Thursday, January 9, 2020
In a tax package agreed to on December 17, 2019, last year, Congress repealed a provision of the code widely known as the church parking tax. I wrote about it on Surly Sub Group when it was enacted in 2017 concerned about its massive probably unintended effect on nonprofits. It caused massive havoc in that world, and nonprofits, led by churches mounted a massive effort to get the provision repealed. It took two years, but they were successful.
Thus, even though the IRS spent significant time providing guidance on how to comply, and presumably large nonprofits around the country adjusted their parking situation dramatically, nonprofits and the IRS must now act as if none of that ever happened. Many nonprofits like universities and hospitals likely paid large 21% rate taxes on parking fringe benefits that they continued to provide to their employees.
What now? IRS needs to figure out how to expeditiously issue refunds.
Congress members just issued a letter to the IRS asking it to issue guidance as quickly as possible to let nonprofits know how to obtain these refunds.
Tuesday, December 31, 2019
Yesterday, I wrote that this week I would be blogging about the Mormon church's $100 billion endowment.
It's worth noting here that estimating the value of the Mormon church has been something of a parlor game for the last couple decades, at least. When I was in college, Time published a story estimating the church's wealth at $30 billion. A decade and a half later, Reuters estimated that the church owned real estate worth $35 billion and received roughly $6 billion annually in donations from members in the U.S. and Canada. And now, apparently, the church receives $7 billion in contributions annually and has an investment portfolio worth $100 billion.
So why all of the estimates? Because churches in the U.S. aren't required to file the financial disclosures that other tax-exempt organizations must file. Church finances and assets, then, can be a black box. (They don't have to be a black box--nothing in the tax law prevents churches from disclosing financial data, and some churches have chosen to be transparent. More on that in a minute.)
Monday, December 30, 2019
About two weeks ago, Religion Unplugged and the Washington Post simultaneously broke a story: the Church of Jesus Christ of Latter-day Saints (which going forward I'll refer to as the Mormon or the LDS church). In brief, they reported a whistleblower complain to the IRS saying that Ensign Peak Advisers, a tax-exempt supporting organization/integrated auxiliary of the Mormon church, was sitting on investment assets worth $100 billion. Moreover, during its 32-year existence, the whistleblower alleged, it had never made any charitable distributions, to the Mormon church or any other charitable institution.
As both someone who spends a lot of time researching and writing about the intersection of tax and religion AND as a practicing Mormon, that revelation ended up taking a lot of my time. It raises interesting and ambiguous legal questions, many of which I wrote about here.
Monday, July 22, 2019
Over the past several years, the Freedom From Religion Foundation has been litigating over the constitutionality of the parsonage allowance. (The parsonage allowance, codified in section 107 of the Code, provides that "ministers of the gospel" can exclude in-kind housing or cash housing allowances from their income.)
In March, the Seventh Circuit ruled against FFRF, holding that tax-free housing allowances available exclusively to clergy didn't violate the Establishment Clause. Then, a month ago or so, FFRF announced that it wouldn't seek review by the Supreme Court.
But the battle isn't over, it turns out. Last week, the Humanist Society of Greater Phoenix announced that it was going to challenge the constitutionality of the parsonage allowance.
The article doesn't provide a ton of details, but it looks to me like it's going to follow the FFRF's playbook by designating a portion of its executives' salary as a housing allowance. (Note that, contrary to its assertion, the Humanist Society wouldn't claim any kind of exemption: the exemption belongs to the minister.) Because the Humanist Society is both a nonprofit and tax-exempt, it's in a similar position to FFRF vis-à-vis the parsonage allowance.
I assume that it believes that the IRS will reject the claim, giving it standing to challenge the provision's constitutionality in court.
I've said before that I'm not completely convinced that this grants standing, the Seventh Circuit notwithstanding. Even if it does, though, the Humanist Society may face hurdles not faced by the FFRF. Specifically, according to the article, leaders of the Humanist Society are broadly recognized as clergy. By contrast, the FFRF expressly denied by religious or quasi-religious, and rejected the IRS's assertion that maybe its executives were clergy. Because the Humanist executives are recognized as clergy, it's not clear to me that they don't qualify as "ministers of the gospel" for purposes of section 107. And, if they qualify as clergy, they're going to have a hard time getting standing to challenge the allowance.
Samuel D. Brunson
Thursday, June 27, 2019
President Trump talked about the so called "Johnson Amendment" again the other day. The Johnson Amendment, as probably most of the readers of this blog know, is the language contained in section 501(c)(3) of the Internal Revenue Code that prohibits a charity hoping to maintain its status as exempt from federal income tax from intervening in any political campaign. I say so called as it was not called that on its entry to the Code, though this article does suggest it was LBJ who was the author of the language added to the Code in 1954.
