Religious Institutions Update: October 2011

Timely Topics

Benevolence funds are sorely in demand. Sometimes religious institutions receive contributions designated for a benevolence fund along with a recommendation or direction as to who should receive support. Are these tax-deductible gifts when made to a qualified charity? Some institutions record them as such without a thought. Others treat the gifts just like a contribution made directly to the individual, which is not tax deductible. In this example, there are two questions: whether the designation of purpose is permissible and whether there has been a designation of recipient that is permissible. With respect to the latter, the rule of thumb is that the donor’s intent should determine whether the transfer should be characterized as a tax-deductible contribution to a church or a nondeductible transfer to an individual. But proper characterization of the gift is nuanced enough that it makes sense to discuss with church-state counsel how your benevolence fund is structured and whether particular types of donations qualify as tax-exempt. Critical questions will be whether the donor’s recommendation is advisory only, the church retains full control of the donated funds and discretion as to their use, and the donor understands both.

Key Cases

Transfer of Parcel to Parochial School as Relocation Incentive Ruled Unconstitutional

In Wirtz v. City of South Bend, Indiana, Case No. 3:11-CV-325-RLM, 2011 WL 3922697 (N.D. Ind. Sept. 7, 2011), the court held that transferring a parcel of property to a parochial school as an incentive to cause the school to relocate to an abandoned downtown parcel violated the Establishment Clause. To encourage St. Joseph’s High School to relocate to and redevelop the downtown location, the City of South Bend adopted an ordinance allocating $1.2 million from the City’s economic development income tax fund for the purchase of a lot to transfer title to the high school to build athletic facilities and a parking lot that would be open to community use under certain circumstances. The plaintiffs sued as municipal taxpayers to prevent the transaction as a violation of the Establishment Clause. The court decided the case under one of the three prongs of the Lemon test as modified in recent years: whether the action appeared to favor or endorse a religion. The court observed that “[g]overnmental programs or actions that provide special benefits to specific religious entities are impermissible.” The City argued that the transaction should “be viewed in the context of many other transactions in which the City facilitates development by non-religious private entities, non-religious public schools, and other religious organizations.” Put otherwise, the City said that it had “neither more or less interest in promoting the religious message of St. Joseph’s High School” than it had in “promoting the particular business message of one of the businesses it aided” to facilitate economic redevelopment. The court agreed that the City had demonstrated a pattern of development that is neutral with respect to religion, but found that each transaction involved unique circumstances, a unique City action, and required separate negotiations, which the City had not shown were governed by any specific, neutral criteria making benefits available to all. Furthermore, the court ruled that the “objective, well-informed, reasonable observer would see no delineation between supporting the high school’s building project and supporting the religious school itself.”

Religious Drug Treatment Program and Homeless Shelter Did Not Violate Fair Housing Act

In Intermountain Fair Housing Council v. Boise Rescue Mission Ministries, Case No. 10-35519, 2011 WL 4347029 (9th Cir. Sept. 19, 2011), the court of appeals held that a Christian-based drug treatment program and homeless shelter did not violate the religious exemption to the Fair Housing Act’s (FHA) anti-discrimination provision by giving preference to persons of its own religion. Given the option by a judge, the plaintiff, Janene Cowles, enrolled in the residential drug treatment program rather than serve out her sentence. The court found that she gave the defendant the impression that she desired to participate in the drug treatment program due to its religious nature, but once enrolled in the program she objected to the mandatory religious activities. She was sent back to jail. Eventually, she filed a complaint with the Federal Department of Housing and Urban Development (HUD), alleging that she was discriminated against because of her sex and religion.

Another plaintiff, Richard Chinn, filed a complaint against the defendant’s homeless shelters, also alleging religious discrimination. Although the defendant welcomed people of all faiths, it required guests to acknowledge the religious nature of the shelter and its rules. The defendant also offered religious activities at its shelters, which Mr. Chin argued were required for full treatment, including regular food service. The court found that this religious exemption within the FHA was applicable: “Nothing in [the FHA] shall prohibit a religious organization ... from limiting the sale, rental or occupancy of dwellings which it owns or operates for other than a commercial purpose to persons of the same religion, or from giving preference to such persons, unless membership in such religion is restricted on account of race, color or national origin.” 42 U.S.C. § 3607(a).

