Freedom of Religion – Part 1

Church Law and Tax 1990-05-01 Recent Developments Freedom of Religion Richard R. Hammar, J.D., LL.M.,

Richard R. Hammar, Attorney, CPA

Bio

State: Arkansas
Categories: Freedom of Religion, Schools

Church Law and Tax 1990-05-01 Recent Developments

Freedom of Religion

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

• A federal court in Arkansas outlawed Bible classes that had been taught in a city’s public schools for 51 years. The schools gave elementary grade children the opportunity to learn about the Bible. Bible classes were taught during regular school hours in the school building, by volunteers not acting on behalf of any church. No course credit was given for the classes, and attendance was voluntary. Nearly 96% of all students attended the Bible classes. The parents of one child filed a lawsuit in federal court, alleging that the program violated the first amendment’s “nonestablishment of religion” clause. The court began its opinion by observing that, according to Supreme Court pronouncements, “any government involvement with religion, to be constitutional, must have a secular purpose, its principal or primary effect must be one that neither advances nor inhibits religion, and it must not foster an excessive governmental entanglement with religion.” A state practice that violates any of these requirements is invalid. The court concluded that the Bible study program violated all three requirements. It referred to lessons and songs that endorsed Christian dogma, and quoted one of the Bible teachers who stated in class that “Jesus is our gateway to Heaven. He laid down his life for us so that we could go to Heaven. He is our shepherd and he wants us all to be one big flock of sheep.” Such evidence, the court concluded, clearly demonstrated that the program had a religious purpose, and that it advanced religion. The court acknowledged that purely “secular” Bible study programs in public schools have been upheld as lawful by other federal courts, and it indicated a willingness to review a modified Bible study program in this case. It noted that the United States Supreme Court has ruled that “Bible study, when presented objectively as part of a secular program of education, may … be effected consistently with the first amendment.” Doe v. Human, 725 F. Supp. 1503 (W.D. Ark. 1989).

© 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: m47 c0390

Legal Developments

Immigration

Church Law and Tax 1990-05-01 Recent Developments Immigration Richard R. Hammar, J.D., LL.M., CPA •

Richard R. Hammar, Attorney, CPA

Bio

State: California

Church Law and Tax 1990-05-01 Recent Developments

Immigration

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

• Can churches be forced to comply with the immigration reporting requirements contained in the Immigration Reform and Control Act of 1986 against their will? Yes, concluded a federal district court in California. In 1986, Congress enacted a comprehensive immigration reform law requiring all employers (including churches) to verify the identity and employment eligibility of every employee hired on or after June 1, 1987 (the application of the new law to churches was explained fully in the July-August 1987 issue of Church Law & Tax Report). Employers who fail to comply with the new law are subject to various penalties. A Quaker social services agency, supported by more than 100 other religious organizations, challenged the law in court. It claimed that compliance with the law’s requirements would violate its “sincerely held religious beliefs in the sacredness and equality of human life,” and would require it to participate in an immigration program that it believed would “visit hunger and deprivation” upon illegal immigrants. The court summarily rejected these claims. It observed that in determining whether or not a law violates the first amendment’s guaranty of religious freedom, the courts must consider three factors: “(1) the magnitude of the law’s impact upon the exercise of religious beliefs, (2) the existence of a compelling state interest justifying the burden imposed upon the exercise of religious belief, and (3) the extent to which recognition of an exemption from the law would impede the objectives sought to be advanced by the state.” The court readily agreed that the law had a “substantial impact” on the religious organization’s right to freely exercise its religion. However, it insisted that this right was outweighed by the government’s compelling interest in controlling immigration. Further, the court concluded that granting an exemption to religious organizations would not be feasible since it would “reactivate the employment ‘magnet’ which draws illegal aliens to the United States. [The government] notes that over 100 religious organizations [support the position of the Quaker social services agency in this case], and therefore an exemption could have far reaching effects on immigration policy.” American Friends Service Committee v. Thornburgh, 718 F. Supp. 820 (C.D. Cal. 1989).

Legal Developments

Construction Projects – Part 2

Church Law and Tax 1990-05-01 Recent Developments Construction Projects Richard R. Hammar, J.D., LL.M., CPA

Richard R. Hammar, Attorney, CPA

Bio

State: Federal

Church Law and Tax 1990-05-01 Recent Developments

Construction Projects

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

• A federal appeals court ruled that a local Methodist church could not sue the manufacturer of asbestos plaster for the cost of removing the plaster from church ceilings. The church, which was constructed in 1961 the Maryland, used an asbestos plaster on all ceilings at the direction of the building’s architect. The church was consecrated in 1962 and has been in continuous use ever since. A portion of the church ceiling was replaced in 1969, and asbestos-laden plaster was used again. In 1985, the church became concerned over the possibility that asbestos materials may have been used in the construction of the church. An investigation confirmed the presence of asbestos in the ceilings, and the church trustees immediately ordered its removal—at a cost of $225,000. In 1988, the church sued the manufacturer of the ceiling plaster, seeking to recover the removal costs, and alleging that the plaster posed a health hazard to those who frequently occupied the building. The church claimed that the manufacturer breached certain warranties, and was guilty of negligence and “fraudulent concealment” of a hazardous condition. The manufacturer’s defense was that the lawsuit was barred by the Maryland 20-year statute of limitations. A federal trial court granted a summary judgment in favor of the manufacturer, without letting the case go to a jury. The church appealed, and a federal appeals court affirmed the trial court’s ruling in favor of the manufacturer. The court concluded that the state 20-year statute was a “statute of repose” rather than a statute of limitation, and accordingly it was not suspended during the period of fraudulent concealment of a hazardous condition. Further, the court rejected the church’s claim that federal hazardous waste laws (notably “CERCLA”) extended the time for filing a lawsuit or gave property owners a right to recover the cost of asbestos clean-up. First United Methodist Church v. U.S. Gypsum, 882 F.2d 862 (4th Cir. 1989).

