Droz v. C.I.R.

Citation48 F.3d 1120
Decision Date11 July 1994
Docket NumberNo. 93-70049,93-70049
Parties-1327, 95-1 USTC P 50,125, Unempl.Ins.Rep. (CCH) P 14514B Martin H. DROZ, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE SERVICE, Respondent-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Martin H. Droz, in pro. per.

Michael L. Paup, Acting Asst. Atty. Gen., Gary R. Allen, Chief, Appellate Section, Ann B. Durney, Reviewer, and Anthony T. Sheehan, Atty., Tax Div., U.S. Dept. of Justice, Washington, DC, for respondent-appellee.

Appeal from a Decision of the United States Tax Court.

Before: POOLE and REINHARDT, Circuit Judges, and TANNER, ** District Judge.

POOLE, Circuit Judge:

Martin Droz appeals pro se the tax court's decision upholding the Commissioner's determination of a tax deficiency attributable to $5,748.98 of unpaid self-employment Social Security taxes for tax year 1988. Droz did not pay the taxes on the ground that he had religious objections to the Social Security system. Because Droz did not belong to a religious organization, he did not qualify for an exemption from the taxes under 26 U.S.C. Sec. 1402(g). That section exempts members of religious sects that have tenets or teachings opposed to participation in the Social Security system and that provide reasonable support to their dependent members. Droz contends that denying him an exemption violates the Free Exercise and Establishment Clauses of the First Amendment and denies him due process and equal protection. We disagree, and we affirm.

I

Taxpayers who earn self-employment income must pay a self-employment tax into the Social Security system. 26 U.S.C. Secs. 1401(a)-(b), 1402(b). Section 1402(g)(1) exempts members of certain religious sects:

An individual may file an application ... for an exemption from the tax imposed by this chapter if he is a member of a recognized religious sect or division thereof and is an adherent of established tenets or teachings of such sect or division by reason of which he is conscientiously opposed to acceptance of the benefits of any private or public insurance which makes payments in the event of death, disability, old-age, retirement or makes payments toward the cost of, or provides services for, medical care....

An application for exemption must contain evidence of the applicant's membership in and adherence to the tenets of the sect, and it must contain a waiver of all Social Security benefits. 26 U.S.C. Sec. 1402(g)(1)(A)-(B). In addition, the Secretary of Health and Human Services must find that the applicant's sect (1) espouses tenets or teachings opposed to the Social Security system; (2) has for a substantial period of time made a practice of providing for its dependent members; and (3) has been in existence since December 31, 1950. Id. Sec. 1402(g)(1)(C)-(E).

Droz concedes that he is not a member of a religious sect and is therefore ineligible for a Sec. 1402(g) exemption. He argues, however, that his exclusion from the exemption on the ground that he is not a member of a religious sect violates his constitutional rights in three ways: (1) it violates his free exercise rights under the First Amendment; (2) it requires the government to choose between individuals who share identical religious beliefs in violation of the Establishment Clause; and (3) it denies him due process and equal protection by discriminating against persons with religious beliefs who do not belong to a religious sect. 1

A. Free Exercise Challenge

The tax court correctly presumed that Droz's objections were based upon sincere religious beliefs. See, e.g., United States v. Lee, 455 U.S. 252, 257, 102 S.Ct. 1051, 1055, 71 L.Ed.2d 127 (1982); Thomas v. Review Bd. of Indiana Employment Sec. Div., 450 U.S. 707, 716, 101 S.Ct. 1425, 1431, 67 L.Ed.2d 624 (1981). The tax court properly rejected Droz's argument that denying him an exemption violated his First Amendment right to freely exercise those beliefs.

To determine whether a government regulation impermissibly burdens an individual's First Amendment right to freely exercise his religious beliefs, a court must decide whether that regulation substantially burdens a sincerely held religious belief; whether the burden is justified by a compelling state interest; and whether the regulation is narrowly tailored to achieve that interest. Vernon v. City of Los Angeles, 27 F.3d 1385, 1392 (9th Cir.1994) (citing Sherbert v. Verner, 374 U.S. 398, 403, 83 S.Ct. 1790, 1793, 10 L.Ed.2d 965 (1963); Thomas, 450 U.S. at 718, 101 S.Ct. at 1432). 2

The controlling case in this analysis is United States v. Lee, in which the Supreme Court upheld the imposition of Social Security taxes on an Amish employer who failed to pay the taxes on his own behalf and failed to withhold the taxes from the wages of his Amish employees. 455 U.S. at 254, 102 S.Ct. at 1053. 3 The Court determined that participation in the Social Security system interfered with Lee's free exercise rights. Id. at 258-59, 102 S.Ct. at 1055-56. It held, however, that the government had a compelling interest in enforcing participation in the Social Security system in order to insure the "fiscal vitality" of a system designed to serve the social welfare. Id. at 259-61, 102 S.Ct. at 1056-57. This compelling interest, held the Court, outweighed the burden that participation placed on Lee's religious beliefs. Id. at 260-61, 102 S.Ct. at 1056-57.

The Court found that Sec. 1402(g) was narrowly tailored to meet the government's objective because

it would be difficult to accommodate the comprehensive social security system with myriad exceptions flowing from a wide variety of religious beliefs.... The tax system could not function if denominations were allowed to challenge the tax system because tax payments were spent in a manner that violates their religious beliefs. Because the broad public interest in maintaining a sound tax system is of such a high order, religious belief in conflict with the payment of taxes affords no basis for resisting the tax.

Id. at 259-60, 102 S.Ct. at 1056-57 (citations omitted).