The President, speaking before the Faith and Freedom Coalition conference in Washington stated: “Our pastors, our ministers, our priests, our rabbis . . . [are] allowed to speak again . . . allowed to talk without having to lose your tax exemption, your tax status, and being punished for speaking." He then apparently jokingly cautioned that if a pastor spoke against him “we’ll bring back that Johnson Amendment so fast,” the president said to laughter, adding, “I’m only kidding.”
President Trump signed an executive order back in May. The law of course is still found within section 501(c)(3) and thus is a duly enforceable law. In my opinion, the executive order did not do anything to change the actual state of affairs of the meaning of the law or its interaction with other laws, such as the Religious Freedom Restoration Act, or constitutional rights. If anything, the current state of the law should work to protect those he jokingly threatened to use the state of the law against.
The news article I cite to above unfortunately wrongly states the following: "The president has not undone the law, like he sometimes claims he has, but rather told the Treasury Department it can enforce at its own discretion — leaving the possibility that the Trump administration could only penalize churches that oppose the president."
Although the President has not undone the law, as the article correctly states, I say wrongly in two senses: (1) he has not told the Treasury Department that it can enforce at its own discretion - he only directs Treasury to apply the law with due regard to allowing individuals and organizations to speak when speaking from a religious perspective "where speech of similar character has, consistent with law, not ordinarily been treated as participation or intervention in a political campaign", and (2) it would be unlawful for the administration to penalize churches that oppose the president, and his executive order did not create that possibility of such unlawful action. If you have interest in more detail on the (obvious) legal problems associated with (2), I wrote about the legal reasons why it would be unlawful for the IRS to unequally enforce the law in such a way in a longer scholarly article here considering the claims that the IRS violated conservative organizations rights when it specifically used names of groups like the Tea Party in managing its application system.
Friday, February 15, 2019
Ellen Aprill's Review of Hamburger's "Liberal Suppression: Section 501(c)(3) and the Taxation of Speech"
Ellen Aprill (Loyola-LA) recently posted a review of Professor Philip Hamburger's (Columbia) "Liberal Suppression: Section 501(c)(3) and the Taxation of Speech" at HistPhil.org. HistPhil, which is "a web publication on the history of the philanthropic and nonprofit sectors, with a particular emphasis on how history can shed light on contemporary philanthropic issues and practice." Prof. Hamburger's book argues that, as a constitutional law matter,
... theopolitical fears about the political speech of churches and related organizations underlay the adoption, in 1934 and 1954, of section 501(c)(3)’s speech limits. He thereby shows that the speech restrictions have been part of a broad majority assault on minority rights and that they are grossly unconstitutional.
Thursday, November 8, 2018
I had the pleasure of speaking to a reporter this morning. He wanted to know if the picture above, a sign posted on the front lawn of the Grace of God Church in New Port Richey, Florida on election day violated the 501(c)(3) prohibition against campaign intervention. The Church, by the way, was also a polling place so the Pastor who placed the sign was careful that it was not within 100 feet of the church, proper. Still, it was on the Church ground, posted on election day even, and the Pastor told the reporter that if he changed the mind of at least one voter, he would be satisfied. The sign was also posted, and then removed after voter outcry, from the Church' Facebook page.
The reporter and I spoke by phone as he told me where to look online for a picture of the sign. As I pulled it up, I couldn't help howling in laughter. We talked a bit about the Service's general reluctance to enforce the prohibition against houses of worship because of obvious First Amendment concerns but I concluded that this is probably the easiest case since Branch Ministries took out a full page advertisement in USA Today (I wish I had a picture of that advertisement) exhorting Christians not to vote for Bill Clinton. I allowed that when Pastors preach about particular issues on any given Sunday (farther in time from election day the better) and perhaps even condemn politicians who support or oppose positions implicating spiritual teachings, they can probably count on some degree of protection from the First Amendment. But the sign above is an easy case. The Pastor seems to know this now because in the aftermath of election day he has tried to explain that the sign conveys a purely spiritual message, a verbal tap dance that evoked another round of laughter from me. In a Tampa Bay Times article yesterday, the Pastor is quoted thusly:
Thursday, October 25, 2018
Columbia Law School Professor Philip Hamburger is a prodigious and iconoclastic legal scholar. ... Hamburger’s latest subject, in Liberal Suppression ([University of Chicago Press] 2018), is an inquiry into the legitimacy of restrictions on the political speech of non-profit organizations. Section 501(c)(3) exempts religious, educational, and charitable organizations from federal income tax but denies them this exemption if they engage in campaign speech for or against any candidate for public office or devote a substantial part of their activities to propaganda or other attempts to influence legislation. Section 170(c) makes contributions to qualifying non-profits tax-deductible to the donor. According to Hamburger, these exemptions and deductions amount to “many billions of dollars annually.”
