CCA 1248020: Chief Counsel says RFRA does not bar a tax levy on a parsonage allowance

Plain-English summary

Chief Counsel advised that the Religious Freedom Restoration Act does not generally bar the IRS from applying tax laws and collection remedies, including an administrative levy against a parsonage allowance. The memorandum relied on cases holding that an effective tax system is a compelling government interest and that uniform tax administration can be the least restrictive means of serving that interest. It also cited a case finding a levy source personally liable for failing to honor a levy against an employee-member's unpaid taxes.

Ruling snapshot

• Question: Does the Religious Freedom Restoration Act prevent an administrative tax levy against a parsonage allowance?
• Outcome: Advice
• Key authorities: IRC § 6331; Religious Freedom Restoration Act, 42 U.S.C. § 2000bb-1; United States v. Indianapolis Baptist Temple, 224 F.3d 627 (7th Cir. 2000)

Full text (IRS public release)

ID: CCA_2012090715501220 Number: 201248020
Release Date: 11/30/2012
Office: --------------
UILC: 6331.00-00, 6331.11-00

From: ---------------------
Sent: Friday, September 07, 2012 3:50:14 PM
To: ----------------------------
Cc: ----------------------
Subject: RE: Levies ------

I got confirmation from the appropriate practice group: While the Service is sensitive to cases potentially
raising the Religious Freedom Restoration Act, the RFRA does not bar application of the tax laws or
collection remedies (such as an administrative levy against a parsonage allowance in your case).
Although not within your Circuit, United States v. Indianapolis Baptist Temple, 224 F.3d 627, 630 (7th Cir.
2000) provides a general summary of the issue:

    Under RFRA, laws that substantially burden the free exercise of religion cannot be enforced
    unless the burden furthers a compelling government interest and is the least restrictive means of
    furthering that interest. 42 U.S.C. § 2000bb-1. In several pre- Smith Free Exercise challenges to
    the application of federal tax laws, the Supreme Court and various courts of appeals concluded
    both that maintaining a sound and efficient tax system is a compelling government interest and
    that the difficulties inherent in administering a tax system riddled with judicial exceptions for
    religious employers make a uniformly applicable tax system the least restrictive means of
    furthering that interest. See Hernandez v. Commissioner, 490 U.S. 680, 698-700, 109 S.Ct. 2136,
    104 L.Ed.2d 766 (1989) (challenge to federal income tax); United States v. Lee, 455 U.S. 252,
    258-60, 102 S.Ct. 1051, 71 L.Ed.2d 127 (1982) (challenge to social security tax); South Ridge
    Baptist Church v. Industrial Comm'n, 911 F.2d 1203, 1206-10 (6th Cir.1990) (challenge to
    premiums required by workers' compensation program); Bethel Baptist Church v. United States,
    822 F.2d 1334, 1338-39 (3d Cir.1987) (challenge to social security tax). The cases that have
    been decided under RFRA reach the same conclusion. See Browne v. United States, 176 F.3d
    25, 26 (2d Cir.1999) (challenge to federal income tax); Adams v. Commissioner, 170 F.3d 173,
    175-80 (3d Cir.1999) (same); Droz v. Commissioner, 48 F.3d 1120, 1122-25 (9th Cir.1995)
    (challenge to social security tax). We find this authority persuasive and see no reason to reach a
    different conclusion.

In keeping with the principles stated above, the court in U.S. v. Philadelphia Yearly Meeting of the
Religious Society of Friends, 322 F.Supp.2d 603 (E.D. Pa. 2004) concluded that, under RFRA, the levy
source (the Society of Friends) was personally liable for failure to honor a levy to collect the taxes of an
employee-member. The court found that, while under the facts of the case there was a substantial
burden on the free exercise of religion, the levy furthered, by the least restrictive means, the government's
compelling interest in quickly and inexpensively collecting the member's unpaid taxes. 322 F.Supp.2d at
611.