Monday, January 19, 2015
In the wake of U.S. Court of Appeals for the Seventh Circuit dismissing on standing grounds a lawsuit challenging the minister housing allowance available under IRC section 107, the U.S. District for the Western District of Wisconsin revisited its 2013 decision finding standing to challenge the church exemption from having to file annual information returns (Form 990) with the IRS. Following the Seventh Circuit's lead, the District Court concluded that the plaintiffs in the Form 990 case (one of which, the Freedom from Religion Foundation, is common to both cases) lacked standing because they had never sought and been denied an exemption from having to file Form 990 for themselves (as opposed to objecting to other organizations emjoying an exemption). Indeed, the District Court noted that the plaintiffs stated in their complaint that they intended to continue to file the Form 990 and did not seek to amend their complaint in this regard even afer the defendant identified this issue in its motion to dismiss.
Therefore while it appears the Seventh Circuit left open a way for plaintiffs to obtain standing in this case and similar cases - claim the exemption or tax benefit that churches enjoy and then file suit if and when the IRS denies that claim - it is not clear that at least the plaintiffs in this case are willing to make such a claim. This path appears to still be available for others with similar concerns about the provision of such exemptions and benefits to churches to the exclusion of other types of nonprofits, however.
Thursday, March 27, 2014
On Monday, Christian relief organization World Vision announced that its employee conduct manual would no longer define marriage as being between a man and a woman. According to a report from the Religious News Service, the organization's U.S. branch would henceforth recognize same-sex marriage as being within the norms of "abstinence before marriage and fidelity in marriage" discussed in World Vision's conduct code for its 1,100 employees.
In a letter to employees issued on Monday, World Vision President Rich Stearns stated that the organization was not endorsing same-sex marriage, but had "chosen to defer to the authority of local churches on this issue."
In an interview with Christianity Today, Stearns said that the organization's board was "overwhelmingly in favor" of the change. However, he stressed that the decision was not driven by theology. He added: "There is no lawsuit threatening us. There is no employee group lobbying us. This is simply a decision about whether or not you are eligible for employment at World Vision U.S., based on a single issue, and nothing more."
Today's NonProfitTimes is reporting that just two days after making its big announcement, World Vision reversed it. In a letter to supporters yesterday, Stearns and Chairman of the World Vision U.S. Board, Jim Bere, announced that the organization was reversing its recent decision to change its "national employment policy."
According to the "Dear friends" letter sent to the organization's "trusted partners,"
The board acknowledged they made a mistake and chose to revert our longstanding conduct policy requiring sexual abstinence for all single employees and faithfulness within the Biblical covenant of marriage between a man and a woman.
Speaking directly to the organization's "trustred partners," Stearns and Bere stated: "We have listened to you and want to say thank you and to humbly ask for your forgiveness."
The initial decision was greeted with both criticism and support. The reversal has drawn the same types of responses. One skeptic posted the following comment on World Vision's Facebook page: "I can see that your board has got its priorities right -- money talked, and you not only listened, you obeyed."
That may not be necessarily true. It is highly probable that upon prayerful reconsideration of its "new policy" and heated discusions concerning the change, the World Vision board reversed itself. Either decision would be popular with some, unpopular with others. In the final analysis, World Vision must do what it believes best helps the organization achieve its mission.
Thursday, November 28, 2013
The NonProfitTimes is reporting that a recent study on charitable giving reveals that charitable giving increases significantly when the recipients are religiously-linked nonprofits. According to the Times:
Some 41 percent of all U.S. donations go to religious congregations. That number jumps to 73 percent when religiously-linked nonprofits such as Catholic Charities, the Salvation Army and Jewish federations are included. Those are some results from the Lilly Family School of Philanthropy at Indiana University study called “Connected to Give: Faith Communities.”
The study, carried out by the Lilly School in conjunction with Los Angeles, Calif. nonprofit research lab Jumpstart and GBA Strategies in Washington, D.C., is the third of six reports. It surveyed 4,862 American households of various religious traditions.
