Upload
dinhtram
View
213
Download
0
Embed Size (px)
Citation preview
Church Litigation
Update
2014 Conference Forum
2
Disclaimer
The material in this update is provided
as general information and education.
It should not be construed as, and does not
constitute, legal advice nor accounting, tax,
or other professional advice or services on
any specific matter, nor does this message
create an attorney-client relationship.
Readers should consult with their counsel or
other professional advisor before acting on any
information contained in this presentation.
3
Agenda
• Housing Allowance Litigation
• Form 990 Case
• “Church Plan” Challenges
• Affordable Care Act (ACA) Cases
— Tax Credits
— Contraceptives
— Other
Housing Allowance Litigation
5
History of Exclusion
• Value of church-owned housing
excluded from clergy income since 1921 — §107(1) of Internal Revenue Code of 1986 (Code)
• Value of clergy-owned housing
excluded since 1954 — Code §107(2)
• Clergy Housing Allowance Clarification Act
of 2002 limited to “fair rental value” — Warren v. Commissioner case (2001–2002)
6
Wisconsin Case
• Code §107(2) ruled unconstitutional
by Judge Barbara Crabb — Violates Establishment Clause of First Amendment
to U.S. Constitution
“Congress shall make no law respecting
an establishment of religion…”
• IRS enjoined from giving §107(2) effect
Court ruling did not affect §107(1) exclusion of value of parsonage
Plaintiffs lacked “standing” to challenge it
Freedom From Religion Foundation (FFRF) v. Lew
Western District, Wisconsin—November 21, 2013
7
Procedural Posture
• Judge Crabb stayed the injunction
(i.e., effect of her ruling) until earlier of:
— All government appeals are exhausted; or
— Time for filing appeal expires (January 25, 2014)
• Government submitted Notice of Appeal
on January 24, 2014
— Keeps Judge Crabb’s stay of her ruling in effect
— Solicitor General decides whether to pursue appeal
8
Appeal Process—2014
Notice of Appeal filed January 24
Government brief due April 2 (March 5)
Amici for Government April 9
FFRF brief due May 2
Government reply brief May 16
Oral arguments Spring/Summer
Decision/Opinion Summer/Autumn
Supreme Court appeal TBD
9
Government’s Arguments
• Judge Crabb erred procedurally
• Plaintiffs (FFRF) lack standing to sue
• Plaintiffs could be “ministers of the gospel”
(atheism is a religion) under §107(2)
• §107(2) is constitutional — Does not “establish” religion
— §107(1) is “convenience of the employer”
like Code §119 (e.g., hotel manager, museum curator) §107(2) is “free exercise” accommodation of younger,
more mobile churches/denominations (without parsonages)
10
Possible Outcomes
• Remand to district court on procedural issues
• Reverse—Find plaintiffs lack standing
• Reverse—Find §107(2) constitutional
• Uphold—Find §107(2) unconstitutional
— Ruling has effect in 7th Circuit
(Illinois, Indiana, Wisconsin)
— IRS could adopt 7th Circuit decision nationwide
11
Church Alliance Efforts
• Intends to submit request to file amicus
(“friend of the court”) brief in 7th Circuit
— April 9, 2014
Government and FFRF have consented
— Professor Michael McConnell will co-author
First amendment scholar, former U.S. Appellate judge
• Legislative solutions (if necessary):
— Revise §107 to more closely track §119
“convenience of the employer” requirement
— Respond by amending SECA tax treatment of clergy
Form 990 Case
13
Kentucky Atheists Case
Three atheist nonprofit organizations challenge:
• Church exemptions from Form 990 and Form 1023
• Church audit procedures of §7611
• Church housing exclusion under §107
• Special SECA tax treatment of ministers
American Atheists v. Shulman
Eastern District, Kentucky
Seek to declare unconstitutional:
All tax code provisions that treat churches differently
than other 501(c)(3) tax-exempt organizations
Church Plan Challenges
15
Dignity Health Case
Plaintiffs claim:
Definition of “church plan” under Tax Code (§414(e)) should not
include defendant Catholic-affiliated hospital (Dignity Health)
Judge denied Dignity Health’s motion to dismiss
Disagreed with IRS interpretation and many other courts
Rollins v. Dignity Health, et al.
Northern District, California
16
Dignity Health Case
Ruling: Plan sponsored by Dignity Health
cannot be “church plan” as a matter of law
• Must be “established by a church”
(or convention or association of churches); and
• Be maintained by a church (or convention/association
of churches) or denominational pension/benefit board
* PBGC: Pension Benefit Guaranty Corporation
Result: Dignity Health plan is subject to ERISA
(funding rules, notice requirements, PBGC*, etc.)
Appeal likely (9th Circuit Court of Appeals)
17
Other “Church Plan” Cases
Overall v. Ascension Health et al. Eastern District, Michigan
Chavies et al. v. Catholic Health East et al. Eastern District, Pennsylvania
Medina v. Catholic Health Initiatives et al. Colorado District Court
Kaplan v. St. Peter’s Healthcare System et al. New Jersey District Court
ACA Cases
19
Tax Credit Cases
Challenges to premium tax credits (PTCs) through
federally-facilitated exchange/marketplace (FFE)
• ACA §1311: “[e]ach State shall...establish
an American Health Benefit Exchange...for the State.”
• ACA §1321: “the [HHS] Secretary shall...establish
and operate such Exchange within the State…”
* Kathleen Sebelius: Secretary, U.S. Department of Health
and Human Services (HHS)
Halbig v. Sebelius*
King v. Sebelius*
20
Tax Credit Cases
• Code §36B(b)(2)(A) limits availability of PTCs
to only taxpayers who enroll in exchange
“established by a state”
• IRS Final Rule authorized PTCs from FFE
• D.C. District and E. Virginia District Courts ruled
for the government
1. Statute is clear: Tax credits were intended
for the federally-facilitated exchanges
2. Even if statute were ambiguous: Agency ruling
“reasonable”; should be upheld
(i.e., not second-guessed by courts)
21
For-Profit Contraceptive Cases
• Challenging contraceptive mandate under: — Religious Freedom Restoration Act (RFRA)
— First Amendment
• Supreme Court argument: March 2013
• Do corporations have a soul? Are they “persons”
with religious conscience rights?
• Is RFRA constitutional?
Sebelius v. Hobby Lobby
Conestoga Wood Specialties Corp. v. Sebelius
22
Tax-Exempt Contraceptive Cases
• ACA exemption
— “Houses of worship”
— “Integrated auxiliaries” that are religious organizations
• ACA “accommodation”
— Other tax-exempt organizations
“associated with or controlled by” churches
Sign attestation form (EBSA Form 700);
provide to employees and insurer or TPA*
Insurer or TPA arranges for
no-cost contraceptive coverage for employees
* TPA: Third-party administrator
23
Tax-Exempt Contraceptive Cases
• Tax-exempts argue that Form 700 requirement
violates religious conscience
— Complicit in provision of objectionable contraceptives
• Little Sisters of the Poor v. Sebelius—Lead case
— Nearly 30 cases in federal courts
• Claim under RFRA—Government is not using
“least restrictive means” to implement mandate
• Supreme Court issued stay of enforcement
December 31, 2013
— Wait for 10th Circuit Court of Appeals ruling on merits
24
Origination Clause Cases
• Sissel v. U.S. Department of HHS
• Hotze v. Sebelius (HHS)
• Pacific Legal Foundation v. Salazar
— Article I, Section 7 of the Constitution
(commonly referred to as “Origination Clause”)
generally requires that “all revenue raising bills”
(e.g., tax bills) originate in House of Representatives
• Challengers claim that ACA originated
in the Senate
25
Origination Clause
D.C. District Court rejected plaintiff’s argument
• ACA “originated” in House (Senate substitute
for House-originated tax bill H.R. 3590) — Original bill covered housing taxes for veterans
• Not a bill purely for “raising revenue”
• Justiciability question — Supreme Court tends to avoid fights about
Congress’ own rules
— House “blue slip” practice
Will Supreme Court really go there again?
26
Employer Mandate
• Renewed Commerce Clause challenge
to Employer Shared Responsibility Rule
• 4th Circuit Court of Appeals rejected
Liberty University’s claims
• Supreme Court denied writ of certiori
December 2, 2013
Liberty University v. Lew
28
© 2014 General Board of Pension and Health Benefits
of The United Methodist Church, Incorporated in Illinois.
29
1-800-851-2201
www.gbobphb.org