Members’ Right to Inspect Church Records

An Illinois appeals court decision provides some guidance.

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State: Illinois
Categories: Church Records

Under what circumstances do church members have a legal right to inspect church records? An Illinois appeals court decision provides some guidance.

Some of the members of a charitable organization incorporated under the state not-for-profit corporation law demanded to see various corporate records. Their request was denied by corporate officers, and the members sued. A trial court ruled in favor of the corporation, and the members appealed. A state appeals court reversed the trial court's decision, and ruled that the members had a broad right to inspect the corporation's records.

The court began its opinion by noting that the corporation was incorporated under the state not-for-profit corporation law, which contains the following provision regarding inspection of corporate records: "Each corporation shall keep correct and complete books and records of account … and shall keep at its registered office or principal office a record giving the names and addresses of its members entitled to vote. All books and records of a corporation may be inspected by any member entitled to vote or that member's agent or attorney, for any proper purpose at any reasonable time."

The court continued:

The [member] has the burden to establish he has a proper purpose to inspect the corporation's records. A proper purpose is shown when a shareholder has an honest motive, is acting in good faith, and is not proceeding for vexatious or speculative reasons; however, the purpose must be lawful in character and not contrary to the interests of the corporation. A proper purpose is one that seeks to protect the interests of the corporation and the [member] seeking the information …. [A member's] right to inspect a corporation's books and records must be balanced against the needs of the corporation depending on the facts of the case. Proof of actual mismanagement is not required; a good faith fear of mismanagement is sufficient to show proper purpose. The [member] is not required to establish a proper purpose for each record he requests. Once that purpose has been established, the [member's] right to inspect extends to all books and records necessary to make an intelligent and searching investigation and from which he can derive any information that will enable him to better protect his interests. The reference in [the not-for-profit corporation statute] to "all books and records" grant a [member] access to a broad range of a corporation's records; however, the access is limited to a showing of proper purpose. Once the purpose is established, the [member] may examine necessary books and records.

In reaching its decision, the court rejected the corporation's claim that granting the members' broad inspection request would violate the "privacy rights" of other members. The court also rejected the corporation's claim that it was being properly managed and therefore the members' request to inspect records to search for evidence of mismanagement was unwarranted. The members have a right to inspect records "to make that determination for [themselves]."

What This Means for Churches:

This decision represents a broad interpretation of a member's right to inspect corporate records. Since it involves an interpretation of the Illinois not-for-profit corporation act, and since many churches are incorporated under this statute in Illinois (and under similar provisions in other states), the court's interpretation is of relevance to all church leaders.

Meyer v. Board of Managers, 583 N.E.2d 14 (Ill. App. 1 Dist. 1991).

Legal Developments

Inspection of Church Records

Can a church avoid the inspection of its records by placing them in a “secret archive”?

Richard R. Hammar, Attorney, CPA

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State: Pennsylvania
Categories: Church Records

Can a church avoid inspection of its records in a civil lawsuit by placing them in a location that it designates as a "secret archive"?

No, concluded a Pennsylvania appeals court. A Catholic priest, and his bishop, church, and diocese, were sued on account of the alleged sexual molestation of a minor child by the priest. The victim claimed that the bishop, church, and diocese were legally responsible since they "negligently hired or retained" the priest and assigned him to a church "when they knew or should have known of his pedophilic tendencies."

In preparation for trial, the victim's attorney sought to inspect documents in the possession of the diocese pertaining to the sexual misconduct of priests with male children for the years 1972 through 1987. The victim's attorney also sought to inspect any records pertaining to the priest who allegedly molested him. The diocese refused to disclose any of these documents. It asserted that they were all contained in a secret archive file that was not subject to inspection.

This position was based on Canon 489 of the law of the Roman Catholic Church which states: "There is to be a secret archive … or at least a safe or file in the ordinary archive, completely closed and locked and which cannot be removed from the place" for those documents that are to be "kept and protected most securely." Canon 490 states further that "only the bishop" of the diocese may possess the key to the secret archive and that "documents are not to be removed from the secret archive or safe."

A trial court ordered the diocese to produce for inspection the documents requested by the victim's attorney. The diocese immediately appealed this order, claiming that it violated the first amendment's guaranty of religious freedom. A state appeals court agreed with the trial court, and ordered the diocese to turn over the requested information.

