Court Opinion

ID: 185153
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:28:22+00
Date Added: 2024-06-11T17:26:13.583207
License: Public Domain

211 F.3d 137 (D.C. Cir. 2000)
Branch Ministries and Dan Little, Pastor, Appellantsv.Charles O. Rossotti, Commissioner, Internal Revenue Service, Appellee
No. 99-5097
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 20, 2000Decided May 12, 2000

Appeal from the United States District Court for the District of Columbia(No. 95cv00724)
Mark N. Troobnick, with whom Jay Alan Sekulow and  Colby M. May were on the briefs, argued the cause for  appellants.
Thomas J. Sawyer, Attorney, U.S. Department of Justice,  with whom Loretta C. Argrett, Assistant Attorney General,  and Kenneth L. Greene, Attorney, U.S. Department of Justice, and Wilma A. Lewis, United States Attorney, were on  the brief, argued the cause for appellee.
Richard P. Hutchison, Mark R. Levin and Janet LaRue  were on the brief for amici curiae Landmark Legal Foundation and Family Research CouncilAyesha N. Khan, Elliot M. Mincberg and Alma C.  Henderson were on the brief for amici curiae Americans  United for Separation of Church and State and People for the  American Way Foundation.
Before Silberman and Henderson, Circuit Judges, and  Buckley, Senior Circuit Judge.
Opinion for the court filed by Senior Judge Buckley.
Buckley, Senior Judge:

1
Four days before the 1992 presidential election, Branch Ministries, a tax-exempt church,  placed full-page advertisements in two newspapers in which it  urged Christians not to vote for then-presidential candidate  Bill Clinton because of his positions on certain moral issues. The Internal Revenue Service concluded that the placement  of the advertisements violated the statutory restrictions on  organizations exempt from taxation and, for the first time in  its history, it revoked a bona fide church's tax-exempt status  because of its involvement in politics.  Branch Ministries and  its pastor, Dan Little, challenge the revocation on the  grounds that (1) the Service acted beyond its statutory authority, (2) the revocation violated its right to the free exercise of religion guaranteed by the First Amendment and the  Religious Freedom Restoration Act, and (3) it was the victim  of selective prosecution in violation of the Fifth Amendment. Because these objections are without merit, we affirm the  district court's grant of summary judgment to the Service.

I. Background
A. Taxation of Churches

2
The Internal Revenue Code ("Code") exempts certain organizations from taxation, including those organized and operated for religious purposes, provided that they do not engage in  certain activities, including involvement in "any political campaign on behalf of (or in opposition to) any candidate for  public office."  26 U.S.C. § 501(a), (c)(3) (1994).  Contributions to such organizations are also deductible from the  donating taxpayer's taxable income.  Id. § 170(a).  Although  most organizations seeking tax-exempt status are required to  apply to the Internal Revenue Service ("IRS" or "Service")  for an advance determination that they meet the requirements of section 501(c)(3), id. § 508(a), a church may simply  hold itself out as tax exempt and receive the benefits of that  status without applying for advance recognition from the IRS. Id. § 508(c)(1)(A).

3
The IRS maintains a periodically updated "Publication No.  78," in which it lists all organizations that have received a  ruling or determination letter confirming the deductibility of  contributions made to them.  See Rev. Proc. 82-39, 1982-1  C.B. 759, §§ 2.01, 2.03.  Thus, a listing in that publication will  provide donors with advance assurance that their contributions will be deductible under section 170(a).  If a listed  organization has subsequently had its tax-exempt status revoked, contributions that are made to it by a donor who is  unaware of the change in status will generally be treated as  deductible if made on or before the date that the revocation is  publicly announced.  Id. § 3.01.  Donors to a church that has  not received an advance determination of its tax-exempt  status may also deduct their contributions;  but in the event  of an audit, the taxpayer will bear the burden of establishing  that the church meets the requirements of section 501(c)(3).See generally id. § 3.04;  Rev. Proc. 80-24, 1980-1 C.B. 658,  § 6 (discussing taxpayers' obligations in seeking a ruling or  determination letter).

4
The unique treatment churches receive in the Internal  Revenue Code is further reflected in special restrictions on  the IRS's ability to investigate the tax status of a church. The Church Audit Procedures Act ("CAPA") sets out the  circumstances under which the IRS may initiate an investigation of a church and the procedures it is required to follow in  such aninvestigation.  26 U.S.C. § 7611.  Upon a "reasonable belief" by a high-level Treasury official that a church  may not be exempt from taxation under section 501, the IRS may begin a "church tax inquiry."  Id. § 7611(a).  A church  tax inquiry is defined, rather circularly, as

5
any inquiry to a church (other than an examination) to serve as a basis for determining whether a church

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(A) is exempt from tax under section 501(a) by reasonof its status as a church, or

7
(B) is ... engaged in activities which may be subjectto taxation....

