Brian Diaz was stunned when he got the May 15 e-mail from Mark Hine, Liberty University’s vice president of student affairs.

“It kind of happened out of nowhere,” said Diaz, the 18-year-old president of Liberty’s College Democrats club.

Hine, in the missive, withdrew the group’s official status as a club, insisting that “we are unable to lend support to a club whose parent organization stands against the moral principles held by” the fundamentalist Christian university.

Wrote Hine, “The Democratic Party platform is contrary to the mission of Liberty University and to Christian doctrine (supports abortion, federal funding of abortion, advocates repeal of the federal Defense of Marriage Act, promotes the ‘LGBT’ agenda, hate crimes, which includes sexual orientation and gender identity, socialism, etc.)”

The club, formed last October when a few students came to like Barack Obama, was ordered to stop using the university’s name and logo. Disobedience would result in university reprimands for the students and ultimately expulsion.

Meanwhile, the Liberty student Republican club would be allowed to continue as an official university organization with university funding.

After Hine’s action was reported by the Lynchburg News & Advance, a national furor erupted about Liberty University, censorship, political partisanship and federal tax law. Once again, the late Jerry Falwell’s fundamentalist empire became the focus of national attention – and national scorn.

The reaction erupted first in Liberty’s home state. It’s an election year in Virginia, and the excommunication of Liberty’s College Democrats quickly became a topic of discussion.

Gov. Tim Kaine, chairman of the Democratic National Committee, wrote to the school urging that the student club be reinstated and calling the revocation an “attack on the liberty of its students.”

All four candidates for governor in Virginia joined the criticism. The three Democrats urged Liberty to reverse its decision. A spokesman for Republican nominee Bob McDonnell said the private school is free to set its own policy on student clubs but that McDonnell “personally disagrees with this specific decision by the school because our political process is strengthened by the free and robust exchange of ideas.”

The issue quickly bubbled into the blogosphere and into the mainstream media, provoking nationwide condemnation of the student Democratic club shutdown. Many observers denounced the heavy-handed move, with MSNBC’s Keith Olbermann dubbing Liberty official Hine one of his “worst person in the world” honorees.

Even conservatives were outraged. Peter Wood of the National Association of Scholars (NAS), a group that claims to oppose liberal bias in academia, said Liberty’s action was unwise, fearful and timid.

“Liberty University is already a self-marginalized institution and may not much care that it has just reinforced the image of the Christian right as narrow-minded and intellectually feeble,” said Wood. “But it ought to care. If Liberty University wants to influence the larger culture and not just preach to the choir, it needs to take the high ground. That means modeling robust intellectual debate, engaging people it disagrees with, and teaching students how to respond thoughtfully to a variety of ideas.”

Stung by the national tongue-lashing, Liberty Chancellor Jerry Falwell Jr. moved into spin mode, trying to re-characterize what the school had done.

In an essay published on CBS News’ Web site, Falwell insisted, “The University has not banned Democrats from campus. Nor has the Democrat club been banned from meeting....The only thing that has changed came about as part of a University-wide review of all student organizations for official recognition status. Official recognition carries with it the benefit of using the University name and funds. While this group will not be an officially recognized club, it may still meet on campus.”

Falwell tried to make it appear as though the brouhaha was all just a misunderstanding and the result of careless reporting by the national media.

But the core fact remained: The College Democrats’ official standing was revoked.

In an interview with the News & Advance, Falwell said, “Last fall, this group was approved by an administrator who really didn’t check with anybody else, and he misread the policy. Now we have a more specific policy.”

Falwell rolled out Mat Staver, dean of Liberty’s law school, to back up the claims.

“This is not about censorship,” Staver told the local newspaper. “What it is about is not using the name of the university to advance a mission that is contrary to the university’s purpose and doctrine.”

But Falwell and Staver ignored a larger issue: Liberty’s tax status. As a tax-exempt entity, the school is not supposed to be partisan or favor one set of candidates over another.

Americans United for Separation of Church and State weighed in on the conflict, citing federal tax law.

“Liberty University is a tax-exempt institution and isn’t allowed to support one party over another,” said Barry W. Lynn, Americans United executive director. “If the school insists on pushing policies that favor Republicans over Democrats, it should have to surrender its tax exemption.”

In a May 27 letter to the Internal Revenue Service, Lynn officially requested a review of Liberty’s tax exemption. The letter noted the recent flap and argued that by giving official recognition and student funding to a Republican club but not a Democratic one, Liberty has run afoul of the tax code.

Liberty’s Republican club endorses candidates for public office and works on their behalf. It can do these things with university recognition and student funding, which are denied to the Democratic club.

“Liberty University has no right to do partisan proselytizing and still retain a tax exemption,” Lynn remarked. “I urge the IRS to act swiftly to correct this injustice.”

Liberty officials were predictably irked by the move.

