Here Is the Church, Where Is the Steeple: Foundation of Human Understanding v. United States

BY Matson Coxe

Advancements in technology and communication have brought remarkable changes to the way the world interacts: the socially frustrated—exhausted by traditional dating—seek relationships online;  video chats replace phone calls;  and videoconferencing allows businesses to conduct meetings virtually in-person from countries apart.  In almost every realm of Americans’ personal and business lives, technology has expanded their reach and interaction beyond the boundaries of physical limitations. This Recent Development recognizes the extension of such advancements to churches by analyzing whether modern “Internet churches” could ever practically satisfy the same legal tests applied by the Internal Revenue Service (“IRS”) and courts to neighborhood chapels, synagogues, and mosques.

Legally speaking, the determination of whether a religious organization qualifies as a church is most implicated by the tax code.  Beyond the benefits of tax exemption granted to all qualified religious organizations,  churches are granted special privileges, including limitations on their notification requirements to the IRS  and greater protection against government investigation.  Given the government’s interest in facilitating church growth,  its ability to encourage the creation of churches through tax incentives, and the potential for growth among Internet churches,  legal analysis regarding the qualifications of Internet churches under tax law is a window into the evolving debate over the most traditional of institutions.

This Recent Development focuses on Foundation of Human Understanding v. United States (“Foundation III”),  which offers two issues for analysis. The first is the question of which test to use in distinguishing churches from mere religious organizations under the federal tax code. In brief, prior to Foundation III, the associational test was carved out of fourteen criteria used by the IRS  (the “fourteen criteria test”)  for making its own determinations of church status. The associational test emphasizes certain criteria of those fourteen, such as regular assemblies, which, taken together, test the “associational role” of churches.  Although the associational test is credited to American Guidance v. United States,  that court used it merely as a threshold test, which it held the appellant did not satisfy.   However, the American Guidance court’s reliance on the associational test did not foreclose subsequent reference to the remaining criteria if an organization has satisfied the associational test  Among the many other criteria included in the fourteen criteria test are “a formal code of doctrine,” “a membership not associated with any other church or denomination,” and “established places of worship.”  The Claims Court’s holding in Foundation II voiced constitutional discomfort with the fourteen criteria test, suggesting that it might favor traditional churches, yet applied the test nonetheless.  Ultimately, however, the court based its holding on the associational test.  Despite echoing these same constitutional concerns with the fourteen criteria test,  the Foundation III court failed to issue a ruling on the test’s constitutionality, instead determining that the Associational test was, for the first time, exclusively satisfactory for determining church status.  In limiting the review of church status to what had previously been a threshold test, Foundation III unnecessarily restricted itself from considering broader considerations offered by the fourteen criteria test, for which sufficient barriers were already in place to mitigate constitutional concerns.


DOWNLOAD PDF | 89 N.C. L. Rev. 1248 (2011)