The plaintiffs argued that the exception should not apply to the shelter, because homeless people who attend the rescue mission’s religious services are not necessarily Christian, but the court held that the defendant reasonably could assume that “those who come to its shelters, who read and complete the admission form that apprises them of defendant’s religious purposes, and who thereafter attend its religious services are Christian.” With respect to the drug treatment program, the court ruled that defendant had every reason to believe that Ms. Cowles was Christian, based on her letter and the program’s advertised character, but added that “[r]equiring participants to convert to Christianity before permitting them to graduate from the program constitutes ‘giving preference’ to Christian participants,” consistent with the FHA. The court did not consider an Establishment Clause challenge to the program or shelter because it was not raised. It also declined to address the defendant’s argument that the definition of a “dwelling” excludes a free homeless shelter, an argument the Secretary of HUD opposed in the amicus brief HUD filed in the case.

Florida Court Lacked Jurisdiction to Determine Whether the Governance of a Church Should Be Elder-Led or Congregation-Led

In Smith v. Jamison, 36 Fla. L. Weekly D2054a (Fla. 1st DCA Sept. 16, 2011), a dispute arose over how the First Baptist Church of Micanopy, Inc. was to be governed. The parties involved had divergent beliefs about church governance, which eventually led to the ousted group suing the church and its pastor for breach of fiduciary duty. The plaintiffs claimed that the defendants acted unlawfully by failing to follow the procedures set forth in the church’s articles of incorporation and bylaws for removing individuals as members and officers of the church, electing directors and amending the articles and bylaws. However, the circuit court concluded that it did not have jurisdiction over what it deemed “an ecclesiastical dispute.”

The plaintiffs alleged that the trial court erred in finding the matter to be an ecclesiastical dispute over which the court had no jurisdiction. They argued that the breach of fiduciary duty claim was purely secular, because the issue was whether the church, in removing certain members, electing new directors and changing its governing documents, contravened chapter 617, Florida Statutes. Furthermore, because the church was incorporated as a nonprofit entity under chapter 617, it was required to abide by the statutory provisions requiring certain corporate actions to be taken in accordance with the entity’s articles of incorporation or bylaws.

The First District Court of Appeal agreed with the circuit court that the essential dispute in this case was over how the church should govern itself, which was a religious matter. The court further explained that any inquiry into whether the church adhered to its bylaws in excluding members necessarily entangled the court in religious matters protected by the First Amendment. Finally, the court held that exercising jurisdiction in this instance would be tantamount to intervening on behalf of a group espousing particular doctrinal beliefs.

District Court May Sever a Zoning Ordinance by Striking Secular Uses When Religious Uses are Excluded

In Covenant Christian Ministries, Inc. v. City of Marietta, Case No. 10-11966, 10-12222, 2011 WL 3903432 (11th Cir. Sept. 7, 2011), the court of appeals affirmed the district court’s authority to remedy an ordinance’s facial violation of the “equal terms” provision of the Religious Land Use and Institutionalized Persons Act (RLUIPA) by striking other assembly uses from the list of permitted uses in residential zones, rather than by adding language permitting religious assemblies in the religious zones. The City argued that “private parks, playgrounds, and neighborhood recreation centers” were not proper comparators or “assembly” uses like a church, because people gather for different reasons. The court disagreed. On the other hand, the court found that the striking of “private parks, playgrounds, and neighborhood recreation centers” from the list of permitted uses was consistent with the purpose of the zoning restriction to limit use to low-density, single-family dwellings. Consequently, the court also affirmed the district court’s award of $1.00 in nominal damages and no compensatory damages for the violation, affirmed the district court’s ruling that the church did not acquire a vested right to develop the church on property never permitted for the purpose, and dismissed the church’s demand for injunctive relief.

