The parish received an IRS letter September 10 saying the federal tax-collection agency had closed its examination without challenging the parish's tax-exempt status and without a threatened audit ever taking place, according to a news release posted on the parish's website.

However, the letter said without explanation that the IRS had concluded that a sermon preached in October 2004 constituted intervention in the 2004 presidential election.

"While we are pleased that the IRS examination is finally over, the IRS has failed to explain its conclusion regarding the single sermon at issue," the Rev. J. Edwin Bacon Jr., All Saints' rector, said in the release. "Synagogues, mosques, and churches across America have no more guidance about the IRS rules now than when we started this process over two long years ago. The impact of this letter leaves a chilling effect cast over the freedom of America's pulpits to preach core moral values. We have no choice but to demand clarification on this matter with the IRS."

In early June 2005, the IRS notified All Saints that it was investigating the parish's tax-exempt status because of a sermon its former rector, George Regas preached on October 31, 2004, the Sunday before the 2004 presidential election.

The IRS alleged that the sermon may have been an "implicit" intervention in the 2004 presidential election because it contained references to the two candidates' positions on certain moral issues, and it reminded parishioners of the need to consider their values when voting.

It is against federal law for organizations with tax-exempt status to directly or indirectly participate in or intervene in any political campaign on behalf of or in opposition to any candidate for political office. The law went into effect with the Revenue Act of 1954 and has been upheld as constitutional.

"I don't intend to tell you how to vote," Regas said early in his sermon.

The September 23 news release also alleges that "certain IRS officials may have breached the Church's confidentiality rights in inappropriate conversations with high-level Department of Justice personnel, which heightens the Church's concern that the exam may have been influenced by partisan political considerations."

For that reason, the release said, the parish leadership had also referred its questions to the Treasury Inspector General for Tax Administration.

"All Saints Church expects an explanation of exactly which elements of the single guest sermon the IRS contends to be political campaign intervention," the release said. "The Church also expects an explanation for the agency's failure to comply with the statutorily-mandated procedures."

In the release, Bacon said "this ruling by the IRS does nothing to clarify the boundaries, and therefore perpetuates the intimidation inherent in the threat of IRS investigations based on inferences rather than fact."

"This leaves me wondering whether we will be investigated again the next time I am called to preach against war, poverty, bigotry or any other of our core moral values as they relate to current social issues and policies," he said.