Nonbelief Relief, Inc. v. Kautter

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
NONBELIEF RELIEF, INC.,
Plaintiff,
v.
CHARLES RETTIG,
Civil Action No. 18-2347 (TJK)
Defendant,
and
NEW MACEDONIA BAPTIST CHURCH,
Defendant-Intervenor.
MEMORANDUM OPINION
NonBelief Relief describes itself as an organization dedicated to alleviating human
suffering, focusing on individuals targeted for their nonbelief, secular activism, or blasphemy. It
was initially incorporated as a tax-exempt 501(c)(3) organization. All such organizations must
file a detailed financial report—known as a Form 990—unless the organization is exempt from
doing so. Churches and religious institutions are exempt. To protest this allegedly preferential
treatment for churches, Nonbelief Relief refused to file a Form 990 for three consecutive years
and then had its tax-exempt status revoked. It now sues the Commissioner of the Internal
Revenue Service, alleging that its status was revoked in violation of the First Amendment’s
Establishment Clause and the Fifth Amendment’s Due Process Clause. The Commissioner
moved to dismiss, as did Intervenor, The New Macedonia Baptist Church. In response,
NonBelief Relief moved to amend its complaint. For the reasons explained below, the Court will
grant the Commissioner’s and The New Macedonia Baptist Church’s motions to dismiss on
jurisdictional grounds and deny NonBelief Relief’s motion to amend because it would be futile.
Background
NonBelief Relief, Inc. was founded as a nonprofit corporation in 2015. ECF No. 1
(“Compl.”) ¶¶ 4, 14. Its mission is “to improve conditions in this world, including by seeking to
help remediate conditions of human suffering and injustice on a global scale, whether the result
of natural disasters, human actions or adherence to religious dogma.” Id. ¶ 16. NonBelief Relief
seeks, more specifically, to assist atheists and other nonreligious individuals. See id. ¶¶ 17–20.
It donates thousands of dollars per year to other charitable organizations. Id. ¶ 22.
Upon incorporation, NonBelief Relief qualified as a tax-exempt nonprofit organization
under 26 U.S.C. § 501(c)(3) of the Internal Revenue Code. Id. ¶¶ 4, 31. The Internal Revenue
Service (IRS) imposes various administrative requirements on 501(c)(3) organizations, such as
requiring them to file annual reports and certain other forms; these requirements differ somewhat
for secular and religious organizations. See id. ¶¶ 27, 30; see also 26 C.F.R. § 6033 (filing
requirements for tax-exempt organizations). In exchange for complying with these
administrative requirements, 501(c)(3) organizations are exempt from federal income tax, and
donations to them are tax-deductible. Compl. ¶ 26; see also 26 U.S.C. §§ 170, 501(a).
During the first three years after its incorporation, NonBelief Relief complied with all
501(c)(3) administrative requirements save one: submission of Form 990, a detailed annual
report of its finances. Compl. ¶¶ 14, 27–28; see also 26 U.S.C. § 6033(a)(1). It refused to file a
Form 990 because churches and religious institutions are not also required to submit one, see 26
2
U.S.C. § 6033(a)(3). 1 Compl. ¶¶ 39–40. Organizations that must submit a Form 990 have to do
so each year, although the IRS gives noncompliant organizations a grace period; their tax-exempt
status is revoked only after they fail to file it for three consecutive years. 26 U.S.C. § 6033(j)(1).
Accordingly, after NonBelief Relief failed to file Form 990 for the three consecutive years, its
tax-exempt status was automatically revoked in 2018. Compl. ¶¶ 6, 31; 26 U.S.C. § 6033(j).
Later that year, NonBelief Relief brought this suit, alleging that (1) the IRS’s exemption
for churches and religious organizations from the requirement to file Form 990 (the “church
exemption”) and (2) the IRS’s revocation of NonBelief Relief’s tax-exempt status each violated
the First Amendment’s Establishment Clause. Compl. ¶¶ 61, 63. It also asserted that the IRS’s
revocation of its tax-exempt status violated the equal protection component of the Fifth
Amendment’s Due Process Clause. Id. ¶ 63. Its prayer for relief requested declarations that both
the church exemption and the revocation of its tax-exempt status were unconstitutional, an
injunction barring the IRS from continuing to exempt churches and religious organizations from
filing Form 990, and a court order reinstating its tax-exempt status. Id. at 12–13.
