Source: https://law.resource.org/pub/us/case/reporter/F3/211/211.F3d.137.99-5097.html
Timestamp: 2018-10-23 21:35:34
Document Index: 588487895

Matched Legal Cases: ['§ 7428', '§ 2000', '§ 1291', '§ 508', '§ 7611', '§ 501', '§ 501', '§ 170', '§ 2000', '§ 508', '§ 2', '§ 102', '§ 501', '§ 501', '§ 501', '§ 170', '§ 1', '§ 1', '§ 527', '§ 1']

211 F.3d 137
211 F.3d 137 (D.C. Cir. 2000)
Branch Ministries and Dan Little, Pastor, Appellants
Charles O. Rossotti, Commissioner, Internal Revenue Service, Appellee
The advertisements did not go unnoticed. They produced hundreds of contributions to the Church from across the country and were mentioned in a New York Times article and an Anthony Lewis column which stated that the sponsors of the advertisement had almost certainly violated the Internal Revenue Code. Peter Applebome, Religious Right Intensifies Campaign for Bush, N.Y. Times, Oct. 31, 1992, at A1;Anthony Lewis, Tax Exempt Politics?, N.Y. Times, Dec. 1, 1992, at A15.
The advertisements also came to the attention of the Regional Commissioner of the IRS, who notified the Church on November 20, 1992 that he had authorized a church tax inquiry based on "a reasonable belief ... that you may not be tax-exempt or that you may be liable for tax" due to political activities and expenditures. Letter from Cornelius J. Coleman, IRS Regional Commissioner, to The Church at Pierce Creek (Nov. 20, 1992), reprinted in App. at Tab 5, Ex. F.The Church denied that it had engaged in any prohibited political activity and declined to provide the IRS with certain information the Service had requested. On February 11, 1993, the IRS informed the Church that it was beginning a church tax examination. Following two unproductive meetings between the parties, the IRS revoked the Church's section 501(c)(3) tax-exempt status on January 19, 1995, citing the newspaper advertisements as prohibited intervention in a political campaign.
The Church and Pastor Little (collectively, "Church") commenced this lawsuit soon thereafter. This had the effect of suspending the revocation of the Church's tax exemption until the district court entered its judgment in this case. See 26 U.S.C. § 7428(c). The Church challenged the revocation of its tax-exempt status, alleging that the IRS had no authority to revoke its tax exemption, that the revocationviolated its right to free speech and to freely exercise its religion under the First Amendment and the Religious Freedom Restoration Act of 1993, 42 U.S.C. § 2000bb (1994) ("RFRA"), and that the IRS engaged in selective prosecution in violation of the Equal Protection Clause of the Fifth Amendment. After allowing discovery on the Church's selective prosecution claim, Branch Ministries, Inc. v. Richardson, 970 F. Supp. 11 (D.D.C. 1997), the district court granted summary judgment in favor of the IRS. Branch Ministries, Inc. v. Rossotti, 40 F. Supp. 2d 15 (D.D.C. 1999).
The Church filed a timely appeal, and we have jurisdiction pursuant to 28 U.S.C. § 1291. We review summary judgment decisions de novo, see Everett v. United States, 158 F.3d 1364, 1367 (D.C. Cir. 1998), cert. denied, 526 U.S. 1132 (1999), and will affirm only if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).
The Church argues that, under the Internal Revenue Code, the IRS does not have the statutory authority to revoke the tax-exempt status of a bona fide church. It reasons as follows: section 501(c)(3) refers to tax-exempt status for religious organizations, not churches; section 508, on the other hand, specifically exempts "churches" from the requirement of applying for advance recognition of tax-exempt status, id. § 508(c)(1)(A); therefore, according to the Church, its tax-exempt status is derived not from section 501(c)(3), but from the lack of any provision in the Code for the taxation of churches. The Church concludes from this that it is not subject to taxation and that the IRS is therefore powerless to place conditions upon or to remove its tax-exempt status as a church.
