UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


BR MNSTRY INC

v.

ROSSOTTI, CHARLES O.


99-5097a

D.C. Cir. 2000


*	*	*


Buckley, Senior Judge: Four days before the 1992 presi- dential
election, Branch Ministries, a tax-exempt church,  placed full-page
advertisements in two newspapers in which it  urged Christians not to
vote for then-presidential candidate  Bill Clinton because of his
positions on certain moral issues.  The Internal Revenue Service
concluded that the placement  of the advertisements violated the
statutory restrictions on  organizations exempt from taxation and, for
the first time in  its history, it revoked a bona fide church's
tax-exempt status  because of its involvement in politics. Branch
Ministries and  its pastor, Dan Little, challenge the revocation on
the  grounds that (1) the Service acted beyond its statutory au-
thority, (2) the revocation violated its right to the free exer- cise
of religion guaranteed by the First Amendment and the  Religious
Freedom Restoration Act, and (3) it was the victim  of selective
prosecution in violation of the Fifth Amendment.  Because these
objections are without merit, we affirm the  district court's grant of


I. Background


A. Taxation of Churches


The Internal Revenue Code ("Code") exempts certain orga- nizations from
taxation, including those organized and operat- ed for religious
purposes, provided that they do not engage in  certain activities,
including involvement in "any political cam-


paign on behalf of (or in opposition to) any candidate for  public
office." 26 U.S.C. s 501(a), (c)(3) (1994). Contribu- tions to such
organizations are also deductible from the  donating taxpayer's
taxable income. Id. s 170(a). Although  most organizations seeking
tax-exempt status are required to  apply to the Internal Revenue
Service ("IRS" or "Service")  for an advance determination that they
meet the require- ments of section 501(c)(3), id. s 508(a), a church
may simply  hold itself out as tax exempt and receive the benefits of
that  status without applying for advance recognition from the IRS. 


The IRS maintains a periodically updated "Publication No.  78," in
which it lists all organizations that have received a  ruling or
determination letter confirming the deductibility of  contributions
made to them. See Rev. Proc. 82-39, 1982-1  C.B. 759, ss 2.01, 2.03.
Thus, a listing in that publication will  provide donors with advance
assurance that their contribu- tions will be deductible under section
170(a). If a listed  organization has subsequently had its tax-exempt
status re- voked, contributions that are made to it by a donor who is 
unaware of the change in status will generally be treated as 
deductible if made on or before the date that the revocation is 
publicly announced. Id. s 3.01. Donors to a church that has  not
received an advance determination of its tax-exempt  status may also
deduct their contributions; but in the event  of an audit, the
taxpayer will bear the burden of establishing  that the church meets
the requirements of section 501(c)(3).  See generally id. s 3.04; Rev.
Proc. 80-24, 1980-1 C.B. 658,  s 6 (discussing taxpayers' obligations
in seeking a ruling or  determination letter).


The unique treatment churches receive in the Internal  Revenue Code is
further reflected in special restrictions on  the IRS's ability to
investigate the tax status of a church.  The Church Audit Procedures
Act ("CAPA") sets out the  circumstances under which the IRS may
initiate an investiga- tion of a church and the procedures it is
required to follow in  such an investigation. 26 U.S.C. s 7611. Upon a
"reason- able belief" by a high-level Treasury official that a church 
may not be exempt from taxation under section 501, the IRS 


may begin a "church tax inquiry." Id. s 7611(a). A church  tax inquiry
is defined, rather circularly, as


any inquiry to a church (other than an examination) to  serve as a
basis for determining whether a church-


(A) is exempt from tax under section 501(a) by reason  of its status as
a church, or


(B) is ... engaged in activities which may be subject  to


Id. s 7611(h)(2). If the IRS is not able to resolve its con- cerns
through a church tax inquiry, it may proceed to the  second level of
investigation: a "church tax examination." In  such an examination,
the IRS may obtain and review the  church's records or examine its
activities "to determine  whether [the] organization claiming to be a
church is a church  for any period." Id. s 7611(b)(1)(A), (B).