Legal Developments

Freedom of Religion – Part 2

Church Law and Tax 1990-05-01 Recent Developments Freedom of Religion Richard R. Hammar, J.D., LL.M.,

Richard R. Hammar, Attorney, CPA

Bio

State: Colorado
Categories: Freedom of Religion, Schools

Church Law and Tax 1990-05-01 Recent Developments

Freedom of Religion

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

• A federal court in Colorado ruled that a public school policy prohibiting the distribution of “material that proselytizes a particular religious or political belief” was unconstitutional. The court observed: “The mission of public education is preparation for citizenship. High school students … must develop the ability to understand and comment on the society in which they live and to develop their own sets of values and beliefs. A school policy completely preventing students from engaging other students in open discourse on issues they deem important cripples them as contributing citizens. Such restrictions do not advance any legitimate governmental interest.” The court rejected the school’s claim that the policy was required in order to avoid violating the first amendment’s nonestablishment of religion clause. It noted that a policy “permitting students to speak to the full extent of their consitutional rights” would have a secular purpose, and would not advance religion. Rivera v. East Otero School District, 721 F. Supp. 1189 (D. Colo. 1989).

Legal Developments

Clergy Compensation

Tax court decides compensation was reasonable

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Compensation and Benefits

Truth Tabernacle, Inc. v. Commissioner of Internal Revenue, T.C. Memo. 1989-451

The United States Tax Court addressed the issue of "unreasonable compensation" paid to clergy.

This issue is important for two reasons. First, section 501(c)(3) of the Internal Revenue Code specifies that churches are not eligible for tax-exempt status if they pay unreasonable compensation to any worker. Second, the law does not define "unreasonable compensation," and this makes court rulings interpreting the phrase very significant.

Let's look at the facts of the case. Truth Tabernacle was incorporated as an independent church in 1978. The church was a fundamentalist Christian congregation, and its doctrine included a belief in "the death, burial, and resurrection of the Lord Jesus Christ … the sovereignty of the Church of God … Jesus Christ as the head of the church … resurrection of the dead … and Jesus Christ coming back again to reign as King of Kings and Lord of Lords over all the earth."

The church, which consisted of about 40 members, conducted worship services three times each week. Regular men's and women's Bible classes were held two or three times each month. Sunday School classes were held every Sunday. Saturday night prayer services were conducted each week. The church's pastor (who was an ordained minister) performed sacerdotal functions, including dedications of children, baptisms, funerals, and marriages.

The IRS audited the church in 1986 (the audit covered the years 1983, 1984, and 1985). At the conclusion of the audit, the IRS revoked the church's tax-exempt status retroactively. The IRS alleged that (1) the church was not operated exclusively for religious purposes, and (2) the church paid "unreasonable compensation" to its minister. The Tax Court rejected the IRS position, and ruled in favor of the church.

In rejecting the IRS claim that the church was not acted exclusively for religious purposes, the Court observed: "Petitioner was a small church operating on a modest budget provided by the weekly contributions of its members. Essentially all of its contributions during the audit years were used to pay the mortgage, utility and maintenance expenses on the church building. Its activities primarily consisted of various worship services conducted in the church building and the performance of sacerdotal rites. In our view the [church is operated exclusively for religious purposes]."

The Court noted that in 1983, the church received contributions of $10,700 and incurred expenses of $12,200. In 1984 it had contributions of $13,700 and expenses of $13,500. In 1985 it had contributions of $16,200 and expenses of $16,200. The major expenses each year were the mortgage payments, utilities, and repairs on the church building. The mortgage alone amounted to $5,000 of the church's annual budget.

In rejecting the IRS claim that the church paid "unreasonable compensation" to its minister, the Court noted that the pastor was provided a car and an apartment free of charge (a custodian and a caretaker received rent-free apartments on the church's property in exchange for 20 hours of service each week), but otherwise received no salary. The Court observed that in determining "whether compensation is reasonable or excessive … one factor to consider is whether comparable services would cost as much if obtained from an outside source in an arm's-length transaction.

Applying that standard to the present case, and considering the meager benefits received by the [church's] minister and grounds keepers in return for services that they performed, we find that the benefits were within the bounds of reasonable compensation for those services. Accordingly, there was no inurement of [the church's] net earnings to any private individual …."

