American Atheists, Inc. et al v. Shulman
Filing
35
MEMORANDUM ORDER & OPINION: 1) Pursuant to the foregoing analysis, the Deft's motion to dismiss 19 is GRANTED; 2) A separate judgment will enter concurrently herewith. Signed by Judge William O. Bertelsman on 5/19/2014.(ECO)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
AT COVINGTON
CIVIL ACTION NO. 2012-264 (WOB)
AMERICAN ATHEISTS, INC.,
ET AL.
VS.
PLAINTIFFS
MEMORANDUM ORDER AND OPINION
DOUGLAS SHULMAN
DEFENDANT
This matter is before the Court on the Defendant’s motion to
dismiss the complaint (Doc. 19).
The Court held oral argument on this motion on Thursday, November
21, 2013.
Edwin Kagin was present for the Plaintiffs.
was present for the Defendant.
recorded the proceedings.
further advisement.
Melissa Dickey
Official Court Reporter LaCartha Pate
Thereafter, the Court took the motion under
Doc. 26, Minute Entry Order.
Subsequently, the Court was advised that on November 22, 2013,
the U.S. District Court for Western District of Wisconsin issued an
Opinion and Order on issues relevant to the controversy before the
Court, and the Court ordered the parties to brief the applicability of
the opinion to the instant case.
Doc. 27, Order.
Having reviewed the written filings and heard from the parties,
and being sufficiently advised, the Court hereby issues the following
memorandum opinion and order.
1
I. FACTUAL AND PROCEDURAL HISTORY
Plaintiffs American Atheists, Inc., Atheists of Northern Indiana,
Inc.,
and
Atheist
Archives
of
Kentucky,
Inc.
(collectively,
the
“Atheists” or “Plaintiffs”) seek injunctive and declaratory relief to
enjoin the Defendant in his capacity as Commissioner of the Internal
Revenue
Internal
Service
(“IRS”)
Revenue
Code
from
enforcing
(“I.R.C.”),
certain
which
the
provisions
Atheists
of
the
assert
are
preferentially applied to churches and religious organizations.
Doc.
1, Complaint, ¶1.
The Atheists assert that “I.R.C. §501(c)(3) distinguishes between
entities that are religious in nature, on the one hand, and those that
are charitable, scientific, testing for the public safety, literary,
educational, or dedicated to amateur athletics or the prevention of
cruelty to children or animals, on the other.”
Id. at ¶9.
According
to Plaintiffs, “‘Religious organizations’ and ‘churches’ are treated
differently from all other organizations entitled to tax exemptions
under I.R.C. §501(c)(3)”, and “under the IRS’s application of I.R.C.
§501(c)(3), churches receive certain preferences that even religious
organizations do not.”
Id.
Although the Atheists do not specifically identify the statutes
and regulations they attack in their complaint, Defendant’s motion to
dismiss and the Court’s research has established that the following
provisions
of
the
I.R.C
are
those
discriminatorily enforced:
2
that
the
Atheists
assert
are
1.
Churches are not required to file an application for
recognition of tax-exempt status.
In order to receive exemption from federal income tax
under I.R.C. §501(c)(3), organizations must file Form
1023.
26 U.S.C. §508(a); 26 C.F.R. §1.508-1.
However,
churches and any other organization that is not a private
foundation and has annual gross receipts less than $5000
are not required to file Form 1023. 26 U.S.C. §508(c)(1).
A non-church, religious organization (or any other
organization) with annual gross receipts over $5000 is
required to file Form 1023. 26 U.S.C. §508(c)(1)(A)-(B).
2.
Churches are
information return.
not
required
to
file
an
annual
Generally, I.R.C. §501(c)(3) organizations must file an
annual informational tax return on Form 990 or 990-PF.1 26
U.S.C.
§6033(a)(1);
26
U.S.C.
§1.6033-2(a)(2)(i).
However, exemptions for the informational return are
granted to churches, the religious activities of a
religious order, and any organization that is not a
private foundation and has annual gross receipts less than
$5000. 26 U.S.C. §6033(a)(3)(A).
3.
Ministers of the
parsonage allowance.
gospel
are
able
to
receive
a
26 U.S.C. §107(1) excludes the rental value of a home
furnished as part the compensation of a “minister of the
gospel” from his or her gross income.
26 U.S.C. §107(2)
excludes rental allowance paid as part of the compensation
1
Pursuant to 28 U.S.C. §6033(b), an informational tax return shall be
filed annually and include the §501(c)(3) organization’s (1) gross
income for the year; (2) expenses attributable to such income and
incurred within the year; (3) disbursements within the year for the
purposes for which it is exempt; (4) a balance sheet showing its
assets, liabilities, and net worth as of the beginning of such year;
(5) the total of the contributions and gifts received by it during the
year, and the names and addresses of all substantial contributors; (6)
the names and addresses of its foundation managers and highly
compensated employees; (7) the compensation and other payments made
during the year to each individual described in paragraph six; and
other various requirements specific to different types of §501(c)(3)
organizations.
3
of a “minister
income.2
of
the
gospel”
from
his
or
her
gross
4.
Salaries of ministers of the gospel are exempted from
income tax withholding and FICA taxes.
The I.R.C. provides an exception from the income tax
withholding requirement and an exemption from the FICA tax
for wages paid for services performed by a minister of the
gospel in the exercise of his or her ministry. 26 U.S.C.
§§1402(c)(4), 1402(e), 3121(b)(8), 3401(a)(9).
5.
The IRS is required to follow specific procedures
when examining a church.
I.R.C.
§7611
requires
the
IRS
to
follow
specific
procedures when conducting a “church tax inquiry” or a
“church tax examination.” 26 U.S.C. §7611. Generally, a
“church tax inquiry” is a determination as to whether that
entity meets the qualifications to be exempt from federal
income tax.
26 U.S.C. §7611(h).
A “church tax
examination” is an examination of a church’s records or
activities. 26 U.S.C. §7611(h)(3).