Most people’s knee-jerk reaction is that section 501(c)(3)’s restrictions are justified by the tax-exempt status such non-profit organizations applied for and received. Rejecting such preconceptions in his trademark fashion, Hamburger strongly disagrees. Although non-profits are free to express a wide range of opinions—even political opinions—outside of political contests, Hamburger views section 501(c)(3) as “an extraordinary abridgement of an essential freedom,” which ought to be considered unconstitutional. Inasmuch as the Supreme Court has unanimously upheld the lobbying restrictions in section 501(c)(3), Liberal Suppression is nothing if not ambitious, but is it persuasive? Realizing that his arguments may appear to be an “uphill struggle,” early on Hamburger asks readers to “hold their skepticism in abeyance.”
After reading the book, my skepticism remains stubbornly intact.
Hamburger reminds the reader that from colonial times until the amendment of section 501(c)(3) in 1934 (and further tightening in 1954, and again in 1987), which imposed the restrictions he finds objectionable, American clergy actively participated in politics from the pulpit. The timing of the 1934 and 1954 restrictions, he points out, coincides with a period of “liberal” anti-Catholic sentiment in America. The principal culprits in Hamburger’s tale are nativists such as Ku Klux Klan imperial wizard Hiram Evans and then-Senator Lyndon B. Johnson, who faced a Catholic opponent in the 1954 senatorial primary. Hamburger portrays them as the instigators of section 501(c)(3)’s “oppressive” political restrictions. ...
Does section 501(c)(3) “threaten the core of most First Amendment freedoms,” as Hamburger claims? Liberal Suppression, despite its undeniable erudition and interesting digressions into American political (and theological) thought and historical asides, falls short of making a compelling case. Hamburger is likewise unconvincing in his attempt to make a connection between the restrictions in section 501(c)(3) and contemporary forms of censorship such as campus speech codes. While Hamburger’s theoretical arguments seem to miss their mark, they are always engaging and sometimes contains gems like this:
"American religion has increasingly been aligned with popular liberal and progressive opinion—even to the point of looking for salvation not in another world but in this one, and not so much from God as from democratic government."
My new book, Liberal Suppression, argues that section 501(c)(3)’s speech restrictions are prejudiced and unconstitutional. These conclusions run counter to widespread assumptions, and it is therefore understandable that Mark Pulliam and other thoughtful readers find them difficult to stomach. All the same, it is important at least to come to grips with the realities that underlie the book’s conclusions, and Pulliam’s review fails to do this. To evaluate the prejudice, one must understand its nature; and to judge the constitutional arguments, one must recognize their breadth and strength.
The prejudice underlying section 501(c)(3) arose from theologically liberal anxieties about the speech of churches. And as traced by my book, the prejudice gradually expanded into a broader liberal fear about the speech of all sort of idealistic organizations. Indeed, these liberal concerns have expanded to include fears about the orthodox or stereotypical speech of individuals. It is therefore disappointing that Pulliam reduces my account of prejudice to a simplistic complaint about narrow anti-Catholicism.
My book, in his view, argues that section 501(c)(3) speech restrictions were added “in order to reduce the influence of the Catholic Church.” Certainly, anti-Catholicism was the opening wedge. But as my book repeatedly emphasizes, the relevant prejudices were not narrowly anti-Catholic. Already in the early nineteenth, they were broadened out to take aim at business corporations, and in the strain that is central to my book, they soon reached not only churches—Protestant as well as Catholic—but also the full range of churchy organizations, including eventually all sort of idealistic groups that were not religious. ...
[T]he prejudiced sentiment about the speech of ecclesiastical and other idealistic organizations is painfully evident in section 501(c)(3). Pulliam protests that I have not shown this. Well, consider just one phrase—the section’s limit on “carrying on propaganda, or otherwise attempting to influence legislation.” Those words were no accident. They came directly out of nativist literature—a literature that, again, reached across much of American society, from KKK klaverns to Ivy League philosophy departments. Once more, the low and the high had more in common than the latter wanted to acknowledge.
Pulliam’s review, in short, recognizes neither the broad character of the prejudice nor its societal depth. And in taking a confined view of both, he misunderstands the antagonisms that underlay section 501(c)(3) and still undergird a host of other speech restrictions. ...
Tax lawyers and First Amendment lawyers tend to have very different sensibilities about the speech restrictions. Tax lawyers usually observe that churches etc. are only slightly quieted down, for they can convey their messages through auxiliary organizations, such as section 501(c)(4) organizations and section 527 PACs. First Amendment doctrine, however, treats even the slightest restriction on political speech with apprehension. And the freedom of speech is not merely the freedom to have one’s message come out of someone else’s mouth; most basically it is the freedom to speak—to speak through one’s own mouth, in one’s own voice.