Four out of five Americans identify themselves with a particular religion. Of those, 65 percent give to congregations or charities. Of those who do not identify with a religion, 56 percent give. “The 9-point difference is due largely to contributions from (religiously) affiliated Americans to organizations with religious ties,” wrote the study’s authors.
“It’s like putting on 3-D glasses,” said one of the study’s authors, Shawn Landres, Ph.D., CEO and research director of Jumpstart, via a statement from the Lilly School. “In addition to looking at congregations, when we also look at the religious identity of the organization and the religious or spiritual orientation of the donor, it turns out that a majority of Americans contribute to organizations with religious ties and a majority of Americans cite religious commitments as key motivations for their giving.”
Almost two-thirds, or 63 percent, of Americans gave to congregations or charitable organizations in 2012, with a median gift of $660. Congregations saw the highest median gift at $375. The median gift to not religiously identified organizations (NRIOs) was greater than that of religiously identified organizations (RIOs), at $250 to $150.
“When it comes to religious identity and giving, demographic categories like income and age resist generalization,” wrote the report’s authors. While the report says that religious denomination alone does not affect giving, other factors help shape rates of giving among the denominations, according to the authors. Jews give at the highest rate to religious and charitable denominations, at 76 percent. Christians — black Protestants, Evangelical Protestants, mainline Protestants and Roman Catholics — all give at similar rates, between 61 percent and 68 percent. Those identifying as not religiously affiliated give at the lowest rate, 46 percent.
The study also examined people's motivation for giving. As reported by the NonProfitTimes, the study revealed that
More than half of Americans who give, or 55 percent, said that religion is an important or very important motivation for charitable giving. Other common motivations include believing they can make a change through giving (57 percent) and thinking they should help others who have less (55 percent).
What a heart-warming story. Happy Thanksgiving to all.
Monday, September 23, 2013
Today's Washington Post features an op-ed by Sally Quinn titled "The Pope Francis Miracle." Quinn joins many around the world who are marveling about the things the pope said in his lengthy interview released over the weekend. Quinn puts it this way:
Pope Francis stunned Catholics last week with his lengthy interview in which he talked about how the church should no longer be “obsessed” with issues like abortion, gay marriage and contraception. “We have to find a new balance,” Francis said. “Otherwise even the moral edifice of the church is likely to fall like a house of cards, losing the freshness and fragrance of the Gospel.”
Quinn reveals the contents of her interview with father Jim Martin, editor-at-large of America, the Jesuit magazine, who is apparently elated by what the relatively new pope is saying. Yet, Martin maintains that the pope's words do not signal a change in the church's teaching. Rather, he says, “There has been a shift in emphasis. His comments on those things have a different tone and language. He is moving us away from some of the issues that have bedeviled the church back to God, Jesus, love, forgiveness and mercy. It’s very beautiful. It’s like Jesus.”
Indeed, we do not know where things are headed for one of the world's largest religious organizations and one of America's largest nonprofits. We must wait for the future to unfold itself. As Father Jim Martin puts it, "Who knows? The Holy Spirit blows where it will."
Thursday, August 15, 2013
The Commission on Accountability and Policy for Religious Organizations has released its second report in response to a request from Sen. Charles Grassley (R-Iowa) for guidance. The approximately 60-page report titled “Government Regulation of Political Speech by Religious and Other 501(c)(3) Organizations: Why the Status Quo Is Untenable and Proposed Solutions” made three primary recommendations:
- Clergy should be able to say whatever they believe is appropriate in the context of their religious services or other regular religious activities without fear of reprisal by the Internal Revenue (IRS), even when that communication includes content related to political candidates. The communication would be permissible provided that the organization’s costs would be the same with or without the political communication.
- Secular nonprofits should have “comparable latitude when engaging in regular, exempt-purpose activities and communications.”