8
Id. § 7611(h)(2).  If the IRS is not able to resolve its concerns through a church tax inquiry, it may proceed to the  second level of investigation:  a "church tax examination."  In  such an examination, the IRS may obtain and review the  church's records or examine its activities "to determine  whether [the] organization claiming to be a church is a church  for any period."  Id. § 7611(b)(1)(A), (B).

B.  Factual and Procedural History

9
Branch Ministries, Inc. operates the Church at Pierce  Creek ("Church"), a Christian church located in Binghamton,  New York.  In 1983, the Church requested and received a  letter from the IRS recognizing its tax-exempt status.  On  October 30, 1992, four days before the presidential election,  the Church placed full-page advertisements in USA Today  and the Washington Times.  Each bore the headline "Christians Beware" and asserted that then-Governor Clinton's  positions concerning abortion, homosexuality, and the distribution of condoms to teenagers in schools violated Biblical  precepts.  The following appeared at the bottom of each  advertisement:

10
This advertisement was co-sponsored by the Church atPierce Creek, Daniel J. Little, Senior Pastor, and bychurches and concerned Christians nationwide.  Tax-deductible donations for this advertisement gladly ac-cepted.  Make donations to:  The Church at PierceCreek.  [mailing address].

11
Appendix ("App.") at Tab 5, Ex. E.

12
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.

13
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.

14
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).

15
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).

II. Analysis

16
The Church advances a number of arguments in support of  its challenges to the revocation.  We examine only those that  warrant analysis.

A. The Statutory Authority of the IRS

17
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.

18
We find this argument more creative than persuasive.  The  simple answer, of course, is that whereas not every religious  organization is a church, every church is a religious organization.  More to the point, irrespective of whether it was  required to do so, the Church applied to the IRS for an  advance determination of its tax-exempt status.  The IRS  granted that recognition and now seeks to withdraw it. CAPA gives the IRS this power.

19
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

20
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.

21
Id. § 501(c)(3).  Similarly, section 170(c) allows taxpayers to  deduct from their taxable income donations made to a corporation

22
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.

23
Id. § 170(c)(2)(B), (D).

24
The Code, in short, specifically states that organizations  that fail to comply with the restrictions set forth in section  501(c) are not qualified to receive the tax exemption that it  provides.  Having satisfied ourselves that the IRS had the  statutory authority to revoke the Church's tax-exempt status,  we now turn to the free exercise challenges.

B. First Amendment Claims and the RFRA

25
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.

26
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.

27
The Church appears to assume that the withdrawal of a  conditional privilege for failure to meet the condition is in  itself an unconstitutional burden on its free exercise right. This is true, however, only if the receipt of the privilege (in  this case the tax exemption) is conditioned

28
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.

29
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").

30
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).

31
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.

32
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.

33
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.").

34
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).

35
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.").

36
Because the Church has failed to demonstrate that its free  exercise rights have been substantially burdened, we do not  reach its arguments that section 501(c)(3) does not serve a  compelling government interest or, if it is indeed compelling,  that revocation of its tax exemption was not the least restrictive means of furthering that interest.

37
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).

C.  Selective Prosecution (Fifth Amendment)

38
The Church alleges that the IRS violated the Equal Protection Clause of the Fifth Amendment by engaging in selective prosecution.  In support of its claim, the Church has submitted several hundred pages of newspaper excerpts reporting  political campaign activities in, or by the pastors of, other  churches that have retained their tax-exempt status.  These  include reports of explicit endorsements of Democratic candidates by clergymen as well as many instances in which  favored candidates have been invited to address congregations from the pulpit.  The Church complains that despite  this widespread and widely reported involvement by other  churches in political campaigns, it is the only one to have ever  had its tax-exempt status revoked for engaging in political  activity.  It attributes this alleged discrimination to the Service's political bias.

39
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).

40
At oral argument, counsel for the IRS conceded that if  some of the church-sponsored political activities cited by the  Church were accurately reported, they were in violation of  section 501(c)(3) and could have resulted in the revocation of  those churches' tax-exempt status.  But even if the Service  could have revoked their tax exemptions, the Church has  failed to establish selective prosecution because it has failed  to demonstrate that it was similarly situated to any of those  other churches.  None of the reported activities involved the  placement of advertisements in newspapers with nationwide  circulations opposing a candidate and soliciting tax deductible  contributions to defray their cost.  As we have stated,

41
[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.

42
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).

43
Because the Church has failed to establish that it was  singled out for prosecution from among others who were  similarly situated, we need not examine whether the IRS was  improperly motivated in undertaking this prosecution.

III. Conclusion

44
For the foregoing reasons, we find that the revocation of  the Church's tax-exempt status neither violated the Constitution nor exceeded the IRS's statutory authority.  The judgment of the district court is therefore

45
Affirmed.