On the legality of the Mormon Church’s contributions to the Yes on 8 campaign

FSU Law Professor Brian Galle has written a paper in the Northwestern University Law Review about the legal issues surrounding the immense efforts made by the Mormon Church to influence the outcome of California’s Proposition 8. In the run

Did the Mormon Church violate the terms of its charitable tax status as specified by US Tax Code da?

Did the Mormon Church violate the terms of its charitable tax status as specified by US Tax Code da?

up to the November election, that Church openly and strongly encouraged members to give time and money to the effort to pass Prop 8:

The LDS Church leadership announced its support for Proposition 8 in a letter that was to be read in every Mormon congregation, in which leaders strongly intimated that church members should donate time and money to supporting Proposition 8.  During the weeks leading up to the vote, church officials took part in a satellite broadcast “discussing the LDS Church’s doctrine of marriage and describing the church’s participation in the Protect Marriage Coalition, which wants voters to approve the initiative.”  The broadcasters urged viewers to contact “friends, family and fellow-citizens in California” and encourage them to support the initiative.  The Church reportedly “tapped every resource, including the church’s built-in phone trees, e-mail lists and members’ willingness to volunteer and donate money.”  It also ran a website—preservingmarriage.org, labeled an “official website” of the Church—with content including videos supporting the ban.

As a result, Mormons donated up to $25 million and thousands of hours to the Yes on 8 campaign. Since the Church itself did not reportedly directly contribute too much actual cash to the campaign, the issue becomes one of the added value of its efforts to get others to contribute and lobby for Yes on 8. As a § 501(c)(3) charitable organization, lobbying is strictly limited; Galle reminds us that 

 “no substantial part” of a charity’s activities can consist of “propaganda, or otherwise attempting, to influence legislation.”

The “substantial” part is also the tricky part. Galle cites a few cases that set “substantial” to be between 5% and 10% of an organizations expenditures, but in this case it’s pretty hard assess the value of the LDS church’s broadcast of the yes on 8 message to its members. But whatever the value of that service (which is certainly very large), it is odd and problematic that the law apparently connects the “substantial part” to the relative size of the organization engaging in the lobbying: 

The implication is that a sufficiently large entity could spend billions of dollars without violating the prohibition against “substantial” lobbying efforts.

That view seems to strain the plain meaning of “substantial.”  It is hard to believe that a charity could outspend its opponents by a large margin and still have engaged in insubstantial lobbying.  Nor is it clear why charities with large budgets should be free to exert political influence while small charities are condemned to be ineffectual. 

To support the idea that Congress did not have such a biased definition in mind when it wrote the statute, Galle notes that charities that are looking to engage in more lobbying can elect to be classified as a § 501(h) charity, which

I'd like to see California challenge the LDS Church in Federal Court.

I'd like to see California challenge the LDS Church in Federal Court.

permits an organization to make lobbying expenditures without fear of penalty so long as the organization stays below its statutory expenditure cap.  The cap increases in proportion to the charity’s revenues, but maxes out at $1 million no matter the size of the organization.

This option was created for charities that intend to do more lobbying than a traditional § 501(c)(3), yet expenditures related to lobbying are still cut off at a rather modest $1 million. It seems clear, then, that Congress felt that more than $1 million dollars worth of lobbying was too “substantial,” even for a charity that knew a priori that it would be engaging in enough lobbying to warrant classifying itself as a § 501(h) organization. In Galle’s words:

If (c)(3) offers an opportunity for massive expenditures by massive organizations, then the § 501(h) safe harbor is useless for just those organizations that are most in need of assurance—those that invest a large sum in lobbying.  Either Congress did not believe that such large expenditures were permissible under the “substantial” standard, or it did not want to encourage large expenditures by offering safe harbor to them.

Galle hedges fairly conservatively in his conclusion about the possibility of actually winning a legal battle with the Mormons. But his legal reasoning is pretty strong, and I believe that it presents a major challenge to what appears to be an abuse of US Tax Code § 501(c)(3) by the LDS Church. The capping of § 501(h) lobbying at $1 million gives fairly obvious insight into how Congress intended to regulate charitable lobbying, and it is not a great leap to imagine that actions that yielded $25 million or more in contributions (and which clearly influenced the outcome of the election itself) were above and beyond what Congress felt was “substantial” for a § 501(c)(3) organization.  I would be encouraged to see California take on the Mormon Church regarding this issue, because it would give us a chance to right some serious wrongs. While a ruling against the Mormons won’t undo the damage done by that group on November 4, 2009, it would go a long way towards shoring up the separation between church and state, as well as mitigating the deleterious effects of allowing any large § 501(c)(3) organization to engage in essentially limitless lobbying (which are also explored in Galle’s paper, but I didn’t really touch on…check it out!).  

h/t Concurring Opinions

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