Unlike Pulliam, most Americans, on both sides of the issue, understand that section 501(c)(3) matters for speech. It is the only subsection of the Internal Revenue Code that is widely known—even by its section number—and that is no accident. The whole point of the section’s speech restrictions was to satisfy deeply felt theo-political anxieties about speech—anxieties that remain pervasive. And this is why so many Americans care. Whether they like or fear the speech of ecclesiastical and other idealistic organizations, they understand that section 501(c)(3) chills such groups.
[Hat tip: TaxProf Blog]
Saturday, December 23, 2017
Ellen P. Aprill (Loyola Law School - Los Angeles) has written Amending the Johnson Amendment in the Age of Cheap Speech, University of Illinois Law Review On-Line (Forthcoming). Below is Professor Aprill's abstract:
On November 2, 2017, the House Ways and Means Committee released its proposed tax reform legislation. It includes a provision amending the provision of the Internal Revenue Code, sometimes called the Johnson Amendment, that prohibits charities, including churches, from intervening in campaigns for elected office, at risk of loss of their exemption under section 501(c)(3). Under the Ways and Means proposal, as later revised and passed by the House, organizations exempt as charities under section 501(c)(3) would be permitted to engage in campaign intervention if “the preparation and presentation of such content . . . is in the ordinary course of the organization’s regular and customary activities in carrying out its exempt purpose and . . . results in the organization incurring not more than de minimis incremental expenses.”
If such legislation becomes law, the IRS and the Department will be faced with the difficult task of giving guidance as to the meaning of “regular and customary,” “de minimis,” and “incidental.” It would likely have to address whether donations could be earmarked for campaign intervention so long as they were within the organization’s de minimis limit and involved regular and customary activities. Whatever rules are announced are sure to be controversial and complicate enforcement of the prohibition for campaign intervention that is more than de minimis. Given the lack of IRS resources and controversy regarding its attempts to regulate political activities of exempt organizations, the IRS may well hesitate to take action against possible violations.
However these terms are defined and enforced, a de minimis exception raises significant issues that demand attention in an era of what Professors Eugene Volokh and Richard Hasen have called “cheap speech.” These are issues that require consideration whether or not a de minimis exception is adopted in the current tax reform legislation.
After giving background on the Johnson Amendment, this essay discusses the impact of any de minimis exception regarding campaign intervention in the age of cheap speech. It concludes that the availability of cheap speech may have undermined the most common constitutional justification for the prohibition – that the government has no duty to subsidize speech – such that a new approach to limiting the political speech of charities is needed.
Wednesday, December 20, 2017
Goodrich & Busick: Sex, Drugs, and Eagle Feathers: An Empirical Study of Federal Religious Freedom Cases
Luke W. Goodrich (The Becket Fund for Religious Liberty; University of Utah - S.J. Quinney College of Law) and Rachel N. Busick (The Becket Fund for Religious Liberty Fellow) have written Sex, Drugs, and Eagle Feathers: An Empirical Study of Federal Religious Freedom Cases, Seton Hall Law Review (forthcoming). Below is their abstract:
This Article presents one of the first empirical studies of federal religious freedom cases since the Supreme Court’s landmark decision in Hobby Lobby. Critics of Hobby Lobby predicted that it would open the floodgates to a host of novel claims, transforming “religious freedom” from a shield for protecting religious minorities into a sword for imposing Christian values in the areas of abortion, contraception, and gay rights.
Our study finds that this prediction is unsupported. Instead, we find that religious freedom cases remain scarce. Successful cases are even scarcer. Religious minorities remain significantly overrepresented in religious freedom cases; Christians remain significantly underrepresented. And while there was an uptick of litigation over the Affordable Care Act’s contraception mandate — culminating in Hobby Lobby and Little Sisters of the Poor — those cases have subsided, and no similar cases have materialized. Courts continue to weed out weak or insincere religious freedom claims; if anything, religious freedom protections are underenforced.
Our study also highlights three important doctrinal developments in religious freedom jurisprudence. The first is a new circuit split over the Religious Freedom Restoration Act. The second is confusion over the relationship between the Free Exercise and Establishment Clauses that is currently plaguing litigation over President Trump’s travel ban. The third is a new path forward for the Supreme Court’s muddled Establishment Clause jurisprudence.