- Current IRS policy not permitting tax-deductible funds to be disbursed for political purposes should be preserved.
According to Commission Chair Michael Batts, “The law prohibiting political campaign participation and intervention by 501(c)(3) organizations as currently applied and administered lacks clarity, integrity, respect, and consistency.” He maintains that 501(c)(3) organizations’ leaders “are never quite sure where the lines of demarcation are, and the practical effect of such vagueness is to chill free speech -- often in the context of exercising religion.”
The report discusses the history of the ban on political campaign participation or intervention, which was included in the Revenue Act of 1954. It also identifies key cases in which the IRS has examined organizations or their leaders for certain actions, particularly several instances during the 2004 presidential campaign.
The Evangelical Council for Financial Accountability (ECFA) established the commission in response to a January 2011 request by Sen. Grassley to coordinate a national effort to provide input on accountability, tax policy and political expression for nonprofits in general and religious organizations in particular. The commission is comprised of 14 members and 66 panel members, including legal experts and representatives of religious and nonprofit sector organizations.
The nation's second largest charity, The Salvation Army USA, yesterday announced that Commissioner David Jeffery will serve as the new National Commander of The Salvation Army USA effective November 1. Jeffrey will succeed William Roberts, who will become the next chief of staff of the International Salvation Army. Jeffrey's wife, Commissioner Barbara Jeffrey, will become National President of Women’s Ministries, also effective Nov. 1.
The announcements come in the wake of the August 3 election of Andre Cox as the 20th General and world leader of The Salvation Army. Cox's election set in motion a series of executive turnovers. Roberts will succeed Cox, who served as chief of staff, the second-highest position within the International Salvation Army, since February. He will begin his new position on October 1. His wife, Nancy Roberts, will become World Secretary of Women’s Ministries.
The new National Commander is not new to high level service within the Salvation Army. Since 2011, Commissioner Jeffery served as territorial commander for The Salvation Army Southern territory. Previously, he was National Chief Secretary for the USA National Headquarters in Arlington, Virginia. As National Commander, Jeffery will be chairman of the national board of trustees, responsible for presiding over tri-annual commissioners’ conferences, bringing together executives from the Salvation’s Army’s four U.S. territories.
The 59-year-old Cox shares his ministry with his wife, Commissioner Silvia Cox, who is the World President of Women’s Ministries. Together, they will lead The Salvation Army’s 1.5 million member churches.
Cox was himself appointed as chief of staff in February. Prior to that, he was a territorial commander in the Southern African Territory, the Finland and Estonia Territory, and the United Kingdom Territory with the Republic of Ireland. As general, he is the international leader of The Salvation Army, and the only person elected to office within the organization. He directs operations throughout the world through administrative departments of the international headquarters in London.
All the best to the new team.
Friday, December 28, 2012
Brett Bloom has published a student comment titled The Rise of the Virtual Church: Is It Really a Church Under I.R.C. Section 170(b)(1)(A)(I)?, 6 Liberty U. L. Rev. 495 (available through Westlaw). Here is a summary of the article from its introduction:
This Note begins with a background discussion of tax exemption for religious organizations, including historical and constitutional concerns, along with a brief discussion of the rationale for tax-exempt organizations. This Note then discusses the distinctions between religious organizations and churches. Next, this Note presents the problem with the Service's and courts' application of their respective tests with respect to the Foundation of Human Understanding. Finally, this Note proposes (1) that the Service and courts abandon their respective tests for determining church status; and (2) that the United States Department of Treasury (the “Treasury”) provide guidance to the meaning of church through Treasury regulations.