It is difficult to comprehend why the IRS challenged the tax-exempt status of a church that so clearly qualified for exempt status. Clearly, if the exempt status of Truth Tabernacle could be challenged, then few churches are beyond challenge.

The Tax Court's decision will be a useful tool in combatting similar efforts in the future.

Legal Developments

Clergy – Part 2

Removal

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Defamation

Church Law and Tax 1990-03-01 Recent Developments

Clergy – Removal

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

• A federal appeals court ruled that civil courts lack authority to resolve disputes between dismissed clergy and their former church or denomination. A minister who had served for 40 years within the Christian and Missionary Alliance (CMA) was dismissed. He sued the CMA, claiming that his dismissal violated established procedures set forth in the CMA bylaws. He alleged that his dismissal violated various “contract and property rights,” injured his reputation, and ruined his emotional health. He demanded $1 million in damages (his wife sought an additional $200,000). A federal district court granted the CMA’s motion to dismiss, and the ex-minister appealed. A federal appeals court upheld the lower court’s dismissal of the lawsuit. The court rejected the ex-minister’s claims that (1) his “due process rights” had been violated by the CMA’s alleged failure to abide by its own bylaws, and (2) his dismissal violated various state and federal labor laws. The court concluded that the first amendment guaranty of religious freedom prevents the civil courts from resolving lawsuits brought by dismissed ministers against former churches or denominations “however a lawsuit may be labelled.” In other words, the fact that a dismissed minister alleges breach of contract, defamation, emotional distress, or similar “secular” theories of liability will not enable the civil courts to resolve what in essence is a dispute between a minister and his or her church or denomination. The court observed: “However a suit may be labelled, once a court is called upon to probe into a religious body’s selection and retention of clergymen, the first amendment [guaranty of religious freedom] is implicated …. The relationship between an organized church and its ministers is its lifeblood. The minister is the chief instrument by which the church seeks to fulfill its purpose. Matters touching this relationship must necessarily be recognized as of prime ecclesiastical concern.” The court concluded: “At bottom, [the ex-minister’s] complaint directly involves, and would require judicial intrusion into, rules, policies, and decisions which are unmistakably of ecclesiastical cognizance. They are, therefore, not the federal courts’ concern …. The [church’s] own internal guidelines and procedures must be allowed to dictate what its obligations to its members are without being subject to court intervention. It is well-settled that religious controversies are not the proper subject of civil court inquiry. Religious bodies must be free to decide for themselves, free from state interference, matters which pertain to church government, faith, and doctrine.” Quoting a decision of the United States Supreme Court, the court observed that it was obligated to accept a church’s decisions “on matters of discipline, faith, internal organization, or ecclesiastical rule, custom, or law.” The court’s decision is reinforced by the fact that it was upholding the lower court’s order dismissing the lawsuit. Under federal law, a motion to dismiss may be granted only if the allegations in the plaintiff’s complaint, accepted as true, state “no set of facts which might entitle the plaintiff to relief.” The court’s dismissal of this lawsuit under this minimal standard of review adds force to its conclusions. Natal v. Christian and Missionary Alliance, 878 F.2d 1575 (1st Cir. 1989).

See also Constitutions, bylaws, and charters, Frankel v. Kissena Jewish Center, 544 N.Y.S.2d 955 (1989); Personal injuries—on church property or during church activities, Erickson v. Christenson, 781 P.2d 383 (Or. App. 1989).

Legal Developments

Schools – Part 1

Church Law and Tax 1990-03-01 Recent Developments Schools Richard R. Hammar, J.D., LL.M., CPA •

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Schools

Church Law and Tax 1990-03-01 Recent Developments

Schools

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

• A federal appeals court ruled that the constitutional guaranty of religious freedom did not exempt a fundamentalist Christian school from state approval. The Massachusetts compulsory attendance law requires children to attend schools (public or private) that have been “approved” by the state. Private schools are approved if their educational program is comparable (in thoroughness and efficiency) to public education. A Baptist church claimed that it was a sin to “submit” its private school to secular authority for approval, and accordingly that the law subjecting the school to state approval violated the constitutional guaranty of religious freedom. Specifically, the church’s religion taught that “God is the sovereign and the final authority in all human conduct [and that] to submit [the church’s] educational ministry for the prior or continued approval of secular authorities would violate the sovereignty of Christ over his church and would, therefore, be a sin.” To help resolve the controversy, the church proposed that its students voluntarily take standardized tests to assure the competency of the school’s educational program, and the test results be shared with the state. A federal trial court agreed with the church, and found that requiring state “approval” of the school violated the church’s constitutional rights. The state of Massachusetts appealed, and a federal appeals court reversed the trial court’s decision and ruled in favor of the state. The court conceded that the state’s “approval” requirement violated the sincerely-held religious beliefs of the church. However, it concluded that the state law was supported by a “compelling” governmental interest that outweighed the church’s religious convictions. It observed that “it is settled beyond dispute that the state has a compelling interest in insuring that all its citizens are being adequately educated.” The court cited with approval an earlier pronouncement of the United States Supreme Court: “A substantial body of case law has confirmed the power of the states to insist that attendance at private schools, if it is to satisfy state compulsory-attendance laws, be at institutions which provide minimum hours of instruction, employ teachers of specified training, and cover prescribed subjects of instruction …. If the state must satisfy its interest in secular education through the instrument of private schools, it has a proper interest in the manner in which those schools perform their secular educational function.” Finally, the court rejected the church’s claim that the state’s interest in competent education could be satisfied through voluntary standardized testing. It noted that “tests, at best, reveal what has occurred.” Further, can the state be certain that “good results reflect good teaching … rather than simply teaching the answers to questions the teachers believe will appear on tests?” The court acknowledged that some states allow mandatory standardized testing to monitor the quality of private education (it cited Alaska, North Carolina, South Dakota, and West Virginia). However, the court could find no state that uses voluntary testing to insure the adequacy of private education. New Life Baptist Church Academy v. East Longmeadow, 885 F.2d 940 (1st Cir. 1989).