Sunday, November 19, 2017
Samuel D. Brunson (Loyola-Chicago) and David J. Herzig (Valparaiso) have written A Diachronic Approach to Bob Jones: Religious Tax Exemptions after Obergefell, 92 Indiana Law Journal 1175 (2017). Here is the abstract:
In Bob Jones University v. United States, the Supreme Court held that an entity may lose its tax exemption if it violates a fundamental public policy, even where religious beliefs demand that violation. In that case, the Court held that racial discrimination violated fundamental public policy. Could the determination to exclude same-sex individuals from marriage or attending a college also be considered a violation of fundamental public policy? There is uncertainty in the answer. In the recent Obergefell v. Hodges case that legalized same-sex marriage, the Court asserted that LGBT individuals are entitled to “equal dignity in the eyes of the law.” Constitutional law scholars, such as Laurence Tribe, are advocating that faith groups might lose their status, citing that this decision is the dawning of a new era of constitutional doctrine in which fundamental public policy will have a more broad application.
Regardless of whether Obergefell marks a shift in fundamental public policy, that shift will happen at some point. The problem is, under the current diachronic fundamental-public-policy regime, tax-exempt organizations have no way to know, ex ante, what will violate a fundamental public policy. We believe that the purpose of the fundamental-public-policy requirement is to discourage bad behavior in advance, rather than merely to punish it after it occurs. As a result, we believe that the government should clearly delineate a manner for determining what constitutes a fundamental public policy. We recommend three safe harbor regimes that would allow religiously affiliated tax-exempt organizations to know what kinds of discrimination are incompatible with tax exemption. Tying the definition of fundamental public policy to strict scrutiny, to the Civil Rights Act, or to equal protection allows a tax-exempt entity to ensure compliance, ex post. In the end, though, we believe that the flexibility attendant to equal protection, mixed with the nimbleness that the Treasury Department would enjoy in crafting a blacklist of prohibited discrimination, would provide the best and most effective safe harbor regime.
Adam Chodorow (Arizona State) has written a brief analysis of Gaylor v. Mnuchin for the ABA Tax Times. titled A Step Toward Greater Clarity on Clergy Tax Exemptions? Here is the first paragraph:
On October 6, 2017, the U.S. District Court for the Western District of Wisconsin declared section 107(2) of the Internal Revenue Code unconstitutional. The provision permits “ministers of the gospel” to exclude from income compensation designated as a housing allowance, thus giving churches and other religious organizations the ability to provide tax-free housing to their ordained ministers. The provision applies not only to parish priests living in modest housing, but also to televangelists like Joel Osteen, who currently lives tax-free in his $10.3 million mansion. It also applies to ministers who work in church-affiliated schools as teachers and administrators. This affords a significant benefit for certain schools whose religious tenets include the ministry of all believers. In one case, a basketball coach was entitled to exclude his housing allowance from income. The government foregoes around $800 million in revenue per year as a result of this provision, and, if the decision stands, it could have a significant impact on churches and other religious institutions.
Edward A. Zelinsky (Cardozo) has written Taxing the Church: Religion, Exemptions, Entanglement,and the Constitution (Oxford University Press). Here is an overview:
- Explores the taxation and exemption of churches and other religious institutions, both empirically and normatively
- Reveals that churches and other religious institutions are treated diversely by the federal and state tax systems
- Focuses on church-state entanglements with respect to taxing or exempting churches and other sectarian entities
- Discusses improvements that can be made in legal and tax policy trade-offs, such as the protection of internal church communications and the expansion of the churches' sales tax liabilities
- A clear, balanced, and comprehensive treatment of the topic that is broadly accessible to tax policymakers, lawyers, nonlawyers, judges, tax specialists, and even those with no background in the subject
For a review, see Peter J. Reilly on Forbes.
Friday, August 18, 2017
J. Michael Martin (Evangelical Council for Financial Accountability) has published Should the Government Be in the Business of Taxing Churches?, 29 Regent U. L. Rev. 309 (2017). Here are the first two paragraphs of the introduction (footnotes omitted):
Throughout our entire history as a nation, the United States has never imposed a federal income tax on churches. In spite of this longstanding policy for over two centuries and the principle it represents of the separate spheres of sovereignty of church and state in America, some critics have recently become more vocal in questioning the legitimacy of church tax-exempt status, based primarily on financial and constitutional concerns.
As a practical matter, the courts and Congress are the two institutions where the unbroken practice of church tax exemption could be placed at risk. As the dissenting Supreme Court justices observed in Obergefell v. Hodges, the newly interpreted constitutional right to samesex marriage in the courts could evolve to threaten tax exemptions and other freedoms heretofore enjoyed by religious organizations. Also, with one political party now controlling Congress and the White House after the 2016 elections, new legislation like comprehensive tax reform has its greatest chance of passage in decades. And as with any scenario involving tax reform, there is always the chance that churches and other types of corporations and entities could find their tax status changing under a new paradigm. In light of these developments, more people may be asking: “Why should churches continue to be tax-exempt?” As the title of this Article suggests, perhaps a more appropriate way to frame the inquiry might be: “Should the government be in the business of taxing churches?”
