by Bennett McPhatter, USMC Veteran
Epilogue by Warren G. Lamb, USMC Veteran, FSM Senior Advisor
Disclaimer: This article represents the opinion of the author and is not certified tax advice, legal counsel or the opinion of Fallen Soldiers March.
Broadly speaking, you can form your church under the protection and rights of the Constitution of the United States of America, or you can form your church under the statutory laws and regulations created by the U.S. Congress. Your choice will impact what your church can and cannot do.
In 2018, I served as finance chair on the council of my local United Methodist Church. I learned more during that time about how the church was organized and the restrictions placed on certain activities, like specific donations, than I had in the time from 1989 when I was first married there until I became finance chair. I think I had been like many congregants who go to hear the Word of God, make a donation, and never really wonder what happens after that. I certainly didn’t wonder about such issues as church organizational structure or the messages I might not hear because of speech restrictions imposed by the federal government. I think there are still many who believe, as I did, that their church has no such restrictions. I also learned of government restrictions on "directed" donations, financial reporting to the IRS, and other restrictions or requirements that troubled me as a matter of conscience.
As finance chair, one of my duties was to review and approve, disapprove, or bring to a vote expenditures of church funds. A family had made a donation by check and directed that the funds be used to help a specific individual who was almost eighty years old and well known to the church and community as an honorable and hard-working man who was struggling financially with a few short-term issues. Initially, I approved the directed donation and expenditure, but to my dismay, I was informed that the donation would need to be rejected because directed donations were not allowed under the 501(c)(3) rules. I was told, "There’s nothing we can do because we can’t jeopardize our 501(c)(3) status." The result was that the check was returned, and the church did not help that man. That bothered me. It bothered me when it happened, and then it kept bothering me in the days and weeks after because I felt strongly that government has no place in telling "my" church, or any church, what it can or cannot do with donated funds in fulfillment of its Christian mission under God. I thought that must conflict with our First Amendment protection of religious liberties . . . "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof."
Isn’t a prohibition on free exercise precisely what’s happening here? Shouldn’t free be taken in the literal sense to mean we’re free to exercise as the church sees fit, free of any restrictions or requirements from government? It was then I realized that my church wasn’t operating as a free church under God, but a restricted church under government. In this situation, a Christian made a donation to the church with intent to help a man in their community, an elderly Christian man who needed their help. But the church interfered. Yes, the church, my church, interfered on orders from the government. The church dutifully complied on the basis that it was following government regulations. Again, I thought that must be antithetical to the constitutional protections of the First Amendment. Why didn’t anyone say that? Why were church leaders so willing to let government dictate the terms of their free exercise of religion? There was a remarkable absence of discussion or logical questions like, "If the government can dictate the terms of my free exercise, then is it really free exercise?" I was shocked and upset. How was the government in a position to restrict the good works of my church, and where did they get the authority to do so?
In the months that followed, I began to research what I saw as a contradiction between those restrictions and the Constitution. I sought to find that answer in black-and-white, written in the law, so I could better understand the source of the contradiction. My approach was to "map" the law, step-by-step, following each reference with respect to our rights as Christians. My personal goal was to demonstrate to the church council that the directed donation could indeed be made, leading to a revision in the council’s interpretation of the 501(c)(3) restrictions. After all, I thought, it’s clearly unconstitutional for government to interfere, so it should be easy to prove.
Much to my chagrin, my own analysis proved that the government restrictions on my church were completely within the Constitution. That’s right, the restrictions are constitutional—and not only that, but I also found a far greater number of restrictions on speech and other rights in addition to what I’d learned through personal experience with the rejected donation. Worst of all, my analysis led me to the conclusion that my church had given away its rights under the Constitution and that the First Amendment no longer applied to the speech and activities of that church because the church itself (founders, trustees, etc.) voluntarily surrendered those rights through a contractual relationship with the federal government. By submitting IRS Form 1023, inter alia, as a request to receive government recognition in the form of a "Letter of Determination" for the church, allowing it to partake in certain benefits afforded by the 501(c)(3) status, the church had entered into a contract surrendering their antecedent rights to do whatever a natural man or woman can do. Even not knowing who was responsible for making that 501(c)(3) election, (because it was decades ago) I trust that those church members were of good conscience and that, at the time, they did not know of the "strings" attached to that bargain, strings that supplanted the church’s constitutional rights and replaced those rights with only those granted under the 501(c)(3) legislated statutes.