The court began its opinion by observing that a party to a lawsuit has the legal right to "discover" or inspect any document in the possession of another party, so long as the document is relevant to the lawsuit and not privileged. The court concluded that the requested information in this case was clearly relevant to the lawsuit, and not privileged. It acknowledged that Pennsylvania law contains a "priest-penitent privilege," which protects clergy from disclosing in court any confidential communications made to them while acting in their role as a confessor or counselor.

However, the court insisted that "this privilege protects priest-penitent communications; it does not protect information regarding the manner in which a religious institution conducts its affairs or information acquired by a church as a result of independent investigations not involving confidential communications between priest and penitent."

Accordingly, the priest-penitent privilege ordinarily would not apply to a priest's personnel file or records maintained by a diocese regarding incidents of sexual molestation by priests, since this kind of information normally is not obtained in the course of confidential communications with clergy.

The court observed: "Insofar as the canons of the Church are in conflict with the law of the land, the canons must yield. Here, it is the Pennsylvania rules of discovery which are controlling. Merely because canon 489 is controlling in the internal operations of the affairs of the Church does not mean that it permits evidence pertaining to sexual molestation of children by priests to be secreted and shielded from discovery which is otherwise proper."

The court quoted with approval from an earlier decision of the United States Supreme Court: "Conscientious scruples have not, in the course of the long struggle for religious toleration, relieved the individual from obedience to a general law not aimed at the promotion or restriction of religious beliefs. The mere possession of religious convictions which contradict the relevant concerns of a political society does not relieve the citizen from the discharge of political responsibilities."

The court concluded: "We hold … that where the only action required of a religious institution is the disclosure of relevant, non-privileged documents to an adversary in civil litigation, such action, without more, poses no threat of governmental interference with the free exercise of religion. In [this] case there is not one iota of evidence that court ordered discovery will 'chill' the rights of [the church and diocese] in the conduct of their religious affairs or inhibit their parishioners from engaging freely in the practice of their religious beliefs and activities …. [T]he relevant inquiry is not whether the church gives a file a particular name, but whether disclosure of the information requested from that file interferes with the exercise of religious freedom." Hutchison v. Luddy, 606 A.2d 905 (Pa. Super. 1992).

Government Inspection of Church Records

Certain records may be available for government inspection of alleged wrongdoing.

Richard R. Hammar, Attorney, CPA

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State: New York
Categories: Church Records

A New York state court ruled that a church's books and records were subject to government inspection as part of an investigation into alleged wrongdoing in soliciting contributions.

The state attorney general received reports that the church forced residents of its homeless shelter to "panhandle" contributions on the streets in exchange for room, board and 25% of the moneys collected. There also were allegations that most of the contributions were appropriated for the personal benefit of the church's founder. Accordingly, the attorney general issued a subpoena to the church, directing it to make available for inspection its

books and records,
leases and deeds,
minutes of its governing body and the names and addresses of all directors, officers, and trustees, and
copies of all materials used to solicit contributions. The church refused to respond to this subpoena on the ground that it violated its "religious rights."

In rejecting the church's claim, the court observed:

There is no doubt that the attorney general has a right to conduct investigations to determine if charitable solicitations are free from fraud and whether charitable assets are being properly used for the benefit of intended beneficiaries.

It makes no difference whether or not the organization soliciting the donations is a church or other religious organization, since

religious corporations … are still within the attorney general's subpoena power, and investigations by the attorney general of alleged fraudulent behavior may proceed based upon law and the public interest against fraudulent solicitations by so-called religious groups.

The court emphasized that the attorney general's investigation did not prevent the church or its members "from practicing their religious activity, nor is it disruptive to such activity."

The court concluded:

"At a time when there is acute sensitivity to the plight of the homeless, the public, the press and the courts must be acutely aware of the possibility that the unscrupulous might prey on the warm heartedness and generosity of the community, and attempt to profit from human misery. At the very least, when such allegations exist and have some degree of evidentiary support, we cannot close our eyes to the possibilities of abuse. The mere fact that a charitable group claims first amendment privileges cannot shield that group from the scrutiny of the attorney general." Abrams v. Temple of the Lost Sheep, Inc., 562 N.Y.S.2d 322 (Sup. Ct. 1990), Abrams v. New York Foundation for the Homeless, Inc., 562 N.Y.S.2d 325 (Sup. Ct. 1990).