Wednesday, June 21, 2017
There have been some interesting developments from the states relating to their bread and butter issues of governance, fundraising, and property tax exemptions, as well as a new law in Texas relating to sermons.
With respect to governance, another round of amendments to the New York Nonprofit Revitalization Act went into effect last month (except for one provision that went into effect on January 1st of this year). The amendments clarified a number of important provisions as well as relaxing some of the stricter rules in the original Act, including those relating to related party transactions. For a helpful summary, see this National Law Review article by Pamela Landman (Cadwalader) and Paul W. Mourning (Cadwalader). One interesting nonprofit governance case under the Act is Schneiderman v. The Lutheran Care Network et al., in which New York Attorney General Eric Schneiderman's office challenged the management fees charged by The Lutheran Care Network (TLCN) to one of its affiliates, in part because TLCN had exercised its authority over the affiliate to render the members of the affiliate's board of directors identical to the members of the TLCN board. The trial court rejected the AG office's position, citing the business judgment rule and the presumption that corporate officers and directors act in good faith, regardless of the decision by TLCN to make the affiliate board's membership mirror that of the TLCN board. The March 13th opinion does not appear to be publicly available, but for coverage see the Albany Times Union stories from March 21st, January 13th, and last October 1st.
NY AG Schneiderman office's was more successful in pursuing a fundraising-related claim against the Breast Cancer Survivors Foundation, Inc. (BCSF) and its President and Founder Dr. Yulius Poplyansky. In that case, the resulting settlement closed the "shell charity" BCSF nationwide and resulted in nearly $350,000 to be paid to legitimate breast cancer organizations. The settlement is one result of a broader NY AG "Operation Bottomfeeder" initiative aimed at such charities. The Nonprofit Quarterly noticed a troubling aspect of this case, however: the person apparently behind BCSF was Mark Gelvan, who has "a long history of such activity" and who also was banned for life from such fundraising by none other than the NY AG's office 13 years ago. What additional penalties he may face is unclear, as the investigation into BCSF is apparently continuing.
Turning to property tax exemptions, last year I mentioned that the Massachusetts Supreme Court was considering what counts as sufficiently "religious" use of real property to qualify for exemption as a house of religious worship under Massachusetts law. We now have an opinion in Shrine of Our Lady of La Sallette v. Board of Assessors, and religious organizations in Massachusetts can (mostly) breath a sigh of relief. While exemption statutes are strictly construed, the court rejected a narrow reading of the statute at issue here that would have subject some supporting facilities to tax. In doing so, the court stated "we recognize that a house of religious worship is more than the chapel used for prayer and the classrooms used for religious instruction. It includes the parking lot where congregants park their vehicles, the anteroom where they greet each other and leave their coats and jackets, the parish hall where they congregate in religious fellowship after prayer services, the offices for the clergy and staff, and the storage area where the extra chairs are stored for high holy days." The court then concluded that because the welcome center and a maintenance building both had a dominant purpose connected with religious worship and instruction they were fully exempt from tax, contrary to the position of the Board of Assessors, which had limited full exemption to a church, chapels, a monastery, and a retreat center. It agreed with the Board, however, that a safe house for battered women (leased to a another nonprofit for this purpose) and a wildlife sanctuary did not meet this test (although if the proper application had been filed, they might have been exempt because their dominant purpose was charitable). More coverage: WBUR News.
Finally, one other religious organization-related state law development. Several years ago attorneys for the mayor of Houston subpoenaed the sermons of five pastors who opposed a city ordinance banning discrimination based on sexual orientation during litigation relating to an attempt to repeal the ordinance. She dropped the subpoenas in the face of nationwide criticism, and the ordinance was repealed by Houston voters in November 2015. Nevertheless, the Houston Legislature and current Texas Governor Greg Abbott felt it was important to bar Texas government officials from ever compelling the disclosure of sermons in the future, and so they enacted legislation along those lines last month.
Tuesday, June 20, 2017
This Article uncovers and names a phenomenon of pressing importance for healthcare policy and religious liberty law: the rise of zombie religious institutions without attachments to churches or associations of religious people. It argues that when religion and commerce combine, commercial transactions shape religious compliance and identity. Contract creates religion—sometimes in perpetuity—for facilities that are not, or never have been, religious and for providers who do not share the institution’s religious precepts. “Religious” institutions far-removed from the paradigm of the church populate the marketplace.
The Article details religion’s spread across healthcare through affiliations, mergers, and—most surprisingly—sales of hospitals that continue religious practice after their connection to a church ends. Secular and religious, public and private, for-profit and non-profit hospitals comply with religion by contract. Private law impedes public policy by expanding the universe of institutions eligible for religious exemption from otherwise applicable laws, including employment antidiscrimination law and the Employee Retirement Income Security Act. As the category of religious institution loses its specialness, theories of religious institutionalism founder. The presumption of autonomy of religious institutions from regulation cannot survive in the marketplace, where religious identity can be bought and sold.