To acquire a vested right to development under a Georgia law, a property owner must prove four conditions including having obtained a valid building permit. The church had argued that upon finding the ordinance in violation of RLUIPA, the district court should have added language allowing churches in the zone to the ordinance, whereupon it would have gained a vested right to build the church. But the court held that any such interlocutory order by a district court would not have been final so as to trigger said rights, and that the church should have known that the City could always amend its ordinance to comply with RLUIPA by denying all assembly uses. The court held the church’s request for injunctive relief moot, because the city fundamentally changed the offending ordinance in 2008 to permit churches in the zone, subject to special use approval, and because the city had a history of attempting to comply with RLUIPA.

Association Lacked Standing to Challenge FEMA-Financed Relocation of Religious School under the National Historic Preservation Act

In Friends of St. Frances Xavier Cabrini Church v. Federal Emergency Mgmt. Agency, Case No. 10-30918, 2011 WL 4435792 (5th Cir. Sept. 26, 2011), the court of appeals ruled that an association comprised of individuals who were current and former parishioners of Cabrini Church, alumni of St. Frances Xavier Cabrini and Redeemer School (Cabrini School), preservationists, architects, citizens and residents lacked standing to assert a claim that the Federal Emergency Management Agency (FEMA) was required under the National Historic Preservation Act (NHPA) to include Holy Cross School campus in a protected Area of Potential Effects (APE) within the meaning of the NHPA. In the aftermath of Hurricanes Katrina and Rita in 2005, Holy Cross School, an all-boys parochial school, applied for, and FEMA granted, public assistance funds to construct a new campus roughly six miles away on the site of Cabrini School, also damaged by the hurricanes. Cabrini Church was a historic site, but the Archdiocese of New Orleans received permission to demolish it after salvaging numerous historically significant objects due to the damage the property sustained. The Archdiocese also received permission to demolish all but one building on the campus of Holy Cross. The association filed suit alleging injury resulting from FEMA’s neglected historic preservation review of the old Holy Cross property. The court ruled that parties complaining of such deficiencies must have a sufficient “geographical nexus” to the property in question and that the association lacked any such nexus, because it existed to protect a property “some six miles away from the Holy Cross campus....” The court also rejected standing for parties alleging mere “procedural deficiencies without any tangible personal injury beyond ‘his and every citizen’s interest in personal application of the Constitution and laws.’”

Ministerial Exception Not a Bar to Particular Sexual Harassment Claims, But a Bar to Reliance on Minister’s Speech to Congregation

In Prince of Peace Lutheran Church v. Linklater, Case No. 66, 2011 WL 4374963 (Md. Sept. 21, 2011), the Maryland Court of Appeals ruled that the ministerial exception doctrine did not preclude a former music director from asserting all county-code based sexual harassment claims against her church, pastor, synod and bishop, because the church did not claim that there was any doctrinal reason for the alleged harassment. The court permitted a hostile work environment and gender discrimination claim to go forward based on allegations, inter alia, that defendants posted to a bulletin board a defaced picture of her “horribly stabbed numerous times.” The court ruled that the ministerial exception doctrine prohibited a quid pro quo sexual harassment claim, because the latter “would necessitate an evaluation of [plaintiff’s] job performance, which would run afoul of the ministerial exception.” Over vigorous dissent, the court ruled that the plaintiff could not premise her claim on the church pastor’s speech informing the church congregation of the pending lawsuit and proclaiming his innocence of misconduct. The court also held that the ministerial exception doctrine precluded plaintiff’s claims for retaliatory harassment, constructive discharge, intentional infliction of emotional distress, negligent retention and supervision, breach of contract and breach of implied contract, because evaluation of these claims would require inquiry into various employment actions taken by the church and matters of church governance and discipline.

Hasidic Jews State Claim Against Villages for Selective Enforcement

In Mosdos Chofetz Chaim, Inc. v. Village of Wesley Hills, Case No. 08-CV-156, 2011 WL 4445626 (S.D.N.Y. Sept. 26, 2011), the court ruled that the plaintiffs adequately pled that the four villages and their former officials, acting in their official capacities, violated the plaintiffs’ equal protection rights so as to avoid immunity the defendants might otherwise have under the so-called Noerr-Pennington doctrine. The plaintiffs alleged the villages did this by allegedly discriminatorily enforcing laws against them, as opposed to other non-religious and religious non-Jewish similarly-situated land uses and developments, even where such developments would affect the same purported governmental interests of water, sewer and traffic in a greater fashion. The court found that the plaintiffs, Hasidic Jews, proffered eight comparators similarly situated in all material respects such that a prudent person would think them roughly equivalent. The court rejected the defendants’ argument that the plaintiffs must show identical comparators. Because the court concluded that the plaintiffs adequately alleged a selective enforcement claim sufficient to defeat Noerr-Pennington immunity, the court also permitted the plaintiffs to go forward with most of their other causes of action premised on free exercise, the Establishment Clause, racial discrimination, equal privileges and immunities, freedom of association and similar state constitutional claims. The court affirmed dismissal of all claims against the individual defendants in their individual capacities, claims requiring statutory notice under New York law that had not already been provided, and some other claims.

New York Court Rules that it Lacks Jurisdiction Over Pastor’s Common Law Claims

In Washington v. African Methodist Episcopal Church, Inc., Case No. 11-CV-6087-CJS, 2011 WL 4352404 (W.D.N.Y. Sept. 16, 2011), the court ruled that the Free Exercise Clause of the First Amendment precluded subject matter jurisdiction over a pastor’s and his wife’s claim against their former church and bishop based on breach of contract, intentional infliction of emotional distress, prima facie tort, and loss of consortium. The pastor argued that the bishop and conference terminated him in malice without reason or bona fide relation to his job performance. The plaintiffs argued that the court could assert jurisdiction over their New York common law claims, because the New York state courts had done so based on their authority under the New York Religious Corporations Law. But the court found that “[i]t became apparent at oral argument that both sides were relying on the [AME Church] Book of Discipline to determine whether the transfer was proper. To adjudicate this question, the court would necessarily have to interpret the AME Church’s spiritual guidance, thus entangling itself in Defendant’s Free Exercise rights under the First Amendment.”

Louisiana Presbytery Enjoined from Preventing Sale of Church Property

In Carrollton Presbyterian Church v. Presbytery of South Louisiana of the Presbyterian Church, Case No. 2011 CA 0205, 2011 WL 4433571 (La. App. 1st Cir. Sept. 14, 2011), the court of appeals affirmed the trial court’s grant of summary judgment and permanent injunctive relief, prohibiting the Presbytery of South Louisiana from taking jurisdiction over Carollton Presbyterian Church’s session to prevent Carollton from selling its property. The court adopted a “neutral principles of law” approach to examining the Presbyterian Church (U.S.A.) Book of Order in the context of Louisiana trust law. The court ruled that the church invoked an exception within the Book of Order to the rule that all property belongs to the Presbytery and, even if it did not, Louisiana trust law would apply to vindicate church ownership of its own property. The court rejected the Presbytery’s argument that language in the temporary restraining order inhibited its free exercise of religion, because the temporary restraining order merged into and was superseded by the permanent injunction.

Religious Institutions in the News

The United States Supreme Court heard argument on the ministerial exception doctrine.
See http://www.supremecourt.gov/oral_arguments/argument_transcripts/10-553.pdfPresident

Obama’s jobs bill calls for a cut in the value of charitable deductions.
See https://www.philanthropy.com/article/Jobs-Bill-Would-Limit-Charity/157891

New report reveals that faith communities are entering this decade less healthy than in the past.
See http://faithcommunitiestoday.org/decade-change

Southern Baptists are considering a name change.
See http://www.christiancentury.org/article/2011-09/southern-baptist-president-floats-name-change

Another case has been filed to declare the clergy housing tax break unconstitutional.
See http://www.huffingtonpost.com/2011/09/20/atheists-target-clergy-housing-tax-break_n_970596.html

The Department of State has identified eight countries that are the worst offenders of religious freedom.
See Original website reference no longer available (6/29/12)