One of my students, Brittany Brantley, has published Beyond Politics in the Pulpit: When Pastors Use Social Networks to Preach Politics, 38 J. Legis. 275 (available through Westlaw). Here is a summary of the article from it's introduction:
Part II of this note will provide an overview of the history of the political campaign prohibition. Part III will explain how churches have attempted to be completely exempt from the prohibition. Part IV will discuss the acts of Individuals of a section 501(c)(3) organization in their individual capacities. Part V will discuss how the development of the Internet has broadened the scope of the prohibition. It will also discuss how pastors use their websites and social media pages. Finally, Part VI will suggest some steps that the Internal Revenue Service and the Federal Election Commission can take to ensure that section 501(c)(3) organizations are aware of what constitutes a violation on social media pages.
Wednesday, September 26, 2012
Christianity Today reports that the U.S. District Court for the Western District of Wisconsin has concluded that the Freedom from Religion Foundation (FFRF) has standing to challenge the income tax exemption for parsonages and pastor housing allowances provided by Internal Revenue Code section 107 because FFRF has altered its salary structure to provide housing allowances, but those allowances do not qualify for exemption since the recipients are not ministers. According to a FFRF press release about the decision, its lawsuit seeks a declaration that section 107 violates the First Amendment's Establishment Clause. The case, which is only the latest attack by FFRF on section 107, raises the interesting question of whether the Supreme Court's recent narrowing of the Establishment Clause exception to the general rule that taxpayers lack standing to challenge tax provisions benefiting others can be avoided by creating a fact pattern that is identical to the one required under the challenged provision except for the lack of a religious element. For example, could a non-religious nonprofit that functions in a manner very similar to a church challenge the exemption for churches from having to file annual information returns (the Form 990)? The outcome of this lawsuit could therefore have even larger ramfications than the possible end of the pastor housing allowance exemption.
(Hat tip: ECFA)
Correction: The original version of this post gave the Washington Ethical Society as an example of a non-religious nonprofit that appears to function in a manner very similar to a church. An astute reader brought to my attention that the Washington Ethical Society is in fact actually classified as a church by the IRS, so I have corrected the post by removing that reference. My thanks for the fact checking.
Wednesday, February 22, 2012
I just came across this interesting commentary by Kevin Clarke, an associate editor at America Magazine, a weekly Jesuit publication. The commentary was posted on the Washington Post's Website this morning.
Tuesday, December 20, 2011
As I have mentioned before on this blog, I supervise my law school's Community Development Law Clinic, which really should be called a Nonprofit Law Clinic. As the semester ends, I have been engaging in my usual practice of reviewing our progress, and it occurs to me that, in this season of religious celebration, we have taken on several projects for religious organizations.
One project is for a well established religious organization in North Carolina that is concerned about liabilty and wishes to explore incorporating under state law. The interesting challenge for the clinic students is that the congregation is strictly committed to non-hierarchical decision making on all aspects of its governance. The legal question, then, is how to devise a board comprised of any congregant who feels moved to show up to the business meeting and express his/her opinion in any given month, and where corporate actions will only be taken when the congregation arrives at "consensus," which is defined vaguely. As nonprofit law folks can imagine, this led to a close analysis of the North Carolina General Statutes on nonprofit governance and to some interesting and precise custom language in the organization's bylaws. Rather than describe the solution we devised, I will leave it up to you imagination.
(The tax folks in the crowd may be interested to hear that the same congregation was renting parking spaces for weekend football games and was completely unaware that UBIT might apply. A clinic student, upon discovering this, correctly pointed out that these exact facts are one of the examples in the IRS UBIT regs.)
Another project involves a group of nuns who wish to establish a 501(c)(3) nunnery. At first blush, the legal issues looked straight-forward, but as we dug in, we realized that we had a potential private inurement/benefit issue. The problem is that the nunnery would be formed by, and would initially house, a small group of nuns. To avoid the inurement issue, we advised that they populate the board with people who will not participate in or benefit from the nunnery's programs. This proved difficult, however, because their religious principles require that organizational decisions be made only by ordained (not sure that's the correct term) nuns, and they are the only ones in the region. Resolving that problem required significant creative, collaborative work between the students and the nuns. The private benefit issue was easier, since the client had no problem making its benefits available to an indefinite class.
