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Jun 2, 2008 10:02 pm US/Central
Sen. Charles Grassley Responds To John Copeland
The following is the full statement made by Sen. Charles Grassley in response to statements made by John Copeland (C.E.O. of Kenneth Copeland Ministries).
Q1. John Copeland says that Sen. Grassley's request is a violation of the church's First Amendment Rights.
A1. I believe strongly in the First Amendment protections for religious liberty. I was one of the champions of the Church Audit Procedures Act in 1983, which places a tremendous on burden the IRS to ensure that an audit is warranted. The IRS' role is to enforce the laws that are already on the books. It is the Senate Finance Committee's job to determine whether existing laws can be administered effectively and efficiently. This investigation is not about doctrine but about the ability to game the tax system precisely because of the ability to hide behind the First Amendment.
As chairman, and now ranking member, of the Senate Finance Committee, I have conducted numerous investigations of tax-exempt organizations. Starting with 9/11, I looked into the American Red Cross using funds collected for 9/11 victims for other purposes. Since then, I have looked into supporting organizations, donor-advised funds, hospitals, universities and large national organizations such as The Nature Conservancy and The Smithsonian Institution.
These investigations focused on the abuse of an organization's tax-exempt status, including the abuse of an organization's funds by its leaders, as well as the abuse of the tax break provided to those contributing to tax-exempt organizations.
A church is subject to the same tax rules as all other charitable organizations – except that it doesn't have file a Form 1023 to notify the IRS when it forms and it also doesn't have to file a Form 990 every year. All of the same compliance and enforcement concerns applicable to other charitable organizations are applicable to churches – but the IRS has a harder time enforcing the rules.
My investigation of these ministries is consistent with my prior investigations. Mr. Copeland and some of the others raise First Amendment concerns in order to cloud the issues at hand.
Courts have upheld the application of the tax code to churches in numerous instances. Some argue that the special treatment provided to churches, such as the exemption from filing with the IRS, should be a violation of the First Amendment.
Q2. Copeland believes that Sen. Grassley is targeting Pentecostal Preachers. He wants to know why other denominations have not been questioned.
A2. The six churches that I wrote to in November promulgate their doctrine in a highly visible manner – television, radio, Internet. As a result, they have drawn scrutiny from news organizations, members (former and current) of the churches, members of other churches and the general public at large. Given my work with tax-exempt organizations, it was only natural that people write to me about these churches.
When I wrote to these churches, I had no idea the ministers considered themselves "Pentecostal." I came to find out recently that one of these six may actually be a Baptist church. I didn't go about trying to figure out what each of them classified themselves as before I wrote to them. I wrote to them based on the concerns raised about their operations.
Q3. Copeland says KCM teaches the doctrine of "Prosperity Gospel." The doctrine states that God blesses everyone and wants us to be fruitful and successful both spiritually, physically and financially. What right does Sen. Grassley have to question a church's faith or doctrine?
A3. Just like I didn't know that some of the ministers consider themselves Pentecostal, I also had no idea that they preached something called the Prosperity Gospel. I hadn't even listened to any of the preachers before I sent the letters. I don't care that they may preach that God wants us to be fruitful and successful both spiritually, physically and financially. I do care, however, if the church leaders themselves are abusing church resources and the tax laws to achieve that success for themselves.
The law prohibits individuals from claiming a charitable contribution deduction for gifts made to specific individuals. The law also prohibits insiders of a tax-exempt organization, such as a minister, from receiving "excess benefits" from any transactions between the insider and the organization. Both of these issues have been alleged with these six ministries.
I understand that some of my comments may be construed as targeting the doctrine of the prosperity gospel. This is another one of these arguments that are made by those with deep pockets – particularly the lawyers. My comments are no different from the comments I made in questioning the spending practices of leaders at other tax-exempt organizations:
"I am worried about what appears to be an "anything goes" culture by the Smithsonian Secretary and his staff that allow his champagne lifestyle to be subsidized by the taxpayer… I am shocked at what the Smithsonian is spending its money on when it comes to food, flowers, alcohol and other items … I cannot explain to my constituents why they need to pay more taxes so that, to take one example, the Secretary and his direct reports can enjoy in September 2002 a dinner for $1,368, eating off china and linen rented for the occasion for $775.20 while enjoying a $300 flower arrangement and alcohol of $186.04 (Letter to Chief Justice John Roberts regarding spending at the Smithsonian Institution, February 21, 2007, as reported in The Washington Post, February 25, 2007, "Smithsonian Head's Expenses Lavish, Audit Says)
"The report shows expenses that would make for a good episode of 'Lifestyles of the Rich and Famous' – a lifestyle paid for by AU students and their parents." (Letter to Chair and Vice-Chair of the Board of Directors of American University, May 17, 2006, as reported in The Washington Post, May 18, 2006, "Senator Questions School's Governance".)
"Charities shouldn't be funding their executives' gold-plated lifestyles." ("Senator Rebukes Getty", The Los Angeles Times, June 23, 2005.)
Q4. KCM says it petitioned the I.R.S. to conduct an audit of its ministries. Although they have not heard back from the I.R.S., Copeland says Sen. Grassley can get all the information he needs from the I.R.S. once an audit is done.
A4. Just because the Copelands have asked the IRS for an audit doesn't mean the IRS is going to do one. This action raises the question of whether this was done to mislead the public. The IRS can only enforce those laws that are already on the books. The Senate Finance Committee does not have the authority to impose and collect taxes – it has a much broader mandate of judging how the laws are working. For example, the IRS can only attempt to assess whether the benefits accruing to individuals from church assets such as the profits earned from related entities, personal use of church assets, and parsonage allowances are reasonable under Section 4958 of the code.
I am interested in whether the law should be changed, such as prohibiting tax-exempt organizations to compare themselves to for-profit corporations when determining reasonable compensation for their executives. Specifically, with respect to churches, I am interested in the lack of information reported to the IRS on transactions with related entities as well as activities overseas. These are things a regular charity has to report on its 990 but a church is exempt from filing. I also wonder whether it makes sense for ministers to completely exclude from income the parsonage and housing allowance they receive. When these exclusions were provided, I doubt that Congress contemplated that a minister would have multiple parsonages across the country and overseas or that a church would deem the majority of its employees "ministers" so that everyone could get these benefits. It is the role of Congress – not the IRS – to consider these questions.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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