In 2013, the American Atheists Inc., Atheists of Northern Indiana Inc., and Atheist Archives of Kentucky Inc. (collectively, the "Atheists") filed a lawsuit in federal district court in Kentucky, claiming certain Internal Revenue Code provisions preferentially benefit churches and religious organizations. According to the Atheists, the tax code treats religious organizations more favorably than non-religious charities, and this favorable treatment represents an unconstitutional preference for religion in violation of the First Amendment's prohibition of an establishment of religion.
Although the Atheists did not specifically identify the statutes and regulations they were challenging, the court surmised that the following provisions of the tax code probably were the ones the Atheists were challenging:
Churches are not required to file an application for recognition of tax-exempt status.
In order to receive exemption from federal income tax under section 501(c)(3) of the tax code, organizations must file Form 1023 with the Internal Revenue Service. However, churches are not required to file Form 1023, although many have done so in order to more easily establish their tax-exempt status to assist donors in substantiating charitable contributions and to qualify for various exemptions under state and local laws. Many other churches are covered by a group exemption ruling issued by the IRS to a parent denomination.