Olsen v. C.I.R., 82-1836

• Decision Date: 09 June 1983
• Docket Number: No. 82-1836,82-1836
• Citation: 709 F.2d 278
• Parties: 83-1 USTC P 9403 Frank T. OLSEN and Lois E. Olsen, Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 278

709 F.2d 278

83-1 USTC P 9403

Frank T. OLSEN and Lois E. Olsen, Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.

No. 82-1836.

United States Court of Appeals Fourth Circuit.

Argued March 7, 1983.

Decided June 9, 1983.

Charles E. Craze, Cleveland, Ohio (Gibbs & Craze & Co., L.P.A., Cleveland, Ohio, on brief), for appellants.

John P. Griffin, Tax Div., Dept. of Justice, Washington, D.C. (Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, William S. Estabrook, Tax Div., Dept. of Justice, Washington, D.C., on brief), for appellee.

Before WINTER, Chief Judge, ERVIN, Circuit Judge, and ALDRICH, ^* Senior Circuit Judge.

HARRISON L. WINTER, Chief Judge:

Frank Olsen appeals from a decision of the Tax Court upholding a deficiency assessment levied for his failure to pay the self-employment tax on his ministerial income for the years 1976 and 1977. T.C.Mem.Dec. (P-H) p 82,340 (1982). Before us, he contends, as he did before the Tax Court, that the imposition of the self-employment tax on his ministerial income (a) violates his right to free exercise of religion, and (b) violates his right to due process because he was denied a second opportunity to file for an exemption from the tax given to members of certain religious sects under 26 U.S.C. Sec. 1402(g). We find neither argument meritorious and affirm.

I.

Olsen was ordained as a Baptist minister in May 1968 after graduation from the Bible Baptist Seminary in Arlington, Texas. Since that time he has been employed as a teacher and minister in Baptist churches in New Jersey and North Carolina. He is now minister of the New Testament Baptist Church in Wilmington, North Carolina. He professes a belief that God, the church and the family, and not the state, should support dependent individuals. On religious grounds, he is thus opposed to participation in the social security system, which the self-employment tax goes to support. He contends payment of the tax would conflict with his beliefs, and that it would impede fulfillment of his religious duty to expend his resources to support his family and the faithful. He makes no claim that his beliefs were belatedly acquired. For all that appears, he has held them at least since his ordination.

Congress has provided an exemption from the tax for persons in Olsen's situation. Under Internal Revenue Code Sec. 1402(e), a licensed minister who is opposed, because of religious principles or conscientious beliefs, to the acceptance of public insurance which makes payments in the event of death, disability, etc. may receive an exemption from the tax with respect to income earned as a minister. ¹ Olsen did not obtain such an exemption, however, for he failed to file a timely application. Section 1402(e)(2) requires an application for the exemption to be made not later than the due date of the tax return for the second year in which the taxpayer has $400 or more of self-employment income, at least some of which is from the performance of exempted services. Olsen did not seek an exemption until May 1978, even though the application for the exemption was required under Sec. 1402(e)(2) to be filed on or before the due date of his tax return for the year 1970. On September 5, 1978, the Service denied his application because it was untimely.

On April 23, 1979, the Service made a deficiency assessment of $660.44 for 1976 and $800.27 for 1977 on the basis of Olsen's failure to pay the self-employment tax during those years. On July 19, 1979, Olsen petitioned the Tax Court for redetermination of the deficiencies. The Tax Court entered a decision against him on June 21, 1982, and this appeal followed.

II.

An analysis of Olsen's contention that requiring him to pay the self-employment tax infringes upon his right of free exercise of religion involves two steps. First, it must be determined whether the payment of taxes and the receipt of benefits interferes with the free exercise of Olsen's religion. Second, if it is concluded that interference results, the inquiry must be made as to whether payment of the tax is essential to accomplish an overriding governmental interest. See United States v. Lee, 455 U.S. 252, 102 S.Ct. 1051, 71 L.Ed.2d 127 (1982); Thomas v. Review Bd. of Indiana Employment Sec., 450 U.S. 707, 101 S.Ct. 1425, 67 L.Ed.2d 624 (1981); Wisconsin v. Yoder, 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15 (1972). As these cases demonstrate, the latter inquiry is important because "[n]ot all burdens on religion are unconstitutional ... [and] ... [t]he state may justify a limitation on religious liberty by showing that it is essential to accomplish an overriding governmental interest." United States v. Lee, 455 U.S. at 257, 102 S.Ct. at 1055.

