Church Litigation Update Conference Forum

Transcription

1 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. 2

3 Agenda Housing Allowance Litigation Form 990 Case Church Plan Challenges Affordable Care Act (ACA) Cases Tax Credits Contraceptives Other 3

4 Housing Allowance Litigation

5 History of Exclusion Value of church-owned housing excluded from clergy income since (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 ( ) 5

6 Wisconsin Case Freedom From Religion Foundation (FFRF) v. Lew Western District, Wisconsin November 21, 2013 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 6

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 7

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 8

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) 9

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 7 th Circuit (Illinois, Indiana, Wisconsin) IRS could adopt 7 th Circuit decision nationwide 10

11 Church Alliance Efforts Intends to submit request to file amicus ( friend of the court ) brief in 7 th 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 11

12 Form 990 Case

13 Kentucky Atheists Case American Atheists v. Shulman Eastern District, Kentucky 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 Seek to declare unconstitutional: All tax code provisions that treat churches differently than other 501(c)(3) tax-exempt organizations 13

14 Church Plan Challenges

15 Dignity Health Case Rollins v. Dignity Health, et al. Northern District, California 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 15

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 Result: Dignity Health plan is subject to ERISA (funding rules, notice requirements, PBGC*, etc.) Appeal likely (9 th Circuit Court of Appeals) * PBGC: Pension Benefit Guaranty Corporation 16

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 17

18 ACA Cases

19 Tax Credit Cases Halbig v. Sebelius* King v. Sebelius* 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) 19

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) 20

21 For-Profit Contraceptive Cases Sebelius v. Hobby Lobby Conestoga Wood Specialties Corp. v. Sebelius 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? 21

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 22

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 10 th Circuit Court of Appeals ruling on merits 23

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 24

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? 25

26 Employer Mandate Liberty University v. Lew Renewed Commerce Clause challenge to Employer Shared Responsibility Rule 4 th Circuit Court of Appeals rejected Liberty University s claims Supreme Court denied writ of certiori December 2,

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28 2014 General Board of Pension and Health Benefits of The United Methodist Church, Incorporated in Illinois. 28

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