Friday, September 9, 2011
We previously blogged about the creation of a Commission on Accountability and Policy for Religious Organzations by the Evangelical Council for Financial Accountability (ECFA) at the request of Senator Charles Grassley. Now ECFA has announced that 66 nonprofit and religious organization experts have been named three panels to aid the Commission in its work. The panels include a Panel on Religious Sector Representatives with members from a variety of faiths, a Panel of Nonprofit Sector Representatives from a variety of nonprofit associations and groups, and a Panel of Legal Experts with a variety of law firm practitioners, in-house counsel, and one academic (Professor Thomas Berg (University of St. Thomas, Minneapolis)). I am personally aware that other academics were invited to join the last Panel but declined because of other commitments, which may explain the low level of academic involvement.
Monday, August 8, 2011
Summer Court Update: 7th Circuit Applies Franchise Law to Girl Scouts; Pastor Housing Allowance Suit Dropped
There were two notable federal court developments recently.
In Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of America, Inc., the U.S. Court of Appeals for the Seventh Circuit concluded the Wisconsin Fair Dealership Law applied with equal force to nonprofit organizations as well as for-profit organizations. Writing for a unanimous panel, Judge Posner rejected a First Amendment challenge to the application of the law and then stated, in concluding that the dissolution of the local chapter by the national Girl Scouts organization violated the law, the following:
"No gulf separates the profit from the nonprofit sectors of the American economy. There are nonprofit hospitals and for-profit hospitals, nonprofit colleges and for-profit colleges, and, as we have just noted, nonprofit sellers of food and for-profit sellers of food. When profit and nonprofit entities compete, they are driven by competition to become similar to each other. The commercial activity of nonprofits has grown substantially in recent decades, fueled by an increasing focus on revenue maximizing by the boards of these organizations, and this growth has stimulated increased competition both among nonprofit enterprises and with for-profit ones." He then reasoned: "Dealer protection laws are aimed at such abuses, though they also and perhaps predominantly reflect the political influence of local businessmen seeking advantages over franchisors likely to be located in other states. . . . . Either way the concerns that motivate the laws seem applicable to nonprofit enterprises that enter into dealership agreements as defined in the laws, and so, as in our previous opinion, we decline to read an exception for nonprofit enterprises into the Wisconsin law." (citations omitted) For a detailed commentary on this decision, see this Charity Governance blog post by Jack Siegel.
As for the other case, the Evangelical Council for Financial Accountability reported that the Freedom from Religion Foundation and other plaintiffs had voluntarily agreed with the defendant federal and state government officials to dismiss (without prejudice) their lawsuit challenging the constitutionality under the Establishment Clause and the California Constitution of the ministerial housing allowance exemptions found in Internal Revenue Code section 107 and a parallel state tax provision. The ECFA press release provided a link to the stipulation of dismissal. We previously blogged about the case, and about the Supreme Court's recent decision in Arizona Christian School Tuition Organization v. Winn that we predicated likely would lead to dismissal of this case because the Court sharply limited standing to bring Establishment Clause challenges to tax provisions. The Freedom from Religion Foundation has not yet updated its public listing of information regarding this lawsuit, however, so it is not clear if they will try to overcome this standing issue at some point in the future.
Thursday, June 2, 2011
There have been occasional scholarly calls to prohibit discrimination on the basis of sexual orientation as a condition for receiving federal tax benefits. For example, Nicholas Mirkay (Widener) has written extensively on this topic (Losing Our Religion, 17 Wm. & Mary Bill Rts. J. 715 (2009); Is it 'Charitable' to Discriminate?, 2007 Wisc. L. Rev. 45), while Shannon Weeks McCormack (UC Davis) has written more generally about not subsidizing organizations that generate significant negative externalities, including by having exclusionary practices such as ones based on sexual orientation (Taking the Good With the Bad, 52 Ariz. L. Rev. 977 (2010)). Whatever the merits of these arguments, there appears to be little political traction for such changes.