Legal Developments

Bankruptcy

Is it appropriate for a creditor to persuade church elders to excommunicate a church member

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Bankruptcy, Church Members

Is it appropriate for a creditor to persuade church elders to excommunicate a church member who declared bankruptcy?

No, ruled a federal appeals court. A church member filed a bankruptcy petition, resulting in a court order prohibiting any attempts by any creditors to collect their debts against him. One creditor contacted the member's church elders and attempted to persuade them to excommunicate the member for filing the bankruptcy petition (which the creditor claimed to be unscriptural conduct).

The debtor sued the creditor for violating the court's prohibition of any effort to collect the debt, and the court awarded punitive damages to the church member. Federal law permits a bankrupt debtor to sue creditors who violate such court orders, and punitive damages may be awarded in appropriate circumstances. The court had "no trouble" in awarding punitive damages against the creditor in this case.

"In particular, we point to the efforts by the creditor … to have the debtor excommunicated from his church. Thus, the creditor not only willfully failed to fulfill its obligations under the [bankruptcy] code, it brazenly attempted to punish the debtor for pursuing his rights given by the code. Such reprehensible conduct more than adequately proves the 'appropriate circumstances' necessary for punitive damages." This case illustrates the danger that creditors face when they attempt to collect a debt from a bankrupt debtor by seeking the help of church leaders. In re Knaus, 889 F.2d 772 (8th Cir. 1989).

Legal Developments

Church Names

Church Law and Tax 1990-03-01 Recent Developments Church Names Richard R. Hammar, J.D., LL.M., CPA

Richard R. Hammar, Attorney, CPA

Bio

State: Federal

Church Law and Tax 1990-03-01 Recent Developments

Church Names

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

• Can a denomination prevent a nonaffiliated local church from using a name similar to that of the denomination itself? That was the issue before a federal appeals court in a recent case. The General Conference of the Seventh-Day Adventists sued the “Seventh-Day Adventist Congregational Church” (located in Kealakekua, Hawaii) and its pastor for trademark infringement and unfair competition. A trial court entered a judgment “on the pleadings” in favor of the denomination (i.e., he refused to let the case proceed to trial). The court also issued an order prohibiting the local church from using a name including the term “Seventh-Day Adventist” or “SDA,” or representing to others that it was connected in any way with the Seventh-Day Adventist denomination. The local church refused to comply with this order on the ground that the denomination’s trademark was invalid since it was “generic.” The trial court found the church to be in contempt of court for ignoring its order, and set a fine of $500 per day until the church and its pastor agreed to comply. The church and pastor appealed this decision, and a federal appeals court agreed that the trial court’s summary ruling in favor of the denomination was improper. The court reasoned that the church and its pastor had raised a significant issue (the validity of the denomination’s trademark) that should have been heard by a jury. The appeals court noted that “a trademark’s function is to identify and distinguish the goods and services of one seller from another.” A trademark, however, is always “subject to the defense that it is generic.” A “generic” trademark is “one that tells the buyer what the product is, rather than from where, or whom, it came.” Generic marks are not eligible for trademark protection since they do “not indicate the product of service’s origin, but is the term for the product or service itself.” The church and pastor claimed that the name “Seventh-Day Adventist” is generic since it refers to a religion rather than to a particular church organization. They asserted: “The phrase Seventh-Day Adventist is not theirs alone, as they would like to claim, for it describes a system or set of Bible based Christian beliefs, doctrines, and standards. One therefore is not necessarily Seventh-Day Adventist because of what organization he may be affiliated with, but rather he is a Seventh-Day Adventist because of what he believes.” The appeals court concluded that the denomination’s claim of trademark infringement would fail if the local church and its pastor could prove that the name “Seventh-Day Adventist” is generic. On the other hand, if the denomination could establish that its name was not generic, then it would win its trademark infringement suit if it could prove a “likelihood of confusion” caused by the church’s continued use of a name similar to that of the denomination. In deciding whether or not there is a likelihood of confusion, a court should consider the following factors: (1) the strength of the denomination’s name; (2) the similarity of the parties’ goods or services; (3) similarity of the two names; (4) evidence that persons actually have been confused by the similarity of names; (5) marketing methods used; (6) the likely degree of care the public would take in differentiating between the names; (7) the intent of the local church in using the similar name; and (8) likelihood of “expansion of product lines” (i.e., will the local church benefit at the expense of the denomination). The local church claimed that it had “never in any way sought to deceive or confuse anyone in regard to our name,” and that its use of the word “Congregational” in its name effectively distinguished it from the Seventh-Day Adventists. The case was sent back to the trial court to determine whether or not the denomination’s name is generic, and if not, whether the local church’s use of its present name created a “likelihood of confusion.” One important consideration that the court failed to mention is the doctrine of “secondary meaning.” A generic name is eligible for trademark protection so long as it has acquired a “secondary meaning” in the mind of the public. There can be little doubt that the name “Seventh-Day Adventist” has in fact acquired a secondary meaning since most persons would identify it with a specific religious organization. This important rule should be controlling in the ultimate disposition of this important case. It is also of great significance to many other denominations whose names are in a sense “generic.” General Conference Corporation of Seventh-Day Adventists v. Seventh-Day Adventist Congregational Church, 887 F.2d 228 (9th Cir. 1989).