B. Factual and Procedural History


Branch Ministries, Inc. operates the Church at Pierce  Creek
("Church"), a Christian church located in Binghamton,  New York. In
1983, the Church requested and received a  letter from the IRS
recognizing its tax-exempt status. On  October 30, 1992, four days
before the presidential election,  the Church placed full-page
advertisements in USA Today  and the Washington Times. Each bore the
headline "Chris- tians Beware" and asserted that then-Governor
Clinton's  positions concerning abortion, homosexuality, and the
distri- bution of condoms to teenagers in schools violated Biblical 
precepts. The following appeared at the bottom of each 


This advertisement was co-sponsored by the Church at  Pierce Creek,
Daniel J. Little, Senior Pastor, and by  churches and concerned
Christians nationwide. Tax- deductible donations for this
advertisement gladly ac- cepted. Make donations to: The Church at
Pierce  Creek. [mailing address]. Appendix ("App.") at Tab 5, Ex. E.


The advertisements did not go unnoticed. They produced  hundreds of
contributions to the Church from across the 


country and were mentioned in a New York Times article and  an Anthony
Lewis column which stated that the sponsors of  the advertisement had
almost certainly violated the Internal  Revenue Code. Peter Applebome,
Religious Right Intensi- fies Campaign for Bush, N.Y. Times, Oct. 31,
1992, at A1;  Anthony Lewis, Tax Exempt Politics?, N.Y. Times, Dec. 1,
 1992, at A15.


The advertisements also came to the attention of the  Regional
Commissioner of the IRS, who notified the Church  on November 20, 1992
that he had authorized a church tax  inquiry based on "a reasonable
belief ... that you may not be  tax-exempt or that you may be liable
for tax" due to political  activities and expenditures. Letter from
Cornelius J. Cole- man, IRS Regional Commissioner, to The Church at
Pierce  Creek (Nov. 20, 1992), reprinted in App. at Tab 5, Ex. F.  The
Church denied that it had engaged in any prohibited  political
activity and declined to provide the IRS with certain  information the
Service had requested. On February 11,  1993, the IRS informed the
Church that it was beginning a  church tax examination. Following two
unproductive meet- ings between the parties, the IRS revoked the
Church's  section 501(c)(3) tax-exempt status on January 19, 1995,
citing  the newspaper advertisements as prohibited intervention in a 


The Church and Pastor Little (collectively, "Church") com- menced this
lawsuit soon thereafter. This had the effect of  suspending the
revocation of the Church's tax exemption until  the district court
entered its judgment in this case. See 26  U.S.C. s 7428(c). The
Church challenged the revocation of  its tax-exempt status, alleging
that the IRS had no authority  to revoke its tax exemption, that the
revocation violated its  right to free speech and to freely exercise
its religion under  the First Amendment and the Religious Freedom
Restoration  Act of 1993, 42 U.S.C. s 2000bb (1994) ("RFRA"), and that
 the IRS engaged in selective prosecution in violation of the  Equal
Protection Clause of the Fifth Amendment. After  allowing discovery on
the Church's selective prosecution  claim, Branch Ministries, Inc. v.
Richardson, 970 F. Supp. 11  (D.D.C. 1997), the district court granted


in favor of the IRS. Branch Ministries, Inc. v. Rossotti, 40  F. Supp.
2d 15 (D.D.C. 1999).


The Church filed a timely appeal, and we have jurisdiction  pursuant to
28 U.S.C. s 1291. We review summary judg- ment decisions de novo, see
Everett v. United States, 158 F.3d  1364, 1367 (D.C. Cir. 1998), cert.
denied, 526 U.S. 1132 (1999),  and will affirm only if there is no
genuine issue as to any  material fact and the moving party is
entitled to judgment as  a matter of law. Fed. R. Civ. P. 56(c).


II. Analysis


The Church advances a number of arguments in support of  its challenges
to the revocation. We examine only those that  warrant analysis.


A. The Statutory Authority of the IRS


The Church argues that, under the Internal Revenue Code,  the IRS does
not have the statutory authority to revoke the  tax-exempt status of a
bona fide church. It reasons as  follows: section 501(c)(3) refers to
tax-exempt status for  religious organizations, not churches; section
508, on the  other hand, specifically exempts "churches" from the
require- ment of applying for advance recognition of tax-exempt sta-
tus, id. s 508(c)(1)(A); therefore, according to the Church, its 
tax-exempt status is derived not from section 501(c)(3), but  from the
lack of any provision in the Code for the taxation of  churches. The
Church concludes from this that it is not  subject to taxation and
that the IRS is therefore powerless to  place conditions upon or to
remove its tax-exempt status as a  church.