Wednesday, December 14, 2016
The Justice Department is investigating South Beach Missions of Oregon for allegedly fraudulently registering corporations as religions, entitling said corporations to 501(c)(3) status. The Justice Department believes that South Beach Missions is intentionally duping the federal government, and showing people how to set up phony churches in order to protect their assets from taxes. The government claims the organization has registered 126 active corporations, and 343 inactive ones, leading to “substantial” harm to the tax payer left footing the bill.
Unsurprisingly, South Beach Missions claims they have done no wrong, and believe they are acting within their First Amendment rights. Ted Landry, president of South Beach Missions, firmly believes he is helping people practice their legitimate religion. Mr. Landry believes the government has no place in defining what is and what is not religion, stating “you’re the only one who gets to figure it out.” South Beach Missions insists that they do not give out legal advice, despite the fact they circulate a 12-page booklet on the legality of corporations and churches.
There are obvious public policy concerns with people being able to establish pseudo-religions in the name of tax breaks. Further, unsuspecting churches registered by South Beach may face a crippling tax liability down the road if the government finds their church is not exempt, even if they were honestly practicing their religion. As obvious as the need to abate tax fraud is, so is the need for the government to allow for the freedom of religion, and adhere to Constitutional principles. It will be interesting to see how this is resolved.
David A. Brennen
Monday, October 10, 2016
With the Election approaching, many are voicing their opinion on the Johnson Amendment, which denies 501(c)(3) organizations the ability to actively campaign or lobby for a political candidate. Currently, in addition to being unable to support a candidate for political office, nonprofit organizations are also unable to oppose political candidates.
Proponents of the rule fear that allowing nonprofits to advocate for candidates could create unhealthy political factions within their organizations and communities at large. A larger concern is that donations from these organizations would be tax deductible and could exacerbate the level of spending and the political power of large scale donors, heavily influencing electoral outcomes. A statement from the Americans United for Separation of Church and State exclaimed “If individual organizations came to be regarded as Democratic charities or Republican charities instead of the nonpartisan problem solvers that they are, it would diminish the public’s overall trust in the sector and thus limit the effectiveness of the nonprofit community.”
Opponents of the rule, like Republican Party Nominee Donald Trump, believe that organizations have a right to voice their opinion for leaders they believe would best represent them. In a speech to Christian leaders Trump stated “if you like somebody or want somebody to represent you, you should have the right to do it.” Opponents also believe freeing 501(c)(3) organizations from these regulations would increase voter participation and elevate levels of political debate.
It is unlikely that this debate will be solved in the near-term, and certainly not in time to impact the nearing election. However, a fundamental change to the Johnson Amendment could drastically change the way campaigns are ran and financed.
Friday, September 18, 2015
As reported (slightly imprecisely from my legal perspective) in Reuters, the United States Court of Appeals for the 8th Circuit, parting ways with other appellate courts deciding the issue, has issued two rulings lending support to the position that the Affordable Care Act (“ACA”) violates the rights of religiously affiliated employers by forcing them to take action that they sincerely believe would constitute complicity in the provision of contraceptive coverage, including abortifacients. The cases are Dordt College v. Burwell and Sharpe Holdings, Inc. v. United States Department of Health and Human Services. This post will highlight language from Sharpe Holdings.
As many readers are aware, regulations under the ACA require nonexempt employers to provide their employees with insurance coverage for FDA-approved contraception, which, as the United States Supreme Court has recognized, includes drugs that may prevent a fertilized egg from attaching to the uterus. The same regulations permit certain religious organizations that object to providing such coverage to opt out of the coverage by filing a form with their third party administrators or by notifying the Department of Health and Human Services of their objection. In Sharpe Holdings, the plaintiffs argued that “both the contraceptive mandate and the accommodation process impose a substantial burden on their exercise of religion in violation of the Religious Freedom Restoration Act of 1993 (RFRA).” More precisely, the plaintiffs ”contend that the government is coercing them to violate their religious beliefs by threatening to impose severe monetary penalties unless they either directly provide coverage for objectionable contraceptives through their group health plans or indirectly provide, trigger, and facilitate that objectionable coverage through the Form 700/HHS Notice accommodation process.” Accordingly, they petitioned the district court to “enjoin enforcement of the contraceptive mandate and the accommodation regulations against them.” The district court granted the requested injunctive relief.
The United States Court of Appeals for the 8th Circuit in Sharpe Holdings affirmed the district court’s order granting injunctive relief. The appellate court concluded that the district court “did not abuse its discretion in finding that [two nonprofits] were substantially likely to succeed on the merits of their claim that the contraceptive mandate and the accommodation process substantially burden their exercise of religion in violation of RFRA and that the current accommodation process is not the least restrictive means of furthering the government’s interests.”