Legal Developments

Amendment of Church Documents

A court ruled that a church’s articles of incorporation could not be amended without the pastor’s approval.

Richard R. Hammar, Attorney, CPA

Bio

State: Washington
Categories: Church Records

Church Law and Tax 1991-01-01 Recent Developments

Constitutions, Bylaws, and Charters

Richard R. Hammar, J.D., LL.M., CPA

• The Washington Supreme Court ruled that a church’s board of elders was powerless to amend the church’s articles of incorporation without the pastor’s approval. In 1967, a pastor organized a church. The church bylaws provided that the pastor was “recognized as the spiritual overseer of the church, ordained and appointed by God for the ministry and to shepherd the flock.” The church’s articles of incorportion specified that (1) the church would not have voting members; (2) the affairs of the church would be managed by a board of elders; (3) the church board consisted of three elders, plus the pastor who was designated the permanent chairman (he could not be removed from office while living); and, (4) neither the articles nor the bylaws could be amended without the pastor’s approval. The bylaws specified that the pastor would serve for life unless he decided to leave, and that pastor could “veto” any action of the board. For 20 years, there were no problems with this arrangement. However, in 1987, allegations of sexual misconduct on the part of the pastor surfaced. One elder testified that the pastor admitted to 27 acts of adultery over a period of 16 months. These alleged incidents resulted in lawsuits being filed against the church. In the midst of this turmoil, the pastor signed a statement agreeing to “step aside” as pastor while the board conducted hearings into the allegations. The board (without the pastor) conducted a series of hearings which lasted for 5 hours a day for several weeks. At the conclusion of these hearings, the board adopted a resolution placing the pastor on “special status.” This meant that he could resume his duties as pastor of the church, but he would not be permitted to be alone with any females. The board explained its action by stating that it was attempting to protect the church, and themselves, against additional lawsuits. This decision was announced to the church congregation in a special meeting. The pastor refused to accept this special status or to honor the board’s decision. Instead, he announced to the congregation that he was not under the authority of the elders and that he would resume his role of pastor without restriction. He also denied that any of the alleged acts occurred as a result of his “spiritual condition.” The board convened a meeting with the pastor in an attempt to reach a compromise. When it was clear that no agreement was possible, the three board members met without the pastor at another location and voted to amend the articles by removing the provision requiring the pastor to approve all amendments to the articles. They also voted to remove the pastor from office because of his breach of his “fiduciary duties” to the corporation. The pastor immediately filed a lawsuit asking a civil court to determine whether or not the elders had the authority to amend the articles without his approval. A trial court ruled in favor of the elders, and the pastor appealed. The state supreme court ruled in favor of the pastor. It reasoned that the articles clearly specified that they could not be amended without the pastor’s approval, and that as a result the elders’ attempt to amend the articles without the pastor’s approval was null and void. The court observed: “Neither of the parties has called to our attention any case holding that any corporation law in the country, profit or nonprofit, prohibits a provision in the articles of incorporation requiring the concurrence of a special individual to amend the articles.” The court agreed that the church’s articles “might well, in retrospect, be viewed by some as an improvident provision,” but it concluded that “it is not the function of this court … to protect those who freely chose to enter into this kind of relationship.” The court did acknowledge that while it rejected the elders’ attempt to amend the articles without the pastor’s approval, “we point out that this does not necessarily defeat the effort by the board to oust the [pastor]” since “the issue of breach of fiduciary duty still remains to be considered by the trial court.” Two justices dissented from the court’s ruling. They lamented that the court’s ruling “eliminates the board’s authority to protect the interests of the church and makes the board inoperative. The pastor’s veto power over the actions of the board impermissibly allows one director to grind the wheels of the corporation to a halt.” The dissenters also claimed that the pastor’s written agreement to let the board conduct hearings into his alleged sexual misconduct amounted to a “waiver” of his veto power over the board’s decision. For now, the case will proceed to trial on the issue of the board’s authority to remove the pastor because of his alleged breach of his fiduciary duties to the corporation. Any developments will be reported in future editions of Church Law & Tax Report. Barnett v. Hicks, 792 P.2d 150 (Wash. 1990).

© Copyright 1991, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m34 m56 m28 c0191

Legal Developments

Audits

Churches

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Church Records

Church Law and Tax 1990-09-01 Recent Developments

Audits – churches

Richard R. Hammar, J.D., LL.M., CPA

• A federal district court in Massachusetts addressed the issue of IRS audits of churches, and ruled that the IRS had exceeded its authority in seeking to subpoena a church’s records. In 1988, an IRS regional commissioner sent a “notice of tax inquiry” to the Church of Scientology of Boston, stating that he had reason to believe that the church might have lost its tax-exempt status because of substantial commercial activities and distribution of funds to private individuals. After receiving written responses from the church to several questions, the IRS determined that an examination of the church’s books, records, and activities was necessary. Accordingly, the IRS sent the church a “notice of church examination.” Following a conference with church officials, the IRS issued a subpoena ordering the church to produce some 200,000 pages of materials. When the church refused to respond to the subpoena, the IRS sought a court order compelling the church to respond. The court began its opinion by noting that “the IRS has broad authority with respect to tax inquiries.” However, this authority is limited in at least three ways. First, Congress “scaled back” this authority when it enacted the Church Audit Procedures Act in 1985. This legislation was enacted “to insure that the IRS does not embark on an impermissibly intrusive inquiry into church affairs.” The Act provides churches with several protections. For example, a “church tax inquiry” can only begin if “a high-level [IRS] official reasonably believes (on the basis of facts and circumstances recorded in writing) that the church may not be exempt, by reason of its status as a church … or may be carrying on an unrelated trade or business … or otherwise is engaged in activities subject to taxation.” Proper notice, including an explanation of the concerns which gave rise to the inquiry, and a statement of the general subject matter of the inquiry, must be given to the subject church. The church also must be apprised of its constitutional and legal protections. Both church records and activities may be examined, but only to the extent necessary to determine either liability for tax or whether the organization in fact qualifies as a church. Examinations must be completed within two years. Second, in addition to the requirements of the Church Audit Procedures Act, several federal court rulings have required that an IRS subpoena of church records must satisfy the following three tests (in addition to satisfying the provisions of the Act): (1) the investigation is being conducted pursuant to a valid purpose, (2) the requested information is necessary to that purpose, and (3) the requested information is not already in the possession of the IRS. Third, federal law provides that if the IRS wants to retroactively revoke the tax-exempt status of a church, then it must show either that the church “omitted or misstated a material fact” in its original exemption application, or that the church has been “operated in a manner materially different from that originally represented.” The court in this case emphasized that the IRS violated both the second and third protections. The second protection was violated since the IRS failed to establish that its massive document request was “necessary” to accomplish its intended purpose. The third protection was violated since the IRS had attempted to retroactively revoke the church’s tax-exempt status without alleging that the church had “omitted or misstated a material fact” in its original exemption application, or that the church has been “operated in a manner materially different from that originally represented.” Accordingly, the court refused to enforce the IRS subpoena. It stressed that “the unique status afforded churches by Congress requires that the IRS strictly adhere to its own procedures when delving into church activities.” The safeguards afforded churches under federal law prevent the IRS from “going on a fishing expedition into church books and records.” United States v. Church of Scientology of Boston, 90-2 U.S.T.C. para. 50,349 (D. Mass. 1990).

© Copyright 1990, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m04 m71 c0690

Legal Developments

Church Records

A New York state court ruled that the constitutional guaranty of religious freedom did not

Richard R. Hammar, Attorney, CPA

Bio

State: New York
Categories: Church Records

A New York state court ruled that the constitutional guaranty of religious freedom did not excuse a church from producing its records in response to a grand jury subpoena.

During a tax investigation, the state attorney general subpoenaed several records and documents from a church (including general ledgers, accounts payable and receivable journals, 941 and W-2 forms, cash receipts and disbursement journals, bank statements, cancelled checks, postal shipment records, employee travel expense records, telephone bills, the corporate charter, minutes of board meetings, and credit card statements). The church challenged the validity of the subpoena on the ground that disclosure of the documents would violate the constitutional rights of the church and its members.