The IRS may commence a church tax inquiry only if an
appropriate
high-level
Treasury
official
reasonably
believes, on the basis of facts and circumstances recorded
in writing, that the church may not be exempt from tax or
may be carrying on an unrelated trade or business or
otherwise subject to tax.
26 U.S.C. §7611(a)(2).
The
heightened requirements outlined in §7611 only apply to
churches
and
not
religious
organizations
or
other
organizations.
The
Atheists
allege
that
the
IRS’s
differing
treatment
of
churches and other tax-exempt entities violates the Equal Protection
laws of the Fifth Amendment, the First Amendment and the Religious
Test Clause of Article VI, §3 of the Constitution.
¶11.
Doc. 1, Complaint,
The Atheists claim that upon information and belief “a number of
atheist
organizations
have
tried
to
obtain
IRS
classification
as
religious organizations or churches under §501(c)(3) or to otherwise
2
This is often referred to as the parsonage allowance.
4
obtain equal treatment,” and “most of those applications and attempts
were rejected by the IRS.”
The
Atheists
Id. at ¶¶21-22.
claim
they
“suffer
from
unconstitutional
discrimination and coercion arising from their inability to satisfy
the IRS test to gain classification to secure the same treatment as
religious organizations or churches under I.R.C. § 501(c)(3).”
Id. at
¶32.
sought
However,
the
Atheists
admit
that
they
have
never
recognition as a religious organization or church under §501(c)(3).
See Doc. 22, Pl. Response in Opp. to Mot. to Dismiss, pp. 2 n. 1, 4.
Rather, the Atheists assert that it would violate their sincerely held
believe to seek classification as a religious organization or church
from the IRS.
As its form of relief, the Atheists request the Court issue a
judgment “[d]eclaring that all Tax Code provisions treating religious
organizations and churches differently than other 501(c)(3) entities
are unconstitutional violations of the Equal Protection of the Laws
required pursuant to the Due Process Clause of the Fifth Amendment,
the Religious Test Clause of Art. VI, §3, and the Establishment Clause
of
the
America;
First
Amendment
[and
of
e]njoining
Constitution
[the
IRS]
of
from
the
United
continuing
States
to
of
allow
preferential treatment of religious organizations and churches under
§501(c)(3).”
Id. at pp. 12-13.
5
II.
ANALYSIS
A. Plaintiffs Lack Standing
1. Lack of Injury
The Atheists lack Article III standing to assert their claims.
Standing
requires
that
“[a]
plaintiff
must
allege
personal
injury
fairly traceable to the defendant's allegedly unlawful conduct and
likely to be redressed by the requested relief.”
Allen v. Wright, 468
U.S. 737, 751 (1984), arguably abrogated on other grounds by Lexmark
Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377 (Mar.
25, 2014).
The injury for standing purposes must be an invasion of a
legally protected interest which is (a) concrete and particularized
and (b) actual or imminent, not conjectural or hypothetical.
Defenders
of
Wildlife,
504
U.S.
internal quotations omitted).
555,
560
(1992)
Lujan v.
(citations
and
Additionally, “[i]n order to satisfy
prudential standing, the [Atheists’] claims must 1) assert their own
legal rights and interests, 2) be more than a generalized grievance,
and,
3)
in
statutory
cases,
fall
within
regulated by the statute in question.”
Citizens,
N.A.,
589
F.3d
274,
278
(6th
the
zone
of
interests
Monroe Retail, Inc. v. RBS
Cir.
2009)
(citation
and
internal quotations omitted).
The Atheists argue that as a direct consequence of the IRS’s
allegedly discriminatory policies, they are injured by being forced
“to (1) submit an application for exemption, (2) file Form 1023, or
(3) pay the 501(c)(3) application fee that is up to $850,” which
establishes their injury is concrete and particularized, and far from
6
conjectural or hypothetical.
Doc. 22, Pl. Response in Opp. to Mot. to
Dismiss, p. 4.
The Atheists contend that they have not applied for exemption as
a religious organization or a church because it would violate their
sincerely
held
Complaint, ¶36.
belief
to
seek
such
a
classification.
Doc.
1,
Plaintiffs also assert seeking classification as a
religious organization or church would be futile, as attempts by other
atheist groups to do so have been rejected by the IRS.
Defendant,
on
the
other
hand,
argues
that
the
Atheists
voluntarily choose to spend their time and money complying with the
alleged
discriminatory
standards
for
tax-exempt
organizations
and
their self-inflicted injury fails to rise to an injury in fact and is
not traceable to Government action.
See Clapper v. Amnesty Int’l USA,
133 S.Ct. 1138, 1151-52 (2013).
Plaintiffs alternatively argue that they need not “twist in the
bureaucratic
wind”
to
remedy
their
alleged
injury-in-fact
because
Establishment Clause and Equal Protection case law does not require
them to establish an economic injury-in-fact to establish standing.
Plaintiffs
rely
extensively
on
the
recent
decision,
Freedom
From
Religion Foundation, Inc. v. Lew, No. 11-626, --- F. Supp. 2d ---,
2013 WL 6139723 (W.D. Wis. 2013), to support their position that they
need not apply for “church” status and be denied in order to have
suffered a concrete, particularized injury.
The Court concludes that Plaintiffs have failed to allege an
injury-in-fact and their assertion that they would not qualify as a
7
church or religious organization is mere speculation.
Atheists’
complaint
concedes
that
some
atheist
Initially, the
organizations
have
obtained classification as a religious organization or church under
§501(c)(3).
See Doc. 1, Complaint, ¶22.
The Atheists also admit
Plaintiff “Atheist Archives of Kentucky’s sincerely held beliefs would
allow
it
to
be
classified
as
a
‘religious
organization’
atheist philosophy concerns solely religious beliefs.”
because
Id. at ¶41.