Legal Developments

Clergy – Part 5

Taxes

Richard R. Hammar, Attorney, CPA

Bio

State: Federal

Church Law and Tax 1990-01-01 Recent Developments

Clergy – Taxes

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

• An editorial in the New York Times (October 28, 1989) suggested that Congress raise needed revenues by repealing the housing allowance exclusion for clergy. The editorial (entitled “Hidden Billions in the Budget”) noted that federal spending continues to rise while taxes remain fixed, and concluded that revenues will have to be obtained by closing existing loopholes. It quoted estimates of the congressional joint tax committee that the housing allowance exclusion costs the government $200 million each year. There is little doubt that Congress will be under heavy pressure in 1990 to look to the reduction or elimination of various tax exclusions and deductions as a potential means of raising needed revenues. Their job is made easier by the well-publicized fiscal excesses of many televangelists and other clergy. The housing allowance is the most significant tax benefit available to clergy. Those wishing to preserve it intact should be careful to strictly comply with its requirements, and to view it with prudence and conservatism.

Legal Developments

Clergy Taxes

Filing as an employee or self-employed

Richard R. Hammar, Attorney, CPA

Bio

State: Federal

Internal Revenue Manual update MT 5(10)00-2

The IRS has been concerned for a number of years with the problem of persons reporting their income taxes as self-employed when in fact they are more properly characterized as employees.

The IRS and General Accounting Office are conducting a joint study to determine whether 1099 forms (annual information returns issued to self-employed workers) may reveal workers more properly classified as employees. In particular, the IRS noted recently that the study of 1099 forms has revealed a "universe" of self-employed persons who received all of their business income (reported on Schedule C of Form 1040) from a single employer.

The IRS is in the process of determining whether such a relationship is an indication of a misclassification of employees as self-employed. This is a significant issue for clergy, many of whom continue to report their federal income taxes as self-employed and who receive a 1099 form each year from their church. In many cases, all of the Schedule C earnings of such clergy is attributable to their employing church, and is reported on a single 1099 form.

If the IRS study concludes that the receipt of a single 1099 form reporting self-employment income from a single source indicates that a worker is improperly reporting his or her federal income taxes as self-employed, then self-employed clergy may wish to re-evaluate their status for federal income tax reporting purposes.

Legal Developments

Schools – Part 1

Church Law and Tax 1989-01-01 Recent Developments Schools Richard R. Hammar, J.D., LL.M., CPA •

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Freedom of Religion, Schools

Church Law and Tax 1989-01-01 Recent Developments

Schools

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

• A federal district court in New York ruled that a state law governing “homeschooling” did not violate the constitutional right of fundamentalist Christian parents to the free exercise of their religion. The law in question requires that educational services provided to a minor “elsewhere than at a public school shall be at least substantially equivalent to the instruction given to minors of like age and attainments at the public schools.” The law also requires that homeschooling be conducted by “competent” instructors, and calls for periodic standardized testing and the approval of a homeschool’s curriculum and textbooks. Visits of homes in which homeschooling occurs is also mandated. A group of parents challenged the law, contending that the state “did not have jurisdiction” over their children’s education. In particular, the parents maintained that their religious beliefs compelled them to give their children a religious education in which religious values are “interwoven” into every area of study, and that the New York law violated their right to religious freedom by reserving unto the state the power to approve or disapprove the manner in which they accomplished the religious education of their children. The court acknowledged that “it is with trepidation that [we] interfere with the traditional interest of parents with respect to the religious upbringing of their children.” Nevertheless, the court concluded that the state’s interest in ensuring an adequate education for its citizens was sufficiently compelling to justify the legal restrictions on homeschooling. The court observed: “Unless a child is a member of an identifiable religious sect with a long history of maintaining a successful community separate and apart from American society in general, it must be assumed that the child must be intellectually, socially, and psychologically prepared to interact with others who may not share the views of the parents in the [present case]. A state’s interest in establishing standards for the education of its young in order to prepare them for participation in American political and economic processes as well as to nurture and develop their human potential overrides the interest of parents to teach their children in a religious school or at home free from governmental interference.” The court acknowledged that the parents feared that the state would require them to teach secular matters inconsistent with their religious beliefs. While acknowledging that “there may be cases in which the manner the state enforces the mandate of [the law] unnecessarily infringes the free exercise rights of particular parents.” However, “the mere possibility that such cases might arise is not enough to invalidate” the state law. As a result, the court rejected the parents’ challenge to the constitutionality of the New York law. Blackwelder v. Safnauer, 689 F. Supp. 106 (N.D.N.Y. 1988).

