The IRS has dropped its tax probe against All Saints Episcopal Church in Pasadena. But the IRS also said in the letter that there are officials (unnamed) who considered the sermon in question to be illegal. The L.A. Times, in Pasadena church wants apology from IRS, takes a look at the case.

A quick review for people who might not have been following the story. In 2004, before the elections, All Saints pastor Rev. George F. Regas (who is no longer at All Saints) gave a sermon imagining if Jesus Christ was participating in a debate with the two presidential candidates. The sermon did not endorse either candidate but it did criticize the war. In June of 2005 the church received a letter from the IRS saying that it was possible the church was in violation of its tax exempt status because of that sermon. The IRS investigation had lasted almost two years. And in a letter dated September 10, 2007, All Saints was notified that the investigation was being dropped.

Paul L. Caron at Tax Prof Blog has been following the case and has many more details. All Saints has been fighting the case all along. And the Rev. J. Edwin Bacon Jr. has said that All Saints will continue to fight for clarification and an apology from the IRS. They are also asking that a Treasury Department official investigate whether the IRS had improper communications with the Justice Department in this matter.  All Saints is noted as being a liberal congregation. And there appears to be some evidence that this case was brought about for retaliatory reasons. Especially since, as we know,  conservative churches seem to have escaped the scrutiny that All Saints received.