Moreover, the IRS cites to a number of cases where state and federal
law have recognized non-theist organizations as tax-exempt religious
organizations.
Dismiss,
pp.
See Doc. 24, Def. Reply Brief in Support of Mot. to
3-4
(citing
VIA
v.
C.I.R.,
T.C.M.
1994-349,
1994
WL
387144, at *5 (T.C.M. 1994) (nonprofit benefit organization designed
to promote “wellness” of members qualified as religious organization);
Fellowship of Humanity v. Alameda County, 153 Cal. App. 2d 673, 697-98
(Cal. Ct. App. 1957) (secular humanist organization is exempt from
taxation under California law as a religious organization); Strayhorn
v. Ethical Society of Austin, 110 S.W. 3d 458, 469-73 (Tex. App. 2003)
(Ethical Society is a tax-exempt religious organization under Texas
law)).
A
review
of
case
law
establishes
that
the
words
“church,”
“religious organization,” and “minister,” do not necessarily require a
theistic or deity-centered meaning. See Torcaso v. Watkins, 367 U.S.
488, 496 n. 11 (1961) (“Among religions in this country which do not
teach what would generally be considered a belief in the existence of
God
are
Buddhism,
Taoism,
Ethical
8
Culture,
Secular
Humanism
and
others.”) (citation omitted and emphasis added); McDaniel v. Paty, 435
U.S. 618, 627 (1978) (“[M]inisterial status is defined in terms of
conduct and activity rather than in terms of belief.”); Kaufman v.
McCaughtry,
419
F.3d
678,
681
(7th
Cir.
2005)
(“[W]hen
a
person
sincerely holds beliefs dealing with issues of ‘ultimate concern’ that
for her occupy a ‘place parallel to that filled by . . . God in
traditionally
religious
persons’
those
beliefs
represent
her
religion.”); Reed v. Great Lakes Cos., 330 F.3d 931, 934 (7th Cir.
2003) (“If we think of religion as taking a position on divinity, then
atheism is indeed a form of religion.”).
Moreover,
“[s]everal
district
courts
have
applied,
without
explicitly adopting, a fourteen-criteria standard introduced in 1977
by Jerome Kurtz, then Commissioner of Internal Revenue, and thereafter
applied by the IRS to evaluate whether an organization qualifies for
church
status
pursuant
to
§170(b)(1)(A)(i).”
Found.
of
Human
Understanding v. U.S., 88 Fed. Cl. 203, 219 (Fed. Cl. 2009), aff'd,
614
F.3d
1383
(Fed.
Cir.
2010)(citations
omitted).
The
fourteen
criteria are: (1) a distinct legal existence; (2) a recognized creed
and
form
of
government;
worship;
(4)
a
(3)
formal
a
code
definite
of
and
distinct
doctrine
and
ecclesiastical
discipline;
(5)
a
distinct religious history; (6) a membership not associated with any
church or denomination; (7) an organization of ordained ministers; (8)
ordained ministers selected after completing prescribed studies; (9) a
literature
of
its
own;
(10)
established
places
of
worship;
(11)
regular congregations; (12) regular religious services; (13) Sunday
9
schools for the religious instruction of the young; and (14) schools
for the preparation of its ministers.
Id. at 220 (citation omitted).
An entity is not required to meet each of the criteria in order to
obtain classification as a church for federal tax purposes.
Id. at
219 (citation omitted).
Thus,
the
unconstitutional
inability
to
Atheists’
assertion
discrimination
gain
that
and
classification
they
coercion
as
due
religious
are
to
subjected
their
alleged
organizations
churches under I.R.C. §501(c)(3) is mere speculation.
to
or
At this point,
the Atheists have no idea whether they could gain classification as a
church or religious organization under I.R.C. §501(c)(3) because they
have never sought such classification.
Accordingly, the Atheists have
not suffered a particularized injury which is fairly traceable to the
actions of the Commissioner.
2. Plaintiffs Must Establish Injury-In-Fact
Plaintiffs’
Clause
and
alternative
Equal
assertion
Protection
case
law
that
relevant
does
not
Establishment
require
them
to
establish an economic injury-in-fact in order to have proper Article
III standing is unpersuasive.
The case law cited by Plaintiffs in
support of this argument, including the recently-decided FFRF case, is
distinguishable.
See Freedom From Religion Foundation, Inc. v. Lew,
No. 11-626, --- F. Supp. 2d ---, 2013 WL 6139723 (W.D. Wis. 2013)
(granting summary judgment for plaintiffs).
The FFRF Court held that the plaintiffs, who could not qualify as
“ministers
of
the
gospel,”
were
not
10
required
to
claim
the
I.R.C.
§107(2) exemption before challenging the statute and that the I.R.C.
§107(2) tax exemption granted solely to “ministers of the gospel”
violated the Establishment Clause.
Id. at *8, 21-22.
This decision
is inapplicable to the instant case for several reasons.
The FFRF
lawsuit was filed by the tax-exempt organization Freedom from Religion
Foundation
(“FFRF”)
and
its
co-presidents,
Laurie
Gaylor
Barker, challenging the constitutionality of I.R.C. §107.
and
Dan
Id. at *1.
The Court denied the defendant’s motion to dismiss the plaintiffs’
I.R.C. §107 claim.
Freedom From Religion Foundation, Inc. v. Werfel,
No. 12-946, 2013 WL 4501057 (W.D. Wis. 2013).
However, while the plaintiffs’ complaint challenged both I.R.C.
§107(1) and §107(2), the plaintiffs narrowed their claim to §107(2) at
the summary judgment stage.
2013 WL 6139723, at *1.
At that stage,
the plaintiffs did not oppose the defendants’ argument that plaintiffs
lacked standing to challenge I.R.C. §107(1) and therefore, the Court
granted the defendants’ motion as to that aspect of their claim.