Analysis led me to the belief that, quite craftily, the government used authority under one area of the Constitution (Article 1, Section 10, Part 1), which prohibits government from "impairing the obligations of contracts" to make a contract of their own, offering provisions detailed in the form submission, the 501(c)(3) statutes, and a myriad of related statutes, regulations, and judicial rulings. I now see this and certain other government offers as a sort of honeypot existing almost invisibly in an intricate system that only ensnares those attempting to act on constitutional rights that no longer exist in that contractual web of control.
Colloquially known as the Johnson Amendment, this set of legislated statutes removed, through legislative authority, rights that had been enjoyed by churches since the founding of our great nation. Government restrictions on free speech and other rights for all 501(c)(3) entities, including churches, began with this law from Congress, named for then-Senator Lyndon B. Johnson of Texas, who introduced it in July 1954. The Johnson Amendment is a provision in the U.S. tax code (Title 26) that prohibits all 501(c)(3) non-profit organizations from endorsing or opposing political candidates. Section 501(c)(3) organizations are common throughout the United States, ranging from charitable foundations to universities and churches. Sadly, the amendment survived under the updated and renamed "Internal Revenue Code of 1986" during the Reagan administration and continues to this day.
The 501(c)(3) contract clearly states this: "An organization is not organized exclusively for one or more exempt purposes if . . . [they] . . . directly or indirectly participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office." (See Cornell Law https://www.law.cornell.edu/cfr/text/26/1.501(c)(3)-1.) So, when you sign your church up to that contract, you agree that your church will follow those rules. It’s important to also point out that certain terms within those provisions are not well defined. Thus, the administrators and regulators in the IRS are the deciders on a case-by-case basis. Is that a recipe for more freedom of religion or more control of religion?
Ask yourself this: Does Congress have the authority to legislatively repeal rights under the Constitution? Clearly, the answer is no because if they did, the Constitution itself would be meaningless. So, what’s really going on here? There’s a maxim of law that states, in essence, that "the creator controls the creation," and that principle can be applied here. This area of legislation that we call the "501 statutes," including without limitation the 501(c)(3) statute, are all created by Congress through their legislative authority. Stated differently, these statutes authorize the creation of certain types of entities, with each having specific benefits, obligations, and restrictions. What Congress creates through legislation, it also controls through legislation.
In a 501(c)(3) organization, who is the creator? The answer lies in the enabling law’s "jurisdiction" used to create that entity. Clearly, Congress created the 501(c)(3) and other 501 organization types under federal jurisdiction, so they are the creator, and they make the laws for these types of entities.
In contrast, who is the creator of an organization formed by right under the Constitution? Since our rights are endowed by God, our Creator, then exercising our right to form a church is a protected right between God and us. The Constitution exists to protect and preserve our rights, and the IRS is nowhere to be found in that relationship.
There exists no law or requirement for "we the people" to ask Congress for permission to form a church, and the government has no authority to interfere in that right. In fact, it’s just the opposite. The government has the duty to protect our rights. It is a protected right entirely within the discretion of the people forming their church to do it according to their own conscience, under God. This is undisputed under the constitutional provisions regarding, inter alia, freedom of religion and freedom of association.