There is nothing in the record to challenge the sincerity of Olsen's proferred religious beliefs; and we do not feel impelled to inquire further, because "[c]ourts are not arbiters of scriptural interpretation." Thomas v. Review Bd. of Indiana Employment Sec., 450 U.S. at 716, 101 S.Ct. at 1431. Therefore, we accept as a fact that his objection to social insurance is religious in nature and deeply held. We consider later the extent of the burden on Olsen's free exercise of his religion, but we conclude that there is at least some interference.

United States v. Lee, supra, largely controls the answer to our second inquiry. There the Supreme Court upheld the imposition of the social security tax upon an Amish employer who had refused to file returns, to withhold the tax from his employees or to pay the employer's share of the tax because of his religious opposition to social insurance. The Court assumed, as we have concluded in this case, that payment of the tax would transgress the taxpayer's sincerely held religious beliefs. Nonetheless it sustained the constitutionality of application of the tax, since "the Government's interest in assuring mandatory and continuous participation in and contribution to the social security system is very high." (footnote eliminated) 455 U.S. at 259-60, 102 S.Ct. at 1056. To accommodate Lee's religious beliefs by exempting him from the tax, the Court reasoned, would undermine the fiscal integrity of the social security system. The Court's conclusion was that "[b]ecause 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 260, 102 S.Ct. at 1056.

Olsen's case for an exemption from the tax is perhaps more compelling than that presented in Lee. The fact that Congress has authorized an exemption from the self-employment tax for a clergyman who files a timely application is some evidence that the burden of allowing a religious exemption to the tax is not prohibitive. Moreover, in Lee the tax at issue was the social security tax imposed on employers, for which no exemption is provided by Congress. It would, of course, be more difficult to allow employers an exemption from the social security tax than to allow one to self-employed individuals, because the grant of an exemption to an employer implicates the interests of his employees, who might not share their employer's religious views. ²

Despite these differences, we conclude that here, too, there is sufficient justification for imposition of the tax. First, much as in Lee, allowance of an exemption would undermine to some extent the financial stability of the social security system. It is true, as Justice Stevens noted in a concurring opinion in Lee, that the cost to the system of exempting those with religious objections from the tax would ultimately be offset by the withholding of benefits from them. 455 U.S. at 262, 102 S.Ct. at 1057. It is true also that, by permitting an exemption for which timely application is made, Congress has determined that the financial threat to the system is supportable. ³ However, it is equally true that the system operates on current income, so that the reduction of future expenses would not ameliorate the immediate injury of decreased revenues. Nor would it be possible to limit in number the class of persons who might potentially claim the exemption or the scope of the exemption. If we hold that ministers have a constitutional right to opt out of the social security system when participation conflicts with their religious beliefs, that same right should extend as well to persons with secular employment and to other taxes, since their right freely to exercise their religion is no less than that of ministers. ⁴

Finally, Olsen's only religious interest directly implicated by the tax is his concern over the use to which his taxes will be put. His desire not to participate in the system by receiving benefits can easily be satisfied by his waiver of benefits or by his gift of them to his church. United States v. Lee, 455 U.S. at 261, n. 12, 102 S.Ct. at 1057, n. 12. Taxpayers generally are not permitted to avoid payment of a tax when their objections concern the manner in which government revenues are expended. See e.g., Lull v. Commissioner, 602 F.2d 1166 (4 Cir.1979), cert. denied, 444 U.S. 1014, 100 S.Ct. 664, 62 L.Ed.2d 643 (1980); First v. Commissioner, 547 F.2d 45 (7 Cir.1976); United States v. Malinowski, 472 F.2d 850 (3 Cir.), cert. denied, 411 U.S. 970, 93 S.Ct. 2164, 36 L.Ed.2d 693 (1973); Autenrieth v. Cullen, 418 F.2d 586 (9 Cir.1969), cert. denied, 397 U.S. 1036, 90 S.Ct. 1353, 25 L.Ed.2d 647 (1970); Crowe v. Commissioner, 396 F.2d 766 (8 Cir.1968); Russell v. Commissioner, 60 T.C. 942 (1973). In Lull, for example, we adopted a Tax Court decision holding that a taxpayer could not refuse to pay that portion of his income tax equivalent to the percentage of government revenues spent on the military even though he had moral and religious objections to paying taxes for military purposes.

We therefore hold that the interference with Olsen's free exercise of his religion is justified by the government's need both for...