We find this argument more creative than persuasive. The  simple
answer, of course, is that whereas not every religious  organization
is a church, every church is a religious organiza- tion. More to the
point, irrespective of whether it was  required to do so, the Church
applied to the IRS for an  advance determination of its tax-exempt
status. The IRS  granted that recognition and now seeks to withdraw
it.  CAPA gives the IRS this power.


That statute, which pertains exclusively to churches, pro- vides
authority for revocation of the tax-exempt status of a  church through
its references to other sections of the Inter- nal Revenue Code. The
section of CAPA entitled "Limita- tions on revocation of tax-exempt
status, etc." provides that  the Secretary [of the Treasury] may
"determine that an orga- nization is not a church which [ ] (i) is
exempt from taxation  by reason of section 501(a), or (ii) is
described in section  170(c)." 26 U.S.C. s 7611(d)(1)(A)(i), (ii).
Both of these  sections condition tax-exempt status on
non-intervention in  political campaigns. Section 501(a) states that
"[a]n organiza- tion described in subsection (c) ... shall be exempt
from tax- ation...." Id. s 501(a). Those described in subsection (c) 


corporations ... organized and operated exclusively for  religious ...
purposes ... which do[ ] not participate in,  or intervene in
(including the publishing or distributing  of statements), any
political campaign on behalf of (or in  opposition to) any candidate
for public office.


Id. s 501(c)(3). Similarly, section 170(c) allows taxpayers to  deduct
from their taxable income donations made to a corpo- ration


organized and operated exclusively for religious ... pur- poses ...
which is not disqualified for tax exemption  under section 501(c)(3)
by reason of attempting to ...  intervene in (including the publishing
or distributing of  statements), any political campaign on behalf of
(or in  opposition to) any candidate for public office.


Id. s 170(c)(2)(B), (D).


The Code, in short, specifically states that organizations  that fail
to comply with the restrictions set forth in section  501(c) are not
qualified to receive the tax exemption that it  provides. Having
satisfied ourselves that the IRS had the  statutory authority to
revoke the Church's tax-exempt status,  we now turn to the free
exercise challenges.


B. First Amendment Claims and the RFRA


The Church claims that the revocation of its exemption  violated its
right to freely exercise its religion under both the  First Amendment
and the RFRA. To sustain its claim under  either the Constitution or
the statute, the Church must first  establish that its free exercise
right has been substantially  burdened. See Jimmy Swaggart Ministries
v. Board of  Equalization, 493 U.S. 378, 384-85 (1990) ("Our cases
have  established that the free exercise inquiry asks whether gov-
ernment has placed a substantial burden on the observation  of a
central religious belief or practice and, if so, whether a  compelling
governmental interest justifies the burden.") (in- ternal quotation
marks and brackets omitted); 42 U.S.C.  s 2000bb-1(a), (b)
("Government shall not substantially bur- den a person's exercise of
religion" in the absence of a  compelling government interest that is
furthered by the least  restrictive means.). We conclude that the
Church has failed  to meet this test.


The Church asserts, first, that a revocation would threaten  its
existence. See Affidavit of Dan Little dated July 31, 1995  at p 22,
reprinted in App. at Tab 8 ("The Church at Pierce  Creek will have to
close due to the revocation of its tax  exempt status, and the
inability of congregants to deduct  their contributions from their
taxes."). The Church main- tains that a loss of its tax-exempt status
will not only make its  members reluctant to contribute the funds
essential to its  survival, but may obligate the Church itself to pay


The Church appears to assume that the withdrawal of a  conditional
privilege for failure to meet the condition is in  itself an
unconstitutional burden on its free exercise right.  This is true,
however, only if the receipt of the privilege (in  this case the tax
exemption) is conditioned


upon conduct proscribed by a religious faith, or ...  denie[d] ...
because of conduct mandated by religious  belief, thereby putting
substantial pressure on an adher- ent to modify his behavior and to
violate his beliefs.