Simultaneously, under the Constitution, the government makes an offer to contract. The government makes it well-known through legislation, documentation, instructions, and by other methods of encouragement that they would like you to form your church under the rules established by Congress in the 501(c)(3) statutes. This is what I call "the offer," and that’s all it is. It’s an offer to contract under the terms originally offered by a 1950’s Congress and amended from time-to-time. But taking the government up on its offer limits your preexisting rights and signs you up to new obligations.
We must remember that Congress has no authority to create laws in opposition to the Constitution. Although they sometimes do and get overturned by the courts, no member of Congress publicly claims the authority to do so, as it would violate their oath to uphold and defend the Constitution. They do, however, have the authority to legislate into being new types of fictional entities and to control the rules and regulations for those fictions under law. The creator has dominion over the creation.
One of our most important freedoms is the right to contract. The Constitution phrases it this way under Article 1, Section 10, Part 1: "No State shall enter into any treaty, alliance, or confederation . . . or law impairing the obligation of contracts." This means that, with few exceptions, a written contract between the parties is the law between the parties. That’s a great freedom, but it must be exercised carefully and with full knowledge (meeting of the minds between the parties).
When you submit IRS Form 1023, you enter into a contract that waives rights on behalf of your church or ministry. When you ask the government (IRS, etc.) for permission to do something according to an offer that they are making, you are agreeing to a deal, and it’s critical that you understand the terms.
Ostensibly, the offer they are making is to grant tax-exempt status for your church if you will only agree to stay away from political or legislative issues. But the offer itself is rooted in deception because a church is mandatorily tax-exempt, so they’re offering your church something it already has and presenting it as a perceived benefit under their contract. Again, tax-exempt status for a church is mandatory under the law.
So, if it’s mandatory, then why would they want churches to be organized as a 501(c)(3)? Could it be about control? Some may think it’s done to prevent churches from leading on moral issues when it comes to our nation’s politics and law. Whatever the reason, that’s the effect it has on the church.
Consider the following: Your church preaches that abortion is against God’s law, but you must censor yourself from saying things like this: Our church has researched the candidates, and "John Jones" is the most pro-life candidate, so I encourage all of you who are pro-life to vote accordingly.
Oops. You’ve just violated the terms of your restrictive 501(c)(3) contract and are now at risk of losing your tax-exempt status with the IRS (which you didn’t need permission for in the first place). Of course, there are countless examples of what you must censor, and this is clearly evident in the imprecise language using subjective terms like "support," "opposition," "attempt," and "influence"—terms so broad that any judgement call is left to the discretion of the regulating agency (the IRS).
The 501(c)(3) statutes for a church are an ongoing deception creating a chilling effect on speech within the church, where leaders and members alike must censor their own speech and activities under fear of losing something that, for many, is critical to the church’s continued existence.
The offer they are making is detailed in the rules and regulations associated with 501(c)(3) entities, and the IRS Form 1023 is your voluntary election to enter into the contract. So, it’s important that you enter into the contract with full knowledge of any rights, responsibilities, and restrictions; otherwise, you may find yourself in breach of contract, which the IRS can use to revoke your Letter of Determination.
Do you agree with the direction our nation is now headed? The government has the power to destroy a 501(c)(3) church and would have the strongest incentives to do so just when the free speech of the church is most needed in the public square.
In the case of Branch Ministries, Inc v. the IRS [Civil Action No. 95-0724] (https://www.irs.gov/pub/irs-utl/branch_ministries.pdf), we learn about some of what can happen when a 501(c)(3) church violates the dictates of its government masters—dictates in the form of restrictions and obligations that they, perhaps unknowingly, agreed to by contract. In this case, four days before the 1992 presidential election, Branch Ministries, a 501(c)(3) tax-exempt church located in New York, placed public advertisements urging Christians not to vote for then-presidential candidate Bill Clinton because of his positions on certain moral issues. (Isn’t that what a Christian church is supposed to do? Aren’t they supposed to comment on moral issues and advise their congregation accordingly?) The IRS concluded that the ads violated the statutory restrictions on organizations exempt from taxation, and for the first time in its history, it revoked a bona fide church’s tax-exempt status because of its involvement in politics. (Think about which is the higher law, statutory or constitutional. Is Congress or God the higher law?) The church and its pastor, Dan Little, challenged the revocation on the grounds that (1) the Service acted beyond its statutory authority, (2) the revocation violated the church’s rights to the free exercise of religion guaranteed by the First Amendment and the Religious Freedom Restoration Act, and (3) that it was the victim of selective prosecution in violation of the Fifth Amendment. The court held that the church’s ". . . objections were without merit . . ." and the decision was upheld on appeal.
