Federal appeals panel upholds IRS decision to strip church of tax-exempt status

Monday, May 15, 2000

A federal appeals court panel has found that the Internal Revenue Service did not violate the First Amendment rights of a New York church when the agency revoked the church's tax-exempt status for buying newspaper ads calling for the defeat of Bill Clinton in the 1992 general election.

In 1983, Branch Ministries, Inc., which operates a church in Binghamton, applied for and received IRS tax-exempt status. The IRS exempts certain groups, including religious ones, from taxation provided that they do not engage in “any political campaign on behalf of (or in opposition to) any candidate for public office.”

In late October 1992, the Branch Ministries church placed full-page ads in USA Today and The Washington Times, which bore the headline “Christians Beware.” The ads claimed that then-Gov. Clinton took positions on abortion, civil rights for gays, and the distribution of condoms to teen-agers in public schools that violated the church's belief in biblical precepts. The ads were noticed by a New York Times' columnist and the IRS, which following an investigation and meetings with the church's leaders, revoked the church's tax status in early 1995.

The church, represented by the socially conservative American Center for Law and Justice, sued the IRS arguing that the agency did not have the authority to revoke the church's tax-exempt status and that the revocation subverted its free-speech and religious-liberty rights.

Late last week, a three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia unanimously ruled that the IRS was justified in revoking the church's tax status and that the group's religious liberties were not substantially infringed upon by the government action.

“The revocation of the Church's tax-exempt status neither violated the Constitution nor exceeded the IRS's statutory authority,” Judge James L. Buckley wrote for the unanimous panel May 12 in Branch Ministries v. Rossotti.

The ACLJ argued that the church would “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 federal appeals court panel, however, found that the church's religious beliefs did not require it to become engaged in partisan politics and that its objections to the IRS action were “without merit.”

“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,” Buckley wrote. “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.”

The high court declared in its 1989 decision in Hernandez v. Commissioner that the “contention that an incrementally larger tax burden interferes with religious activities knows no limitation.”

Buckley added that the revocation of the church's tax status is “likely to be more symbolic than substantial” because the church is free to continue holding itself out as a tax-exempt group as long as it does not “intervene in future political campaigns.”

“As the IRS confirmed at oral argument, if the Church does not intervene in future political campaigns, it may hold itself out as (a tax-exempt) organization and receive all the benefits of that status,” Buckley wrote. “Contributions will remain tax deductible as long as donors are able to establish that the Church meets the requirements” of the tax code.

Buckley also said that the church could create a political action committee through a separate — and taxable — entity. He added that the federal government's refusal to grant tax relief to religious-based political efforts would not violate the church's fundamental rights. “The Supreme Court has consistently held that, absent invidious discrimination, 'Congress has not violated [an organization's] First Amendment rights by declining to subsidize its First Amendment activities,' ” Buckley wrote.

Americans United for Separation of Church and State, a civil rights group in Washington, D.C, which has asked the IRS to investigate televangelist Jerry Falwell's political efforts, lauded the panel's ruling.

“This decision slams the door on mixing religion and partisan politics,” Barry Lynn, Americans United president said in a prepared statement. “This is a staggering defeat for Pat Robertson, Jerry Falwell and others who want to convert America's churches into a partisan political machine.”

Mark Troobnick, an ACLJ attorney, says a decision to appeal the panel's ruling has not yet been made.

Although “disappointed” by the panel's decision, Jay Sekulow, the ACLJ's chief counsel, said he was nonetheless “encouraged that this court appears to provide a blueprint for churches to express their beliefs in a political context.”