Shortly after NonBelief Relief filed suit, The New Macedonia Baptist Church moved to
intervene. ECF No. 5. The Court granted that motion, reasoning that The New Macedonia
Baptist Church’s interests might diverge from the Commissioner’s because of its intention “to
argue not simply that the IRS’s reporting exception is lawful, but that it is constitutionally
required under the First Amendment,” and because its motion otherwise satisfied the
requirements for intervention as of right. ECF No. 30 at 4–5.
1
NonBelief Relief may have been formed in part to challenge the constitutionality of 26 U.S.C.
§ 6033(a)(3) after a similar challenge by a related organization failed for lack of standing. See
ECF No. 19-1 at 14–15; Freedom From Religion Found. v. Koskinen, 72 F. Supp. 3d 963 (W.D.
Wisc. 2014). But its motivations for challenging that exemption are irrelevant to the Court’s
analysis.
3
The Commissioner moved to dismiss NonBelief Relief’s complaint on several grounds:
that (1) the Anti-Injunction Act and Declaratory Judgment Act bar the declaration sought
regarding NonBelief Relief’s own tax-exempt status and reinstatement of that status; (2)
sovereign immunity bars the injunctive and declaratory relief sought; and (3) NonBelief Relief
lacks standing to bring its constitutional challenge to the church exemption. ECF No. 19. In
response, NonBelief Relief moved to amend its complaint. The proposed amended complaint
strikes its previous requests for an order reinstating its tax-exempt status and a declaration that
the revocation of its tax-exempt status was unconstitutional, seemingly in response to the
Commissioner’s arguments concerning the Anti-Injunction Act and Declaratory Judgment Act,
but is otherwise identical in substance to the operative complaint. See ECF No. 25. 2
The New Macedonia Baptist Church filed its own motion to dismiss, arguing that the
Court lacks jurisdiction over NonBelief Relief’s claims, NonBelief Relief lacks standing to bring
them, and the IRS’s actions were not only consistent with the Establishment Clause but required
by the Free Exercise Clause. See ECF No. 31. The parties completed briefing on all these
motions, including an unopposed surreply by the Commissioner to NonBelief Relief’s motion to
amend. See ECF Nos. 27, 29, 32, 33, 35.
Legal Standards
“Federal courts are courts of limited jurisdiction. They possess only that power
authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994). “Within constitutional bounds, Congress decides what cases the federal courts
have jurisdiction to consider.” Bowles v. Russell, 551 U.S. 205, 212 (2007). Courts lack subject-
2
NonBelief Relief first attempted to file its proposed amended complaint as of right, but it did so
too late under Federal Rule of Civil Procedure 15(a)(1)(B). The Court thus struck the amended
complaint, Minute Order of March 25, 2019, and NonBelief Relief then moved to amend.
4
matter jurisdiction over cases which fall within the scope of the Anti-Injunction Act. Maze v.
Internal Revenue Serv., 862 F.3d 1087, 1091 (D.C. Cir. 2017). In addition, under Article III of
the Constitution, an indispensable element of the Court’s subject-matter jurisdiction is the
plaintiff’s standing to bring its claims. See Swigert v. Perez, 334 F. Supp. 3d 36, 40 (D.D.C.
2018). Challenges to a plaintiff’s standing are thus properly brought as motions to dismiss under
Federal Rule of Civil Procedure 12(b)(1). Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir.
1987). “To survive a motion to dismiss for lack of standing, a complaint must state a plausible
claim that the plaintiff has suffered an injury in fact fairly traceable to the actions of the
defendant that is likely to be redressed by a favorable decision on the merits.” Humane Soc’y v.
Vilsack, 797 F.3d 4, 8 (D.C. Cir. 2015). In considering the motions to dismiss, the Court will
“accept the well-pleaded factual allegations as true and draw all reasonable inferences from those
allegations in the plaintiff’s favor.” Arpaio v. Obama, 797 F.3d 11, 19 (D.C. Cir. 2015).