It pains me to admit that the court got it right. Branch Ministries lost before it even filed the complaint against the IRS. They lost the case because they were arguing about the wrong jurisdiction. Jurisdiction is everything when it comes to protecting our rights, and we would do well to be aware of any voluntary elections that change jurisdiction. You see, Branch Ministries was making a constitutional argument without realizing that the court was applying that argument to a completely different jurisdiction under statutory law within the provisions of the 501(c)(3) government contract. That’s why the church’s objections were without merit.
When I was a young Marine, I was involved in a training exercise with the British RAF and Royal Marine forces. During our off time, we competed in sports: football, rugby, racquetball, and squash. Can you imagine how that went? We got crushed in rugby and squash because we didn’t know the rules, and that was a lesson to us. In rugby, you can’t stand around thinking the play is over because the ball hit the ground—because it isn’t. Rugby has different rules than American football. The rules of American football don’t apply when playing rugby because it’s the wrong set of rules or "jurisdiction."
It’s the same thing here. You can’t go into a court and think you’re playing by constitutional rules when you’ve already agreed to play by the rules laid out in the 501(c)(3) contract. If you do, you lose. Ask yourself this: Is it in the government interest to control free speech in a way that chills church participation and leadership in the public square? What kind of chilling effect do these types of court decisions have on the speech, actions, and activities of churches all over our nation? Did the Branch Ministries decision effectively give the government more control over churches?
If you’re prone to the pragmatic approach, you may consider speaking with a Christian who has served on a church council or as a pastor and ask them how seriously they consider the 501(c)(3) regulations in everything they say and do on behalf of their church.
Government has wormed its way into the position of an interloper between God and His church.
Consider this: Are you asking to form a church and waiting for permission from your government, or are you notifying your government that you have formed a church? In the latter, since you are exercising a right (not asking permission), there can be no strings attached because to do so would necessarily interfere with the right you chose to exercise. That’s what it means to be free, and you are free to exercise your rights.
Most churches that learn about the court’s ruling in the Branch Ministries case along with other subsequent rulings against a 501(c)(3) church are frightened into submission. They fear the same could happen to them if they speak out on their own matters of conscience. Others are just "following the rules" without pausing to think about their contradiction of our natural rights.
We must continually root out contradictions to our God-inspired Constitution by not accepting contradictions without explanation because only then can we make an informed choice. If we allow fear, ignorance, or blind compliance with government to take hold in church leadership across our nation, we are lost.
Each Christian church must reclaim its role as a moral leader, saying whatever needs to be said to serve as a guiding light in the face of any evil befalling our people—Christians and those who would become Christians. We must speak the truth realized through thoughtful prayer and placed on our heart by the Holy Spirit and as taught in the Bible, or our Christian foundations will continue to erode and our nation will perish.
If our church leaders acquiesce to government and abandon the words of Jesus as documented in Matthew 5:13–16, we will cease to be the salt of the earth and the light of the world as Jesus has commanded of us. We must let our light so shine before men that they see our good works and glorify our Father in heaven. There is no place for a government/IRS-enforced muzzle on our speech, activities, good works, or any decisions within our church.
Those of us forming and running a Christian church should humbly learn from past mistakes. Proverbs 24:16 teaches us to learn from our mistakes and the mistakes of others: "For a just man falleth seven times, and riseth up again: but the wicked shall fall into mischief" (KJV).