© Copyright 1989, 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: m65 m47 c0189

Legal Developments

Court Ruled That a Virginia Law Exempting Church-Operated Childcare Facilities from State Licensing Did Not Violate the Nonestablishment of Religion Clause

A federal appeals court ruled that a Virginia law exempting church-operated childcare facilities from state

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Freedom of Religion, Tax Exemption

A federal appeals court ruled that a Virginia law exempting church-operated childcare facilities from state licensing did not violate the constitution's nonestablishment of religion clause. The law was enacted in response to the contentions of several churches that their religious beliefs would not permit them to apply for or accept a state license to carry out a function that they considered to be an integral part of their religious ministry.

A group of childcare providers without religious affiliation challenged the law in court on the ground that it placed them at an unfair competitive disadvantage. The appeals court upheld the validity of the Virginia exemption largely on the basis of the United States Supreme Court's decision (in Amos v. Presiding Bishop) upholding the exemption of churches from the prohibition of religious-based discrimination in employment.

The court quoted from the Amos decision: "A law is not unconstitutional simply because it allows churches to advance religion, which is their very purpose. For a law to [violate the nonestablishment clause] it must be fair to say that the government itself has advanced religion through its own activities and influence." The Virginia law, concluded the appeals court, did not amount to an impermissible advancement of religion by the state. Rather, it was a permissible "accommodation of the exercise of religion."

The court, in rejecting the contention that a single exemption of church-operated facilities rendered the law invalid, again quoted from the Amos decision: "Where, as here, government acts with the proper purpose of lifting a regulation that burdens the exercise of religion, we see no need to require that the exemption comes packaged with benefits to secular entities."

The court also noted that "absent the exemption, some church leaders would immediately be forced to violate their convictions against submitting aspects of their ministries to state licensing, or face legal action by the state. This would be an unseemly clash of church and state which the legislature might well wish to avoid."

Finally, the court emphasized that the civil courts are not equipped to determine whether the operation of childcare facilities by a church is a secular or religious activity, and therefore they cannot reject a church's claim that such facilities promote its religious purposes. Forest Hills Early Learning Center v. Grace Baptist Church, 846 F.2d 260 (4th Cir. 1988)

Legal Developments

Court Concluded Employer Discriminated Against Discharged Employee on the Basis of His Religious Beliefs

Can an employee be terminated for his refusal (based on religious beliefs) to work on

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Discrimination, Freedom of Religion

Can an employee be terminated for his refusal (based on religious beliefs) to work on Sundays? That was the difficult question before a federal appeals court.

When hired, the employee (who was a member of the Church of God) explained to his employer that he could not work on Sundays because it would violate his religious beliefs. He was advised working on Sundays was purely voluntary. However, a few years later, the employer experienced a substantial increase in business, and it was forced to operate on some Sundays.

The employee was ordered to work on a number of Sundays, and on each occasion he refused. He eventually was terminated, and later sued the employer for its alleged violation of Title VII of the Civil Rights Act of 1964 which prohibits most employers from discriminating against employees on the basis of religion unless they can demonstrate that they are "unable to reasonably accommodate" an employee's religious beliefs "without undue hardship on the conduct of the employer's business."

The court concluded that the employer had in fact violated Title VII, since it had discriminated against the discharged employee on the basis of his religious beliefs, but had failed to make any attempt to "reasonably accommodate" those beliefs. In particular, the court observed that several other employees testified that they would have been willing to work on Sundays in place of the discharged employee if they had been asked.

The court rejected the employer's claim that it had no duty to accommodate the religious beliefs of an employee who absolutely refused to work on Sundays, since the employer's position "turns the statute on its head. It improperly places the burden on the employee to be reasonable rather than on the employer to attempt accommodation." Even an absolute refusal to work on Sundays "requires some offer of accommodation by employers," concluded the court.

E.E.O.C. v. Ithaca Industries, Inc., 849 F.2d 116 (4th Cir. 1988)

Legal Developments

Freedom of Religion – Part 6

Church Law and Tax 1988-11-01 Recent Developments Freedom of Religion Richard R. Hammar, J.D., LL.M.,

Richard R. Hammar, Attorney, CPA

Bio

State: Federal

Church Law and Tax 1988-11-01 Recent Developments

Freedom of Religion

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

• A federal appeals court ruled that the placement of a nativity scene in the main lobby of a county courthouse building violated the constitutional prohibition of any “establishment of a religion.” Annually, since 1981, the county had permitted the display of the nativity scene, which consisted of traditional figures ranging in height from 3 to 15 inches, including a wooden stable with the infant Jesus, the Virgin Mary, Joseph, the three wise men, shepherds, various animals, and an angel holding a banner reading “Gloria in Excelsis Deo” (Glory to God in the Highest). The display was provided by the Holy Name Society of the Diocese of Pittsburgh, and included a sign reading “this display donated by the Holy Name Society.” Such a practice, concluded the court, violated the constitution’s ban on an establishment of a religion, since the display was located “in a public building devoted to core functions of government” and was “placed at a prominent site … where visitors would see it.” The court rejected the applicability of a 1984 decision of the United States Supreme Court upholding the constitutionality of a nativity scene, since (unlike the present case) the Supreme Court’s ruling had involved a display “subsumed in a larger display of nonreligious items.” The appeals court emphasized that there would be no objection to displaying religious objects (including nativity scenes) in a museum or in a history course. A dissenting judge argued that the display posed “no threat to religious freedom,” and warned that the court’s suppression “forebodes ominous consequences.” ACLU v. Allegheny County, 842 F.2d 655 (3rd Cir. 1988).

© Copyright 1988, 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: m47 c0688

Legal Developments

US Supreme Court Upheld the Validity of the Adolescent Family Life Act

The Adolescent Family Life Act was designed to address the problem of adolescent pregnancy, and

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Freedom of Religion

The Adolescent Family Life Act was designed to address the problem of adolescent pregnancy, and among other things provided grants to public and nonprofit organizations engaged in "educational services relating to family life and problems associated with adolescent premarital sexual relations."

Congress recognized that "legislative or governmental action alone" was insufficient to deal with the problem, and accordingly the Act required that all federally funded services should "emphasize the provision of support by family members, religious and charitable organizataions." In addition, all applicants for federal grants had to demonstrate how they would involve religious and charitable organizations in the delivery of services and counseling.

A number of agencies associated with churches and religious denominations received federal funding under the Act, triggering a lawsuit challenging the validity of the Act. A federal district court struck down the Act, and the case was appealed directly to the Supreme Court.

In a 5-4 decision, the Court concluded that the Act did not violate the nonestablishment of religion clause. "Nothing in our previous cases," noted the Court, "prevents Congress from … recognizing the important part that religion or religious organizations may play in resolving certain secular problems." Further, "religious institutions need not be quarantined from public benefits that are neutrally available to all." However, the Court acknowledged that government funding cannot go to "pervasively sectarian" institutions, or toward "indoctrination into the beliefs of a particular religious faith."

But, the Court concluded that "nothing in our prior cases warrants the presumption" that religious agencies receiving funding under the Act "are not capable of carrying out their functions under the Act in a lawful, secular manner." Bowen v. Kendrick, 108 S. Ct. 2562 (1988)

Legal Developments

Nativity Scene in a County Courthouse Violated the Constitutional Prohibition of Any “Establishment of a Religion”

A federal appeals court ruled that the placement of a nativity scene in the main

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Freedom of Religion

A federal appeals court ruled that the placement of a nativity scene in the main lobby of a county courthouse building violated the constitutional prohibition of any "establishment of a religion."

Annually, since 1981, the county had permitted the display of the nativity scene, which consisted of traditional figures ranging in height from 3 to 15 inches, including a wooden stable with the infant Jesus, the Virgin Mary, Joseph, the three wise men, shepherds, various animals, and an angel holding a banner reading "Gloria in Excelsis Deo" (Glory to God in the Highest). The display was provided by the Holy Name Society of the Diocese of Pittsburgh, and included a sign reading "this display donated by the Holy Name Society."

Such a practice, concluded the court, violated the constitution's ban on an establishment of a religion, since the display was located "in a public building devoted to core functions of government" and was "placed at a prominent site … where visitors would see it." The court rejected the applicability of a 1984 decision of the United States Supreme Court upholding the constitutionality of a nativity scene, since (unlike the present case) the Supreme Court's ruling had involved a display "subsumed in a larger display of nonreligious items."

The appeals court emphasized that there would be no objection to displaying religious objects (including nativity scenes) in a museum or in a history course. A dissenting judge argued that the display posed "no threat to religious freedom," and warned that the court's suppression "forebodes ominous consequences." ACLU v. Allegheny County, 842 F.2d 655 (3rd Cir. 1988)

Legal Developments

Charitable Contributions

Another federal appeals court has ruled that payments made to the Church of Scientology for “auditing” and “training” services were properly deductible as charitable contributions.

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Charitable Contributions, Compensation and Benefits

Another federal appeals court has ruled that payments made to the Church of Scientology for "auditing" and "training" services were properly deductible as charitable contributions.

The IRS had argued that the payments were not deductible contributions since the donors had received a benefit in return for their payments. The appeals court agreed with the IRS that "a payment of money generally cannot constitute a charitable contribution if the contributor expects a substantial benefit in return."

However, it specifically held that "a strictly spiritual or religious return is simply not enough" to make a contribution nondeductible. To hold otherwise would "present not only the problem of determining value but also the problem of excessive entanglement in the affairs of a religious institution," since courts would be required to monitor church records and activities in an attempt "to place a monetary value on the benefit of church services, group programs, and pastoral counseling."

The court observed that "any other conclusion has ominous implications for all religious institutions." Does this ruling lend support to the deductibility of "contributions" made to churches by persons who receive professional counseling from a staff counselor?

A growing number of churches are hiring staff counselors, and many of these churches require counselees to pay an hourly "contribution" for the counseling provided. Could not the Scientology case be cited as precedent in support of the deductibility of these payments? The answer is probably no, since it is likely (though not certain) that a court would conclude that counseling services provided by a staff counselor (particularly one with formal training in psychology) are not "spiritual" or "religious" benefits received in exchange for payments.

The court based its opinion in part on the fact that the "auditing" and "training" services provided by the Church of Scientology were not available from private businesses. If they had been available outside of the Church, the court observed, then it is difficult to characterize the services as "spiritual or religious" in nature. Similarly, it is entirely possible that a civil court would conclude that counseling services provided by a staff counselor in a church are services that could be obtained outside of the church.

If so, such services cannot be characterized as spiritual or religious, and therefore payments made in exchange for such services are not deductible as charitable contributions. The United States Supreme Court has agreed to determine whether payments made to the Church of Scientology for auditing and training services are deductible as charitable contributions. A decision is expected later this year. Neher v. Commissioner, 88-2 U.S.T.C. para. 9430 (6th Cir. 1988).

Legal Developments

Court Ruled City’s Refusal to Permit an Islamic Center to Operate within City Limits Violated the Guaranty of Religious Freedom

A federal appeals court decision strongly supports the right of churches to locate in residential

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Freedom of Religion, Zoning

A federal appeals court decision strongly supports the right of churches to locate in residential districts. The court ruled that a city's refusal to permit an Islamic center to operate within city limits near a university campus violated the constitutional guaranty of religious freedom.

A city zoning ordinance prohibited the use of any building as a church in all areas of the city near a university campus unless a special permit was obtained from the city council. Twenty-five churches were granted permits to operate in restricted areas. However, the Islamic center's request for a permit was denied. No reason was given for the denial, though a neighborhood spokesman expressed concern over "congestion, parking, and traffic problems."

The center sued the city, arguing that the city's action in banishing it from the restricted area near the university campus, while allowing 25 churches to meet in the same area, violated the right of Muslims to the free exercise of their religion. The city denied that the Muslims' rights were violated, since "they can establish a mosque … outside the city limits or buy cars and ride to more distant places within the city."

The federal appeals court observed that the city's suggestion was "reminiscent of Anatole France's comment on the majestic equality of the law that forbids all men, the rich as well as the poor, to sleep under bridges, to beg in the streets, and to steal bread." The court further observed that "laws that make churches accessible only to those affluent enough to travel by private automobile obviously burden the free exercise of religion by the poor." And, while "the constitution does not forbid all governmental regulation that imposes an incidental burden on worship by making the free exercise of religion more difficult or more expensive," once it is established that a governmental action burdens religious exercise, "the government must offer evidence of an overriding interest" to justify its action.

In this case, however, the city "advanced no rational basis other than the neigborhood opposition to show why the [permit] granted all other religious centers was denied the Islamic center …. [N]eighbors' negative attitudes or fears, unsubstantiated by factors properly cognizable in a zoning proceeding, are not a permissible basis" for denying a permit. Further, the court concluded that the city had acted improperly in "applying different standards" to the Islamic center than to the "worship facilities of other faiths."

This decision is binding authority in federal courts located within the fifth federal circuit, which includes the states of Texas, Lousiana, and Mississippi. Churches in these states that face antagonistic zoning boards should profit from this decision. Islamic Center of Mississippi, Inc. v. Starkville, 840 F.2d 293 (5th Cir. 1988)

Legal Developments

Court Ruled That a Prayer Room in the Illinois Legislature Did Not Violate the Nonestablishment of Religion Clause

In 1985, the Illinois House of Representatives adopted a resolution authorizing the establishment of a

Richard R. Hammar, Attorney, CPA

Bio

State: Federal
Categories: Freedom of Religion

In 1985, the Illinois House of Representatives adopted a resolution authorizing the establishment of a "prayer room" in the state capital building, as a "quiet and special place where the members of the General Assembly may seek God, the comfort of His presence, the light of His guidance, and the strength of His love."

To alleviate any constitutional questions, the room was made "nonsectarian," and the costs of renovation and maintenance were to be borne by private contributions. Shortly after the resolution was adopted, it was challenged in court on the grounds that it was an unconstitutional "establishment of religion."

A federal appeals court rejected this challenge, largely on the basis of a 1983 decision of the United States Supreme Court finding that the Nebraska legislature's practice of opening each session with a prayer read by a state-employed chaplain did not violate the First Amendment's nonestablishment of religion clause.

The appeals court observed that "if legislators may collectively bow their heads while a clergyman, paid from public funds, invokes the Deity to bless and assist their efforts, it seems absurd to find fault with the designation of a room in which they may pray or meditate privately as they individually see fit."

The court also based its ruling in part on "a degree of deference to the internal spiritual practices of another branch of government or of a branch of the government of another sovereign," and upon a tradition of legislators acknowledging, in relatively modest and nonintrusive ways, some role for spiritual values in their work." However, the court cautioned that "the intrusion of sectarian influences and religious emphases [in the decoration and use of the prayer room] could give rise to an establishment clause violation." Van Zandt v. Thompson, 839 F.2d 1215 (7th Cir. 1988)