Pending Lawsuits Challenging the Form 990 Exemption for Churches

Two secularist organizations are currently engaged in litigation challenging the constitutionality of the exemption churches have from filing the Form 990. As explained elsewhere on this site, other tax-exempt organizations are required by law to file the IRS Form 990, on which they must disclose detailed financial information. Because the law also requires Forms 990 be made available to the public, donors are easily able to access financial information about other charities on websites such as GuideStar.

The first lawsuit was filed by the American Atheists on December 20, 2012 in the U.S. District Court for the Eastern District of Kentucky. About a week later, the Freedom from Religion Foundation (FFRF) filed a similar suit in the U.S. District Court for the Western District of Wisconsin. The complaints filed in both cases allege, inter alia, that the exception from filing the Form 990 provides preferential treatment for churches in violation of the Establishment Clause of the First Amendment.

The IRS moved to dismiss both lawsuits on the grounds that the plaintiffs lacked standing to sue. Judge Barbara Crabb of the Western District of Wisconsin denied the government’s motion to dismiss, concludng that the plaintiffs had standing for the same reasons she had earlier decided that the FFRF had standing to sue over the parsonage allowance. (In that case, Judge Crabb ruled for the FFRF, holding that the parsonage allowance violated the Establishment Clause; that decision is currently being appealed.) However, Judge Crabb asked the plaintiffs to show that they had suffered a redressable injury. She has not yet issued a ruling on that question.

In November 2013, the District Court for the Eastern District of Kentucky heard oral arguments on the government’s motion to dismiss. A decision on that motion is pending.

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