That statute, which pertains exclusively to churches, provides authority for revocation of the tax-exempt status of a church through its references to other sections of the Internal Revenue Code. The section of CAPA entitled "Limitations on revocation of tax-exempt status, etc." provides that the Secretary [of the Treasury] may "determine that an organization is not a church which [ ] (i) is exempt from taxation by reason of section 501(a), or (ii) is described in section 170(c)." 26 U.S.C. § 7611(d)(1)(A)(i), (ii). Both of these sections condition tax-exempt status on non-intervention in political campaigns. Section 501(a) states that "[a]n organization described in subsection (c) ... shall be exempt from taxation...." Id. § 501(a). Those described in subsection (c) include
corporations ... organized and operated exclusively for religious ... purposes ... which do[ ] not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
Id. § 501(c)(3). Similarly, section 170(c) allows taxpayers to deduct from their taxable income donations made to a corporation
organized and operated exclusively for religious ... purposes ... which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to ...intervene in (including the publishingor distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
Id. § 170(c)(2)(B), (D).
B. First Amendment Claims and the RFRA
The Church claims that the revocation of its exemption violated its right to freely exercise its religion under both the First Amendment and the RFRA. To sustain its claim under either the Constitution or the statute, the Church must first establish that its free exercise right has been substantially burdened. See Jimmy Swaggart Ministries v. Board of Equalization, 493 U.S. 378, 384-85 (1990) ("Our cases have established that the free exercise inquiry asks whether government has placed a substantial burden on the observation of a central religious belief or practice and, if so, whether a compelling governmental interest justifies the burden.") (internal quotation marks and brackets omitted); 42 U.S.C. § 2000bb-1(a), (b) ("Government shall not substantially burden a person's exercise of religion" in the absence of a compelling government interest that is furthered by the least restrictive means.). We conclude that the Church has failed to meet this test.
The Church asserts, first, that a revocation would threaten its existence. See Affidavit of Dan Little dated July 31, 1995 at p 22, reprinted in App. at Tab 8 ("The Church at Pierce Creek will have to close due to the revocation of its tax exempt status, and the inability of congregants to deduct their contributions from their taxes."). The Church maintains that a loss of its tax-exempt status will not only make its members reluctant to contribute the funds essential to its survival, but may obligate the Church itself to pay taxes.
upon conduct proscribed by a religious faith, or ...denie[d] ... because of conduct mandated by religious belief, thereby putting substantial pressure on an adher-ent to modify his behavior and to violate his beliefs.
Jimmy Swaggart Ministries, 493 U.S. at 391-92 (internal quotation marks and citation omitted). Although its advertisements reflected its religious convictions on certain questions of morality, the Church does not maintain that a withdrawal from electoral politics would violate its beliefs. The sole effect of the loss of the tax exemption will be to decrease the amount of money available to the Church for its religious practices. The Supreme Court has declared, however, that such a burden "is not constitutionally significant." Id. at 391;see also Hernandez v. Commissioner, 490 U.S. 680, 700 (1989) (the "contention that an incrementally larger tax burden interferes with [ ] religious activities ... knows no limitation").
In actual fact, even this burden is overstated. Because of the unique treatment churches receive under the Internal Revenue Code, the impact of the revocation is likely to be more symbolic than substantial. As the IRS confirmed at oral argument, if the Church does not intervene in future political campaigns, it may hold itself out as a 501(c)(3) organization and receive all the benefits of that status. All that will have been lost, in that event, is the advance assurance of deductibility inthe event a donor should be audited.See 26 U.S.C. § 508(c)(1)(A); Rev. Proc. 82-39 § 2.03. Contributions will remain tax deductible as long as donors are able to establish that the Church meets the requirements of section 501(c)(3).
Nor does the revocation necessarily make the Church liable for the payment of taxes. As the IRS explicitly represented in its brief and reiterated at oral argument, the revocation of the exemption does not convert bona fide donations into income taxable to the Church. See 26 U.S.C. § 102 ("Gross income does not include the value of property acquired by gift...."). Furthermore, we know of no authority, and counsel provided none, to prevent the Church from reapplying for a prospective determination of its tax-exempt status and regaining the advance assurance of deductibility--provided, of course, that it renounces future involvement in political campaigns.
We also reject the Church's argument that it is substantially burdened because it has no alternate means by which to communicate its sentiments about candidates for public office.In Regan v. Taxation With Representation, 461 U.S. 540, 552-53 (1983) (Blackmun, J., concurring), three members of the Supreme Court stated that the availability of such an alternate means of communication is essential to the constitutionality of section 501(c)(3)'s restrictions on lobbying. The Court subsequently confirmed that this was an accurate description of its holding. See FCC v. League of Women Voters, 468 U.S. 364, 400 (1984). In Regan, the concurring justices noted that "TWR may use its present § 501(c)(3) organization for its nonlobbying activities and may create a § 501(c)(4) affiliate to pursue its charitable goals through lobbying." 461 U.S. at 552.
The Church has such an avenue available to it. As was the case with TWR, the Church may form a related organization under section 501(c)(4) of the Code. See 26 U.S.C. § 501(c)(4) (tax exemption for "[c]ivic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare"). Such organizations are exempt from taxation; but unlike their section 501(c)(3) counterparts, contributions to them are not deductible. See 26 U.S.C. § 170(c); see also Regan, 461 U.S. at 543, 552-53. Although a section 501(c)(4) organization is also subject to the ban on intervening in political campaigns, see 26 C.F.R. § 1.501(c)(4)-1(a)(2)(ii) (1999), it may form a political action committee ("PAC") that would be free to participate in political campaigns. Id. § 1.527-6(f), (g) ("[A]n organization described in section 501(c) that is exempt from taxation under section 501(a) may, [if it is not a section 501(c)(3) organization], establish and maintain such a separate segregated fund to receive contributions and make expenditures in a political campaign.").
At oral argument, counsel for the Church doggedly maintained that there can be no "Church at Pierce Creek PAC."True, it may not itself create a PAC; but as we have pointed out, the Church can initiate a series of steps that will provide an alternate means of political communication that will satisfy the standards set by the concurring justices in Regan. Should the Church proceed to do so, however, it must understand that the related 501(c)(4) organization must be separately incorporated; and it must maintain records that will demonstrate that tax-deductible contributions to the Church have not been used to support the political activities conducted by the 501(c)(4) organization's political action arm. See 26 U.S.C. § 527(f)(3); 26 C.F.R. § 1.527-6(e), (f).
That the Church cannot use its tax-free dollars to fund such a PAC unquestionably passes constitutional muster. The Supreme Court has consistently held that, absent invidious discrimination, "Congress has not violated [an organization's] First Amendment rights by declining to subsidizeits First Amendment activities." Regan, 461 U.S. at 548; see also Cammarano v. United States, 358 U.S. 498, 513 (1959) ("Petitioners are not being denied a tax deduction because they engage in constitutionally protected activities, but are simply being required to pay for those activities entirely out of their own pockets, as everyone else engaging in similar activities is required to do under the provisions of the Internal Revenue Code.").
Nor does the Church succeed in its claim that the IRS has violated its First Amendment free speech rights by engaging in viewpoint discrimination. The restrictions imposed by section 501(c)(3) are viewpoint neutral; they prohibit intervention in favor of all candidates for public office by all taxexempt organizations, regardless of candidate, party, or viewpoint. Cf. Regan, 461 U.S. at 550-51 (upholding denial of tax deduction for lobbying activities, in spite of allowance of such deduction for veteran's groups).
To establish selective prosecution, the Church must "prove that (1) [it] was singled out for prosecution from among others similarly situated and (2) that [the] prosecution was improperly motivated, i.e., based on race, religion or another arbitrary classification." United States v. Washington, 705 F.2d 489, 494 (D.C. Cir. 1983). This burden is a demanding one because "in the absence of clear evidence to the contrary, courts presume that [government prosecutors] have properly discharged their official duties." United States v. Armstrong, 517 U.S. 456, 464 (1996) (internal quotation marks and citation omitted).
[i]f ... there was no one to whom defendant could be compared in order to resolve the question of [prosecuto-rial] selection, then it follows that defendant has failed to make out one of the elementsof its case. Discrimination cannot exist in a vacuum; it can be found only in the unequal treatment of people in similar circumstances.
Attorney Gen. v. Irish People, Inc., 684 F.2d 928, 946 (D.C. Cir. 1982); see also United States v. Hastings, 126 F.3d 310, 315 (4th Cir. 1997) ("[D]efendants are similarly situated when their circumstances present no distinguishable legitimate prosecutorial factors that might justify making different prosecutorial decisions with respect to them.") (internal quotation marks and citation omitted).