November 22, 2013; Religion News Service
This issue was bound to surface again in light of questions about nonprofit accountability. 501(c) nonprofits file Form 990s and other documents, but religious organizations can be treated as the equivalent of public charities for tax-deductible donations without having to file 990s or fulfill other the administrative and procedural strictures required of 501(c)(3)s. American Atheists has filed suit in the U.S. District Court for the Eastern District of Kentucky, demanding that the IRS require of churches the same transparency of donors, salaries, and other expenditures that’s required of secular nonprofits.
The case specifically concerns whether churches should be required to file a Form 990. American Atheists contends that the 990-filing exemption for churches and other religious organizations is a violation of the First and Fifth Amendments to the Constitution. According to the Religion News Service, the suit says that this exemption from filing 990s means that religious organizations have “little proof that…[their] activities benefit the public and should be tax exempt.” The argument of American Atheists is essentially that this disparity between religious and secular organizations is unconstitutional and treatment should be made uniform.
The RNS report was terse, and raised a confusing question regarding whether public charities are more or less subject to donor disclosure than we think they are, so we decided to check the American Atheists website to see the plaintiff’s explanation of its concerns and to review the court filings. Contrary to the RNS report, the American Atheists case was actually filed in December of 2012. The U.S. government filed to dismiss in June of 2013, the Atheists responded in August, and oral arguments began last week.
American Atheists contends that secular 501(c)(3) groups end up subsidizing religious groups, because it takes money to maintain 501(c)(3) status. While churches don’t have to file 990s, secular public charities do, taking an estimated 211 hours to prepare and file according to IRS analyses. It also costs public charities money to file an application for nonprofit tax-exempt status.
The website contends that the “IRS treats your organization better if you profess in a supernatural deity.” Part of that is the requirement that secular nonprofits disclose to the IRS information about their donors, which American Atheists argues is then public information. In reality, that isn’t quite true, since (c)(3)s do not have to disclose their donors’ names and amounts to the public per se.
Sign up for our free newsletters
Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox.
The government’s response was basically a dismissal both of American Atheists’ claim to having suffered “any concrete or particularized harm from the alleged discrimination” warranting judicial action and its standing to bring suit. While the government response seems like a textbook dismissal of all claims based on standing, the response from American Atheists is quite specific regarding the harm the organization and its members suffer from the unequal treatment compared to religious groups and, in contrast to the defendant’s claim that there was no governmental action to remedy, that there are governmental actions that violate equal protection (Fifth Amendment) and no religion (First Amendment) parts of the Constitution, consistent with the arguments in the plaintiffs’ initial complaint.
Don’t write this complaint off. This author remembers a plenary discussion at a meeting held by one of the national nonprofit leadership organizations during the period a decade ago when there was something of a national dialogue on charitable accountability, prompted by the Senate Finance Committee. At one of these sessions, a leader of the national organization asked the audience whether they felt that religious organizations should be required to file 990s. The answer from the audience was a resounding yes, but the response from the dais was that it was a topic too politically sensitive to pursue. That may be so politically, but the federal courts could rule otherwise, and wouldn’t that be a sea change in the nonprofit sector?—Rick Cohen