As
to
the
§107(2)
challenge,
the
FFRF
Court
granted
Id.
the
plaintiffs’ motion for summary judgment, because “ministers of the
gospel” receive a tax-exempt housing allowance and Gaylor and Barker
could not as they are not practicing clergy.
In
contrast,
in
this
case,
there
Id. at *5.
are
no
named
individual
plaintiffs and no individuals who claim they could qualify for the
minister of the gospel exemption under I.R.C. §107(1).
Plaintiffs
also do not allege they have any employees that receive a housing
allowance, that they are suing on behalf of their employees who have
11
been injured by I.R.C. §107(2), or that Plaintiffs have a right to
claim a tax-exemption under I.R.C. §107(2).
Additionally, unlike in FFRF, the Atheists’ alleged injury is not
“clear from the face of the statute” that plaintiffs are excluded from
an exemption granted to others.
See 2013 WL 4501057, at *2.
In
denying the defendant’s motion to dismiss, the FFRF Court “concluded
that plaintiffs' alleged injury is clear from the face of the statute
and that there is no plausible argument that the individual plaintiffs
could qualify for an exemption as ‘ministers of the gospel,’ so it
would serve no legitimate purpose to require plaintiffs to claim the
exemption and wait for the inevitable denial of the claim.” 2013 WL
6139723, at *4.
that
their
As noted above, Plaintiffs in this case never claim
housing
allowance
was
tax-exempt
or
that
there
are
plaintiffs who could otherwise qualify for this tax exemption.
The FFRF decision is narrow and does not address standing to
challenge any of the other statutes at issue in this case beyond 26
U.S.C. §107, including 26 U.S.C. §508 (application requirements for
tax-exempt
churches
and
religious
organizations),
26
U.S.C.
§6033
(annual return requirement), 26 U.S.C. §§1402, 3121, 3401 (employment
tax exemptions, and 26 U.S.C. §7611 (examination authorizations).
Finally, the Plaintiffs in FFRF and the instant case present no
facts
or
atheist
authority
beliefs
that
could
organization or church.
motion
to
dismiss
on
establish
never
that
qualify
an
as
organization
a
tax
exempt
expressing
religious
The FFRF Court based denial of Defendant’s
the
fact
that
12
“the
government
admits
that
plaintiffs could not qualify as ‘churches’ in order to receive the
exemption.”
2013 WL 4501057, at *3.
In contrast, Defendant here strongly argues that there is no
evidence
Plaintiffs
could
not
qualify
as
a
church
or
religious
organization, and the IRS does not admit that the Atheists could not
qualify as a “church” in order to receive the exemption.
Defendant
continually asserts that the Atheists could qualify as a church or
religious organization under the challenged I.R.C. provisions.
This Court does not find the FFRF Court’s finding that “there is
no
reasonable
construction
of
§107
that
would
persuasive or applicable to the instant case.
*20.
include
atheists,”
2013 WL 6139723, at
Rather, as Defendant points out, in the First Amendment context,
atheism is considered a religion because “when a person sincerely
holds beliefs dealing with issues of ‘ultimate concern’ that for her
occupy a ‘place parallel to that filled by . . . God in traditionally
religious persons,’ those beliefs represent her religion.”
McCaughtry, 419 F.3d 678, 681-682 (7th Cir. 2005).
Kaufman v.
This Court has no
basis to presume that the IRS would not adopt the same or similar
definition of religion and deny an atheist organization classification
due to its alleged lack of supernatural beliefs.
The
other
unpersuasive.
authority
on
which
Plaintiffs
rely
is
similarly
Relying on Awad v. Ziriax, 670 F.3d 1111 (10th Cir.
2012), the Atheists argue that they “suffer injury from a form of
‘personal and unwelcome contact’ with the IRS classification system
13
that ‘targets their beliefs for disfavored treatment.’”
Doc. 22, Pl.
Response in Opp. to Mot. to Dismiss, p. 7.
In Awad, the plaintiff challenged
the constitutionality of a
proposed constitutional amendment to the Oklahoma Constitution that
forbade state courts in Oklahoma from considering or using Sharia law.
670 F.3d at 1116.
The defendants moved for dismissal, arguing that
the plaintiff lacked standing because the amendment had not yet taken
effect, rendering the plaintiff’s injuries speculative.
Id. at 1120.
After noting that “the concept of injury for standing purposes is
particularly elusive in Establishment Clause cases,” the Tenth Circuit
held
that
the
plaintiff’s
“allegation
–
that
the
proposed
state
amendment expressly condemns [the plaintiff’s] religion and exposes
him and other Muslims in Oklahoma to disfavored treatment – suffices
to establish the kind of direct injury-in-fact necessary to create
Establishment Clause standing.”
Id. at 1123.
The Court further
stated that, “[b]ecause the amendment would likely have been certified
a
week
alleged
after
by
it
was
[the
hypothetical.”
passed,
plaintiff]
we
is
further
imminent
conclude
and
that
not
the
injury
conjectural
or
Id.
Additionally, citing to Ne. Fla. Chapter, Assoc. Gen. Contractors
of
Am.
v.
Jacksonville,
508
U.S.
656,
667
(1993)
and
Adarand
Constructors, Inc. v. Pena, 515 U.S. 200, 211 (1995), the Atheists
assert
that
they
need
not
participate
in
an
unconstitutionally
discriminatory scheme in order to demonstrate injury-in-fact under the
Establishment Clause.
However, in both those cases, the challenged
14
statutory scheme or regulation expressly favored certain racial or
ethnic groups.
In Ne. Fla. Chapter, the plaintiff challenged an ordinance in
Jacksonville,
Florida
which
gave
preferential
treatment
minority-owned business in the award of city contracts.
658.
certain
508 U.S. at
The ordinance in question required 10% of the city contracts to
be awarded to minority-owned businesses.
as
to
“a
person
who
is
or
considers
Id.
himself
A minority was defined
to
be
black,
speaking, Oriental, Indian, Eskimo, Aleut, or handicapped.”