Jimmy Swaggart Ministries, 493 U.S. at 391-92 (internal  quotation
marks and citation omitted). Although its adver- tisements reflected
its religious convictions on certain ques- tions of morality, the
Church does not maintain that a with- drawal from electoral politics
would violate its beliefs. The  sole effect of the loss of the tax
exemption will be to decrease  the amount of money available to the
Church for its religious  practices. The Supreme Court has declared,
however, that  such a burden "is not constitutionally significant."
Id. at 391;  see also Hernandez v. Commissioner, 490 U.S. 680, 700
(1989)  (the "contention that an incrementally larger tax burden 
interferes with [ ] religious activities ... knows no limita-


In actual fact, even this burden is overstated. Because of  the unique
treatment churches receive under the Internal  Revenue Code, the
impact of the revocation is likely to be  more symbolic than
substantial. As the IRS confirmed at  oral argument, if the Church
does not intervene in future  political campaigns, it may hold itself
out as a 501(c)(3)  organization and receive all the benefits of that
status. All  that will have been lost, in that event, is the advance
assur- ance of deductibility in the event a donor should be audited. 
See 26 U.S.C. s 508(c)(1)(A); Rev. Proc. 82-39 s 2.03. Con- tributions
will remain tax deductible as long as donors are  able to establish
that the Church meets the requirements of  section 501(c)(3).


Nor does the revocation necessarily make the Church liable  for the
payment of taxes. As the IRS explicitly represented  in its brief and
reiterated at oral argument, the revocation of  the exemption does not
convert bona fide donations into  income taxable to the Church. See 26
U.S.C. s 102 ("Gross  income does not include the value of property
acquired by  gift...."). Furthermore, we know of no authority, and
coun- sel provided none, to prevent the Church from reapplying for  a
prospective determination of its tax-exempt status and  regaining the
advance assurance of deductibility--provided,  of course, that it
renounces future involvement in political  campaigns.


We also reject the Church's argument that it is substantial- ly
burdened because it has no alternate means by which to  communicate
its sentiments about candidates for public office.  In Regan v.
Taxation With Representation, 461 U.S. 540,  552-53 (1983) (Blackmun,
J., concurring), three members of  the Supreme Court stated that the
availability of such an  alternate means of communication is essential
to the constitu- tionality of section 501(c)(3)'s restrictions on
lobbying. The  Court subsequently confirmed that this was an accurate 
description of its holding. See FCC v. League of Women  Voters, 468
U.S. 364, 400 (1984). In Regan, the concurring  justices noted that
"TWR may use its present s 501(c)(3)  organization for its nonlobbying
activities and may create a  s 501(c)(4) affiliate to pursue its
charitable goals through  lobbying." 461 U.S. at 552.


The Church has such an avenue available to it. As was the  case with
TWR, the Church may form a related organization  under section
501(c)(4) of the Code. See 26 U.S.C. s 501(c)(4)  (tax exemption for
"[c]ivic leagues or organizations not orga- nized for profit but
operated exclusively for the promotion of  social welfare"). Such
organizations are exempt from taxa- tion; but unlike their section
501(c)(3) counterparts, contribu- tions to them are not deductible.
See 26 U.S.C. s 170(c); see  also Regan, 461 U.S. at 543, 552-53.
Although a section  501(c)(4) organization is also subject to the ban
on intervening  in political campaigns, see 26 C.F.R. s
1.501(c)(4)-1(a)(2)(ii)  (1999), it may form a political action
committee ("PAC") that  would be free to participate in political
campaigns. Id.  s 1.527-6(f), (g) ("[A]n organization described in
section  501(c) that is exempt from taxation under section 501(a) may,
 [if it is not a section 501(c)(3) organization], establish and 
maintain such a separate segregated fund to receive contribu- tions


At oral argument, counsel for the Church doggedly main- tained that
there can be no "Church at Pierce Creek PAC."  True, it may not itself
create a PAC; but as we have pointed  out, the Church can initiate a
series of steps that will provide  an alternate means of political
communication that will satisfy  the standards set by the concurring
justices in Regan. 