The Court concluded that

Congress has accommodated, to the extent compatible with a comprehensive national program, the practices of those who believe it a violation of their faith to participate in the social security system. In Sec. 1402(g) Congress granted an exemption, on religious grounds, to self-employed Amish and others. Confining the Sec. 1402(g) exemption to the self-employed provided for a narrow category which was readily identifiable. Self-employed persons in a religious community having its own "welfare" system are distinguishable from the generality of wage earners employed by others.

Id. at 260-61, 102 S.Ct. at 1057 (citations and footnote omitted). 4

Under Lee, compulsory participation in the Social Security system interferes with Droz's free exercise rights, id. at 257, 102 S.Ct. at 1055, but is not unconstitutional. Droz's case is less compelling than that of the plaintiff in Lee, who was a member of a religious organization that met the requirements of Sec. 1402(g). Droz does not belong to any religious organization that provides for its dependent members. Thus, permitting him to opt out of the Social Security system would not only threaten the integrity of the system, but would threaten Congress's goal of ensuring that persons who opt out are provided for (and will not burden the public welfare system). See id. at 258-61, 102 S.Ct. at 1055-57. Other courts that have addressed this issue have reached this result. See Olsen v. Commissioner, 709 F.2d 278, 280-82 (4th Cir.1983); Kelley v. Terry, 629 F.2d 572, 572 (9th Cir.1980) (pre-Lee case); see also South Ridge Baptist Church v. Indus. Comm'n of Ohio, 911 F.2d 1203, 1205-09 (6th Cir.1990) (applying Lee and upholding state requirement of mandatory participation in worker's compensation program), cert. denied, 498 U.S. 1047, 111 S.Ct. 754, 112 L.Ed.2d 774 (1991).

Droz's citation to Frazee v. Illinois Dep't of Employment Sec., 489 U.S. 829, 109 S.Ct. 1514, 103 L.Ed.2d 914 (1989), does not change this conclusion. In Frazee, the Supreme Court held that an Illinois state court's denial of unemployment benefits to a person who refused to work on Sundays for religious reasons, but did not belong to a religious sect with tenets prohibiting work on Sunday, violated that person's free exercise rights. 489 U.S. at 830, 109 S.Ct. at 1516. In Frazee, the state's interests would not have been jeopardized by granting an exemption. In the instant case, on the other hand, the government's compelling interest in a fiscally sound Social Security system would be threatened by granting "myriad exceptions." See Lee, 455 U.S. at 258-61, 102 S.Ct. at 1055-57. Moreover, the statute in Frazee put Frazee in the position of choosing between observing his religion and receiving a benefit affecting his livelihood. The denial of a tax exemption is an entirely different burden.

B. Establishment Clause Challenge

Droz argues that Sec. 1402(g) violates the Establishment Clause because it distinguishes, based on membership in an approved sect, among individuals who share identical religious beliefs. This amounts to discrimination among religions, Droz argues, because some individuals receive exemptions, and other individuals with identical beliefs do not. The tax court properly rejected Droz's Establishment Clause argument.

To withstand an Establishment Clause challenge, a statute must have a secular legislative purpose. The statute's primary purpose must neither advance nor inhibit religion, and the statute must not foster an excessive entanglement with religion. Lemon v. Kurtzman, 403 U.S. 602, 612-13, 91 S.Ct. 2105, 2111, 29 L.Ed.2d 745 (1971); Vernon, 27 F.3d at 1396-97.

Section 1402(g) does not discriminate among religions: it accommodates, consistent with the goals of the Social Security system, those who...

To continue reading

Request your trial
63 cases
  • Children's Healthcare Is A Legal Duty, Inc. v. Min De Parle, NANCY-ANN
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • October 18, 1999
    ...viability of the Social Security system and the coverage of all individuals in a public or private welfare plan." Droz v. Commissioner, 48 F.3d 1120, 1124 (9th Cir. 1995); see Jaggard v. Commissioner, 582 F.2d 1189, 1190 (8th Cir. 1978) (per curiam). The same is true of section 4454; it was......
  • Adams v. C.I.R.
    • United States
    • U.S. Court of Appeals — Third Circuit
    • March 4, 1999
    ...social security taxes under the free exercise clause, claiming that he had religious objections to the social security system. 48 F.3d 1120, 1121 (9th Cir.1995). The court determined that the RFRA test should be applied to his claim, and then looked to Lee as the determinative case in analy......
  • Catholic Charities v. Superior Court
    • United States
    • California Supreme Court
    • March 1, 2004
    ...(9th Cir.2003) 341 F.3d 1132; Children's Health. Is A Legal Duty v. Min De Parle (8th Cir.2000) 212 F.3d 1084; Droz v. Commissioner of I.R.S. (9th Cir.1995) 48 F.3d 1120.) 10. We read Larson, supra, 456 U.S. 228,102 S.Ct. 1673, as condemning laws that discriminate among religions or religio......
  • Malyon v. Pierce County
    • United States
    • Washington Supreme Court
    • April 24, 1997
    ...v. Stone, 68 F.3d 973, 979 (6th Cir.1995) ("We review Establishment Clause claims under Lemon v. Kurtzman [ ]."); Droz v. Comm'r IRS, 48 F.3d 1120, 1124 (9th Cir.1995) ("Thus, the Lemon test applies."); Robinson v. City of Edmond, 68 F.3d 1226, 1229 (10th Cir.1995) ("[T]he Supreme Court has......
  • Request a trial to view additional results
2 books & journal articles

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT