United States of America v. Indianapolis Baptist Temple

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-1102
United States of America,
Plaintiff-Appellee,
v.
Indianapolis Baptist Temple,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. IP98-0498 C-B/S--Sarah Evans Barker, Chief Judge.
Argued May 11, 2000--Decided August 14, 2000
Before Coffey, Evans, and Williams, Circuit Judges.
Williams, Circuit Judge. The members of
Indianapolis Baptist Temple (IBT) believe it to
be a sin for their church to pay taxes.
Accordingly, since at least 1987, IBT has paid
none of the federal employment taxes for which it
is responsible. After attempts to secure payment
of the taxes due through 1993 failed, the
government filed suit against IBT to recover the
amount owed. Unpersuaded by IBT’s various
defenses, the district court granted the
government summary judgment. IBT now appeals on
the ground that the religion clauses of the First
Amendment protect it from liability. We affirm.
I
IBT was founded in 1950 and operated as a not-
for-profit corporation until 1983, when it began
operating as a unincorporated religious society.
In 1986, IBT renounced its status as an
unincorporated religious society, opting instead
to define itself as a "New Testament Church,"
based on its belief that the exclusive
sovereignty of Jesus Christ over the church
required it to disassociate itself from secular
government authority. Around the same time, and
for the same reason, IBT also stopped filing
federal employment tax returns and paying the
federal employment taxes for which it was
responsible.

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There are three federal employment taxes--the
social security tax, the medicare tax, and the
normal income tax. Employers must pay half of the
applicable social security and medicare taxes and
must withhold from employees’ wages the other
half of the applicable social security and
medicare taxes, as well as all of the applicable
normal income tax. 26 U.S.C. sec.sec. 3102(a),
3111(a), (b), 3402. Employers are liable for both
the taxes imposed directly on them and the taxes
they are required to withhold from employees. 26
U.S.C. sec.sec. 3102(b), 3111(a), (b), 3403.
Since sometime before 1987, IBT has paid none of
these taxes.
Eventually, the Internal Revenue Service (IRS)
contacted IBT about its failure to file
employment tax returns, but IBT offered no
indication that it would file returns. As a
result, in early 1994, the IRS prepared quarterly
returns for IBT beginning in 1987 and continuing
through 1993. The IRS then sent the forms to IBT
so that IBT could check the accuracy of the
amounts on the returns, but IBT submitted no
corrections. After the time for submitting
corrections had passed, the IRS calculated an
assessment of tax, interest, and additions
totaling $3,498,355.62 and sent a notice and
demand for payment to IBT.
When the assessment went unpaid, the government
filed suit against IBT seeking to reduce the
assessment to a judgment and to initiate
foreclosure proceedings against two parcels of
real estate owned by IBT. In defense of its
failure to pay, IBT argued that the tax
assessments at issue were not properly made
against it and that the religion clauses of the
First Amendment protect it from liability. On
cross-motions for summary judgment, the district
court rejected both of IBT’s arguments and
awarded the government the relief it sought. IBT
now appeals, but only on the ground that the
First Amendment’s religion clauses prevent the
government from taxing it.
II
IBT challenges the district court’s decision on
the grounds that both the Free Exercise and
Establishment Clauses of the First Amendment, as
well as general principles of religious liberty
embodied in the First Amendment, protect it from
having to pay taxes. As with all appeals from
decisions granting summary judgment, we review
the district court’s decision de novo, construing
the evidence and the inferences drawn from it in
the light most favorable to the non-moving party.
Curran v. Kwon, 153 F.3d 481, 485 (7th Cir.
1998).

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A. Free Exercise Clause
IBT contends that the federal employment tax
laws, as applied to it, violate the Free Exercise
Clause of the First Amendment by requiring the
church to act in a manner inconsistent with its
beliefs. Specifically, IBT alleges that complying
with the federal employment tax laws would
require it to recognize the sovereignty of the
federal government over the church, something
that would be inconsistent with its belief in the
exclusive sovereignty of Jesus Christ over the
church. In IBT’s view, the Free Exercise Clause
grants it a right to act in accordance with its
beliefs, notwithstanding contrary federal law.
The Free Exercise Clause absolutely protects the
freedom to believe and profess whatever religious
doctrine one desires. Employment Div., Dep’t of
Human Resources v. Smith, 494 U.S. 872, 876-77
(1990); Sherbert v. Verner, 374 U.S. 398, 402
(1963). It also provides considerable, though not
absolute, protection for the ability to practice
(through the performance or non-performance of
certain actions) one’s religion. Smith, 494 U.S.
at 877-78; Church of the Lukumi Babalu Aye, Inc.
v. City of Hialeah, 508 U.S. 520, 546-47 (1993).
Significantly, however, neutral laws of general
application that burden religious practices do
not run afoul of the Free Exercise Clause. Smith,
494 U.S. at 878-85.
IBT does not (and, in any event, could not)
contest the government’s characterization of the
federal employment tax laws as neutral laws of
general application. Those laws are not
restricted to IBT or even religion-related
employers generally, and there is no indication
that they were enacted for the purpose of
burdening religious practices. Contrast Church of
the Lukumi Babalu Aye, 508 U.S. at 531-45
(concluding that laws forbidding a particular
religion’s animal sacrifices were neither neutral
nor generally applicable). Accordingly, IBT’s
Free Exercise challenge to the federal employment
tax laws must be rejected.
IBT, however, argues from the premise that this
conclusion does not follow directly from the fact
that the federal employment tax laws are neutral
laws of general application. Rather, IBT proceeds
as though the Religious Freedom Restoration Act
(RFRA), 42 U.S.C. sec. 2000bb-1 et seq., somehow
overturned the Supreme Court’s decision in Smith-
-that neutral laws of general application cannot
be attacked on Free Exercise grounds--and
reinstated the pre-Smith standards for evaluating
Free Exercise challenges. RFRA did not (and could
not) do this. See City of Boerne v. Flores, 521

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U.S. 507, 516-20, 535-36 (1997). RFRA simply
established an independent statutory regime
essentially prohibiting the enforcement of laws
that cannot satisfy the pre-Smith standards./1
Even if IBT’s misguided attempts to invoke RFRA
as a constitutional standard are construed
generously as an effort to seek relief on
statutory grounds, IBT’s challenge to the federal
employment tax laws must still be rejected. Under
RFRA, laws that substantially burden the free
exercise of religion cannot be enforced unless
the burden furthers a compelling government
interest and is the least restrictive means of
furthering that interest. 42 U.S.C. sec. 2000bb-
1. In several pre-Smith Free Exercise challenges
to the application of federal tax laws, the
Supreme Court and various courts of appeals
concluded both that maintaining a sound and
efficient tax system is a compelling government
interest and that the difficulties inherent in
administering a tax system riddled with judicial
exceptions for religious employers make a
uniformly applicable tax system the least
restrictive means of furthering that interest.
See Hernandez v. Commissioner, 490 U.S. 680, 698-
700 (1989) (challenge to federal income tax);
United States v. Lee, 455 U.S. 252, 258-60 (1982)
(challenge to social security tax); South Ridge
Baptist Church v. Industrial Comm’n, 911 F.2d
1203, 1206-10 (6th Cir. 1990) (challenge to
premiums required by workers’ compensation
program); Bethel Baptist Church v. United States,
822 F.2d 1334, 1338-39 (3d Cir. 1987) (challenge
to social security tax). The cases that have been
decided under RFRA reach the same conclusion. See
Browne v. United States, 176 F.3d 25, 26 (2d Cir.
1999) (challenge to federal income tax); Adams v.
Commissioner, 170 F.3d 173, 175-80 (3d Cir. 1999)
(same); Droz v. Commissioner, 48 F.3d 1120, 1122-
25 (9th Cir. 1995) (challenge to social security
tax). We find this authority persuasive and see
no reason to reach a different conclusion.
IBT, however, claims that the cases we have
cited can be distinguished on factual grounds as
each involved a state-recognized legal entity,
whereas IBT is simply a "New Testament Church."
But, none of these cases, expressly or
implicitly, rely on the fact that the entities
involved were state-recognized, nor does such a
distinction have any logical connection to the
relevant legal standards. Accordingly, we
conclude that RFRA provides no basis for
sustaining IBT’s challenge to the federal
employment tax laws.
B. Establishment Clause
IBT contends that applying the federal

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employment tax laws to it violates the
Establishment Clause of the First Amendment by
deeply involving the government in the internal
affairs of the church. In IBT’s view, the payment
and withholding obligations imposed by these
laws, as well as the enforcement proceedings that
have resulted from IBT’s refusal to comply with
these laws, require a constitutionally
impermissible amount of government involvement in
church affairs.
The Establishment Clause prohibits government
sponsorship of, financial support for, and active
involvement in religious activities. Jimmy
Swaggart Ministries v. Board of Equalization, 493
U.S. 378, 393 (1990); Walz v. Tax Comm’n, 397
U.S. 664, 668 (1970). However, total separation
of church and state is not required. Walz, 397
U.S. at 668-72. If a statute has a secular
purpose and it has a primary effect of neither
advancing nor inhibiting religion, it will be
upheld. Mitchell v. Helms, 120 S. Ct. 2530, 2540
(2000) (plurality opinion); Agostini v. Felton,
521 U.S. 203, 232-33 (1997).
IBT concedes that the federal employment tax
laws have a secular purpose and only contends
that the laws have a primary effect of inhibiting
religion to the extent that they foster excessive
government entanglement with religion. Cf.
Agostini, 521 U.S. at 233 (listing excessive
entanglement as one of three primary factors to
be considered in evaluating the effect of a law
for Establishment Clause purposes). In support of
its excessive entanglement argument, IBT relies
exclusively on Walz v. Tax Commission, which
upheld a property tax exemption for houses of
worship against an Establishment Clause
challenge, reasoning in part that removing the
exemption would likely create greater government
entanglement (through property valuations, tax
liens, tax foreclosures, etc.) than leaving it in
place would. 397 U.S. at 674. IBT claims that
Walz thus implies that taxing religious
organizations (and all that goes with taxing such
organizations) fosters unconstitutionally
excessive government entanglement.
We cannot accept IBT’s reading of Walz. While
taxing religious organizations involves greater
government entanglement than not taxing them
does, this greater entanglement is not
necessarily unconstitutionally excessive. In
fact, the Supreme Court has held that the sorts
of generally applicable administrative and record
keeping requirements imposed by tax laws may be
imposed on religious organizations without
violating the Establishment Clause. See Jimmy
Swaggart Ministries, 493 U.S. at 394-97 (state
sales and use tax); Hernandez, 490 U.S. at 695-98