What has gained political traction, however, is tying more direct government financial support to not discriminating on the basis of sexual orientation. The most recent example of such a condition is in Illinois, where the Huffington Post reports that Catholic Charities of Rockford, Illinois has stopped providing foster care services because a new state law would have required it, as a recipient of state money, to treat people in civil unions as it would treat married couples. The Rockford Diocese announced the decision at a press conference last week, noting that approximately 350 children would be immediately affected. According to the Huffington Post article, if Catholic Charities statewide followed suit another entity would need to be identified to handle approximately 2,500 foster care cases annually. For a helpful summary of similar decisions by Catholic Charities in other states and recent scholarship for and against religious exemptions in this context, see this Concurring Opinions post by Courtney Joslin (UC Davis).
Additional Coverage: Chicago Tribune.
Monday, September 6, 2010
The New York Times reports that numerous religiously-affiliated organizations are protesting a religious nondiscrimination provision in pending legislation (H.R. 5466) to reauthorize the Substance Abuse and Mental Health Services Administration. One provision (Sec. 1947) states that any block funds received under the legislation constitute "federal financial assistance" under certain Civil Rights laws and are subject to the following nondiscrimination requirement as to recipients of services:
(2) Prohibition. No person shall on the ground of sex (including, in the case of a woman, on the ground that the woman is pregnant), or on the ground of religion, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any program or activity funded in whole or in part with funds made available under section 1911 or 1921 [of the legislation].
In effect, recipients of federal funding under this legislation must provide social services free of any religious bias or restriction.
The more controversial provision of the pending legislation deals with religious preference in hiring (H.R. 5466, section 2(a), amending Title V, Part A, section 501 (m)(2)), which provides:
(2) CONSIDERATION OF RELIGION IN EMPLOYMENT DECISIONS- With respect to any activity to be funded (in whole or in part) through an award of a grant, cooperative agreement, or contract under this title or any other statutory authority of the Administration, the Administrator, or the Director of the Center involved, as the case may be, may not make such an award unless the applicant agrees to refrain from considering religion or any profession of faith when making any employment decision regarding an individual who is or will be assigned to carry out any portion of the activity. This paragraph applies notwithstanding any other provision of Federal law, including any exemption otherwise applicable to a religious corporation, association, education institution, or society.
This particular provision would trump the exemption provided to religious organizations under Title VI of the Civil Rights Act of 1964 that permits them to discriminate on the basis of religion in employment. As reported in the New York Times article, both Christian and Jewish organizations alike are concerned about the impact of the pending legislation on their ability to hire and administer their missions consistent with their faiths and beliefs. In contrast, the Coalition Against Religious Discrimination (including the ACLU, Hindu American Foundation, and NAACP) support such restrictions and desire that Congress eliminate federal funding of faith-based providers all together.
The debate over religious nondiscrimination in federal funding of social service programs administered by religiously-affiliated nonprofits is anything but new. Both Presidents Clinton and Bush supported such federally financed programs provided they were administered on a religiously-neutral basis. However, until this legislation, there was no attempt to impose religious nondiscrimination in hiring on faith-based providers as a prerequisite to federal funding.
(Hat tip: Jack Siegel at Charity Governance Consulting, LLC)
Monday, July 26, 2010
In a post on today's Opinionator (the Online Commentary from the New York Times), Professor Stanley Fish returns to a discussion of Christian Legal Society v. Martinez, 561 U.S. ____ (2010), in which the Supreme Court upheld Hastings Law School's right to withhold official recognition from a Christian group that restricted its membership to co-believers who not only talked the talk but walked the walk as far as Christianity was concerned. Professor Fish addressed the issue in his post last week, arguing that "[u]nder cover of 'neutrality,' Hastings, with the [Supreme Court] majority’s approval, is imposing the goals and ideology of liberal multiculturalism on the very diverse members of the law school’s community."
