Branch Ministries v. Rossotti, CIV. A. 95-0724 (PLF).

• Decision Date: 30 March 1999
• Docket Number: No. CIV. A. 95-0724 (PLF).,CIV. A. 95-0724 (PLF).
• Citation: 40 F.Supp.2d 15
• Parties: BRANCH MINISTRIES, INC., et al., Plaintiffs, v. Charles O. ROSSOTTI, Commissioner, Internal Revenue Service, Defendant.
• Court: U.S. District Court — District of Columbia

40 F.Supp.2d 15

BRANCH MINISTRIES, INC., et al., Plaintiffs, v. Charles O. ROSSOTTI, Commissioner, Internal Revenue Service, Defendant.

No. CIV. A. 95-0724 (PLF).

United States District Court, District of Columbia.

March 30, 1999.

COPYRIGHT MATERIAL OMITTED

Colby Mims May, Mark Nathan Troobnick, American Center for Law & Justice, Washington, DC, for plaintiffs.

Donald J. Gavin, U.S. Dept. of Justice, Washington, DC, for defendants.

OPINION

PAUL L. FRIEDMAN, District Judge.

This case is about the decision of the Internal Revenue Service to revoke the status of plaintiff Branch Ministries as an organization exempt from taxation pursuant to 26 U.S.C. § 501(c)(3). Before any discovery was conducted, the government filed a motion to dismiss or for summary judgment. Plaintiffs sought discovery on their claim that they were victims of selective prosecution, and the Court granted plaintiffs' motion to compel. The case now is before the Court on the renewed motion of the government for summary judgment and on plaintiffs' cross-motion for summary judgment. Upon consideration of the cross-motions, the Court concludes that the government has established that there are no material facts in dispute and that it is entitled to judgment as a matter of law.

I. FACTUAL BACKGROUND

The genesis of this case occurred two presidential elections ago. Governor William Jefferson Clinton of Arkansas was running as the nominee of the Democratic party for President of the United States. On October 30, 1992, four days before the election, plaintiff Branch Ministries, Inc. ("BMI"), doing business as the Church at Pierce Creek, expressed its concern about the moral character of Governor Clinton in a full page advertisement in the Washington Times and in USA Today. The advertisement proclaimed "Christian Beware. Do not put the economy ahead of the Ten Commandments." It asserted that Governor Clinton supported abortion on demand, homosexuality and the distribution of condoms to teenagers in public schools. The advertisement cited various Biblical passages and stated that "Bill Clinton is promoting policies that are in rebellion to God's laws." It concluded with the question: "How then can we vote for Bill Clinton?" At the bottom of the advertisement, in fine print, was the following notice: "This advertisement was co-sponsored by The Church at Pierce Creek, Daniel J. Little, Senior Pastor, and by churches and concerned Christians nationwide. Tax-deductible donations for this advertisement gladly accepted. Make donations to: The Church at Pierce Creek," and provided a mailing address. Defs' Motion for Summ. J., Decl. of Peter Lorenzetti, Exh. E.¹

At the time the advertisement was published, BMI was an organization exempt from taxation pursuant to 26 U.S.C. § 501(c)(3). On October 31, 1992, the New York Times published an article entitled "Religious Right Intensifies Campaign for Bush." Pl's Mot'n for Summ. J., Exh. 1. The article discussed the role of the religious right in the 1992 presidential campaign and mentioned the advertisement described above, but it did not mention Branch Ministries or the Church at Pierce Creek by name. The article also stated, erroneously as it turned out, that "[t]he advertisement is to run in 157 more papers this weekend." Id. On December 1, 1992, the New York Times published an op-ed piece by Anthony Lewis entitled "Tax-Exempt Politics?" Id. Lewis discussed the "use of tax-exempt money for politics," and, as a case in point, he focused on the advertisement run in USA Today by the Church at Pierce Creek. Lewis opined that "[t]he sponsors [of the advertisement] almost certainly violated the Internal Revenue Code." Id.

On November 20, 1992, the Regional Commissioner of the Internal Revenue

Service sent the Church at Pierce Creek a letter stating that he was authorizing the District Director to begin "a Church Tax Inquiry because a reasonable belief exists that you may not be tax-exempt or that you may be liable for tax. The general subject matter of the inquiry concerns political expenditures which you may have paid or incurred, as well as whether you are tax-exempt." Defs' Motion for Summ. J., Decl. of Peter Lorenzetti, Exh. F. The letter also requested certain information "[i]n order to better understand your activities," including information about the USA Today advertisement, any political campaigns for public office in which the Church had sponsored advertisements, the political expenditures of the Church, the total amount of contributions received in response to the USA Today advertisement and the purpose of the Church. Id.