The court noted that the church had to "make at least some showing that production of the information sought would impair their first amendment rights" and that "once such a showing is made, the prosecution has the burden of establishing that the infringement is outweighed by a compelling state interest to which the information sought is substantially related, and that the state's ends may not be achieved by less restrictive means." Church representatives argued that disclosure of the records would reveal the identities of contributors to the church in violation of the church's belief (based on Matthew 6:1-4) that "charity should be given in secrecy."

The court rejected the church's claim that disclosure of many of the requested records would violate the church's right to religious freedom. For example, the court observed that "it is hard to conceive that release of charge or credit account records, or records of employees' travel expense accounts, would have any likelihood whatsoever" of violating any religious beliefs or tenets of the church. The court agreed that the church "sufficiently substantiated" that disclosure of some records would violate contributor's constitutional guaranty of religious freedom. It cited cash receipts records and bank statements. The court further agreed that disclosure of records revealing the charitable recipients of church funds (e.g., cancelled checks and bank statements) also might violate the church's rights.

The court emphasized that "the fact that disclosure of the items would directly violate the denominational belief that church contributions should be kept secret is only the beginning, however, and not the end of the inquiry." The church would be required to disclose the constitutionally protected records if the state could establish that the alleged violation of the church's rights was outweighed by a "compelling state interest to which the information sought is substantially related" and that the "state's ends may not be achieved by less restrictive means." The court concluded that such was the case here, since the church's records were sought in connection with an investigation into tax-related offenses including underreporting of compensation paid to officers and employees and diversion of church funds to nonreligious purposes, and "it is by now well settled that enforcement of a state's revenue laws constitutes a compelling governmental interest."

The court also concluded that there "was no less restrictive means for obtaining the relevant evidence of the violations of law under investigation," and therefore the church's "first amendment objections to the subpoenas are unavailing." The court did acknowledge that the subpoenas "did not seek either general membership lists or general lists of contributors to or charitable donees of the [church]," and that "disclosure of the identities of specific contributors was incidental to the effort to uncover the flow of money and property in and out of the [church], and indispensable part of the grand jury's investigation." In other words, since general membership or contributor lists were not relevant to the grand jury's inquiry, they may have been protected from disclosure had they been specifically sought by the attorney general.

This case is significant because it is one of the few published opinions to discuss the validity of a church's objections to attempts to subpoena its records. Many churches assume that their records enjoy a mantle of secrecy and are immune from the subpoena power. The New York case recognizes that this assumption is flawed, even with respect to records whose disclosure would admittedly violate the church's religious beliefs. Full Gospel Tabernacle, Inc. v. Attorney General, 536 N.Y.S.2d 201 (1988).

Legal Developments

Court Concluded that a State Law Giving Members of Nonprofit Corporations the legal right to Inspect Corporate Records Could Not be Applied to the Church

Do members of an incorporated church have the legal authority to inspect the church's financial

Richard R. Hammar, Attorney, CPA

Bio

State: Arkansas
Categories: Church Records

Do members of an incorporated church have the legal authority to inspect the church's financial records over the objection of church "elders"?

That was the difficult issue before the Arkansas Supreme Court in a recent case. As part of what the court described as a dispute of "a longstanding, ongoing, and heated nature, certain members of a local Church of Christ congregation sought to obtain various financial records of the church as part of a concerted effort to oust the current church leadership.

When church elders rejected the members' request, the members proceeded to incorporate the church under a state nonprofit corporation law making the "books and records" of a corporation subject to inspection "by any member for any proper purpose at any reasonable time." Church elders continued to reject the members' request for inspection, whereupon the members asked a state court to recognize their legal right to inspection under state corporation law.

The elders countered by arguing that application of state corporation law would impermissibly interfere with the religious doctrine and practice of the church, contrary to the constitutional guaranty of religious freedom. Specifically, the elders argued that according to the church's "established doctrine," the New Testament "places within the hands of a select group of elders the sole responsibility for overseeing the affairs of the church," and that this authority is "evidenced by biblical admonitions to the flock to obey and submit to them that have rule over the flock."

The state supreme court agreed that "application of our state corporation law would almost certainly impinge upon the doctrine of the church" as described by the elders, and accordingly would violate the constitutional guaranty of religious freedom. The court relied in part on a 1952 decision of the United States Supreme Court in which the Court ruled that religious freedom includes the right of religious bodies "to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine."