Spanish-
Id.
The District Court and Court of Appeals held that the plaintiff
had no standing because “it failed to allege that one or more of its
members would have been awarded a contract but for the challenged
ordinance.”
Id. at 664.
Reversing, the Supreme Court held that,
“[t]he ‘injury in fact’ in an equal protection case of this variety is
the denial of equal treatment resulting from the imposition of the
barrier, not the ultimate inability to obtain the benefit.”
Id. at
666.
Similarly, in Adarand, the plaintiff, a non-minority-controlled
business, challenged a federal law which gave general contractors on
Government
projects
a
financial
incentive
to
hire
subcontractors
controlled by “socially and economically disadvantaged individuals.”
515
U.S.
at
204.
That
federal
law
contained
a
presumption
that
“socially and economically disadvantaged individuals” included “Black
Americans,
Hispanic
Americans,
Native
Americans,
Asian
Pacific
Americans, and other minorities, or any other individual found to be
15
disadvantaged
by
the
[Small
Business]
Administration
section 8(a) of the Small Business Act.”
that
plaintiff’s
injury
was
Id. at 205.
sufficient
for
pursuant
to
The Court found
standing
since
the
“discriminatory classification prevent[s] the plaintiff from competing
on equal footing.”
Id. at 211 (citing Ne. Fla. Chapter, 508 U.S. at
667).
Here,
the
organizations
religious
statutes
do
not
and
regulations
expressly
organizations,
nor
favor
do
pertaining
certain
they
to
churches
expressly
tax-exempt
or
certain
favor
theist
organizations over atheist or non-theist organizations.
In fact, the
IRS argues that atheist and non-theist organizations may be eligible
for treatment as religious organizations or churches under the I.R.C.
Moreover,
as
addressed
above,
the
labels
“church,”
“religious
organization,” and “minister” do not create the same barriers seen in
Awad, Ne. Fla. Chapter, or Adarand.
As the Atheists have never sought
classification as a church or a religious organization under I.R.C.
§501(c)(3), their assertion that the IRS targets the Atheists’ beliefs
for disfavored treatment is unfounded.
Therefore, the Atheists have failed to establish a sufficient
injury-in-fact to confer Article III standing.
3. No Representative Standing
The
Atheists
themselves,
they
organization.
standing
to
assert
could
This
sue
on
that
still
argument
behalf
of
even
if
assert
also
its
16
they
do
standing
fails.
members
not
as
a
have
standing
representative
“[A]n
organization
‘when
(a)
its
has
members
otherwise have standing to sue in their own right; (b) the interests
it seeks to protect are germane to the organization's purpose; and (c)
neither
the
claim
asserted
nor
the
relief
requested
participation of individual members in the lawsuit.’”
requires
Adland v. Russ,
307 F.3d 471, 478 (6th Cir. 2002) (quoting Hunt v. Wash. State Apple
Adver. Comm., 432 U.S. 333, 343 (1977)).
Here, the parties dispute whether the Atheists can establish the
first prong of the representative standing test.
More specifically,
the Commissioner argues that the Atheists cannot establish that their
members suffered concrete or particularized harm.
In response, the
Atheists assert that, unlike donors to many churches and religious
organizations, their members experience personal and unwanted contact
with the IRS by having their information disclosed as donors.
The Atheists’ representative standing argument suffers from the
same problem outlined above – their asserted injury stems from their
own voluntary actions in choosing not to seek classification as a
church or religious organization.
See Clapper, 133 S. Ct. at 1151-52.
As such, the Atheists lack representative standing.
4. No Taxpayer Standing
The
Atheists’
argument
that
they
have
taxpayer
standing
to
challenge the IRS’s tax policies under Flast v. Cohen, 392 U.S. 83
(1968), is similarly flawed.
standing
to
challenge
In finding that taxpayer-plaintiffs had
certain
disbursements
of
funds
to
religious
schools, the Supreme Court stated the following two-part test:
17
First, the taxpayer must establish a logical link between
that status and the type of legislative enactment
attacked.
Thus, a taxpayer will be a proper party to
allege the unconstitutionality only of exercises of
congressional power under the taxing and spending clause
of Art. I, [§] 8, of the Constitution.
It will not be
sufficient to allege an incidental expenditure of tax
funds in the administration of an essentially regulatory
statute. . . Secondly, the taxpayer must establish a
nexus between that status and the precise nature of the
constitutional
infringement
alleged.
Under
this
requirement, the taxpayer must show that the challenged
enactment exceeds specific constitutional limitations
imposed upon the exercise of the congressional taxing and
spending power and not simply that the enactment is
generally beyond the powers delegated to Congress by Art.
I, [§] 8.
Id. at 102–03.
The Supreme Court has opined that “Flast’s holding provides a
‘narrow exception’ to ‘the general rule against taxpayer standing.’”
Arizona Christian Sch. Tuition Org. (“ACSTO”) v. Winn, 131 S. Ct.
1436,
1445
(2011)
(quoting
Bowen
v.
Kendrick,
487
U.S.
589,
618
(1988)).
Despite the Atheists’ lengthy discussion of Flast, they fail to
discuss the Supreme Court’s recent holding in ACSTO.
In fact, the
following distinction made by the Supreme Court in ACSTO applies with
equal force to the case at bar:
It is easy to see that tax credits and governmental
expenditures can have similar economic consequences, at
least
for
beneficiaries
whose
tax
liability
is
sufficiently large to take full advantage of the credit.
Yet tax credits and governmental expenditures do not both
implicate individual taxpayers in sectarian activities.
A dissenter whose tax dollars are “extracted and spent”
knows that he has in some small measure been made to
contribute
to
an
establishment
in
violation
of
18
conscience.
In that instance the taxpayer's direct and
particular connection with the establishment does not
depend on economic speculation or political conjecture.
The connection would exist even if the conscientious
dissenter's tax liability were unaffected or reduced.
