Monday, July 27, 2009

Defining "Church": Foundation of Human Understanding v. U.S.

Last week, the Court of Federal Claims held that a religious group that was once properly recognized as a "church" for tax exempt purposes lost its "church" status.  According to Chief Judge Hewitt's opinion, the organization lost its "church" status because the extent to which it "brings people together to worship [became] incidental to its main function . . .[of] dissemination of its religious message through radio and internet broadcasts, coupled with written publications."  Here is the courts conlusion:

To qualify as a church, "an organization must serve an associational role in accomplishing its religious purpose."  The associational test is a "threshold" standard which religious organizations must satisfy in order to obtain church status. Id. In creating the associational standard, the United States District Court for the District of Columbia stated that demonstrating associational aspects is the "minimum" requirement necessary for a religious organization to gain church status.

During the tax years in question, Foundation's activities were similar to the activities of those plaintiffs whose suits for church status were unsuccessful primarily because their activities lacked the associational aspects which convinced the Tax Court to grant church status to Foundation in its prior declaratory judgment action. . . .

In explaining its rejection of plaintiff's declaratory judgment action in VIA, the Tax Court summarized the key characteristics exhibited by plaintiff in Foundation I which were sufficient to support recognition of church status: plaintiff conducted services "three to four times a week by ordained ministers for congregations of no less than 50 to 300 members[;] [Foundation] ministers were ordained only after having completed a three-year apprenticeship under the tutelage of [Foundation's] founder and leader[;] [and] Foundation operated a regular school for children in which the teaching of [Foundation] principles formed part of the curriculum."  There is no evidence in the record presently before the court in this case to show that the distinguishing characteristics of plaintiff in Foundation I, as delineated by the Tax Court in VIA, continue to exist. See supra Part IV.B.1.a-n. In fact, the evidence before the court shows that plaintiff's primary activities are those which caused the most concern for the Tax Court in Foundation I and subsequent cases. In VIA, the resemblance between plaintiff in VIA and Foundation I which cut against the plaintiff in VIA was the plaintiff's use of the mass media and commercial activities. The court noted that Foundation's use of mass media and commercial activities in order to spread its beliefs, including radio broadcasts, a magazine, and the sale of audio tapes and books, were "of concern" to the court in Foundation I. Id. It appears that the Tax Court decision relied on the fact that Foundation also exhibited "associational aspects" which were "much more than incidental" when the court recognized plaintiff in Foundation I as a church. The evidence now before the court presents a picture of Foundation that resembles the plaintiff in VIA much more closely than it resembles the plaintiff described in the court's findings in Foundation I. Plaintiff no longer provides religious services to an established congregation. See supra Part IV.B.1.m-n. Plaintiff's primary activities are internet and radio broadcasting, activities which are no longer supplemented by the associational activities in existence at the time of the Tax Court's decision in Foundation I. See supra Part IV.B.1.n (discussing the irregularity of plaintiff's Sunday meetings, seminars and weddings). The court in VIA stated that VIA, unlike plaintiff in Foundation I, exhibited a form of worship which was only incidental to petitioner's other activities, and was therefore insufficient to obtain church status.

In Spiritual Outreach I, the Tax Court entertained a declaratory judgment action in which petitioner contested the IRS's initial determination that petitioner did not qualify as a church under I.R.C. sections 509(a)(1) and 170(b)(1)(A)(i).  The court held that petitioner failed to satisfy the associational test. In that case, petitioner maintained an outdoor amphitheater on its grounds at which petitioner held bimonthly musical programs. Petitioner held a total of twenty gatherings during the two years at issue in the case. The musical programs always included congregational singing, and opened and closed with a prayer facilitated by a minister. Id. Also during the two years at issue, petitioner held several retreats on the church grounds "wherein followers of different religions met for the purpose of meditation study and spiritual advancement." Id. A total of five wedding ceremonies were conducted in petitioner's chapel by ministers from guest churches. Id. The court was unpersuaded that "musical festivals and revivals . . . and gatherings for individual meditation and prayer by persons who do not regularly come together as a congregation for such purposes" was sufficient to satisfy the "cohesiveness factor which . . . is an essential ingredient of a 'church.'" Id. The court distinguished petitioner in Spiritual Outreach I from plaintiff in Foundation I, describing the associational factor as "critical." Id. The court stated that the presence of the associational factor in Foundation I was essential to resolving what was a "close question" in that case. Id. The record before the court describes an organization similar to the petitioner in Spiritual Outreach I, and is therefore similarly distinguishable from plaintiff's record presented in Foundation I.

In Church of Eternal Life, the court held that plaintiff failed the threshold associational test based on a finding that petitioner's principal activities included "the operation of a library containing about 4,000 items, bi-monthly meetings, the distribution of literature, the sale of merchandise and the publication of a newsletter."  Based on the court's factual findings in this opinion, Foundation is an institution that closely resembles the plaintiff in Church of Eternal Life. Foundation similarly fails to satisfy the associational standard.

Here, as in First Church of In Theo, plaintiff is a "self-described non-membership organization" whose "religious purposes were accomplished through the writing, publishing, and distribution of religious literature rather than through the regular assembly of a group of believers to worship together."  In addition to failing to meet most of the fourteen criteria, the court in First Church of In Theo also concluded that plaintiff "fail[ed] to satisfy the threshold criteria of communal activity necessary for a church." Id. Accordingly, here, as in First Church of In Theo, the court finds that plaintiff is not a church within the meaning of section 170(b)(1)(A)(i) as interpreted by the weight of persuasive authority.

Because plaintiff no longer exhibits the associational characteristics which were critical to convincing the Tax Court to grant church status to Foundation in 1987, what may have been a "close question" on the facts before the court in Foundation I is more readily determinable in this case.

The extent to which Foundation brings people together to worship is incidental to its main function which consists of a dissemination of its religious message through radio and internet broadcasts, coupled with written publications. "When bringing people together for worship is only an incidental part of the activities of a religious organization, those limited activities are insufficient to label the entire organization a church."

The case is Foundation of Human Understanding v. U.S. (July 21, 2009) (available on LEXIS in the Tax Analysts at 2009 TNT 139-8).

(Hat Tip:  Ellen Aprill)


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