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(federal income tax); see also South Ridge
Baptist Church, 911 F.2d at 1210 (workers’
compensation program); Bethel Baptist Church, 822
F.2d at 1340-41 (social security tax). The normal
incidents of collecting federal employment taxes
simply do not involve the intrusive government
participation in, supervision of, or inquiry into
religious affairs that is necessary to find
excessive entanglement. See Jimmy Swaggart
Ministries, 493 U.S. at 394-96; Hernandez, 490
U.S. at 696-98. Even the somewhat more intrusive
tax foreclosure ordered in this case is a
discrete event involving no inquiry into
religious matters and, as such, raises no
excessive entanglement concerns. Accordingly,
there is no merit to IBT’s Establishment Clause
challenge to the federal employment tax laws.
C. Other Arguments
Finally, IBT makes a pair of arguments that
rely on what it contends are the general
principles behind the religion clauses of the
First Amendment. First, IBT argues that applying
general regulatory laws to it would abridge the
religious liberty guaranteed by the religion
clauses. As noted above, however, there is no
basis under either the Free Exercise Clause or
the Establishment Clause for the argument that
neutral, generally applicable, minimally
intrusive tax laws (like the ones at issue here)
cannot be applied to religious organizations. IBT
asserts that Church of the Holy Trinity v. United
States, 143 U.S. 457 (1892), and Corporation of
the Presiding Bishop of the Church of Jesus
Christ of Latter-day Saints v. Amos, 483 U.S. 327
(1987), are to the contrary, but it is mistaken.
In Holy Trinity, the Court declined to interpret
an immigration statute to prohibit the
immigration of a Catholic priest, in part on the
ground that it believed it unlikely that Congress
would have intended such a prohibition in light
of the nation’s strong religious tradition. 143
U.S. at 465-72. The case had nothing to do with
the constitutionality of general regulatory laws,
and there is no question in this case regarding
the intended scope of the federal employment tax
laws. In Amos, the Court upheld against an
Establishment Clause challenge an exception for
religious organizations to Title VII’s
prohibition on religious discrimination in
employment. 483 U.S. at 334-39. Just as with the
property tax exemption in Walz, however, the fact
that the Establishment Clause allows exceptions
for religious entities does not mean that such
exceptions are required. Put simply, applying
neutral, generally applicable, minimally
intrusive tax laws to religious entities does not
unconstitutionally abridge the religious liberty
guaranteed by the First Amendment.

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Second, IBT takes issue with the district
court’s characterization of it as an
unincorporated religious society under Indiana
law. IBT contends that it is a "New Testament
Church," not an unincorporated religious society,
and that by characterizing it as such an entity,
the district court "established" a state church
and imposed on IBT a form of worship contrary to
its beliefs. The district court did neither of
these things. It simply described the legal (not
religious) nature of an already existing church.
In any event, it does not matter what sort of
entity IBT is. Whatever it is, it must comply
with the federal employment tax laws. Thus, IBT’s
objection to the district court’s
characterization of it is both without merit and
beside the point.
III
IBT’s challenges to the application of the
federal employment tax laws to it are without
merit. Accordingly, we Affirm the judgment of the
district court.
/1 We are aware that the constitutionality of RFRA
as applied to the federal government is not
without doubt. Contrast City of Boerne, 521 U.S.
at 536-37 (Stevens, J., concurring) (suggesting
that RFRA is unconstitutional under the
Establishment Clause), with Christians v. Crystal
Evangelical Free Church (In re Young), 141 F.3d
854 (8th Cir.) (upholding RFRA against an
Establishment Clause challenge), cert. denied,
525 U.S. 811 (1998). However, as the government
does not contest the law’s constitutionality
here, we will assume the law is constitutional.
See Adams v. Commissioner, 170 F.3d 173, 175 (3d
Cir. 1999).

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