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Sen. John Kerry, D-Mass. (photo: cliff1066)

A religious group is charging the Internal Revenue Service with using a legal loophole to first tax nonprofits’ free speech, then run away with impunity when challenged in court.

The nonprofit Catholic Answers tasted this tactic firsthand in 2008, when its president, Karl Keating, posted a discussion on the organization’s website arguing that, according to church rules, Sen. John Kerry, D-Mass., should not be allowed to receive communion in the Catholic Church because of his support for legalized abortion.

The IRS then levied an excise tax on Catholic Answers for engaging in alleged “political speech” against then-presidential primary candidate Kerry, a tax Catholic Answers paid.

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But when challenged in court, the IRS simply refunded the tax, while refusing to change its ruling that Catholic Answers’ speech was taxable political intervention in an election. Lower courts then ruled Catholic Answers had no course of action against the IRS.

But Catholic Answers, together with the James Madison Center for Free Speech, are now asking the Supreme Court to step in, claiming this “tax-and-run” strategy allows the IRS to arbitrarily tax churches, charities and religious activists into silence, or dodge the consequences if the nonprofits fight back.

“Not only did the federal courts in this case misapply Supreme Court law, they have allowed the IRS to engage in trickery by penalizing nonprofits who exercise their right to speak, only to return the money at the last possible second,” explained James Bopp Jr., general counsel for the James Madison Center and co-chairman of the Election Law Subcommittee of the Federalist Society. “So long as the IRS is allowed to do this, nonprofits like Catholic Answers will be deterred from speaking about individuals who are political candidates in any context for fear they’ll be investigated and taxed. Nothing prevents the IRS from doing this again. And these groups now have no judicial remedy.”

The IRS initially conducted an extensive investigation and concluded that, since nonprofits should not engage in political speech, Catholic Answers should be penalized for making a “political expenditure” during an election.

But Catholic Answers argued its speech was not about the election of a candidate but about a theological issue surrounding a public official.

When challenged, the IRS returned the money on the grounds that Catholic Answers didn’t intentionally try to engage in political speech, but the federal agency refused to change its decision.

Catholic Answers, in turn, asked the federal courts to review that decision, knowing that without a change in the IRS’s position on its speech, it couldn’t make comments on figures like Kerry again without risking another investigation and tax penalty.

Yet both the California federal district court and the federal appeals court held that because Catholic Answers got its money back, the issue was resolved, and there was nothing for the courts to do.

“This allows the IRS to harass and penalize nonprofits who discuss public officials who are also running for office while leaving those nonprofits without any recourse,” the James Madison Center said in a statement. “The IRS can simply return the money at the last minute and never be sued for taxing protected speech that shouldn’t be taxed in the first place.”

A copy of the petition to the Supreme Court can be seen on the James Madison Center website.


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