This week, he states in part:
Lurking in the background of . . . cases [like C.L.S. v. Martinez] is the question of exactly what a religion is. The courts do not confront that question directly — how could they? what would be their expertise? — but when even-handed treatment becomes the rule in aid and burdens on free exercise must be tolerated if imposing them was not the law’s affirmative intention, an answer has implicitly been given: religion is just another discourse, no different than any other. That is to say, religion is not special; it is not special in the negative sense implied by the establishment clause, which by its very existence announces, “watch out, this stuff is trouble”; and it is not special in the positive sense declared by the free exercise clause, which seems to announce, “this is something the state must protect.” The evisceration of the establishment clause gets religion in the door but at the expense of its unique status; the neutering or “neutraling” of the free exercise clause completes the denial to religion of the label “special.”
In the final analysis, Professor Fish presents what he sees as the current dilemma:
Religious organizations face a choice between altering their core beliefs or forfeiting privileges enjoyed by others. The liberal state and its institutions face a choice between being faithful to the democratic principle of open access or closing the liberal door to those who are illiberal.
The dilemma is sharpened and even rendered poignant by the fact that liberalism very much wants to believe that it is being fair to religion, but what it calls fairness amounts to cutting religion down to liberal size. That is what the majority in Christian Legal Society v. Martinez does when it invokes the limited forum doctrine, which, according to a line of cases, should have protected C.L.S.’s expressive rights of association, but does not because expressive association is declared to be trumped by the value of non-discrimination.
Professor Fish's pieces on the case make interesting reading. I highly recommend them.
Friday, July 9, 2010
In a recent MSNBC story, the validity of the Syro Russian Orthodox Catholic Church as a "church" is under scrutiny. Questions are being raised about the true religious nature of the church, whether the self-proclaimed religious priests and archbishop were ever ordained, and the validity of diplomas being awarded by its affiliated university (formerly, the Notre Dame de Lafayette University of Colorado, whose assets were subsequently transferred to the Mercian Orthodox Catholic Church). A police detective in Duluth, Minnesota spent over a year investigating the church and its seminary then located in Minnesota (now in Ohio), documenting more than $40,000 in fraud alleged by five students. He presented his documented evidence to the Minnesota attorney general, the FBI, and the local prosecutor, all of which were reluctant to take on the case because it involved a church.
The article discusses the relatively non-evasive nature of income tax exemption law with respect to entities claiming to be bona fide churches, making it an area of potential abuse, as discussed by our fellow blogger and academic, Lloyd Mayer. In fact, it appears that the IRS did grant exempt status to this organization as a church. The article also reveals the slippery slope that law enforcement encounters when dealing with an entity claiming to be a church. At a minimum, it provides a fascinating case study and teaching opportunity for any nonprofit law professor.
Thursday, July 8, 2010
Michael L. Gompertz, a retired IRS attorney, has published Lawsuit Challenges Income Tax Preferences for Clergy in the July 5th edition of Tax Notes. Tax Notes' synopsis follows:
In this article, the author argues that sections 107 and 265(a)(6)(B) are unconstitutional because they are narrow tax preferences for clergy that violate the First Amendment's establishment clause. Taxpayers have standing to challenge these sections. In Freedom From Religion Foundation v. Geithner, a district court correctly denied the government's motion to dismiss taxpayers' claims that section 107 is unconstitutional, but incorrectly granted the motion to dismiss claims that section 265(a)(6)(B) is unconstitutional.
We previously blogged about the significance of the Freedom From Religion Foundation v. Geithner case.