When the government declines to impose a tax, by
contrast, there is no such connection between dissenting
taxpayer and alleged establishment. Any financial injury
remains speculative. And awarding some citizens a tax
credit allows other citizens to retain control over their
own funds in accordance with their own consciences.
Id. at 1447 (internal citations removed).
Here, the Atheists have not challenged any specific expenditure
made
by
the
Government.
Rather,
the
Atheists
challenge
specific
provisions of the Internal Revenue Code, contending that they are
unconstitutional
differently
based
because
upon
tax-exempt
a
organizations
“particular
organization’s
supernatural religious beliefs or lack thereof.”
¶11.
are
treated
members’
Doc. 1, Complaint,
Thus, under the Supreme Court’s holding in ACSTO, any financial
injury that the Atheists allege as taxpayers resulting from the IRS’s
purportedly
unconstitutional
application
of
the
§501(c)(3)
tax
exemptions is speculative.
Therefore, the Atheists lack standing as taxpayers.
B. Application of the Anti-Injunction Act and the Declaratory
Judgment Act
Although the above analysis demonstrates that the Plaintiffs lack
standing to assert their claims, the Court will also briefly address
the remaining arguments raised by the parties.
The IRS argues that based on the relief sought by the Atheists, a
waiver of sovereign immunity has been expressly withdrawn by both tax
19
Anti-Injunction Act, 26 U.S.C. §7421(a), and the Declaratory Judgment
Act, 28 U.S.C. §2201.
The Anti-Injunction Act states that “no suit for the purpose of
restraining
the
assessment
or
collection
maintained in any court by any person.”
of
any
tax
shall
26 U.S.C. §7421(a).
be
The
Declaratory Judgment Act provides, “In a case of actual controversy
within its jurisdiction, except with respect to Federal taxes . . .
any court of the United States, upon the filing of an appropriate
pleading, may declare the rights and other legal relations of any
interested party seeking such declaration.”
28 U.S.C. §2201.
Both parties agree that although the Anti-Injunction Act and the
Declaratory Judgment Act are “not similarly worded[, they] are . . .
to be interpreted coterminously.”
Ecclesiastical Order of the ISM of
AM, Inc. v. I.R.S., 725 F.2d 398, 404-05 (6th Cir. 1984) (Jones, J.,
concurring and dissenting in part); see also Lugo v. Simon, 453 F.
Supp. 677, 690 (N.D. Ohio 1978) (“[T]he congressional intent [behind
the
Declaratory
Judgment
Act]
was
to
create
a
prohibition
as
to
actions concerning federal taxes coterminous with that provided in the
Anti-Injunction Act so as to preclude circumvention of the provisions
of
the
Anti-Injunction
Act
through
the
maintenance
of
an
action
seeking declaratory relief only.”).
“The [Supreme] Court has interpreted the principal purpose of
[the
Anti-Injunction
Act’s]
language
to
be
the
protection
of
the
Government's need to assess and collect taxes as expeditiously as
possible with a minimum of preenforcement judicial interference, and
20
to require that the legal right to the disputed sums be determined in
a suit for refund.”
Bob Jones Univ. v. Simon, 416 U.S. 725, 736
(1974) (citation and internal quotations omitted).
Here,
the
“[d]eclaring
Atheists
that
all
request
Tax
the
Code
Court
to
provisions
issue
treating
a
judgment
religious
organizations and churches differently than other 501(c)(3) entities
are unconstitutional violations of the Equal Protection of the Laws
required pursuant to the Due Process Clause of the Fifth Amendment,
the Religious Test Clause of Art. VI, § 3, and the Establishment
Clause of the First Amendment of Constitution of the United States of
America;
[and
e]njoining
[the
IRS]
from
continuing
to
allow
preferential treatment of religious organizations and churches under §
501(c)(3).”
In
Arizona
Hibbs
tax
violation
There,
Doc. 1, Complaint, pp. 12-13.
the
v.
Winn,
credit
of
the
that
Arizona
allegedly
Establishment
Supreme
Court
taxpayers
held
supported
Clause.
that
sought
the
542
Tax
to
invalidate
parochial
schools
U.S.
92
88,
Injunction
an
in
(2004).
Act,
which
prohibits federal courts from restraining the assessment, levy, or
collection of any tax under state law, did not bar the plaintiffs’
suit
because
the
relief
sought
by
the
plaintiffs
–
an
injunction
prohibiting allegedly unconstitutional tax credits – did not seek to
interfere with the state’s assessment or collection of taxes.
Id. at
94.3
3
While the IRS’s argument here concerns the Anti-Injunction Act, the
Tax Injunction Act is the state corollary to the Anti-Injunction Act.
See Hibbs, 542 U.S. at 104 (2004) (“Just as the [Anti-Injunction Act]
21
Pursuant to the Supreme Court’s holding in Hibbs, the Atheists’
requested
relief
unconstitutional
–
tax
an
credits
injunction
–
does
not
prohibiting
run
afoul
of
allegedly
the
Anti-
Injunction Act, 26 U.S.C. §7421(a), or the Declaratory Judgment Act,
28 U.S.C. §2201, because the requested relief does not seek to curb
the IRS’s ability to assess or collect taxes.
Accordingly,
the
Atheists’
claim
is
not
barred
by
the
Anti-
Injunction Act or the Declaratory Judgment Act.
C. Failure to State a Claim
Rule 8(a) requires a plaintiff to “allege facts that, if accepted
as
true,
are
sufficient
‘to
raise
a
right
to
relief
above
the
speculative level,’ and to ‘state a claim to relief that is plausible
on its face.’”
Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th
Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570
(2007)).
“A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference
that
the
defendant
is
liable
for
the
misconduct
alleged.”
Id.
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
1. Equal Protection Clause
The Equal Protection Clause of the Fourteenth Amendment
commands that “no state shall . . . deny to any person
within its jurisdiction the equal protection of the laws.”