Under Federal Rule of Civil Procedure 15(a)(2), a party may amend its complaint with
leave of court. The Court should grant that leave “freely . . . when justice so requires.” Fed. R.
Civ. P. 15(a)(2). But the Court need not grant the motion when the proposed amended complaint
would not survive a motion to dismiss. Hettinga v. United States, 677 F.3d 471, 480 (D.C. Cir.
2012).
Analysis
NonBelief Relief seeks two types of relief in the operative complaint: first, a declaration
that the IRS unconstitutionally revoked its tax-exempt status in violation of the First
Amendment’s Establishment Clause and the Fifth Amendment’s Due Process Clause and an
injunction reinstating its status; and second, a declaration that the church exemption violates the
5
Establishment Clause and an injunction striking it down for that reason. 3 But as explained
below, its first set of claims are barred by the Anti-Injunction Act and the Declaratory Judgment
Act, and it lacks standing to seek the prospective relief in its second set of claims.
A. Claims Related to NonBelief Relief’s Tax Status
Congress has sharply limited the circumstances in which a taxpayer may bring a pre-
collection suit challenging her tax liabilities. The Anti-Injunction Act, 26 U.S.C. § 7421(a),
prohibits any court, subject to certain exceptions, from entertaining a suit “for the purpose of
restraining the assessment or collection of any tax.” “The manifest purpose of § 7421(a) is to
permit the United States to assess and collect taxes alleged to be due without judicial
intervention, and to require that the legal right to the disputed sums be determined in a suit for
refund.” Cohen v. United States, 650 F.3d 717, 724 (D.C. Cir. 2011) (quoting Enochs v.
Williams Packing & Navigation Co., 370 U.S. 1, 7 (1962)). The Supreme Court has interpreted
this prohibition broadly to include, as relevant here, suits seeking conferral or retention of tax-
exempt status, because a judicial grant of tax exemption may ultimately affect revenue collected
by the government. See, e.g., Alexander v. Ams. United, Inc., 416 U.S. 752, 759–62 (1974); Bob
Jones Univ. v. Simon, 416 U.S. 725, 736–40 (1974). Similarly, the Declaratory Judgment Act,
28 U.S.C. § 2201(a), generally prohibits courts from issuing declaratory judgments “with respect
to Federal taxes.” This Circuit has interpreted the Anti-Injunction Act and the tax limitation in
the Declaratory Judgment Act to be coterminous. Fla. Bankers Ass’n v. U.S. Dep’t of Treasury,
799 F.3d 1065, 1067–68 (D.C. Cir. 2015).
Bob Jones and Americans United straightforwardly dictate the result here. The Anti-
Injunction Act and Declaratory Judgment Act divest this Court of jurisdiction to hear claims that
3
All references to the Fifth Amendment’s Due Process Clause refer to that clause’s equal
protection component.
6
NonBelief Relief’s tax-exempt status was improperly revoked, since the award of an injunction
or declaratory judgment on NonBelief Relief’s behalf would restrain the government’s collection
of taxes against NonBelief and its donors. 4 For example, in Americans United, a nonprofit
dedicated to preserving the separation of church and state argued that its tax-exempt status had
been erroneously or unconstitutionally revoked and sought its reinstatement. 416 U.S. at 756.
The Court held that the Anti-Injunction Act barred the suit because its “objective” was to enable
donors to give gifts that would qualify as charitable deductions. Id. at 761; see also Bob Jones,
416 U.S. at 738–42. It further held that the constitutional nature of Americans United’s claim
did not affect its analysis. Americans United, 416 U.S. at 759. Here, NonBelief Relief similarly
asserts that one of the harms caused by its loss of tax-exempt status is harm to its donors, who
can no longer make tax-deductible charitable donations. See Compl. ¶¶ 7–8. Under Americans
United, NonBelief Relief’s request for reinstatement of its tax-exempt status thus has the
“purpose” of restraining the collection of taxes under 26 U.S.C. § 7421(a), despite the
constitutional nature of its claims.
