Christian Coalition Denied Tax-Exempt Status by IRS

The Christian Coalition, which has helped steer the Republican Party to the right for the last 10 years, has lost a decade-old effort to win tax-exempt status from the Internal Revenue Service.

The development is the latest blow to the coalition’s once-vaunted political clout, raising questions about the group’s future influence.

The coalition filed for a 501(c)4 tax-exemption shortly after it was founded in 1989. That status gives nonpolitical organizations such as the NAACP and American Civil Liberties Union certain tax exemptions, but prohibits them from attempting to influence voters.

But critics have long questioned--and federal officials have long debated--whether the group was crossing the line from social welfare to political organization when it supported Republican candidates.

In the meantime, the coalition conducted business as if it had tax-exempt status, growing in political and financial influence across the nation. At its peak in 1996, it raised $26.5 million and distributed tens of millions of voter guides in churches to support GOP candidates. Since then, however, its fortunes have tumbled with a drop in contributions, high turnover among its top officials and a reduction of its influence with congressional leaders.

The coalition, which is based in Chesapeake, Va., could owe back taxes. An Associated Press report estimated that it might owe taxes of $300,000 to $400,000. But some tax experts said that a liability that high is unlikely because the group tended to spend more than it collected and would not owe taxes unless it had reported profits.

Mike Russell, a spokesman for the coalition, declined to comment on the status of the group’s request for protection from tax laws. He said that the group’s board of directors decided “roughly two months ago” to withdraw its application after “more than 10 years of a fruitless dialogue with the IRS. I don’t know of any organization--left, right or center--which has to have gone through these kind of hoops. That’s one of the reasons the board has decided to pull the plug.”

An IRS spokesman declined to comment on the status of the coalition’s application, citing confidentially laws.

Sources familiar with the matter said that the IRS first denied tax-exempt status to the group last year in a ruling kept under wraps pending appeal. The coalition was notified recently that it would lose the appeal and decided to withdraw the application, the sources said. Contributors were warned of the impending decision earlier this year and urged to increase contributions to wage a fight to change the agency’s mind.

Barely masking their glee, critics said that they have long complained about the coalition’s skirting of federal tax laws.

“In effect, the Christian Coalition was doing PAC [political action committee] activities . . . to get around the limits that a PAC has to adhere to,” said Carole Shields, president of People for the American Way, a liberal Washington lobbying group. “There will be a lot of Republican candidates who aren’t going to be happy about this because they were hoping to receive the same kinds of benefits.”

In a statement released Thursday, the coalition said that it was reorganizing its operations into two parts--one with existing tax-exempt status to continue its voter education programs and a for-profit group that will support political candidates openly. “Christian Coalition’s board of directors has authorized a sweeping reorganization of its corporate structure to accomplish a much more effective and extensive political mission,” the statement said.

Under the new structure, the for-profit arm will be called Christian Coalition International. It will raise money for political campaigns, make contributions and endorse candidates--all activities forbidden for organizations with tax-exempt status.

The existing Texas chapter of the Christian Coalition, which has tax-exempt status, is being renamed Christian Coalition of America and will act as the national group responsible for voter education programs, including the distribution of voter guides in churches on the Sundays before elections.

Barry Lynn, executive director of Americans United for Separation of Church and State, a Washington-based activist group, condemned the coalition for what he called an attempt to evade tax laws with its new structure. “This sounds to me like a shell game that you would find at a second-rate carnival,” he said in an interview. “It’s an effort to do damage control to the most devastating blow any government agency has dealt to the Christian Coalition.”

Lynn said that his group will watch closely to see if the Christian Coalition of America violates tax laws, saying that “this new group . . . is suspiciously just like the old group.” But, he said, “I don’t think the average pastor would touch one of their fliers, if he had a 20-foot pole. I think more and more American churches are going to shun them because those churches may lose their tax-exempt status or the ministers may be fined if it turns out the Christian Coalition is doing something illegal.”

Other observers, however, said that it is premature to predict the death of the Christian Coalition or the religious right’s influence in Republican Party politics.

“Religious conservatives will continue to play a major role,” said Marshall Wittman, director of congressional relations at the Heritage Foundation, a conservative think tank in Washington. “Some organizations, like perhaps the Christian Coalition, will recede and others will grow but religious conservatives will always have a place at the table in the Republican Party.”

Wittman said that losing tax-exempt status is one in a series of downward moves affecting the coalition over the last three years. “It’s been a long process that began when Ralph Reed left the organization,” he said, referring to the group’s politically savvy former executive director who left in 1997. “With the loss of Ralph, they lost the vision and the organizational prowess that they had during the halcyon days of 1993 and 1994.”

Reed told Associated Press that “people are most concerned about whether we were out there fighting the good fight. They don’t care about names.”

The coalition, founded by television evangelist and past presidential candidate Pat Robertson, grew in political power as GOP lawmakers saw their influence expand from city halls to state legislatures to Capitol Hill. At its peak, the coalition excited millions of conservative, churchgoing voters and helped propel a largely overlooked congressional backbencher, former Rep. Newt Gingrich of Georgia, to the House speakership in 1994.

“The religious right and the Christian Coalition have been victims of their own success,” added Wittman, who worked with Reed at the coalition in the early 1990s. “The expectations of the ’94 revolution were not met. The Congress . . . didn’t eliminate the Education Department and there was no school prayer amendment. Those setbacks caused disappointment among the ranks.”