U.S. Const. amend. XIV, § 1. To state an equal protection
claim,
a
plaintiff
must
adequately
plead
that
the
shields federal tax collections from federal-court injunctions, so the
[Tax Injunction Act] shields state tax collections from federal-court
restraints.”); McCrory Corp. v. State, 212 B.R. 229, 232 (S.D.N.Y.
1997) (stating that the Tax-Injunction Act and the Anti-Injunction Act
“should be interpreted in a harmonious manner”).
22
government treated the plaintiff “disparately as compared
to similarly situated persons and that such disparate
treatment either burdens a fundamental right, targets a
suspect class, or has no rational basis.”
Club Italia
Soccer & Sports Org., Inc. v. Charter Twp. of Shelby,
Mich., 470 F.3d 286, 299 (6th Cir. 2006). As we have held,
the “threshold element of an equal protection claim is
disparate treatment; once disparate treatment is shown, the
equal protection analysis to be applied is determined by
the classification used by government decision-makers.”
Scarbrough v. Morgan Cnty. Bd. of Educ., 470 F.3d 250, 260
(6th Cir. 2006).
Ctr. for Bio-Ethical Reform, Inc. v. Napolitano, 648 F.3d 365, 379
(6th Cir. 2011).4
Rather than discuss the “threshold element of an equal protection
claim,” the Atheists assert that they are members of a suspect class
and,
thus,
the
organizations
exemptions
under
the
provided
challenged
subject to strict scrutiny.
See id.
to
churches
provisions
of
and
the
religious
I.R.C.
are
Since the Atheists cannot show
that they have suffered any disparate treatment as a result of the
IRS’s application of the above-referenced provisions of the I.R.C.,
the Court need not determine the type of scrutiny that would need to
be applied in an Equal Protection analysis.
Regarding the issue of disparate treatment, the Atheists concede
that they “concern themselves with religion,” yet postulate that “it
is not plausible or rational to assert that the IRS might ever deem
any
[]
purely
anti-theistic
entities
to
qualify
as
churches
or
religious organizations within the meaning of I.R.C. § 501(c)(3).”
4
“We evaluate equal protection claims against the federal government
under the Fifth Amendment just as we would evaluate equal protection
claims against state and local governments under the Fourteenth
Amendment.” Ctr. for Bio-Ethical Reform, Inc., 648 F.3d at 379.
23
Doc.
22,
Pl.
Response
in
Opp.
assertion is pure speculation.
to Mot.
to
Dismiss,
p.
18.
This
The Atheists concede that some atheist
organizations have obtained classification as a religious organization
or
church
under
§501(c)(3).
See
Doc.
1,
Complaint,
¶¶21-22.
Additionally, the Atheists point to no statute or regulation which
forecloses an atheist organization from classification as a church or
religious
organization.
Accordingly,
disparate
treatment
conclusory
are
the
and
Atheists’
are
not
assertions
entitled
presumption of truth at this stage of the litigation.
to
of
a
See Ctr. for
Bio-Ethical Reform, Inc., 648 F.3d at 379.
Though the Atheists’ argument under the Equal Protection clause
is not entirely clear, either way it is presented, the Atheists cannot
establish an Equal Protection claim.
they
are
a
church
discriminatorily
or
applied
a
religious
the
If the Atheists are arguing that
organization
above-referenced
and
the
IRS
has
provisions
of
the
I.R.C., then the Atheists’ assertion is pure speculation because they
have not actually sought classification as a church or a religious
organization.
If, on the other hand, the Atheists are arguing that
they are not a church or a religious organization and the IRS is
discriminating by only applying the challenged I.R.C. provisions to
churches or religious organizations, then the Atheists have not stated
a claim under the Equal Protection clause.
More specifically, the
Atheists cannot establish that they have been treated disparately as
compared to similarly-situated organizations.
24
Accordingly,
the
Atheists
have
failed
to
state
an
Equal
Protection claim.
2. No Religious Test Clause
In their second claim, the Atheists assert that the Commissioner
violates the No Religious Test Clause, Art. VI, cl. 3, through the
exemptions
provided
to
churches
certain provisions of the I.R.C.
and
religious
organizations
under
Doc. 1, Complaint, ¶¶56-59.
Article VI, clause 3 of the United States Constitution states:
The Senators and Representatives before mentioned, and
the Members of the several State Legislatures, and all
executive and judicial Officers, both of the United
States and of the several States, shall be bound by
Oath or Affirmation, to support this Constitution; but
no religious Test shall ever be required as a
Qualification to any Office or public Trust under the
United States.
Interestingly,
the
Atheists
argue
that
“modern-day
501(c)(3)
entities amount to public Trusts,” and, “[t]hus, I.R.C. § 501(c)(3)’s
favorable
their
treatment
religious
of
certain
faithfulness,
501(c)(3)
over
entities
based
non-theistic
violates the No Religious Test Clause.”
solely
on
organizations,
Doc. 22, Pl. Response in Opp.
to Mot. to Dismiss, p. 25.
“The Constitution was written to be understood by the voters; its
words
and
phrases
were
used
in
their
normal
and
ordinary
as
distinguished from technical meaning.” D.C. v. Heller, 554 U.S. 570,
577
(2008)
(quoting
United
States
(1931)) (further citation omitted).
v.
Sprague,
282
U.S.
716,
731
“Normal meaning may of course
include an idiomatic meaning, but it excludes secret or technical
25
meanings that would not have been known to ordinary citizens in the
founding generation.”
Id. at 577-78.
Reading Article VI, Cl. 3 as a whole, rather than deconstructing
each of its words and phrases, would not lend itself to the extension
of the phrase “public Trust” requested by the Atheists.
Similarly, the limited case law discussing the No Religious Test
Clause
does
not
support
the
Atheists’
argument.
See
Torcaso
v.
