IRS Probes Political Sermon at Calif. Church

LOS ANGELES – All-Saints Church in Pasadena, Calif., touts itself as having an all-inclusive congregation. But it's newest member is not so welcome.

The Internal Revenue Service has come to All-Saints to investigate a sermon by Rev. George Regas. The sermon was delivered Oct. 31, 2004, two days before Election Day. The IRS argues that the sermon, entitled "If Jesus debated Senator Kerry and President Bush," violates the church's non-profit status because it has a partisan message.

According to the tax code, "Tax-exempt organizations described in section 501(c)(3) Of the Internal Revenue Service code are prohibited from participating or intervening in any political campaign on behalf of, or inopposition to, any candidate."

But the current rector disagrees that the sermon breaks the law and warns of the danger of Washington in religion.

"The IRS is arguing that they can investigate a church based on a field officer's subjective determination that a preacher's sermon implicitly opposes or endorses candidates, regardless of the explicit statements of the preacher," said All-Saints Rector Ed Bacon.

"If the IRS interpretation stands, that means that a preacher cannot speak boldly about the core values about his or her faith community without fear of governmental recrimination," he said.

One way to get out of paying taxes is to declare oneself or one's institution a church. While experts agree the IRS may be reaching in this case, concerns are growing that individuals and organizations are abusing the tax code by falsly claiming a religious exemption.

"One thing that's going on at the very same time we're talking about war and peace and the politics of churches, we're also in an ongoing battle with tax evasion and tax avoidance," said Ed McCaffery, a professor at USC law school.

"I think that the IRS is really trying in good faith to do as good a job as they can interpreting a statute that's both gotten out of control and that involves every aspect of our social life, including what it means to be or not to be a church," he said.

The IRS originally learned of the sermon from a newspaper article that called it a searing indictment of the president. All-Saints has received support from other churches calling the IRS probe a "political witch hunt" and "a violation of the Constitution." But the investigation is still ongoing and the agency refuses to comment.

FOX News' Nora Zimmett contributed to this report.