Jonathan Ellis questions whether South Dakotans for Responsible Lending will be able to build an effective coalition to support its petition to cap interest rates at 36% and quash predatory payday lenders. To show that South Dakota’s rate-cap initiative isn’t building the same broad support as a multi-year legal battle against payday lenders in Utah, Ellis cites Mark Anderson of the AFL-CIO:
…Mark Anderson, the president of the AFL-CIO here, said his group has stayed out of the issue, preferring instead to focus on a constitutional amendment that would establish a non-partisan redistricting commission for the state Legislature.
“You don’t participate in everything,” Anderson said. “We have limited resources.”
Anderson said he would be surprised if many churches get involved. When his group was working to raise the minimum wage, he said churches declined to help [Jonathan Ellis, “Coffee-Shop Chaos Predicts Pay-Day Loan Petition Campaign,” that Sioux Falls paper, 2015.08.01].
Interesting that Anderson should mention churches. Overshadowed by this week’s “coffeeshop chaos” was this announcement on South Dakotans for Responsible Lending’s Facebook page, calling on pastors to use their pulpit to promote the 36%-rate-cap petition:
PLEASE SHARE THE FOLLOWING WITH YOUR CHURCH LEADERS
Sunday August 30 is SIGNATURE SUNDAY in our state. We have a growing network of pastors and churches who understand there are times to rally our people behind key moral and justice issues in our state. Certainly your church opposes the exploitation of the poor and elderly through predatory lending, the use of defective financial products intended to be debt traps, and the charging of excessive interest rates.
It says in Isaiah for us to “break every unjust contract” and that is what we are trying to do. We have a couple more months to collect thousands of signatures to put a 36% interest rate cap on the 2016 ballot. In a couple weeks you will receive a packet from us with petition sheets and a circulators guide.
Here’s how you can help.
1. On Sunday August 30, either in the announcements or in a sermon, comment on how serious a matter it is to God that we not exploit the poor and that we don’t approve of those who do. Some pastors and priests are preaching on Lending to the Poor and the financial sins of our nation, and immoral usury rates. In the packet you receive we will supply you with a fact sheet for your reference.
2. With your permission and the agreement of your church leaders, ask your congregation to consider signing the petition at the conclusion of the morning worship service. IT IS LEGAL FOR YOU TO COLLECT SIGNATURES FOR BALLOT ISSUES IN YOUR CHURCH. Sadly, in other states we have been told the payday lending bosses have sent deceptive letters to churches threatening them if they get involved. Please don’t be swayed by them. It is legal and the Alliance Defending Freedom is prepared to push back on any threats made to South Dakota clergy.
3. Some of our pastors are having a table in the back with some volunteers to be petition circulators. Others are mentioning the name of people in their fellowship who will be available outside after the service to collect their signature.
4. Ask your members to take a petition sheet with them and a circulators guide and get friends, family, neighbors and co-workers to sign. It’s easy and almost no one is saying no to putting their signature toward this ballot measure. The payday and title lenders only have a 9% approval rating in our nation!!
5. Send an email to email@example.com and let them know you are participating in Signature Sunday. Have those who circulate petitions notarize them and send them to South Dakotans for Responsible Lending, P.O. Box 709, Sioux Falls, SD 57101 [South Dakotans for Responsible Lending, Facebook post, 2015.07.28].
In the past, I’ve raised alarms about political candidates trying to get pastors to use their pulpit to endorse their campaigns (see Gordon Howie 2010). We may be able to distinguish endorsing candidates from the pulpit and endorsing ballot measures from the pulpit. Let’s look at the IRS warning to 501(c)3 non-profits about political activity:
Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
Certain activities or expenditures may not be prohibited depending on the facts and circumstances. For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity. In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.
On the other hand, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention [emphasis mine; “The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations,” Internal Revenue Service, updated 2015.01.06].
Ballot initiatives and the petitions SDRL is asking pastors to ask their congregants to sign on August 30 are non-partisan and not connected with any candidate. Encouraging people to sign a petition would seem to fall under encouraging people to participate in the electoral process.
But let’s look at the exact language of IRS Code 501(c)3, which sets this standard for tax exemption:
Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not 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 [emphasis mine; 26 US Code 501(c)3, downloaded from Cornell University Law School, 2015.08.02].
Influence legislation—hmmm… under South Dakota Constitution Article 3 Section 1, ballot initiatives are an exercise of the people’s legislative power—i.e., the 36% interest rate cap is legislation. Encouraging people to sign the 36%-rate-cap petition is attempting to influence legislation.
But what’s that about Subsection (h)? That portion of the tax code appears to make exceptions and allow certain 501(c)3’s to try influencing legislation, within certain lobbying expenditure limits. I’d go try to calculate those limits… but then I see under (h) a section 5(a), which appears to say that churches don’t qualify for this exemption.
We thus have an interesting question: if pastors choose to participate in Signature Sunday on August 30, if they from their pulpits, in their vestments, say, “Hey, congregants! Let’s sign this petition and make a new law!” will they be forfeiting their 501(c)3 tax-exempt status? SDRP apparently has its legal defense ready, and that’s good, because, given the wording of the tax code, they may be handing the payday lenders an opportunity to drag the churches into ugly, costly conversations with the IRS.