Iowaska Church Tries Again, This Time Relying On Chevron's Demise

Iowaska Church of Healing is not going away. There's a recap below.  Last week Iowaska filed a petition for rehearing en banc in the DC Circuit. The petition relies, in part, on Loper Bright Enterprises, the case that scuttled the Chevron doctrine.  Iowaska thinks the 3-judge panel's application of a "clearly erroneous" standard of review shows too much deference.  So its asking for a rehearing on that and other grounds relating to standing.  Frankly, the deference argument smells like desperation.  The arguments on standing are better and ultimately correct but quite byzantine.  You gotta take a left, then a right, followed by another right and then around a corner and another left to arrive at Iowaska's desired outcome.

I still think none of this would be necessary and this case would be a slam dunk for Iowaska if the Church had sued DEA instead of IRS. But its only been 100 years since I've seen the inside of a courtroom so what do I know maybe. I also want to point out that the amicus brief, filed by Chacruna Institute and Sacred Plant Alliance is excellent.  We could have saved ourselves a lot of time and the Court might have sorted this mess out already if it paid attention to that brief. Lord only knows whether the judges really understand Iowaska's argument.  If they did Iowaska would win.  The Court should read the amicus brief again before deciding whether to grant the petition for rehearing.  Here is part of what amici sensibly argued:

Nonetheless, if questions had remained about whether the IRS (or the United States) was a proper RFRA defendant, then the court below should have concluded that DEA was an indispensable party. From there, the proper course was not to dismiss the Church’s case for lack of standing, but to join DEA sua sponte.

A “person who is subject to service of process and whose joinder will not deprive the court of subject-matter jurisdiction must be joined as a party if: in that person’s absence the court cannot accord complete relief among existing parties.” Fed. R. Civ. P. 19(a)(1) (emphasis added). Thus, “if a person has not been joined as required, the court must order that the person be made a party.” Fed. R. Civ. P. 19(a)(2) (emphasis added). The court has an “independent duty” to consider Rule 19(a) and join indispensable parties. Eco Tour Adventures, Inc. v. Zinke, 249 F.Supp.3d 360, 390 (D.D.C. 2017); see also Fed. R. Civ. P. 21.

Joinder did not happen here, despite the district court’s observation that the Church also “claim[ed] injury from the independent and pending action of DEA regarding [its] application for a CSA exemption.” Instead, the court dismissed the Church’s action. This was improper and is an independent ground for reversal.

That translates to, "if DEA is so important then dadgummit let's get 'em in here so we can straighten this all out right now."  Good lawyering requires plain talk and common sense sometimes.  I just think Iowaska is way over thinking the entire case.  As regards the repeal of Chevron, Iowaska argues that the panel incorrectly applied a deferential standard of review -- "clearly erroneous" -- to uphold summary dismissal of Iowaska's 7428 petition.  The Church makes the interesting, novel and somewhat hard to follow argument that the panel should have applied the less deferential de novo standard of review.  By affirming on the lesser standard, according to Iowaska, the panel abdicated the judicial responsibility underlying the Supreme Court’s overruling of Chevron. Its hard to tell but you can judge for yourself:

III. The Panel’s Deference To The IRS On A Question Of Law Cannot Survive Loper

ICH argued that the district court’s grant of summary judgment for the IRS on ICH’s Tax Code claim should be reviewed de novo, and that the panel could only uphold the IRS’s 501(c)(3) denial decision if the panel itself found, as required by Bob Jones, that there is “no doubt” that ICH’s ayahuasca sacrament is illegal or contrary to public policy. See Bob Jones, 461 U.S. at 592. Instead, the panel reviewed the district court’s decision only for “clear error,” and joined the district court in ruling that the IRS is not required to demonstrate that there is “no doubt” that the sacrament is illegal, but instead ICH bears a “high” burden to establish that it is legal.

As ICH argued, that deferential approach neglected the distinction between questions of law and questions of fact. Deference may be appropriate on questions of fact. But neither the district court nor the IRS purported to resolve any disputed issues of fact regarding ICH’s ayahuasca sacrament. The key issue in this proceeding is the legality, for Bob Jones purposes, of an ayahuasca sacrament practiced as a sincere exercise of religion by an entity that has committed to follow safety and anti-diversion protocols. That issue is a pure question of law, involving  the interaction of the Bob Jones test, the CSA and RFRA.

In Loper, decided one week after the panel’s decision, the Supreme Court did away with judicial deference to agency decisions on questions of law, declaring in sweeping terms that that “‘[t]he interpretation of the meaning of statutes, as applied to justiciable controversies,’ [is] ‘exclusively a judicial function.’” 

Under Loper, it is this Court’s job to determine, de novo, whether the Bob  Jones “no doubt” test is satisfied. Since there are no disputes of fact in this case, any evidentiary burden that ICH might bear is irrelevant. Unless this Court concludes that there is “no doubt” that under the CSA and RFRA read together, ayahuasca sacraments are illegal, ICH should prevail on its Tax Code claim.  This case should, at a minimum, be reheard so that it can be decided, in accordance with Loper, without a deferential thumb on the scales in the IRS’s favor.

darryll k. jones

 

Nearly twenty years ago, the Supreme Court held that organized worshipers (i.e., churches) have a First Amendment right to use h0asca in their worship activities.  In 2019, Iowaska applied for a permit from DEA.  The permit would acknowledge that Iowaska had the right to use huasca in its worship activities, as central American religions have done for centuries.  Iowasca wasn’t seeking permission just an acknowledgement.  The Supreme Court had already established the right and Iowaska wanted the DEA acknowledgement to alleviate anxiety arising from the implicit threat created by the Controlled Substances Act.  Sure Iowaska could have just used the substance and then relied on the Religious Freedom Restoration Act to defend against a federal criminal action.  But who wants the life altering and jeopardizing hassle?

Even if the Church prevailed, the risk of losing jobs and other collateral consequences that might not be remedied until years later is too great.  So the Church sought a DEA permit.  Shortly thereafter, but before DEA acted on the permit application, Iowaska submitted a 1023 to the Service seeking recognition of its tax-exempt status.  Here too, Iowaska need not have applied.  As a Church it is presumed tax exempt.  Iowaska applied anyway and right about now must be thinking “no good deed goes unpunished.” I’m told churches often  apply for exemption, though they are not required, at the behest of potential big donors or to satisfy a state or local requirement. The Service denied the application under the illegality doctrine because Iowaska lacked a permit from DEA.  The Service candidly informed Iowaska that as soon as it obtained a permit, the Service would issue a determination letter. 

Meanwhile, DEA is foot-dragging on Iowaska’s 5 year old permit application.  It still doesn’t look like the DEA will issue the permit any time soon even though Iowaska is clearly entitled.  So Iowaska sued the Service under IRC 7928 in federal district court.  It did not also sue DEA.  It could have, but Iowaska’s counsel told me that it declined for various unexplained strategic and legal reasons. The district and then the DC Circuit Court of Appeals made the seemingly common sense finding that Iowaska sued the wrong party.  It should have sued the DEA.  Both Courts ruled that Iowaska did not have standing because its beef was with DEA not IRS.  Iowaska argued that every federal agency is independently subject to RFRA and that IRS should have applied RFRA, as interpreted by the Supreme Court regarding church use of huasca instead of deferring to DEA.  The Court rejected that argument, though it took the long way around with some dubious conclusions regarding whether Iowaska waived its religious freedom argument through  insufficient arguments on brief.