NonBelief Relief has not meaningfully contested the Commissioner’s argument that its
claims as to its tax-exempt status are barred by the Anti-Injunction Act and the Declaratory
Judgment Act. Rather than do so, it moved to amend its complaint, effectively withdrawing
these claims. Compare Compl. at 12–13, with ECF No. 25-2 at 9. Because NonBelief Relief
seeks an injunction and declaratory judgment that would restrain the collection of federal taxes,
4
26 U.S.C. § 7428, which generally provides an organization the right to bring a suit for a
declaratory judgment over the revocation of its 501(c)(3) status, does not apply here because
NonBelief Relief’s tax-exempt status was automatically revoked under 26 U.S.C. § 6033(j). See
26 U.S.C. § 7428(b)(4).
7
this Court lacks jurisdiction to grant it the relief it seeks with respect to its own 501(c)(3) status.
26 U.S.C. § 7421(a); 28 U.S.C. § 2201(a). For this reason, these claims must be dismissed.
B. Claims Relating to the Church Exemption
In addition to claims relating to its own tax-exempt status, NonBelief Relief alleges that
the church exemption, 26 U.S.C. § 6033(a)(3), violates the Establishment Clause and the Due
Process Clause and requests that the Court enjoin the Commissioner from “continuing to
preferentially exempt churches and other affiliated religious organizations” from filing Form
990. 5 See Compl. at 12–13; ECF No. 25-2 at 9. Both the Commissioner and The New
Macedonia Baptist Church assert that this relief would not redress NonBelief Relief’s alleged
injury, depriving it of standing. ECF No. 19-1 at 25–26; ECF No. 31 at 12–13. They make
largely the same standing arguments in opposing NonBelief Relief’s motion to amend, so the
Court will consider this threshold question for all three motions together.
“The ‘irreducible constitutional minimum of standing’ requires that a plaintiff
demonstrate three elements: (1) injury in fact; (2) causation; and (3) redressability.” Scenic Am.
Inc. v. U.S. Dep’t of Transp., 836 F.3d 42, 48 (D.C. Cir. 2016) (quoting Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560–61 (1992)). “[A] plaintiff must demonstrate standing separately for
each form of relief sought.” Friends of the Earth, Inc. v. Laidlaw Env’t Servs. (TOC), Inc., 528
U.S. 167, 185 (2000).
Redressability examines whether the relief sought, assuming that the court chooses to
grant it, will likely alleviate the particularized injury alleged by the plaintiff.” West v. Lynch,
5
The operative complaint alleges that the IRS’s revocation of NonBelief Relief’s tax-exempt
status violated both the Establishment and Due Process Clauses, and that the church exemption
violates only the Establishment Clause. See Compl. ¶ 63. NonBelief Relief’s proposed amended
complaint alleges that the church exemption violates both the Establishment and Due Process
Clauses. See ECF No. 25-2 ¶ 1.
8
845 F.3d 1228, 1235 (D.C. Cir. 2017) (quoting Fla. Audobon Soc’y v. Bentsen, 94 F.3d 658,
663–64 (D.C. Cir. 1996) (en banc)). Logically, then, “[t]he starting point in the redressability
analysis is necessarily the relief sought.” Abulhawa v. U.S. Dep’t of the Treasury, 239
F. Supp. 3d 24, 36 (D.D.C. 2017). To have standing to seek prospective relief, the plaintiff must
show that the claimed injury is continuing or imminent. Owner-Operator Indep. Drivers Ass’n,
Inc. v. U.S. Dep’t of Transp., 879 F.3d 339, 346 (D.C. Cir. 2018). Both injunctive and
declaratory relief are forms of prospective relief. See, e.g., Los Angeles County v. Humphries,
562 U.S. 29, 31 (2010). Thus, to have standing to obtain declaratory or injunctive relief, the
plaintiff must show an ongoing or imminent injury. See, e.g., Los Angeles v. Lyons, 461 U.S. 95,
101–110 (1983). Past injuries alone “are insufficient.” Dearth v. Holder, 641 F.3d 499, 501
(D.C. Cir. 2011).
