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Atheists lose bid to overturn IRS' religious exemptions

Published: Saturday, May 24 2014 12:00 a.m. MDT

The headquarters of the Internal Revenue Service (IRS) in Washington.

J. David Ake, Associated Press

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You don't have to believe in God to be considered a "church" and get tax breaks, a federal district judge in Kentucky told atheists last week, striking down their objections to tax exemptions granted religious organizations and ordained clergy.

On Monday, May 19, U.S. District Judge William O. Bertelsman in Louisville ruled that the American Atheists Inc. did not have legal "standing" to challenge the exemptions, which include a "parsonage allowance" ruled unconstitutional in November 2013 by another federal judge in Wisconsin. The debate involves Section 501 (c) (3) of the Internal Revenue Code, or I.R.C.

“We’re very disappointed in the court’s decision,” American Atheists President Dave Silverman said in a statement. “The court has upheld a prejudiced government practice. This isn’t just about atheists; American Atheists will continue to fight this blatant discrimination on behalf of all taxpayers and all Americans. Make no mistake: this case is not over.”

The atheists maintain the Internal Revenue Service, whose then-commissioner, Douglas Shulman, was named in the lawsuit, "discriminates in its filing requirements for nonreligious nonprofit organizations compared to its requirements for religious organizations and churches." The religious groups, in other words, get breaks other nonprofits don't qualify for in terms of a need to file applications for tax-exempt status, certain reports and the ability of ordained clergy to allocate a portion of their paychecks as a "housing allowance," which is exempt from income tax. Churches can also opt out of collecting Social Security and Medicare taxes

The atheist groups say it would violate their conscience to apply for religious exemptions, even though the IRS, Bertelsman noted in his opinion, allows for this: "A review of case law establishes that the words 'church,' 'religious organization,' and 'minister,' do not necessarily require a theistic or deity-centered meaning" in order to qualify for IRS designation as a tax-exempt religious organization."

Bertelsman wrote, "Thus, the Atheists’ assertion that they are subjected to unconstitutional discrimination and coercion due to their alleged inability to gain classification as religious organizations or churches under I.R.C. §501(c)(3) is mere speculation. 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."

That may — or may not — bolster the arguments made by critics of a Nov. 22, 2013, ruling by U.S. District Judge Barbara Crabb who declared Section 107(2) of the I.R.C. unconstitutional "because the exemption provides a benefit to religious persons and no one else, even though doing so is not necessary to alleviate a special burden on religious exercise."

That case is due to be appealed to the 7th U.S. Circuit Court of Appeals in Chicago, and pro-exemption religious groups — including the Seventh-day Adventist Church — are expected to file briefs supporting the provision.

Speaking with Adventist Review magazine last year, Tom Wetmore, an associate general counsel for the Adventists, said Crabb's ruling was "a huge deal because it would have a dramatic impact in how the church compensates its ministers. We have long depended on this tax benefit for the compensation package for our clergy in North America.”

The Evangelical Council for Financial Accountability, which also supports the parsonage exemption and other church tax breaks, believes the Kentucky ruling might influence the appeals court verdict: "The judge ordering the dismissal of the lawsuit in Kentucky specifically referenced the Wisconsin court’s decision in the (Freedom From Religion Foundation) case, calling it unpersuasive and not applicable," the group said in a statement.

Other evangelical voices were also pleased. Christianity Today magazine's website headlined its report on the Kentucky ruling as "Good News for Churches Worried About Losing Their Pastor's Best Benefit to Atheist Lawsuits."

Email: mkellner@deseretnews.com

Twitter: @Mark_Kellner

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