We perish for our lack of knowledge. Hosea 4:6 teaches us the critical importance of knowledge, especially in matters related to following God’s Word: "My people are destroyed for lack of knowledge: because thou hast rejected knowledge, I will also reject thee, that thou shalt be no priest to me: seeing thou hast forgotten the law of thy God, I will also forget thy children" (KJV).
Clearly, Christians who are filled with the Holy Spirit and feel compelled to start a church, ministry, or faith-based organization are being duped in large numbers into forming a 501(c)(3) organization without full knowledge of what that means and are operating under the false presumption that their constitutional rights and, by extension, the rights of their church under God will be protected.
We formed our government to exist only to protect our life, liberty, and property. Our rights, under God, are a form of property given to us by God himself and are recognized as such by our nation’s founding documents. I write this article with profound prayer that my Christian brothers and sisters do not surrender our precious property, given by God, because of our lack of knowledge.
The mode of control is revealed, and it need not be effective on those who choose to keep the rights of their church intact. Indeed, it is the very nature of deceptive information that, once exposed, has no more power over you or your church.
I use that word deception deliberately and with purpose, knowing that the obvious rebuttal is "How can it be a deception if it’s all there, written for all to see, and available online and in print?" Of course, that’s true. But the deception lies not in the text itself, but in the sheer complexity of it all and the broad promotion of 501(c)(3) entities for churches without a more obvious disclosure that in the contract, you will lose important rights that you already have in exchange for perceived benefits.
The complexity and promotion serve as an obfuscation of the complete truth. When I revealed the 508(c)(1)(A) entity to my CPA of over twenty years, he first validated my analysis and then told me that he had never before heard of that type of entity. This comes from a sophisticated and experienced CPA of nearly forty years, working for a large firm in Maryland. He regularly deals with complex business structures and knows the non-profit regulations as well as anyone I’ve found. Yet, he didn’t know about the 508(c)(1)(A) and neither did a Virginia tax attorney at a different firm whom I had spoken with just days before. It’s simply not well known.
Who in their right mind would enter into a contract limiting their rights in exchange for something they already have? That’s like making a contract and allowing the other party to reach into your pocket for the money to pay his obligations to you under that same contract. Nobody would do it, yet so many have entered into a similar arrangement with their 501(c)(3) church entity and, while not dispositive, it may be persuasive to many who made that choice without full disclosure, knowledge, or a "meeting of the minds," as required to form a contract in the first place.
One fundamental difference is that a 501(c)(3) is formed under federal law and a 508(c)(1)(A) is formed under state law. That’s a critical shift from federal to state jurisdiction. It’s also important to know that all states are not the same in their implementation of the protection of church rights, but owing to the Interstate Comity Clause (Constitution: Article IV, Section 2, Clause 1), you can form your church in any state your choose. This is evident when thinking about an entity like an LLC, which you can form in Delaware, Wyoming, or any other state and be protected nationally. The same is true with a church, ministry, or faith-based organization. You can even acquire an apostille, making your church recognized by signatories to the Hague Convention of 1961 in accordance with private international law, including over 80 nations. (Cite: https://www.hcch.net/en/instruments/conventions/status-table/)
If you feel compelled to keep government out of your church and wish to operate according to your conscience with a full set of rights, I encourage you to research the 508(c)(1)(A) church entity for yourself. It is the remedy to the 501(c)(3) that came fifteen years after the 1954 Johnson Amendment. It came in 1969 when changes, owed to litigation, were codified into law specifically acknowledging that a church has (and always did have) all the benefits of a 501(c)(3) entity, by nature, to include providing tax-deductible receipts for donations, and makes clear that a church need not surrender rights in the process. Review section 508(a) regarding 501(c)(3) status and carefully evaluate the exception language, which indicates that a 508(c)(1)(A) church does enjoy 501(c)(3) status, including the ability to issue tax-deductible receipts to donors, without the surrendering of rights under the Constitution.