Falwell told the News & Advance that Americans United is “a Democratic front group.”

“AU,” he said, “seems to only file complaints against other 501(c)(3) groups that don’t support AU’s liberal agenda. We have noticed a pattern of them favoring the Democratic Party over the years, and we have documented that pattern.”

Staver called the AU complaint frivolous.

On June 1, Liberty Counsel, a Religious Right legal group run by Staver, filed a complaint with the IRS charging that AU engages in “politically partisan activity.”

Americans United dismissed the move as posturing.

“Falwell knows full well that Americans United is rigorously non-partisan,” said AU’s Lynn. “He’s feeling the heat for a bad decision and trying to shift the focus to Americans United.”

Continued Lynn, “This is a desperate diversionary tactic, and it will fail. Instead of launching baseless attacks against Americans United, Falwell needs to get his own house in order.”

Lynn pointed out that the Liberty Counsel letter is replete with distortions, inaccuracies and outright falsehoods. For example, the letter claims that Lynn attended Obama speeches at the Rev. Jeremiah Wright’s church and a national meeting of the United Church of Christ. In fact, Lynn did not attend either of those events.

Lynn says Americans United has been scrupulously non-partisan in its complaints to the IRS about electioneering by religious groups.

In 2008, for example, AU filed a complaint against the Pentecostal Temple Church of God in Christ, a Las Vegas congregation, for hosting then-candidate Obama and endorsing him.

In the same year, AU filed a complaint about the General Baptist State Convention for inviting Michelle Obama to give a campaign speech at its meeting in North Carolina.

AU’s first venture into the church electioneering issue came in 1988 when the group successfully opposed a move by Democratic presidential candidate Jesse Jackson to pass the plate for his campaign in churches during Sunday services.

Lynn noted that members of the Falwell family have had a difficult time obeying federal tax law.

In 1993, Falwell’s father, the late TV preacher Jerry Falwell, had to pay the IRS $50,000 in back taxes due to partisan political activity by the “Old Time Gospel Hour,” a tax-exempt broadcast ministry. The ministry’s tax exemption for the years 1986 and 1987 was retroactively revoked.

In 1997, Falwell and clergy allies tried to recruit Virginia ministers into a plot to give “personal” candidate endorsements from the pulpits of their churches. Americans United filed IRS complaints against two participating congregations, and the scheme fizzled.

In 2007, Americans United filed an IRS complaint against Liberty University after Jerry Falwell Jr. used school resources to endorse Republican presidential candidate Mike Huckabee.

Falwell hosted the candidate at Liberty University and then sent a Dec. 1 e-mail message on Liberty University letterhead endorsing Huckabee.

Staver says the complaint “was resolved without incident.” That ambiguous comment suggests the IRS and Liberty reached some sort of agreement barring further use of school resources for partisan activities.

Falwell also encouraged Liberty students to register to vote in Virginia in an apparent bid to carry the hotly contested state for 2008 Republican nominee John McCain. Students did so in large numbers, and the GOP nominee carried the precinct near Liberty. (McCain, however, lost statewide.)

With Americans United, the IRS and the news media now watching current developments, Falwell seems intent on brokering some kind of deal with the College Democrats. He initially consulted with Republican gubernatorial candidate McDonnell, who suggested the student group affiliate with Democrats for Life.

Club activists were wary of the offer, however, because it would limit them to a single issue. They were also irked that the concept came from a GOP candidate.

Said club adviser Maria Childress, “Given the original force being Bob McDonnell, that is a little bit contrary to the mission of our club.”

Falwell met with club representatives for nearly two hours May 27. He told reporters the group may regain official recognition if it issues an apology for the lies and slander about Liberty that circulated in the news media and if the club can organize in a way that makes clear that it is anti-abortion and anti-gay.

Childress, an administrator in the university’s honors program, told Fox News that the conditions are not very attractive.

“I do not believe that we have done anything wrong that deserves an apology,” she said. “I do, however, feel that the students deserve an apology for how [Liberty officials] have handled the situation.”

Childress said students are upset.

“Many students – not just the ones involved with the club – have lost trust and respect for the administration and the university,” she said.

Club President Diaz told Fox, “We’re scared about being reinstated and then having the administration look over our shoulders and tell us we can only endorse pro-life candidates. Making an articulate vote isn’t based on one issue, it’s based on all the issues. The message we’re trying to send is that we don’t have to agree with a candidate on every issue but we need to look at all the issues and make the best choice.”

Diaz told Fox he has been deeply hurt by the conflict, noting that he and other club members oppose abortion and gay marriage but think other issues are important too.

“That’s such a problem in the Christian community that people only vote on two issues and they don’t look at the other issues,” he said.

“Jesus talks about other issues besides those two,” Diaz continued. “You don’t ever agree with a candidate 100 percent, but you have to make the best overall decision based on all the issues.”