Last month, Liberty University made headlines by withdrawing official recognition of the student-run Democratic organization on campus.

In removing official recognition (and subsequent eligibility for school funding) from the College Democrat club on its campus, LU officials set off a firestorm of criticism from local, state, and national Democrats and now face a drive to have the Internal Revenue Service review its tax-exempt status.

Jerry Falwell, Jr. Chancellor and president of Liberty, responded to the criticism with an op-ed piece on the CBS news Web site that took on the reporting of the events. Looking to set the record straight, Mr. Falwell decried erroneous reports that Democrats would be forced to meet off-campus and claims that LU officials had stated that one could not be a Christian and a Democrat.

At issue, it seems, is the 2008 Democratic Party platform that has “taken an extreme turn to the left on social issues” and “supports federal funding of abortion and repeal of the federal Defense of Marriage Act,” according to Mr. Falwell’s piece.

The LU leader goes on to state succinctly that “Liberty University will not lend its name or financial support to undermine marriage or to promote abortion.” So, LU will not fund or officially recognize this club. Mr. Falwell vigorously emphasized that this did not mean such a club could not exist or meet on campus. Rather, he said the the university was exercising its prerogative to fund only those groups in alignment with its mission.

Not surprisingly, the three candidates for the Democratic nomination for Virginia governor piled on the university, and Gov. Tim Kaine, in his dual role as chairman of the Democratic National Committee, wrote to Falwell asking that the decision be reversed.

Last week, an advocacy group called Americans United for Separation of Church and State said it wrote the IRS asking for an official review of the University’s tax-exempt status. As the Richmond Times-Dispatch reports, Barry Lynn, executive director of the Washington-based group, wrote to the IRS that by “banning a Democratic club while permitting a Republican club” the university “appear[s] to be operating in violation of federal tax law.”

LU officials fired back quickly, with LU Law School Dean Matthew Staver calling the complaint “outrageous and bogus” and telling the RT-D that LU is preparing a claim against Americans United “for using its tax-exempt status to attack only those organizations it disagrees with.”

So, at issue here is how far a university can go without entering too far into the political process and running afoul of IRS regulations. For his part, Mr. Falwell thinks Liberty is on solid ground, and he concludes his op-ed piece with this line in support of his position: “Liberty stands for certain core values; not for a political party.”

Yes, Liberty is and does, and it is well within its rights to defund an campus organization that opposes the teaching and religious mission of the school. Liberty is a private institution that clearly advertises its religious biases. If the College Democrats don’t like that, too bad. They have no right to students’ funding, and in any event, the school has not banished the group, merely defunded it and withdrawn its official recognition.

In short, the College Democrats are free to operate on campus ... on their own dime.

That is as it should be. Watching the IRS settle this one will be interesting. Deciding this issue in favor of the College Democrats would be a serious blow to the free exercise of religion.

Americans should hope the IRS rules correctly, and defends the rights of private institutions to refuse to subsidize endeavors that trespass their moral and religious sensibilities.