Indeed, this had to happen because the Johnson Amendment had been passed under legislative authority, which is subordinate to the people’s rights under our Constitution. Congress simply does not have the power to legislate away our rights, but it sometimes takes years of litigation to realize the remedy when they do—which, for this matter, was the newly legislated 508(c)(1)(A) statute recognizing the rights that had been there all along.
Ask yourself this: Had Branch Ministries been formed under a state jurisdiction implementing the 508(c)(1)(A) statutes, would the IRS have had standing to question their actions?
If you are planning to form a faith-based organization, you can directly create a 508(c)(1)(A) with mandatory tax-exempt status and do not need to ask permission from the IRS or anyone in government. For those with an existing 501(c)(3), there is a process to convert your church, ministry, or faith-based organization to a 508(c)(1)(A), removing the government interloper from their position between the church and God.
Real freedom lowers the burden on your resources, so you can spend more time and money on your church mission:
If you’d like to find out more, I encourage you to do your own research. I’m happy to recommend a credible third-party service organization to help you start or transition to a 508(c)(1)(A) church, operating under the full rights and protection preserved by our Constitution.
by Bennett McPhatter, USMC Veteran
Epilogue by Pastor Warren G. Lamb
Think of the scene in the old Western movie where the posse is chasing after the bandit and they reign in their horses, bringing to a sudden stop their pursuit because the bandit has entered the door of a church. Even back then—and even in Hollywood—was the recognition of the change in jurisdiction once a person sets foot inside a church.
It has been a great many years now since I first ran across the distinction between a free church and a state church. What quickly became clear was that hundreds of thousands of believers have, in good faith, inadvertently changed their governance from God to the IRS by filing for recognition by the IRS as a 501(c)(3). Granted, there was a 15-year window when the distinction in the law was not there. Yet, since 1964, the 508(c)(1)(A) exception to the 501(c)(3) filing has been in place.
It has been almost nineteen years since Truth in Love Fellowship (the fellowship I pastor and that is the umbrella for our auxiliary ministries) was formed as a Christian free church, fully in keeping with the 508(c)(1)(A) exception. When we set up, we called the IRS, told them we were forming a church, needed an Employer ID Number, and they issued one over the phone. This was followed a couple of weeks later with a letter confirming that information. The IRS agent confirmed that our church is fully tax-exempt, that donations are tax-deductible, and that we have no IRS reporting requirements.
Since that time, we have shared the distinction—and the freedom that comes with it—with many others, even helping other churches restructure as a "508." Sure, there are many businesses that do not recognize us as non-profit without the designation letter from the IRS, but that’s okay. Not being granted certain benefits because of the lack of that letter has been more than worth it in the long run.
How about this for a conversation starter: "Are you part of a free church or part of a state church?" Note the tilt of the head and the look of confusion on the other person’s face. Invariably the response comes: "What do you mean?" Barrett Craig has done a thorough job of providing many of the specifics of how many churches in America ended up becoming state churches instead of free churches. Without realizing it, many have "sold their birthright." Oh, not necessarily for temporary pleasure, but because they have been deceived into believing that it was necessary, even required by the law.
It is time to take back the ground the enemy has so skillfully deceived God’s people into surrendering. Time to righteously take advantage of the law of the land and return our governance to God.
by Warren G. Lamb, Certified Biblical Counselor, Professor, Author, Conference Speaker, FSM Senior Advisory Board
______________________________________
If you are Veterans or a friend/family member of a Veteran and would like request our counseling, please use the link below:
If you are a counselor and would like to join our network, please use the link below:
Join the FSM Biblical Counselor Network
If you like what you've read , sign up to receive quarterly newsletter articles and updates via email!
If you are a Federal Employee and would like to donate FSM
is a certified Combined Federal Campaign (CFC) charity.
Designate ID #59846 / Fallen Soldiers March.
_____________________________________________
