Hollman Report

Investigations should spur thinking on relationship between church & state

By K. Hollyn Hollman

January 2008

Despite persistent misunderstandings and deliberate distortions of the phrase “separation of church and state,” one thing is certain: most people of faith support the concept insofar as it prevents government from interfering in matters of religious doctrine and church finances. Interpretations of the Establishment Clause that restrict government promotion of religious messages, protect minority rights and prohibit taxpayer funding of religious ministries are not always popular, but few religious individuals or entities question laws that protect religious liberty by keeping government out of church business.

Proponents of separation, from early Baptist leaders to the framers of the First Amendment, aimed to prevent both government interference in and government sponsorship of religion. Government should neither advance nor inhibit religion.

The tax code’s treatment of religious entities does not fit squarely into the constitutional framework, but reflects some of the underlying principles. Churches receive many of the same tax benefits (with accompanying regulations) as other nonprofit entities. Some exemptions from filings and audit procedures, however, are available only to certain religious entities as a permissible accommodation of the need to keep government from becoming entangled in religious affairs.

Sen. Charles Grassley’s investigation of six high-profile ministries provides an opportunity and incentive to consider various aspects of the relationship between government and religious entities. As the ranking member of the U.S. Senate Finance Committee, which has jurisdiction over federal tax policy, including the policy governing tax-exempt organizations, Grassley is well known for his efforts to uncover fraud and scandal. He turned his sights on these ministries, apparently spurred by reports of lavish compensation and displays of wealth, unbecoming a nonprofit entity. As explained by Grassley’s office, the rules against private benefit serve to prevent anyone involved in such organizations from “siphoning off any of a charity’s income or assets for personal use.” To that end, Senate investigators have requested detailed information about the ministries’ organizational structure and practices.

While government investigation of particular religious groups (in this case, media ministers who preach a so-called “prosperity gospel”) inevitably raises concerns about government intrusion into religion or select enforcement, it is important to note that the First Amendment provides no blanket protection against reasonable oversight and enforcement of tax laws. Investigators should not be based upon theological considerations (such as differences of opinion over biblical teachings on wealth). Nor should Grassley ignore reports of financial wrongdoing because they coincide with a theological perspective.

Lawyers for some of the ministries will no doubt challenge the extent of the committee’s powers to conduct oversight through inquiries and hearings. They will correctly argue that the primary responsibility for tax law enforcement lies with the Internal Revenue Service, which operates under audit rules that are especially protective of churches. That protection is intended to prevent government from targeting entities based on theology, and it is reasonable to expect the Senate to honor those protections.

More worrisome, however, is that the investigation may lead to a push for legal reforms that would be more burdensome on all religious entities. As Ethics Professor Larry McSwain of McAfee School of Theology noted in an Ethics Daily piece, other outcomes are possible. The investigation may have the beneficial effect of focusing needed attention on the legal and ethical responsibilities of churches with regard to clergy income and tax reporting. It may also promote conversations in churches about the benefits of transparency.

The original deadline to respond to Grassley has passed, and it remains to be seen what will become of the investigation. Some ministries responded fully and publicly, some partially and with requests for extensions, while others refused to cooperate at all. The Committee will determine the next steps, including whether to issue subpoenas and hold hearings. We will follow the story closely as it unfolds. In the meantime, all churches should note that ensuring financial responsibility under the tax laws is not necessarily a threat to religious freedom. By contrast, ministries that take for granted or abuse legal protections for religion, while claiming an unfettered right to avoid transparency and accountability, may jeopardize the very liberty they invoke.