The rector of a liberal Pasadena church today demanded an apology and a clarification from the Internal Revenue Service after being notified that the agency had closed a lengthy investigation of the church over a 2004 antiwar sermon -- but also found that the same sermon constituted illegal intervention in a political campaign.

The Rev. J. Edwin Bacon Jr., rector of All Saints Episcopal Church, told congregants during morning services today that he and other officials were relieved that the church no longer faced the imminent loss of its tax-exempt status, but were bewildered by the IRS' seemingly contradictory conclusions about the case.

All Saints has "no more guidance about the IRS rules now than when we started this process over two long years ago," Bacon said. He said the lack of clarity from the IRS in its recent letter to the church would have a continuing "chilling effect" on the freedom of clerics from all faiths to preach about core moral values and such issues as war and poverty.

Parishioners at this morning's early service applauded his comments.

Bacon said the unclear outcome could mean future investigations of the church.

All Saints, one of Southern California's largest and most liberal congregations, came under IRS scrutiny after a sermon two days before the 2004 presidential election by a guest speaker, the Rev. George F. Regas. In the sermon, Regas, the church's former rector, depicted Jesus in a mock political debate with then-presidential candidates George W. Bush and John F. Kerry.

Regas did not instruct parishioners whom to support in the presidential race, but his suggestion that Jesus would have told Bush that his preemptive war strategy in Iraq "has led to disaster" prompted a letter from the IRS in June 2005 stating that the church's tax-exempt status was in question.

Federal law prohibits tax-exempt organizations, including churches, from intervening in political campaigns and elections.

In its latest letter to All Saints, dated Sept. 10, the IRS said the church continues to qualify for tax-exempt status but that Regas' sermon on Oct. 31, 2004, amounted to a one-time intervention in the 2004 presidential race. The letter offered no specifics or explanation for either conclusion, but noted that the church did have appropriate policies in place to ensure that it complied with prohibitions on political activity.

Jesse Weller, an IRS spokesman, said late Saturday that he could not comment on the case.

In addition to its requests for clarification and an apology, All Saints has asked a top Treasury Department official -- its inspector general for tax administration -- to investigate what the church described as a series of procedural and substantive errors in the case, including allegedly inappropriate conversations about it between IRS and Justice Department officials.

Those conversations, documented in e-mails obtained by the church through Freedom of Information Act requests, appear to show that Justice Department officials were involved in the All Saints case before the IRS made any formal referral of it for possible prosecution, an attorney for the church said. And they raise concerns that the IRS' investigation may have been politically motivated.

"In view of the fact that recent congressional inquiries have revealed extensive politicization of [the Department of Justice], my client is very concerned that the close coordination undertaken by the IRS allowed partisan political concerns to direct the course of the All Saints examination," attorney Marcus S. Owens wrote in a Sept. 21 letter requesting an investigation.