Should the Church proceed to do so, however, it must under- stand that
the related 501(c)(4) organization must be sepa- rately incorporated;
and it must maintain records that will  demonstrate that
tax-deductible contributions to the Church  have not been used to
support the political activities conduct- ed by the 501(c)(4)
organization's political action arm. See 26  U.S.C. s 527(f)(3); 26


That the Church cannot use its tax-free dollars to fund such  a PAC
unquestionably passes constitutional muster. The  Supreme Court has
consistently held that, absent invidious  discrimination, "Congress
has not violated [an organization's]  First Amendment rights by
declining to subsidize its First  Amendment activities." Regan, 461
U.S. at 548; see also  Cammarano v. United States, 358 U.S. 498, 513
(1959) ("Peti- tioners are not being denied a tax deduction because
they  engage in constitutionally protected activities, but are simply 
being required to pay for those activities entirely out of their  own
pockets, as everyone else engaging in similar activities is  required
to do under the provisions of the Internal Revenue  Code.").


Because the Church has failed to demonstrate that its free  exercise
rights have been substantially burdened, we do not  reach its
arguments that section 501(c)(3) does not serve a  compelling
government interest or, if it is indeed compelling,  that revocation
of its tax exemption was not the least restric- tive means of


Nor does the Church succeed in its claim that the IRS has  violated its
First Amendment free speech rights by engaging  in viewpoint
discrimination. The restrictions imposed by  section 501(c)(3) are
viewpoint neutral; they prohibit inter- vention in favor of all
candidates for public office by all tax- exempt organizations,
regardless of candidate, party, or view- point. Cf. Regan, 461 U.S. at
550-51 (upholding denial of tax  deduction for lobbying activities, in
spite of allowance of such  deduction for veteran's groups).


C. Selective Prosecution (Fifth Amendment)


The Church alleges that the IRS violated the Equal Protec- tion Clause
of the Fifth Amendment by engaging in selective 


prosecution. In support of its claim, the Church has submit- ted
several hundred pages of newspaper excerpts reporting  political
campaign activities in, or by the pastors of, other  churches that
have retained their tax-exempt status. These  include reports of
explicit endorsements of Democratic candi- dates by clergymen as well
as many instances in which  favored candidates have been invited to
address congrega- tions from the pulpit. The Church complains that
despite  this widespread and widely reported involvement by other 
churches in political campaigns, it is the only one to have ever  had
its tax-exempt status revoked for engaging in political  activity. It
attributes this alleged discrimination to the Ser- vice's political


To establish selective prosecution, the Church must "prove  that (1)
[it] was singled out for prosecution from among  others similarly
situated and (2) that [the] prosecution was  improperly motivated,
i.e., based on race, religion or another  arbitrary classification."
United States v. Washington, 705  F.2d 489, 494 (D.C. Cir. 1983). This
burden is a demanding  one because "in the absence of clear evidence
to the contrary,  courts presume that [government prosecutors] have
properly  discharged their official duties." United States v.
Armstrong,  517 U.S. 456, 464 (1996) (internal quotation marks and


At oral argument, counsel for the IRS conceded that if  some of the
church-sponsored political activities cited by the  Church were
accurately reported, they were in violation of  section 501(c)(3) and
could have resulted in the revocation of  those churches' tax-exempt
status. But even if the Service  could have revoked their tax
exemptions, the Church has  failed to establish selective prosecution
because it has failed  to demonstrate that it was similarly situated
to any of those  other churches. None of the reported activities
involved the  placement of advertisements in newspapers with
nationwide  circulations opposing a candidate and soliciting tax
deductible  contributions to defray their cost. As we have stated,


[i]f ... there was no one to whom defendant could be  compared in order
to resolve the question of [prosecuto-


rial] selection, then it follows that defendant has failed to  make out
one of the elements of its case. Discrimination  cannot exist in a
vacuum; it can be found only in the  unequal treatment of people in
similar circumstances.


Attorney Gen. v. Irish People, Inc., 684 F.2d 928, 946 (D.C.  Cir.
1982); see also United States v. Hastings, 126 F.3d 310,  315 (4th
Cir. 1997) ("[D]efendants are similarly situated when  their
circumstances present no distinguishable legitimate  prosecutorial
factors that might justify making different pros- ecutorial decisions
with respect to them.") (internal quotation  marks and citation


Because the Church has failed to establish that it was  singled out for
prosecution from among others who were  similarly situated, we need
not examine whether the IRS was  improperly motivated in undertaking
this prosecution.


III. Conclusion


For the foregoing reasons, we find that the revocation of  the Church's
tax-exempt status neither violated the Constitu- tion nor exceeded the
IRS's statutory authority. The judg- ment of the district court is
therefore


Affirmed.