In accepting the plaintiffs’ argument that the ACA regulations substantially burdened their exercise of religion, the court relied heavily on the Supreme Court’s Hobby Lobby decision:
As Hobby Lobby instructs, however, we must accept CNS and HCC’s assertion that self-certification under the accommodation process—using either Form 700 or HHS Notice—would violate their sincerely held religious beliefs. See Hobby Lobby, 134 S. Ct. at 2778; see also Hernandez v. Comm’r, 490 U.S. 680, 699 (1989) (“It is not within the judicial ken to question the centrality of particular beliefs or practices to a faith, or the validity of particular litigants’ interpretations of those creeds.”). It is not our role to second-guess CNS and HCC’s honest assessment of a “difficult and important question of religion and moral philosophy, namely, the circumstances under which it is wrong for a person to perform an act that is innocent in itself but that has the effect of enabling or facilitating the commission of an immoral act by another.” Hobby Lobby, 134 S. Ct. at 2778. As discussed above, Form 700 or HHS Notice will inform CNS and HCC’s TPA of its obligations to facilitate contraceptive coverage for CNS and HCC’s employees and plan beneficiaries and thus will play a part in providing the objectionable contraceptives. As in Hobby Lobby, CNS and HCC sincerely believe that the actions “demanded by the . . . regulations [are] connected to” illicit conduct “in a way that is sufficient to make it immoral for them to” take those actions. Id. CNS and HCC have drawn a line between actions they find “to be consistent with [their] religious beliefs” and actions they consider “morally objectionable.” Id. (citing Thomas, 450 U.S. at 715). And it is not for us “‘to say that the line [they] drew was an unreasonable one.’” Id. (quoting Thomas, 450 U.S. at 715); see also Priests for Life, slip op. at 12 (Kavanaugh, J., dissenting from denial of rehearing en banc) (“Judicially second-guessing the correctness or reasonableness (as opposed to the sincerity) of plaintiffs’ religious beliefs is exactly what the Supreme Court in Hobby Lobby told us not to do.”).
In holding against the government on whether the ACA regulations are the least restrictive means for furthering a compelling government interest, the 8th Circuit emphasized the government’s burden of proof on the issue, and found that it “has not shown that these [several possible] alternatives [discussed in the opinion] are infeasible.”
Friday, September 4, 2015
Fellow blogger Lloyd Hitoshi Mayer, Professor of Law at the University of Notre Dame School of Law, has posted an interesting, brief opinion piece, What John Oliver Got Wrong (and Right) About Churches and Taxes, on America: The National Catholic Review. He begins with the following:
One of the reasons I like “Last Week Tonight with John Oliver” is that it usually gets its law right. I was therefore looking forward to its piece on churches, especially since I had talked on background with Oliver’s staff and so knew it was coming. The piece was as funny as I expected, but unfortunately it also struck a few false legal notes that are worth clarifying.
Mayer critiques various aspects of the popular HBO show’s segment on churches, including its failure “to mention the long history of tax benefits for churches of all faiths,” but focuses on Oliver’s never having answered the question of why tax laws treat certain televangelists (the apparent object of Oliver’s scrutiny) “the same as other churches.” Says Mayer:
The answer is simple and yet is never mentioned in his piece—the Constitution’s Establishment Clause.
The First Amendment states “Congress shall make no law respecting an establishment of religion . . . .” This means neither Congress nor the IRS can choose among theologies. That is why the IRS has no choice but to recognize as religious any group that sincerely holds its beliefs and does not engage in illegal activities. Oliver sharply criticizes this standard, but what is the alternative? Do we want Congress or, horrors, IRS agents picking and choosing which theologies are “correct” and which are not? ….
This sincerely held belief standard is also not meaningless. With all due respect to Oliver’s attorney, his newly founded “church”—Our Lady of Perpetual Exemption—almost certainly would not survive IRS scrutiny. No one watching the piece could believe that there is a sincere religious belief at its heart, much less at the heart of its purported congregation of audience members. The IRS will probably leave it alone because ultimately any donations it receives will go to a bona fide charity (Doctors Without Borders).
Mayer concludes with the following words:
None of this is to defend the “prosperity Gospel” or the excesses of the televangelists that Oliver criticizes. But the government cannot and should not choose among theologies or treat churches differently because their members sincerely hold beliefs that are out of the mainstream or even ridiculous in the eyes of many. It is instead up to you and me and, yes, John Oliver to his credit, to bring the beliefs and practices of these ministries into the light so the harm they cause can be clearly seen by those who otherwise might be lured into giving to them.