Wednesday, July 7, 2010
As reported by The Chronicle of Philanthropy, The U.S. Supreme Court's decision in Hastings Christian Fellowship v. Martinez handed down last week addressed the constitutionality of a public educational institution conditioning access to a school-funded student organization based on compliance with an "all-comers" policy. Like most colleges and universities, the Hastings College of Law at the University of California required all student organizations to obtain official recognition before they can receive the institution's support for their activities. Hastings referred to such an organization as a "Registered Student Organization" (RSO). An RSO provides a student group with several benefits, including the use of school funds, facilities, and channels of communication, as well as the school's name and logo. In exchange, any RSO must comply with the school's Nondiscrimination Policy, which mirrors California state law barring discrimination on a number of bases, including religion and sexual orientation. Hastings interprets this policy to mandate acceptance of all comers; namely, an RSO must permit any student to participate, become a member or seek leadership in the organization, regardless of that student's status or beliefs. Hasting's Nondiscrimination Policy was problematic for the Christian Legal Society, which mandates that its members sign a "statement of faith" adhering to the Society's theological views, including, as the Supreme Court noted, the belief that "sexual activity should not occur outside of marriage between a man and a woman." When seeking status as an RSO, the Society also requested an exemption from the school's nondiscrimination policy, alleging that such policy would violate its First Amendment right to freedom of association by forcing it to include members who do not share its fundamental views. Hastings refused to grant the exemption, leading to the lawsuit.
Writing for the 5-justice majority, Justice Ginsburg explained that the Hastings case was not simply about "expressive association" under the First Amendment, on which the Court ruled in Boys Scouts of America v. Dale (upholding the Boy Scouts right to refuse membership to a gay assistant scoutmaster). Rather, the Court held that this case was governed by the "limited public forum" doctrine, which permits colleges, universities and other institutions that receive government funds to restrict First Amendment rights provided they have a valid reason. As to Hastings, the Court found that it had valid reasons, including the encouragement of "tolerance, cooperation, and learning among students." In response to the Society's contention that the school's nondiscrimination policy discriminated against its tenets, the Court noted that the Hastings policy affected all student groups; specifically, that a Republican student organization must admit avowed Democrats, and likewise. Accordingly, the Court concluded that the Hastings policy draws no distinction between groups based on their message or perspective; its requirement that all student groups accept all comers is "textbook viewpoint neutral."
Tuesday, July 6, 2010
Present-Day Public Policy Doctrine: Should Charitable Donations Continue to Fund West Bank Settlements?
The New York Times reports that during the last 10 years a minimum of 40 U.S.-based charities have remitted more than $200 million in tax-deductible contributions to Jewish settlements in the West Bank and East Jerusalem. Although a majority of the contributions have been funneled to schools, synagogues, and other public centers, some contributions have funded housing developments, guard dogs, bulletproof vests and other commodities needed to secure the settlements. At a minimum, the latter funding is in direct conflict with a succession of United States policy, continued by the Obama administration, opposing the settlements. Specifically, the United States consistently restricts Israel from using American government aid in the settlements. Although the IRS has announced that it is working on a publication to address domestic nonprofits and international activities, including consideration of additional questions on Schedule F of the Form 990, it has not announced any concentrated effort to address such charitable contributions made in direct conflict with United States foreign policy.
As discussed in a previous article on Forward.com, the primary issue raised in using charitable contributions to support West Bank settlements is the public policy doctrine announced by the U.S. Supreme Court in Bob Jones University: an institution seeking tax-exempt status "must serve a public purpose and not be contrary to established public policy." Of course, what constitutes "established public policy" is subject to much conjecture by legal scholars. In Bob Jones University, the Supreme Court found that racial discrimination in education violated a fundamental national public policy rooted in judicial decisions, legislation (Civil Rights Act), and executive orders. Does the U.S. policy on West Bank settlements meet that same threshold? Or, is the succession of past administrations' policy opposing West Bank settlements sufficient? Even if violation of established public policy is found, as Professor Ellen Aprill stated in the Forward.com article, the IRS would be "loath" to revoke the exemption of the domestic charities that have violated such policy. Regardless of IRS action or inaction, the continued domestic charity support of the West Bank settlements arguably poses a present-day test of the public policy doctrine.