending habits.

But the investigation was stymied when only two of the ministries—the Joyce Meyer Ministries and the World Healing Center Church—provided complete answers to the senator’s questions. His staff than issued a report raising a host of questions about whether tax rules affecting religious organizations should be tightened, and Senator Grassley asked the evangelical council to coordinate an effort to answer them.

In his response to today’s report, Senator Grassley said he appreciated the need to “shut down abuse without harming the many aboveboard organizations.” However, he added in a statement, “The report gives less attention to resolving some of the thornier questions, such as how to build accountability from entities that exploit vagueness in current laws and regulations for individual benefit rather than the greater good.”

The commission included leaders from Christian, Jewish, Muslim, and other faith groups, along with legal and nonprofit experts. Among its recommendations:

• The rules that allow charities to take certain steps to show that executive compensation is not excessive should be preserved. It rejected suggestions from the Grassley staff report to toughen that standard and to impose excise-tax penalties on board members if they have “reason to know” they approved an overly high sum..

• The IRS should improve tax forms, worksheets, and guidance to clarify rules that allow clergy members to exempt housing allowances from income tax. No action should be taken to limit the dollar amount of the allowances or who can receive them.

• Churches should not engage in abusive financial activities just because they are exempt from filing Form 990 tax documents, and donors should seek the information they need from churches to know they are giving wisely. Congress should not require churches to file Form 990s, annual “e-postcards,” or any other tax information or require new entities to notify the IRS they are setting up as churches.

• The IRS should not, as floated by the Grassley staff report, set up an IRS advisory committee for religious organizations or consult any third-party oversight organization like the evangelical council when deciding which churches to audit. That could lead to charges of religious favoritism from those who felt underrepresented on such bodies, it said.

• The IRS should provide better guidance about when “love offerings,” or payments provided by individuals to clergy members, are taxable.

• Organizations that file Form 990s should be able to identify “highly sensitive information” that the IRS should shield from public view because it would threaten the organization’s safety, property, or employees.

Political Campaigns

The commission said it would present a separate report next year on another issue raised by Senator Grassley—whether to change rules that bar churches and other charities from getting involved in political campaigns.

Senator Grassley said that if Congress follows through with plans to overhaul the tax code, many of the issues raised in the reports compiled by his staff and the commission “will be ripe for review.”

In the meantime, he said, potential donors “can elicit some accountability” by taking the “commissions’s advice to request financial data from organizations before donating.”

Send an e-mail to Suzanne Perry.