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.