The U.S. Supreme Court ruled on Wednesday that the Westboro Baptist Church's protests of military funerals are protected under the First Amendment. In addition to funeral protests, members of the church—known for signs reading "God Hates Fags"—maintain a busy schedule of demonstrations at colleges and political conventions. Like all incorporated churches in the United States, the WBC conducts the majority of its activities tax-free under the 501(c)(3) provision—which is rather odd, when you think about it, since part of the 501(c)(3)/nonprofit deal is that churches must accept restrictions on political engagement. This raises the question: Why is the Church tax-exempt?
Because they avoid direct advocacy. Nonprofits are allowed to hold opinions on public issues, of course. Only overtly political activities (electioneering, for example) are forbidden. The easiest way to lose 501(c)(3) protection is to contribute to a candidate's campaign, whether through funding, stated support, or the contribution of office space. But the WBC has never made such mistakes. While Phelps and company do target specific political figures such as Hillary Clinton and Al Gore, they keep their criticisms ad hominem (Gore is apparently a "famous fag pimp").
Likewise, although a church may devote only an "insubstantial amount" of time or resources to lobbying, the WBC is careful to eschew pronouncements on specific legislation. They stick to "we hate homos" as opposed to "we support Prop 8." Moreover, because calls to vote a certain way are subject to IRS scrutiny, the Church's statements are almost always declarative ("AIDS cures fags"), not coercive or persuasive ("AIDS cures fags; elect John Smith").
The WBC has not escaped taxation entirely. In 2008, a Kansas State Board of Tax Appeals ruled that their truck, a 2002 Ford F-150 used to transport signs to protests, was too involved in their "political activities and secular philosophy, which constitute a significant part of [the church's] picketing activities" to be tax-exempt. If an IRS lawyer really wanted to go after the WBC, he could point out that most of the 100 or so congregants are members of the Phelps family, and that a number of them work for the family's successful law firm—which makes them seem more like a home-grown activist group with a vested financial interest in political outcomes than a religious organization. If a church seems to operate for mostly nonreligious purposes (i.e., political work or personal profit), the IRS can revoke 501(c)(3) status.
If a church seems to operate for mostly nonreligious purposes (i.e., political work or personal profit), the IRS can revoke 501(c)(3) status.
Oddly enough, it may be easier to get the Church of Jesus Christ of Latter-day Saints (LDS) into tax trouble than Westboro. The Mormon Church exhorted its members to use their time and resources to support the 2008 anti-gay marriage Proposition 8 campaign in California, arguably crossing the 501(c)(3) line. Though Prop 8 protesters have organized a number of petitions demanding an investigation, the IRS has not yet moved against the LDS.
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Thanks to Miranda P. Fleischer of the University of Colorado Law School.