IRS Grants Church Absolution Over Sermon

A liberal church no longer faces the imminent loss of its tax-exempt status because of an anti-war sermon delivered days before the 2004 presidential election, its minister said Sunday.

The Rev. J. Edwin Bacon Jr. told the congregants at All Saints Episcopal Church that the Internal Revenue Service has closed a lengthy investigation into a speech by the church's former rector, the Rev. George F. Regas.

In the sermon, Regas did not urge parishioners to support President Bush or Sen. John Kerry, D-Mass., but was critical of the Iraq war and President Bush's tax cuts.

Federal tax codes prohibit churches and other tax-exempt institutions from endorsing or opposing political candidates.

In a letter dated Sept. 10, the IRS said the church continues to qualify for tax-exempt status but that Regas' sermon amounted to a one-time intervention in the presidential race. The letter offered no specifics or explanation for either conclusion, but noted that the church did have appropriate policies in place to ensure that it complied with prohibitions on political activity.

Bacon said the letter's unclear conclusion could mean future investigation of the church and leaves a "chilling effect" on the freedom of clerics from all faiths to preach about core moral values and such issues as war and poverty.

The church has "no more guidance about the IRS rules now than when we started this process over two long years ago," Bacon said.

He demanded an apology and a clarification from the agency.

IRS spokesman Jesse Weller told the Los Angeles Times late Saturday that he could not comment on the case.

All Saints has also asked a top Treasury Department official to investigate what the church described as a series of procedural and substantive errors in the case, including what the church said were inappropriate conversations about it between IRS and Justice Department officials. The conversations were documented in e-mails the church obtained through Freedom of Information Act requests.

"In view of the fact that recent congressional inquiries have revealed extensive politicization of (the Department of Justice), my client is very concerned that the close coordination undertaken by the IRS allowed partisan political concerns to direct the course of the All Saints examination," attorney Marcus S. Owens wrote in a Sept. 21 letter requesting an investigation.

All Saints has a history of social activism dating back to World War II, when its rector spoke out against the internment of Japanese Americans.