NonBelief Relief alleges that it suffered an injury when, as a 501(c)(3) tax-exempt
organization, it was required to file a Form 990, while churches and other religious institutions
were not. But assuming that is so, that injury is neither ongoing nor imminent, because
NonBelief Relief is no longer a tax-exempt organization and has expressed no intent to reapply
for that status. In fact, NonBelief Relief is not currently suffering any injury caused by the
Commissioner’s alleged preferential treatment of churches and religious organizations; it is
being treated the same as all other non-501(c)(3) organizations. Because it is not suffering from
an ongoing or imminent injury, it does not have standing to obtain the declaratory and injunctive
relief at issue. See Dearth, 641 F.3d at 501; Conservation Force, Inc. v. Jewell, 733 F.3d 1200,
1207 (D.C. Cir. 2013). Forward-looking, prospective relief will not address such past alleged
injuries. See Lyons, 461 U.S. at 102–05. More specifically, a declaration that the church
9
exemption is unlawful and an injunction prohibiting the Commissioner from enforcing it will not
redress NonBelief Relief’s alleged injury; in fact, it will not affect NonBelief Relief at all.
NonBelief Relief alleges in its proposed amended complaint that “[t]he Defendant’s
unequal treatment of the Plaintiff is ongoing and will continue as long as churches continue to be
exempted from the information filing requirements of § 6033.” ECF No. 25-2 ¶ 47. The Court
disagrees. The injury it alleges occurred when it had to file a Form 990, a requirement from
which churches and religious organizations are exempt. But as discussed above, this alleged
unequal treatment is not ongoing or imminent because NonBelief Relief faces no current or
future prospect of having to fill out a Form 990. See Conservation Force, 733 F.3d at 1207.
And while it is true that the loss of its tax-exempt status is, in a sense, ongoing, NonBelief Relief
has not based its standing argument on that loss, and for good reason. The relief it seeks—a
declaration that the church exemption is unlawful and an injunction prohibiting the
Commissioner from enforcing it—will not redress that loss. And as explained above, in any
event, the Anti-Injunction Act and Declaratory Judgment Act deprive the Court of jurisdiction to
reinstate NonBelief Relief’s tax-exempt status.
For these reasons, NonBelief Relief’s claims related to the church exemption and its
alleged unequal treatment must be dismissed for lack of standing. And because these are the
only claims remaining in its proposed amended complaint, its motion to amend must be denied
as futile. See Hettinga, 677 F.3d at 480 (“A district court may deny a motion to amend a
complaint as futile if the proposed claim would not survive a motion to dismiss.”).
* * *
The Court notes that its decision does not mean that the church exemption is immune
from judicial review. Cf. South Carolina v. Regan, 465 U.S. 367, 378 (1984) (holding that the
10
Anti-Injunction Act would not apply if the plaintiff had no other way to contest the
constitutionality of a tax code provision). As the Commissioner points out, NonBelief Relief
could pay any taxes it owed, claim a refund for the entire amount, and sue when the refund was
denied, arguing that its 501(c)(3) status was unconstitutionally revoked. 6 See 26 U.S.C. § 7422;
26 U.S.C. § 6532(a)(1). NonBelief Relief may also respond to a notice of deficiency with a
deficiency suit in Tax Court, where it may raise the same issues before paying any taxes owed.
26 U.S.C. §§ 6212–6213; see also Z Str. v. Koskinen, 791 F.3d 24, 26–27 (D.C. Cir. 2015)
(outlining the avenues available to a plaintiff in a tax lawsuit).
Conclusion
For all these reasons, the Commissioner’s Motion to Dismiss for Lack of Jurisdiction,
ECF No. 19, will be granted, The New Macedonia Baptist Church’s Motion to Dismiss, ECF No.
31, will be granted, and NonBelief Relief’s Motion for Leave to File a First Amended
Complaint, ECF No. 25, will be denied. A separate order will issue.
/s/ Timothy J. Kelly
TIMOTHY J. KELLY
United States District Judge
Date: January 10, 2020
6
Injunctive and declaratory relief appear available through a refund suit, despite NonBelief
Relief’s arguments to the contrary. See, e.g., Gaylor v. Mnuchin, 919 F.3d 420, 424–26 (7th Cir.
2019), rev’g 278 F. Supp. 3d 1081, 1105 (W.D. Wis.) (in a refund suit, adjudicating a claim for
an injunction and declaratory judgment that 26 U.S.C. § 107(2), an exemption for religious
housing, violates the Establishment Clause).
11