Iowaska Church of Healing Loses on Bad Strategy and Other Unnecessary Mental Gymnastics
I have been on my high horse about Iowaska Church of Healing’s suit against the wrong agency in pursuit of tax exemption. I just can’t figure out why Iowaska did not sue the DEA for effectively overruling the Supreme Court’s decision that the First Amendment and the Religious Freedom Restoration Act preclude government from prohibiting the use of “hoasca” in religious sacraments. DEA foot-dragging amounts to a pocket veto of the Supreme Court. Even if its true that others have sued the DEA and lost, the record is pretty clear by now that DEA never intends to grant any permits. Iowaska should have sued DEA. And Iowaska should have won that case long before it crashed and burned on standing at the DC Circuit Court late last week.
But after 5 years pursuing the IRS instead of the DEA, Iowaska is no closer to tax exemption. That’s because the DC Circuit Court of Appeals endorsed the District Court’s conclusion that Iowaska sued the wrong agency. I have always thought that conclusion was a no-brainer. It’s the correct outcome, alright. It’s just that the Court’s unnecessary mental gymnastics resulted in a poorly reasoned opinion.
Iowaska asserted three injuries to prove standing. It argued the denial of exemption (1) “chilled” its free exercise of religion, (2) cost it economic harm by virtue of lower membership and fewer donations, and (3) resulted in reputational damage. Apparently, the IRS’ denial scared potential worshippers away. The Court easily dismissed the second and third assertions, saying the number and amount of donations the Church would receive with tax exemption is pure speculation, and that reputational damage is too vague and uncertain to support standing. Fine.
But the Court did a real disservice to the argument that denial of tax exemption burdens Iowaska’s free exercise of religion. Of course it does, so Iowaska asserted a harm the Court should have been explicitly adjudicated. Instead, the Court said that Iowaska did not complain loudly enough and thus waived the argument:
The Church also urges that it has standing to assert its RFRA claim based on the chilling and reputational injuries it raised below, but the Church has waived these alleged bases for standing by referencing them only vaguely in a footnote. “A party forfeits an argument by mentioning it only ‘in the most skeletal way, leaving the court to do counsel’s work, create the ossature for the argument, and put flesh on its bones.’” Gov’t of Manitoba v. Bernhardt, 923 F.3d 173, 179 (D.C. Cir. 2019) (quoting Schneider v. Kissinger, 412 F.3d 190, 200 n.1 (D.C. Cir. 2005)). An argument left so naked “is tantamount to failing to raise it.” Al-Tamimi v. Adelson, 916 F.3d 1, 6 (D.C. Cir. 2019). Here, the Church references the chilling and reputational injuries introduced below in passing but asserts in a footnote it “does not minimize or waive its claim of standing” based on these injuries. Appellant’s Br. 45 n.15. However, “[w]e need not consider cursory arguments made only in a footnote.” Hutchins v. District of Columbia, 188 F.3d 531, 539 n.3 (D.C. Cir. 1999) (en banc).
C’mon. A free exercise argument fully briefed and argued below but mentioned only in a footnote on appeal is waived? You must be kidding. Because Iowaska’ hard to decipher argument has validity once you really understand the fundamental point and why Iowaska sued the IRS. It doesn’t explain why it did not also sue DEA, by the way, but I finally understand Iowaska’s reason for suing the IRS, an agency that is otherwise just a bystander in the basic dispute.
Iowaska’s fundamental argument is that the IRS and every other federal agency is required by the Religious Freedom Restoration Act to scrutinize their own agency actions to determine whether that agency action imposes an undue burden on religion. According to Iowaska, the IRS may not defer to the DEA nor refuse to make its own RFRA determination on whether denial of exemption for using hoasca unduly burdens Iowaska’s free exercise of religion. And since using hoasca in religious sacraments is clearly protected by Supreme Court precedent, the Service may not deny exemption simply because the DEA has not yet acted on Iowaska’s five year old application for a permit. In other words, RFRA is self-enforcing independently against each federal agency. The argument amounts to an assertion that the single path by which exemption may be vindicated — by application to DEA only — imposes an undue burden on the free exercise of religion. The DC Circuit speculated without actually deciding (since Iowaska lacked standing according to the Court), that that the government might have a compelling state interest in a uniform permitting process through a single agency, rather than one that might create varied outcomes across different agencies. Why not just decide that issue instead of hiding behind dubious procedural guises?