Watkins, 367 U.S. 488, 491 (1961) (“When our Constitution was adopted,
the desire to put the people securely beyond the reach of religious
test oaths brought about the inclusion in Article VI of that document
of a provision that no religious Test shall ever be required as a
Qualification to any Office or public Trust under the United States.”)
(internal quotations omitted); U.S. Term Limits, Inc. v. Thornton, 514
U.S. 779, 903 (1995) (“Both the context and the plain language of the
[No Religious Test] Clause show that it bars the States as well as the
Federal
Government
from
imposing
religious
disqualifications
on
federal offices.”) (Thomas, J., dissenting); Stewart v. Washington,
301 F. Supp. 610, 611 (D.D.C 1969) (stating that the No Religious Test
Clause “recoil[s] from the odious test oaths that emerged in Britain
in the 17th century, and which disqualified from public office all
Catholics and non-conformists not subscribing to the doctrines of the
Church of England”); Smith v. Lindstrom, 699 F. Supp. 549, 561 (W.D.
Va. 1988), aff'd sub nom., Smith v. Cnty. of Albemarle, Va., 895 F.2d
953 (4th Cir. 1990) (“Surely, the object of [Article VI, Cl. 3 of the
26
United States Constitution] is to keep participation in the political
community from being narrowed on the basis of religious adherence.”)
The Atheists go to great lengths in their briefs to convince the
Court that tax-exempt organizations under I.R.C. §501(c)(3) should be
considered
“public
organizations
interest
services.
34.
–
Trusts”
exemptions
namely,
because
under
the
§501(c)(3)
alleviating
the
cost
purpose
is
of
to
of
serve
providing
providing
a
public
government
Doc. 22, Pl. Response in Opp. to Mot. to Dismiss, pp. 25-
However, a basic reading of Art.VI, Cl. 3 and the limited case
law discussing that provision does not suggest that the this clause
stretches to the lengths suggested by the Atheists.
Accordingly, the Atheists have failed to state a claim under the
No Religious Test Clause.
3. Establishment Clause
The Establishment Clause of the First Amendment provides that
“Congress shall make no law respecting an establishment of religion.”
U.S. Const., amend. I; Everson v. Bd. of Educ., 330 U.S. 1, 8 (1947).
In Lemon v. Kurtzman, 403 U.S. 602 (1971), the Supreme Court set out a
three-part test for determining whether government conduct violates
the Establishment Clause.
Am. Civil Liberties Union of Ohio Found.,
Inc. v. DeWeese, 633 F.3d 424, 430 (6th Cir. 2011), cert. denied, 132
S. Ct. 368 (2011).
“The test ‘ask[s] (1) [whether] the challenged
government action has a secular purpose; (2) [whether] the action's
primary
effect
neither
advances
nor
27
inhibits
religion;
and
(3)
[whether]
the
religion.’”
action
fosters
an
excessive
entanglement
with
Id. at 430-31 (quoting Lemon, 403 U.S. at 612-13).
While the Sixth Circuit in DeWeese acknowledged that both the
Sixth Circuit and the Supreme Court have questioned the utility of the
Lemon test, the Sixth Circuit nonetheless stated that, “Lemon remains
the law governing Establishment Clause cases.”
Id. at 431 (citation
omitted).
The
Atheists
Bullock,
which
sufficiently
assert
the
FFRF
alleged
that
that
pursuant
Court
the
found
tax
to
to
Texas
be
provisions
Monthly,
Inc.
controlling,
at
issue
v.
it
has
improperly
advance religion.
In Texas Monthly v. Bullock, 489 U.S. 1, 14 (1989), a plurality
opinion, the Supreme Court held that, “Texas’ sales tax exemption for
periodicals
published
or
distributed
by
a
religious
faith
and
consisting wholly of writings promulgating the teaching of the faith
lacks
sufficient
Clause.”
breadth
to
pass
scrutiny
under
the
Establishment
The Court further stated that “when government directs a
subsidy exclusively to religious organizations that is not required by
the
Free
Exercise
Clause
and
that
either
burdens
nonbeneficiaries
markedly or cannot reasonably be seen as removing a significant stateimposed deterrent to the free exercise of religion, as Texas has done
[],
it
provide[s]
unjustifiable
awards
of
assistance
to
religious
organizations and cannot but conve[y] a message of endorsement to
slighted members of the community.”
quotations omitted).
28
Id. at 15 (internal citation and
The IRS asserts that the challenged provisions of the I.R.C. are,
in fact, required by the Free Exercise Clause.
IRS
argues
that
the
I.R.C.
provisions
at
More specifically, the
issue
have
“the
secular
purpose of alleviating governmental interference with the ability of
churches and certain religious organizations to define and carry out
their religious missions.”
to Dismiss, pp. 26-27.
Doc. 19-1, Def. Memo. in Support of Mot.
In response, the Atheists assert that the “IRS
does not point to any specific facts or legislative intent showing
that the provisions at issue in this case are necessary to avoid a
Free Exercise violation against religious organizations.”
Doc. 22,
Pl. Response in Opp. to Mot. to Dismiss, p. 36.
While
both
parties
argue
the
merits
of
the
Atheists’
Establishment Clause claim, their arguments are unnecessary at this
stage because the Atheists have sufficiently pleaded that the I.R.C.
provisions at issue do not have a secular purpose and they improperly
endorse religion.
merits
of
illegal.”
omitted).
the
Nonetheless, “standing in no way depends on the
plaintiff’s
Warth
v.
contention
Seldin,
422
U.S.
that
490,
particular
500
conduct
(1975)
is
(citation
Thus, the fact that the Atheists have properly stated a
claim under the Establishment Clause does not obviate the Article III
standing requirements.
29
Therefore, the Court being advised,
IT IS ORDERED THAT:
1. Pursuant to the foregoing analysis, the Defendant’s motion to
dismiss (Doc. 19) be, and hereby is, GRANTED; and
2. A separate judgment will enter concurrently herewith.
This 19th day of May, 2014.
30
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