501(c)(3) Church Eligibility: Religion vs. Philosophical View

Recently, I wrote about the test for determining whether a religious organization qualifies as a church, and thus, a tax exempt organization, even though the organization does not obtain 501(c)(3) status by completing Form 1023.

Another important issue for churches seeking tax-exempt status as a 501(c)(3) is whether their belief system will qualify as a religion under 501(c)(3). For this issue, the court’s decision in the case of Church of the Chosen People, Etc. v. United States is helpful.

Church of the Chosen People, Etc. v. United States, 548 F.Supp. 1247 (D. Minn., 1982)

The case’s full title is Church of the Chosen People (North American Panarchate) Also Known as Demigod Socko Pantheon v. United States, 548 F.Supp. 1247 (D. Minn., 1982) (No. Civ. 4-81-311).

The following is a quote from the court’s decision:

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The issue before the Court is whether the plaintiff is entitled to a refund for the years in question because it satisfied the requirements for a tax exempt organization, pursuant to section 501(c)(3) of the Internal Revenue Code of 1954 (I.R.C.), 26 U.S.C. § 501(c)(3).10 An organization qualifies for an exemption under this statute only if it is both “organized and operated exclusively for religious … purposes….” In addition, the statute also requires that no part of the corporation’s net earnings benefit any private shareholder or individual and that the corporation not engage in prohibited political activity. The burden is on the plaintiff to establish that it qualifies for the exemption. First Libertarian Church v. Commissioner, ¶ 74.27 P-H TC 216, 220 (1980); Parker v. C.I.R., 365 F.2d 792, 799 (8th Cir. 1966), cert. denied, 385 U.S. 1026, 87 S.Ct. 752, 17 L.Ed.2d 674 (1967). Tax exemptions are a matter of legislative grace, and thus, plaintiff must establish that it is entitled to exemption. Dickinson v. U.S., 346 U.S. 389, 74 S.Ct. 152, 98 L.Ed. 132 (1953).

In determining whether the plaintiff is entitled to an exemption, the Court must avoid any judgments concerning the truth or validity of the plaintiff’s religious beliefs. In Teterud v. Burns, 522 F.2d 357 (8th Cir. 1975), the United States Court of Appeals for the Eighth Circuit emphasized the first amendment’s ban on such inquiries: “It is not the province of government officials or court to determine religious orthodoxy.” 522 F.2d at 360 (citations omitted). See also U.S. v. Seeger, 380 U.S. 163, 185, 85 S.Ct. 850, 863, 13 L.Ed.2d 733 (1965) (“while the `truth’ of a belief is not open to question, there remains the significant question whether [the belief] is `truly held.'”). Even if the Court determines that the plaintiff organization and its adherents are sincere in their beliefs, they must still establish that their beliefs are religious in nature. The definitions of the words “religion” and “religious” are by no means free of ambiguity. See Washington Ethical Society v. District of Columbia, 249 F.2d 127, 129 (D.C.Cir.1957). See also Malnak v. Yogi, 592 F.2d 197 (3d Cir. 1979) (definition of religion in first amendment cases). The United States Supreme Court has not established a clear standard for determining which beliefs are religious. The Supreme Court has, however, distinguished between personal secular philosophy and religious beliefs. See, e.g., Wisconsin v. Yoder, 406 U.S. 205, 216, 92 S.Ct. 1526, 1533, 32 L.Ed.2d 15 (1972) (distinguishing between the religious belief of the Amish and personal philosophy of Thoreau). In Africa v. Commonwealth of Pennsylvania, 662 F.2d 1025 (3d Cir.), cert. denied, ___ U.S. ___, 102 S.Ct. 1756, 72 L.Ed.2d 165 (1982), the court set forth a three-part Page 1253 test for determining whether a plaintiff’s goals are religious.

The test addresses the questions of: (1) whether the beliefs address fundamental and ultimate questions concerning the human condition, (2) whether the beliefs are comprehensive in nature and constitute an entire system of belief instead of merely an isolated teaching, and (3) whether the beliefs are manifested in external forms. 662 F.2d at 1032. Many courts use a definition by analogy approach, inquiring whether the beliefs espoused hold “the same important position for members of one of the new religions as the traditional faith holds for more orthodox believers ….” Malnak v. Yogi, 592 F.2d 197, 207 (3d Cir. 1979).

Section 501(c)(3) states that an exempt organization must be organized and operated exclusively for religious purposes. Courts have, however, interpreted the word “exclusively” to mean “substantially.” If an organization engages in substantial political activity, in contrast to religious activity, the organization is denied tax exempt status even if the political activity is religiously motivated. Contracting Plumbers Cooperative Restoration Corp. v. U.S., 488 F.2d 684 (2d Cir. 1973), cert. denied, 419 U.S. 827, 95 S.Ct. 47, 42 L.Ed.2d 52 (1974); Christian Echoes National Ministry, Inc. v. U.S., 470 F.2d 849 (10th Cir. 1972), cert. denied, 414 U.S. 864, 94 S.Ct. 41, 38 L.Ed.2d 84 (1973). The plaintiff argues that the Court should merely accept the plaintiff’s own assessment that its purposes were religious in nature. However, as the defendant aptly states, the Court is not bound by the plaintiff’s assertions. Christian Echoes National Ministry, Inc. v. U.S., 470 F.2d 849, 856 (10th Cir. 1972).

The Court concludes based on its findings of fact and the standard set forth in Africa that the plaintiff was not exclusively or substantially organized for religious purposes. During the period in question, The Gay Imperative, the plaintiff’s only major doctrine, was a single-faceted doctrine of sexual preference and secular lifestyle. The plaintiff’s ideology did not address the fundamental and ultimate questions concerning the human condition, such as the nature of good and evil, right and wrong, life and death. The plaintiff’s doctrine was not comprehensive in nature nor did it constitute an entire system of belief. Instead, the plaintiff narrowly focused on only one aspect of human existence — sexual preference. Despite the construction of an elaborate framework based on numerous borrowings from ancient Greek philosophy, the plaintiff’s entire structure rested on the slim foundation of one teaching.

In addition, the plaintiff lacked external manifestations analogous to other religions during the period in question. It possessed no established history or literature, required no formal or informal education of its leaders, conducted no regular ceremonies, and possessed no identifiable membership beyond its small core of leaders. The plaintiff is prohibited by Minnesota law from conducting same-sex “marriages,” one of the few activities the plaintiff performed that is analogous to those of mainstream religions. The Court also concludes that the plaintiff was operated to benefit private individuals and thus, was not qualified for exemption on this basis. The entire rent for Baker and McConnell’s residence was paid by the plaintiff even though the residence was not used substantially for religious purposes. The plaintiff’s revenues provided other substantial personal benefits to Baker and McConnell that were unrelated to religious purposes. See Founding Church of Scientology v. U.S., 412 F.2d 1197, 1199-1200 (Ct.Cl.1969). The Court concludes that because the plaintiff was not organized and operated exclusively for religious purposes, the plaintiff was not entitled to tax exempt status under section 501(c)(3).

ACCORDINGLY, IT IS ORDERED that the plaintiff’s request for a tax refund for the years 1976, 1977, and 1978, is hereby denied.

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As you can see from the court’s discussion above, this organization did not fulfill the requirements to be a tax-exempt church under 501(c)(3).