On December 23, 1992, the Church sent a response to the request for information. Defs' Motion for Summ. J., Decl. of Peter Lorenzetti, Exh. G. The Church took the position that it had not engaged in any political activity; the advertisement printed in USA Today and the Washington Times constituted a "warning to members of the Body of Christ," and the warning "did not constitute participation in a political campaign." Id. The Church refused to respond to most of the requests made by the IRS, including the request for the identities of persons who had contributed money in response to the USA Today and Washington Times advertisement. Id.

By letters of February 11, 1993 and August 11, 1993, the IRS informed the Church that it was beginning a Church Tax Examination, and it again requested certain documents from the Church. Defs' Motion for Summ. J., Decl. of Peter Lorenzetti, Exhs. H, J. At one point, the IRS drafted a summons to require the Church to submit the requested information, but the summons was never issued. Finally, on January 19, 1995, the IRS issued a letter stating that BMI's status as a Section 501(c)(3) tax-exempt organization was revoked, retroactive to January 1, 1992. Id., Exh. K.² Three months after the revocation letter was issued, plaintiffs filed this action asserting that the revocation of its status as a Section 501(c)(3) organization violates the Internal Revenue Code, the Religious Freedom Restoration Act ("RFRA"), 42 U.S.C. § 2000bb, the First Amendment and the church's equal protection rights under the Fifth Amendment.

In June 1995, the government filed a motion to dismiss or for summary judgment. In response, plaintiffs filed a motion to compel, arguing that they were entitled to discovery on their selective prosecution claim. While the motion was pending, the Supreme Court decided United States v. Armstrong, 517 U.S. 456, 116 S.Ct. 1480, 134 L.Ed.2d 687 (1996), in which it clarified that a defendant in a criminal case must make a colorable showing of both discriminatory intent and discriminatory effect in order to obtain discovery on a selective prosecution claim. Subsequently, this Court granted plaintiffs' motion to compel and ordered the government to provide fairly broad discovery. The Court noted that "plaintiffs' evidence is by no means strong at this stage of the litigation," but it concluded that plaintiffs had "produced sufficient evidence to raise a colorable claim of intentional discrimination." See Branch Ministries v. Richardson, 970 F.Supp. 11, 17 (D.D.C. 1997). It therefore ordered discovery to the extent permitted by the Internal Revenue Code. Id.

The IRS disclosed nearly 4000 pages of documents to plaintiffs, including the entire investigatory file it had maintained on the Church. Plaintiffs subsequently filed another motion to compel and for additional discovery. Plaintiffs sought (1) to compel the IRS to be more forthcoming in its discovery responses and (2) to take depositions from various religious leaders to establish that political activity occurs in churches. On March 31, 1998, the Court denied plaintiffs' motion. See Memorandum Opinion and Order of March 31, 1998.

II. DISCUSSION

Plaintiffs seek to have the revocation decision of the IRS reversed on a variety of statutory and constitutional grounds. The basic premise of their statutory claims is that once a church applies for and is deemed a Section 501(c)(3) organization, the IRS lacks authority to revoke that status unless it concludes that the church is not a bona fide church. Plaintiffs also contend that the IRS selectively prosecuted the Church on the basis of its political and/or religious views in violation of the Equal Protection Clause and that the revocation violated the First Amendment and the Religious Freedom Restoration Act.

A. Statutory Framework

Churches occupy a unique position in the tax code. A church or religious organization that so chooses may seek an advance ruling from the IRS that it is exempt from taxation pursuant to 26 U.S.C. § 501(c)(3).³ A church or religious organization seeking tax-exempt status under Section 501(c)(3) is required to provide the IRS with fairly detailed information with respect to its mission, goals, and organizational structure so that the IRS can determine whether the organization in fact is a bona fide religious organization eligible for tax-exempt status. See 26 C.F.R. § 1.501(a)-1(b)(1)(iii). In addition, the organization is required to make certain representations, including a representation that it will not participate in any political campaign on behalf of, or against, any candidate for political office. See Defs' Motion for Summ. J., Decl. of Peter Lorenzetti, Exh. A at 4.

If an organization receives an advance determination from the IRS that it meets the Section 501(c)(3) criteria, there are two effects. First, the organization is exempt from paying taxes under Section 501(a). See 26 U.S.C. § 501(a) ("An organization described in subsection (c) ... shall be exempt from taxation under this subtitle"). Second, there is a presumption that one who contributes to the organization can deduct the amount of the contribution from his or her taxable income. See 26 U.S.C. § 170(c) (defining deductible charitable contribution). An organization with an advance determination is listed by the IRS as a Section 501(c)(3)...