Editor’s Note: This legal challenge was subsequently dismissed in 2014 after the court determined the plaintiff, Freedom From Religion Foundation (FFRF), lacked standing (meaning the type of injury constitutionally required in order for FFRF to bring a lawsuit was too remote or speculative). In October 2018, FFRF initiated a new legal challenge which remains unresolved at this time. Sign up for the free Church Law & Tax e-newsletter to stay up-to-date on this key legal issue and dozens more.
The Freedom from Religion Foundation (FFRF) sued the IRS in a federal district court in Wisconsin, claiming that 501(c)(3) tax code provisions make it easier for churches to obtain and maintain tax-exempt status than other nonprofit organizations. This, they claim, violates the First Amendment's prohibition of an "establishment of religion" and the Fifth Amendment's guaranty of the equal protection of the laws. Freedom from Religion Foundation v. Werfel, 2013 WL 4501057 (W.D. Wis. 2013).
In particular, FFRF alleged that it was required to file a "detailed application" (Form 1023) and pay a fee before obtaining tax exempt status, and since then has been required to file "detailed, intrusive and expensive annual reports" (Form 990) in order to maintain that status, but churches are not required to do either of these things.
The federal government, which defended the constitutionality of the tax code provisions (since they are federal statutes), asked the court to dismiss the lawsuit on the ground that FFRF lacked "standing" to pursue its claims. Standing is a requirement of any plaintiff in a federal case. It has been described by the United States Supreme Court as follows: