Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 8, 1993 TAG: 9304080188
SECTION: VIRGINIA PAGE: C-3 EDITION: METRO
SOURCE: Associated Press
DATELINE: LYNCHBURG LENGTH: Medium
IRS CRACKDOWN CITED AT GOSPEL HOUR
The federal government's two-year revocation of the Old Time Gospel Hour's tax exemption may signal a crackdown on tax-exempt organizations' political activities, advocates of church-state separation say.The Internal Revenue Service revoked the tax-exempt status of the Rev. Jerry Falwell's broadcast ministry for 1986 and 1987 because it raised money for a political action committee. Falwell signed an agreement to pay $50,000 in back taxes and to take steps to prevent further incidents.
The settlement, reached in February but not widely publicized until last week, concluded a four-year IRS audit of organizations affiliated with Falwell.
"I think it's an encouraging signal that the IRS is taking a hard look and taking action," said Arthur Kropp, president of People For the American Way, which bills itself as a nonpartisan constitutional liberties organization.
"It shows the IRS is taking seriously the tax code's prohibition on tax-exempt organizations' engaging in political activity," said Brent Walker, associate counsel to the Baptist Joint Committee on Public Affairs.
However, Walker said the penalty did not seem very severe.
"Certainly, they got off easy to the extent their exemption wasn't revoked entirely - only for those two years and with the promise of changing the organization," he said. "It was a less harsh penalty than it could have been."
The broadcast arm of Falwell's Thomas Road Baptist Church raised about $94 million those two years, so "$50,000 seems less than a slap on the hand," Kropp said.
The IRS began examining about 30 television ministries in 1987 after the PTL scandal. In its last public announcement, the IRS said 15 audits still were ongoing.
The News & Advance of Lynchburg on Wednesday quoted an anonymous source familiar with the IRS probe as saying the I Love America Committee was the political action committee that benefited from its association with the Old Time Gospel Hour.
According to the newspaper's source, the political action committee was allowed to use the broadcast ministry's mailing list for fund raising and was never paid for it.
The PAC was founded by Falwell in 1980 to collect money from individuals and donate it to political candidates. Tax-exempt organizations are prohibited by law from making gifts to PACs involved in federal elections.
In another development, the IRS has filed two tax liens totaling $128,000 against Falwell's Liberty University. The school's tax consultants say the IRS total is wrong, and the school actually owes $77,000.
Liberty attorney Jerry Falwell Jr. said the liens, filed in Lynchburg Circuit Court, are not related to the four-year audit. He said the liens are for penalties assessed for late payment of taxes in 1991 and 1992.
Liberty is negotiating with the IRS to drop the penalties, the attorney said.
The university is preparing a plan, subject to creditors' approval, to retire $73 million in debts over seven years.