The Court’s discussion of the burden of proof to bolster the conclusion that Iowaska lacked standing is also sadly remarkable. The Court really got lost in the weeds on this one.
The Court rightly stated that charitable organizations have the burden of proving exemption, not the other way around. An applicant has to prove entitlement to tax exemption, the IRS does not have to presume exemption. Organizations have to prove they are organized and operated for an exempt purpose. Thus, according to the Court, RFRA does not create a presumption in favor of tax exemption. Instead, the Service may presume the opposite until entitlement is proven by the applicant:
To start, the Church contends that its proposed Ayahuasca use is “presumptively legal” and, thus, cannot serve as a basis for failing the Church on the organizational or operational tests. This argument is unconvincing, however, because it conflates the burden the Church would face for an actionable RFRA claim with its burden for the instant tax- exemption claim to obscure the fact that the Church fails to meet the latter. For a RFRA claim, an “effective[] demonstrat[ion] that . . . [a] sincere exercise of religion was substantially burdened” is sufficient to make out a prima facie case. O Centro, 546 U.S. at 428. Under that framework, a showing that an organization’s Ayahuasca ceremonies are a “sincere exercise of religion” could be sufficient to establish the presumptive legality of those ceremonies and shift the burden to the government. For a tax-exemption claim, however, the burden is both different and higher: the taxpayer must show entitlement to tax-exempt status, which, here, puts the onus on the Church to demonstrate that its proposed Ayahuasca use is not “illegal” or “contrary to established public policy” in the first instance. Bob Jones, 461 U.S. at 586; see FSEGTR, 161 F.3d at 759. This is why, contrary to what the Church says, it was not the IRS’s responsibility to presume the Church’s Ayahuasca ceremonies were legal. It was, instead, the Church’s job to establish that it had a CSA exemption and it failed to do so.
But the important point missed entirely by the litigants and the Court is that churches are presumed exempt. Churches don’t even have to ask for exemption. RFRA does not create a presumption that churches are tax exempt, but the Tax Code does. Churches are presumed tax exempt, and it is for the Service to prove otherwise. That’s why churches have no application requirement. The only way we might say Iowaska had the burden is if we conclude that by applying for exemption when it need not have, the church waived the presumption and the burden shifted back to the church. That might be defensible.
Had Iowaska not bothered to apply, it could have used hoasca in its sacraments. When or if the Service sought to revoke its presumptive tax exemption, the Service would have had the burden of proving compliance with the First Amendment and RFRA. I understand why Iowaska applied when it needn’t have. Its members were afraid of being prosecuted for using a controlled substance. Even though they had a First Amendment right, vindicating that right in a criminal case would be scary and expensively disruptive to their lives. If the burden of proof were rightly assigned to the Service in this case, the Service would have been forced to concede that denying tax exemption until Iowaska obtained a license available only from DEA burdened or “chilled” Iowaska’s free exercise of religion. It would not have been required to concede that the burden was unconstitutional.
Implicitly, at least, the Court decided that the burden was not unconstitutional. The Court therefore got the outcome right as a practical matter. An application process exclusively through DEA is theoretically justifiable even against strict scrutiny. But it’s a whole ‘nother matter whether DEA’s foot-dragging constitutes an undue burden. Surely after five years and not a single application granted, DEA is unduly burdening the free exercise of religion without a compelling justification. Iowaska should have sued DEA sooner or along with the Service. It still can and it still should.
I just hate that this case was impacted by poor strategy, doctrinal errors and procedural “gotcha.”
darryll k. jones