Recently, an IRS official was quoted as saying that the IRS had suspended auditing churches. Does this mean that the IRS has thrown up its hands and given up on enforcing the tax code against churches? The answer is “no,” the IRS has not given up and the tax code still applies to churches.
The IRS official was Russell Renwicks with the Tax-Exempt and Government Entities division. He said that the IRS had received some complaints about potential violations of the tax code by churches this election cycle. But he stated, “We are holding any potential church audits in abeyance.” What did he mean by this?
Mr. Renwick’s statement stems from a 2009 court ruling involving the IRS’ regulations related to church audits. These regulations began in 1984 when Congress passed the Church Audit Procedures Act (CAPA). CAPA instituted several rules the IRS was required to follow when auditing any churches, and was passed to protect the constitutional rights of churches.
One of the requirements of CAPA is that an IRS official at the level of Regional Commissioner or above approve any church audits prior to the IRS contacting the church. The IRS followed this requirement until 1998 when Congress reorganized the IRS. After 1998, the IRS was no longer organized by regions of the country. Instead, it became organized by the constituency it served. So, until 1998, the IRS had regions like the Midwest region or the Northeast region. After 1998, the IRS has divisions such as the small business division and the exempt organizations division.