FindLaw: Why the Constitution Neither Protects Nor Forbids Tax Subsidies for Politicking from the Pulpit, And Why Both Liberals and Conservatives May be on the Wrong Side of this Issue, by Michael C. Dorf:
The clergy participating in the ADF's "Pulpit Initiative" argue that federal tax law violates their First Amendment rights by limiting their ability to tell their flock which candidates best reflect the teachings of Scripture. Meanwhile, supporters of the law contend that it is necessary to protect the separation of church and state, and that, in any event, pastors can say whatever they want--so long as they do not demand a government subsidy to do so.
In this column, I will argue that neither side in this debate is right. The Constitution neither protects nor forbids politicking from the pulpit. Rather, the matter is a policy judgment for elected officials.
Oddly, however, liberals and conservatives each appear to be on the wrong side of the issue. In other contexts, liberals often fret about government using the power of the purse to constrain speech, while conservatives oppose the expenditure of general funds for sectarian purposes. Here the roles are reversed. Politics, it seems, not only makes strange bedfellows, but sometimes puts them on the wrong side of the bed.
See also New York Times: Politics and the Pulpit (Once Again), by Stanley Fish:
The story goes that when he was running for re-election to the Senate in 1954, Lyndon Johnson was opposed by a couple of non-profits that urged voters to reject him and his radical communist ideas. (And you thought things were crazy today.) In response, Johnson had new language inserted into the section of the IRS code, which defines a tax exempt entity. His addendum declared that an exempt organization “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.”
Now, in the middle of the 2008 election, several dozen pastors are challenging the amendment by speaking out in the pulpit in favor of a candidate (usually John McCain) and by sending the IRS copies of the sermons in which they openly cross the line the law has drawn since 1954. At the same time, a bill (H.R. 2275) repealing the Johnson amendment has been introduced by Walter Jones, Republican of North Carolina. The bill has been referred to the House Ways and Means Committee where it awaits action.
The debate over Jones’s bill and Johnson’s amendment reveals once again how confusing and confused church-state jurisprudence is and has always been and will always be. Both sides claim that the other is violating the separation of church and state. ...
The bottom line is that there is no rational or principled or constitutional resolution to this conflict. The resolution, if there is one, will have to be political. Either the Johnson amendment will be repealed or it won’t be. And when one or the other happens, the boundaries between church and state, at least with respect to this issue, will have been settled — for a while.