The court concluded that if the application of a state law would conflict with the "doctrine, polity, or practice" of a church, then the law cannot be applied to the church without a showing of a "compelling state interest." No such showing was made in this case, the court concluded, and therefore the state law giving members of nonprofit corporations the legal right to inspect corporate records could not be applied to the church.

This decision should not be interpreted as giving the leaders of incorporated churches broad discretion in denying members' requests for inspection of church records. Note that the court based its ruling entirely upon its finding that the church's doctrine and practice required members to submit without reservation to the authority of elders in all matters of church administration. Obviously, this is a position that does not enjoy universal acceptance. Gipson v. Brown, 749 S.W.2d 297 (Ark. 1988).

Legal Developments

Court Ruled Church Members Had Authority to Obtain a Court Order Requiring an Accounting of Church Funds

Court stated that when the members of the church decided to incorporate, they submitted themselves to the jurisdiction of the state courts in all matters of a corporate nature, such as accounting for funds.

Richard R. Hammar, Attorney, CPA

Bio

State: Florida
Categories: Charitable Contributions, Church Records

A group of church members who had contributed funds to their church demanded that the church give an "accounting" of the use of the contributed funds. When the church refused, the members turned to the courts for relief.

A trial judge ordered an immediate accounting, as well as annual audits "forever," and required the church to disclose the contents of a church safety deposit box to the complaining members. The church appealed, arguing that the civil courts had no jurisdiction over a church, and even if they did, they had no authority to order accountings or annual audits.

A state appeals court, in upholding the trial judge's ruling regarding an accounting and inspection of the church's safety deposit box, observed that "we are of the opinion that this is not an improper interference by the government into a church, or ecclesiastical, matter. When the members of the church decided to incorporate their body under the laws of the state of Florida, they submitted themselves to the jurisdiction of the state courts in all matters of a corporate nature, such as accounting for funds." However, the court reversed the trial judge's order requiring annual audits forever, since "we cannot agree it is proper to order annual, ad infinitum, audits of the books" of a church. Matthews v. Adams, 520 So.2d 334 (Fl. App. 5th Dist. 1988)

Legal Developments

A Federal Appeals Court Addressed the Significant Issue of IRS Authority to Demand Disclosure of Church Records

An IRS agent became convinced that a church official was soliciting donations of depressed real

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Charitable Contributions, Church Records

An IRS agent became convinced that a church official was soliciting donations of depressed real estate to his church at grossly inflated values, with the church thereafter selling the properties at their substantially lower market values. For example, one property donated to the church and valued at $2.3 million was later sold by the church for only $250,000. Another property valued at $622,500 was sold for $50,000. An advertisement in the Wall Street Journal and New York Times read: "Hard to sell, distressed and other real estate accepted by religious corporation. Will structure contribution of real estate to meet need of donor."

The IRS, convinced that "the administration of the income tax laws regarding charitable contributions" was being impeded, served summons on church attorneys demanding production of all church records associated with real estate transactions. The church claimed that the IRS summonses were invalid since they violated both the constitutional guaranty of religious freedom and the "Church Audit Procedures Act." With regard to its constitutional claim, the church contended that the IRS summonses would dissuade donors from making contributions to the church, thereby restricting the church's exercise of its religion.

A federal district court rejected the church's arguments and ruled in favor of the IRS. A federal appeals court affirmed this decision. The appeals court denied that the Church Audit Procedures Act applied in this case, since that Act was not intended to apply to IRS investigations of donor contributions.

With regard to the church's claim that the IRS summonses violated its constitutional right of religious freedom, the court observed: "Even assuming, however, that the IRS investigation has dissuaded some donors from contributing property to [the church], due to their fears that their names will be publicized or they will face potential investigation by the IRS … the claimed impact on free exercise is incidental; contribution to the church is not forbidden, and the summonses do not directly impinge upon any practice central to the religious beliefs of church contributors or members.

To the extent that some donors may be dissuaded from donating property appraised at unjustifiably inflated values and from taking corresponding charitable deductions, we need simply note that such action … is not immunized from governmental investigation."

Furthermore, the court observed that "any incidental burden on the free exercise rights of the church … must be balanced against the government's interest in enforcing the summonses …. A compelling governmental interest exists here—that of enforcing the tax laws." St. German of Alaska Eastern Orthodox Catholic Church v. United States, 840 F.2d 1087 (2nd Cir. 1988)