This IRM section contains specific examination guidelines for a religious organization recognized as exempt from income tax under IRC § 501(a) as an organization described in IRC § 501(c)(3). It provides examination techniques effective in identifying and developing issues commonly encountered during the examination of religious organizations.

These guidelines provide specific assistance for examining religious organizations and are not all-inclusive.The intent is to assist not restrict the examiner in identifying issues or using examination techniques not included herein.

This IRM does not contain detailed technical information regarding IRC § 501(c)(3) religious organizations. The examiner should review the technical information contained in IRM 7.25.3. If the organization claims to be a church, the examiner must follow the procedures contained in IRC § 76ll (see IRM 4.76.7 for church tax inquiries and examinations).

Under the First Amendment, the Service cannot consider the content or sources of a doctrine alleged to constitute a particular religion, and cannot evaluate the content of a doctrine an organization claims is religious. This does not apply to rites or practices that violate federal, state or local law.

The term "church" includes a religious order or a religious organization if the order or organization is an integral part of a church and is engaged in carrying out the functions of a church whether as a civil law corporation or otherwise. In determining if a religious order or organization is an integral part of a church, consider the degree to which it is connected with and controlled by. A religious order or organization carries out the functions of a church if its principal activity is religious in nature, such as the ministration of sacerdotal functions or the conduct of religious worship. If the organization claims to be or appears to be a church, it is subject to the requirements of IRC § 7611. Refer to IRM 4.76.7, Church Tax Inquiries and Examinations – IRC § 7611, for a discussion for a congressional intent and the requirements of IRC § 7611.

IRC § 501(c)(3) provides for the exemption of organizations organized and operated exclusively for "religious" purposes. Because activities often serve more than one purpose, an organization that is "advancing religion" within the meaning of Treasury Regulations § 1.501(c)(3)-1(d)(2) may also qualify under IRC § 501(c)(3) as charitable or educational organization.

Any religious organization must satisfy the statutory requirements to be exempt under IRC § 501(c)(3).

The constitutional protections afforded religious organizations do not prevent the government from regulating conduct or actions when it has a compelling interest to do so. Thus, the First Amendment does not prevent the government from requiring compliance with general laws designed to effectuate an important governmental policy or objective even though compliance may be contrary to an individual’s sincerely held religious beliefs.

The fact that an organization is organized for religious purposes does not preclude the Service from determining if its activities further religious or other exempt purposes. Likewise, a religious organization must otherwise meet the requirements under IRC section 501(c)(3) to be exempt. During the examination of a religious organization, the examiner should consider:

IRC § 501(c)(3) does not prohibit all activity that might be described as "political" within the common meaning of the term. Rather, it prohibits an organization from directly or indirectly participating in or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements (verbal or non-verbal) made by or on behalf of the organization in favor of, or opposition to, any candidate for public office violates the prohibition against political campaign intervention.

Public forums involving candidates for public office may qualify as educational activities. However if the forums were operated to show a bias for or against any candidate, then it would be a prohibited activity, as it would constitute an intervention or participation in a political campaign.

An IRC § 501(c)(3) organization may invite candidates to speak at an event of the organization either in their capacity as a candidate or in their individual capacity other than as a candidate without being considered to have participated or intervened in a political campaign if it takes actions to ensure there is no indication of support of or opposition to the candidate by the organization. Such actions include:

Other factors to be considered are:

The prohibition on campaign activities applies only to IRC § 501(c)(3) organizations, not to the activities of individuals in their private capacity. The prohibition against political campaign activity does not prevent an organization’s officials from being involved in a political campaign. The officials must not, in any way, utilize either the organization’s financial resources, facilities, or personnel. When acting in an individual capacity, an official should clearly and unambiguously indicate that the actions taken or the statements made are those of the individual and not the organization.

Sometimes the political activity of an individual may be attributed to the organization. Such determination is based on the facts and circumstances. In particular, when officials of an IRC § 501(c)(3) organization engage in political activity at official functions of the organization or through the organization’s official publications, the actions of the officials are attributed to the organization. Use of the organization’s financial resources, facilities or personnel is also indicative that the actions of the individual should be attributed to the organization.

Officials engaging in a political campaign activity in an individual capacity outside of an official organization function or official publication of the organization may be identified as officials of the organization. In such case the individual must make it clear they are acting in their individual capacity, they are not acting on behalf of the organization and their association with the organization is given only for purposes of identification.

An IRC § 501(c)(3) organization may act or communicate with others through the authorized actions of its employees or members. The actions of individuals will be attributed to the organization, if there is an actual or apparent authorization by the IRC § 501(c)(3) organization. In general the principles of agent will be applied to determine whether an individual engaging in political activity was acting with the authorization of the IRC § 501(c)(3) organization. Generally, the actions of employees performing within the context of their employment will be considered as being authorized by the organization.

Acts of individuals not authorized by the organization may be attributed to the organization if it explicitly or implicitly ratifies the actions. A failure to disavow the actions of individuals under apparent authorization from the 501(c)(3) organization may be considered a ratification of the actions. To be effective, the organization must disavow the action in a timely manner and take steps to ensure that such unauthorized actions do not reoccur.

In 1987 Congress enacted IRC § 4955, which imposes an excise tax on political expenditures of IRC § 501(c)(3) organizations. The regulations indicate that the restriction on interventions in political campaigns remain an absolute prohibition. However, the preamble to IRC § 4955 regulations and the legislative history of IRC § 4955 indicate that, based on facts and circumstances, such as the nature of the political intervention and the measures the organization has taken to prevent recurrence, the Service may exercise its discretion to impose a tax under IRC § 4955 and not seek revocation.

If the examiner determines the organization sponsored a public forum or invited candidates to speak, the examiner should review all publicity regarding the forum, including transcripts, if available, to identify any bias toward any candidate.

Any IRC § 501(c)(3) examination of a religious organization not claiming church status should serve the following examination objectives in addition to those in IRM IRM 4.76.3:

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Review the organization’s articles of incorporation or other creating document to ensure the organization is organized exclusively for IRC § 501(c)(3) purposes and its assets are permanently dedicated to IRC § 501(c)(3) purposes.

Review the minutes of the Board of directors, brochures, and other publications to ascertain whether the organization:

Review financial books and records, contracts and agreements to determine if the organization engages in any of the following kinds of transactions or activities:

Ensure the organization’s activities do not promote a substantial nonexempt purpose.

Publishing literature is an important method of disseminating religious views. Publishing may also be a business operating in competition with commercial enterprises. The following are some of the items to consider in determining whether or not the activity is an unrelated business:

Broadcasting is an activity analogous to publishing. Examiner should determine: