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August 14, 2020

Submitted Electronically & By Mail

Internal Revenue Service
CC: PA: LPD:PR (Notice 2020-36), Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044

SUBJECT: IRS Notice 2020-36 Public Comments

Dear Sirs and Madams:

We represent the interests of the Evangelical Lutheran Church in America, the General
Synod of the United Church of Christ, General Council on Finance and Administration of The
United Methodist Church, the Protestant Episcopal Church in the United States of America (also
known as The Episcopal Church), and the General Synod of the Reformed Church in America in
the above referenced matter. Each is a central administrator of a group ruling tax exemption
from the Internal Revenue Service that recognizes each of them and entities that are religiously
affiliated with them in a faith community as public charities. Filing separate letters of comment
are the Presbyterian Church (U.S.A.), the Executive Committee of the Southern Baptist
Convention (and some state or regional conventions), and the United States Conference of
Catholic Bishops. Each has a different self-understanding of the relationship between the
religious denominations represented here and their affiliated entities that express that faith in the
larger community. None of them exercises the sort of uniform control or supervision over their
faith communities envisioned in the Proposed Revenue Procedure outlined in Notice 2020-36.
All share the conviction that the Proposed Revenue Procedure is impractical, impolitic and
impermissibly burdensome to religious organizations and the protected rights of religious
communities.

In response to the proposed changes to the group exemption letter program in Notice
2020-36, we respectfully submit these comments on behalf of these national religious
denominations representing some of the largest group exemption holders in the country. As
central organizations, they facilitate the tax-exempt recognition of the religiously affiliated
entities within their faith communities throughout the country. In total, they cover nearly
100,000 “subordinate organizations” which carry out the work of their faith in local churches,
charities, schools, camps, conference centers, and other entities that express that faith through
worship, education, action and service. These denominations are not identical to each other in
theology, polity or structure. That they hold a “group ruling” may, for some of them, even be at
odds with their own theology and how adherents and agencies see their relationships within and
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Comments on IRS Notice 2020-36
August 14, 2020

to the denomination. Their willingness to participate in the group ruling program has depended
from the outset upon an understanding that the language employed, “subordinate”, “control”, and
“supervision”, connoted merely a nomenclature of convenience for the Service and had no
bearing on the internal governance of the churches themselves. But primarily these entities hold
a group ruling for their faith community as an accommodation both to the Internal Revenue
Service (“IRS” or “Service”) which is spared the administration of tens of thousands of church
groups, and to the faith communities themselves, whose local churches and agencies lack the
resources and sophistication to parse the nuances of the Internal Revenue Code, but yet are
entitled by statute to exemption.

The signing denominations display a diverse range of polities and structures that reflect
each of their theologies about how their religion’s faith is to be carried out in the world. The
Proposed Revenue Procedure, if adopted, would wreak havoc in the broader religious community
in that it demands a sense of uniformity and redefines “supervision or control” in ways that are
theologically anathema to them, and thus both unworkable in practice and unconstitutional in
application. It would impress on them a rigid and controlling hierarchical view of polity and
structure which they reject on theological grounds, and thus violate rights protected under the
Religious Freedom Restoration Act (“RFRA”) and the First Amendment.

This letter asks that if the IRS adopts a revamped procedure for the administration of the
group ruling exemption process, it make an accommodation to allow the faith communities to
continue their status quo. Otherwise, the group ruling process would constitute such a
substantial burden on these communities that litigation would result and, if unsuccessful, they
would abandon the group ruling process going forward. We do not believe the IRS desires a set
of modifications that would burden the expression of religious beliefs in ways that would range
from making group rulings overwhelmingly unmanageable to obviously unconstitutional.

I. Background

The burden created by these requirements is substantial. And it directly contradicts the
express concessions made when the group exemption letter program was begun by the IRS. No
one disputes the considerable burden that would result if the Service was required to separately
review the hundreds of thousands of exemption applications associated with group rulings issued
to central organizations over the years. In establishing the group exemption letter program, the
IRS instead opted to permit a central organization to assume responsibility for the tax-exemption
review process within the parameters of the group ruling letter issued to it. In describing this
process, the Service’s own internal employee training documents state, “[I]t is well to remember
that the entire group exemption program is an administrative procedure, devised by the Service,
to ease the burden of individually processing as many as a million exemption applications,

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August 14, 2020

returns, and reports by processing some 3,000 group applications.” 1 This is directly reflected in
the history of the group exemption process for churches.

One of the earliest group ruling determination letters granted to what was then known as
the National Catholic Welfare Conference (today the United States Conference of Catholic
Bishops) identifies “subordinates” of the “Roman Catholic Church in the United States” and not
the exemption holder NCWC. 2 Further accommodation reflected the extension of the exemption
process not just to those Catholic agencies “controlled by” but also “operated … in connection
with” the Roman Catholic Church—as identified by submission of the Official Catholic
Directory, accompanied by statements that “to the best of its knowledge” each organization listed
was a nonprofit, did not inure net earnings to individuals, and did not lobby as a substantial
activity. 3 Correspondence surrounding the issuance of this determination letter indicates that the
negotiation process was steered by the IRS to eliminate the burden of examining the enormous
number of applications from Catholic agencies by consolidating them under a single group ruling
based on their religious affiliation, 4 and not control or supervision. A June 2007 version of IRS
Publication 4573 explains that this administrative convenience continues to assist the IRS,
“which need not process separate applications” and does not issue separate determination letters
to the subordinate organizations, but instead refers inquiries to the central organization to verify
to donors that a subordinate is on its official subordinate list. 5

In line with their unique histories and polities, each denomination maintains and manages
its group ruling in a way that is appropriate to its religious expression within the boundaries of
the existing program under Revenue Procedure 80-27:

Evangelical Lutheran Church in America (ELCA)

The ELCA is a connectional polity that has characteristics of hierarchal and
congregational polities. The ELCA does not govern or supervise each of its affiliated agencies in

1
I.R.S. 1979 Exempt Organizations Continuing Professional Education, Text O. Group
Exemptions, Section 2. available at https://www.I.R.S..gov/pub/I.R.S.-tege/eotopico79.pdf
(Emphasis added).
2
There is no “Roman Catholic Church in the United States” as a distinct civil agency. It is a
faith community with many thousands of church related entities carrying out the works of the
religion. Authority is decentralized and exercised by dioceses, parishes, orders and other
canonical agencies. Tabbing the NCWC was the best the IRS could hope for in finding a
central agency to hold the exemption and look after the process. The group exemption
process was as much an accommodation for the NCWC but even more so for the IRS.
3
I.R.S. Det. Ltr. National Catholic Welfare Conference, March 25, 1946.
4
Letter from Howard Carroll, General Secretary, The National Catholic Welfare Conference,
to the Archbishops, Bishops, and Superiors of Religious Orders (April 2, 1946) (on file with
the Catholic University of America Library).
5
I.R.S. Pub. 573, Rev. 6-2007.
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August 14, 2020

the United States. The ELCA’s group ruling, held since its formation in 1988, now covers nearly
10,000 congregations, synods, colleges and universities, seminaries, social ministry
organizations, camps, and conference centers along with their supporting organizations.
Although the ELCA maintains an online directory of those organizations affiliated with it, those
organizations are not required to be included in the group ruling but instead choose whether to
participate. This approach expresses the ELCA’s connectional polity. Self-governing
congregations share a confession of faith and are encouraged to adopt common constitutional
provisions regarding the nature of the church, its purpose, congregational powers, and on matters
such as membership, property, and ministers, but the local governance structure is left to each
congregation. Control by the ELCA over each of these ministries is inconsistent with the
doctrine of the ELCA.

The Episcopal Church

The structure of The Episcopal Church is hierarchical, comprised of three tiers within the
denomination that range from the national church to the regional dioceses then to the local
congregations, numbering approximately 7,000 parishes, missions, and other congregations. The
majority of these dioceses and congregations choose to be included in the denominational group
ruling that dates back to the 1940s, along with many Episcopal schools, retirement homes, soup
kitchens, and other charities. Dioceses and congregations are, by definition, subject to the
denomination’s governing documents, its Constitution and Canons; and non-ecclesiastical
affiliated entities are required to expressly acknowledge the authority of these instruments.
Although requiring uniformity in a number of areas, the Constitution and Canons also permit
regional and local autonomy on other subjects. This allowance for local variation, along with
differences in state law governing corporations and unincorporated associations, has produced a
diversity of governing structures and instruments at the diocesan and local levels, all permissible
within the Church’s polity as long as they are not in conflict with the Church’s Constitution and
Canons.

Reformed Church in America (RCA)

The RCA has a presbyterian polity, in which local churches are divided into regional
synods and classes, all of which fall under the General Synod as the parent organization for IRS
purposes. Aside from serving as the sole member of two corporate agencies that administer
benefits and lending to the denominational organizations, the General Synod exercises no
governance or supervision over RCA congregations. The RCA group ruling includes nearly 900
subordinate organizations. The RCA maintains a group exemption roster that is separate from its
Directory of denominational organizations. Organizations submit a written request to participate
along with copies of their governing documents (which demonstrate formation and are not a
denominational requirement). Congregations and other participating agencies have autonomy
over their choice of governance except as it relates to the limited requirements of the religious
provisions of the RCA Constitution in the Book of Church Order.

United Church of Christ (UCC)

The group ruling exemption letter for the United Church of Christ was issued in 1964 and
currently includes approximately 5,000 charitable and religious organizations. These
organizations are recorded in the UCC Yearbook, which includes members of the group ruling as
well as other organizations affiliated with the denomination and a compilation of annual church
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August 14, 2020

demographic and operational information provided on a voluntary basis. Pursuant to its

governance, Associations within the UCC are solely responsible for developing criteria by which
a local church gains standing within the denomination. Once an Association grants standing in
the denomination, the local church is automatically included in the UCC group ruling as a matter
of convenience. However, as the churches are completely autonomous and self-governing, a
local church could also choose to leave the group ruling of its own accord. This autonomy is
more than a mere administrative option, but rooted in the sincere religious belief that
congregational self-governance is the nearest approximation of the isolated and self-governing
Christian churches established in the first century.

The United Methodist Church (UMC)

The group ruling determination letter granted to The United Methodist Church’s Council
on Finance and Administration dates back to 1974. The structuring of the group ruling under the
Council came about because the connectional polity of The United Methodist Church dictates
that it remain a nonjural entity under its Book of Discipline. As such, The United Methodist
Church as a denomination possesses no legal capacities, cannot hold title to property, and has no
officers, directors, agents or employees. The denomination’s group ruling, administered by its
agency now known as the General Council on Finance and Administration, now includes more
than 30,000 organizations affiliated with the denomination. These include local churches,
conferences, commissions, committees, and church agencies. Participation in the group ruling is
discretionary, and some United Methodist organizations apply directly for tax exemption. A list
of subordinate organizations is not published, but individual subordinates are given individual
letters establishing their status under the group exemption.

Together these denominational agencies share an interest in the Proposed Revenue

Procedure based on their historic participation in the group ruling program. They represent
decades of experience under the existing system, adapting the process to accommodate their own
polities and beliefs. Together there are just under 100,000 “subordinate” entities, 6 with new
“subordinates” being formed and eligible to participate under their denominational group rulings
on a regular basis. Under Notice 2020-36, the changes suggested threaten their ability to
continue participating in the group exemption process, immensely increase the complexity of
compliance where subordinates are closely aligned by their shared faith, and present a significant
risk of forcing them to choose between their religious beliefs as expressed in their organizational
structure and compliance with a tax administration program.

While there are many aspects of the Proposed Revenue Procedure that must be addressed,
we call attention specifically to the way the requirements for uniform governing instruments and
the newly-defined control and supervision requirements will contribute to these problems unless

6
We may refer to the participants in the group exemption process as “subordinates,” even
though that term relates more to hierarchical agencies. The participating affiliates are more
aptly described as denominational “affiliates.” They share faith and beliefs including faith
and beliefs about the limits of what the denominational can faithfully ask. Whether we call
them “subordinates” or “affiliates”, the relationship should not be understood as reflecting
any form of corporate hierarchy.
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Comments on IRS Notice 2020-36
August 14, 2020

additional modification or clarification is provided concerning their application to religious

organizations.

II. The Uniform Governing Instrument Requirement is Unworkable and Impractical.

The Proposed Revenue Procedure requires that subordinate organizations participating in

a group exemption ruling must adopt a uniform governing instrument. Where a group exemption
letter includes subordinate organizations with different purposes under Section 501(c)(3), there
must be a uniform governing instrument for each category of subordinate organizations.
However, there is no clarification of what is required to meet the criteria of a uniform governing
instrument or of how finely or broadly categories of organizations are to be defined. This
presents significant obstacles, both from a practical and polity standpoint.

Considering the decades during which these religious organizations added first
thousands, and then tens of thousands, of subordinate organizations to their group rulings, the
impact of this requirement going forward is enormous. Even if it were possible to comply, it
would represent an overwhelming amount of work to require subordinates to align their
charitable missions within standard categories and undertake the governance process of adopting
or amending documents to conform to a uniform standard that has not been set forth with any
specificity.

Further, the very act of requiring uniform governing instruments is theologically

untenable in these denominations that have chosen respective ecclesiastical structures and
relationships that best express their beliefs about where authority resides and how it is exercised,
and how and by whom ultimate decisions about key theological issues are made. The difficulty
of straddling both civil and theological requirements for such structures is both well-documented
and well-litigated. 7 However, the current proposal would introduce new and unprecedented
levels of interference with religious denominations’ ability to express their own polity by
attempting to dictate requirements on the corporate structures of religious denominations based
solely on their source of documented tax-exempt status.

Among these commenters, it is notable that, for disparate reasons, churches whether
organized hierarchically or congregationally (or connectionally) only have authority to proscribe
documents based on their profession of a common creed, shared form of worship, or united
theological and pastoral purposes. On the hierarchical side of the spectrum, The Episcopal
Church regards each “subordinate” part—its dioceses and local congregations—as local
manifestations of a unitary whole that requires compliance with the Church’s central governance
but also permits each “affiliate” the freedom to adopt civil governing documents according to its
operational needs through unique documents. Variations among organizations reflect not only
each entity’s state law requirements, but the individual entity choices concerning how best to
operate in the faith and public communities.

7
Mark E. Chopko, Principal Civil Law Structures: A Review, 69 Jurist 237 (2009); Patty
Gerstenblith, Civil Court Resolution of Property Disputes among Religious Organizations, in
Religious Organizations in the United States (Carolina Academic Press 2006).
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Comments on IRS Notice 2020-36
August 14, 2020

The Reformed Church in America utilizes a presbyterian polity in which specific entities
are autonomous except for a few limited requirements dictated by its Book of Church Order.
Likewise, in the ELCA, congregations and denominational organizations have no mandated
constitutional or governing provisions beyond a handful that express a common theology and
ecclesiology. This is intentional. The denomination reflects theological and historical
prohibitions on mandating governing instruments rooted in the Reformation and its rejection of a
fixed decisional hierarchy. As such, a top-down approach to governance would be antithetical to
Lutheran belief. Church congregations that predate the formation of the ELCA in 1988 can
choose to retain their existing documents. Some of these ELCA and RCA congregations also
span more than one denomination. The ELCA is in full communion with the RCA, Episcopal,
UCC, and UMC denominations (among others), and some congregations are therefore affiliated
with more than one denomination. Mandated uniformity thus can have adverse consequences
across denominations as well as within them.

In the polity expressed by the UCC and UMC, the challenges to creating uniform
governing documents are even greater. For example, the UCC churches are legally and
ecclesiastically autonomous because of the concerted choice to mirror the self-governing and
geographically isolated first-century Christian churches. Thus, their structures reflect a direct
expression of religious belief and practice. Similarly, UMC’s Book of Discipline and its more
than 200-year religious history reflect a practice of permitting denominational churches freedom
to determine for themselves the best way to carry out their missions in the local communities,
which includes the structure of governing documents related to the organization’s mission. This
is similar to the approach under the Reformed Church’s Book of Church Order, which requires
its denominational entities to be permitted autonomy in matters with the exception of some
limited governance requirements.

Even setting aside the theological implications of requiring a uniform governing

instrument, the practical considerations make the implementation of this requirement absurd
without additional clarification. Holders of group rulings most commonly include those
organizations that are sufficiently large to have a diversity of subordinate organizations across
the country. This fact means that a uniform governing instrument would have to be acceptable to
each state’s criteria for tax-exempt associations or corporations.

Additionally, without clear guidance as to categories of similar organizations that must

share a uniform governing document, it is not possible to determine the level at which they must
share governance in their documents. By way of example, schools within a group ruling may be
a category unto themselves, but even within that category there are substantial operational
differences that mandate different governance structures. Practical considerations inform the
appropriate governance whether the school provides daycare and preschool services, educates
elementary and high school students, or operates as a college or university. And within each of
those classifications, the entity may be run by a single local church with only simple governance
or require more complex structures where it is operated by a coalition of local churches or
religious agencies. Independent religious schools would be affiliated with their respective
denominations but could require more robust governing documents to reflect their status with the
church. The issue persists even at the denominational level within churches. For example, the
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Comments on IRS Notice 2020-36
August 14, 2020

UMC, like many denominations, has established various kinds of core denominational entities,
each of which carry out the work of the church in distinct and specific ways. Thus, these entities
have unique structures dictated by the UMC Book of Discipline, based on their respective
functions and purposes within the church—e.g. “local churches” and “districts” which are the
most localized entities within the denomination, have roles and structures which are intentionally
different, as the districts coordinate and support the ongoing and direct missions and ministries
of local churches and their pastors. While these core entities may be classified as a “church” for
tax-exemption purposes, for both practical and theological reasons, their specialized functions
could not be carried out if subject to a uniform governance structure.

We also note that a broader harm exists, which is that the subordinate organizations
would be coerced to adopt uniform governing instruments to match the central standard for
inclusion in the group ruling despite being at odds with the optimal, and actual, operations of the
organization. After decades of recognizing that church organizations express their religious
beliefs about structure and governance as closely as possible through the available civil
structures, the tax-exemption process would force them into wholly incompatible structures, both
for purposes of uniform governing instruments and, as discussed below, for control and
supervision. For these reasons, the Proposed Revenue Procedure must address both the polity
and practical considerations of requiring a uniform governing instrument.

III. The Control or General Supervision Requirements Directly Contradict Church

Polity Choices and Are Unworkable in Fact.

The Proposed Revenue Procedure attempts to define criteria by which central

organizations establish general supervision and control over subordinate organizations. This is
in addition to establishing affiliation, which the denominational relationship generally addresses
for the organizations joining these comments. However, Notice 2020-36 provides that either
control or general supervision must be shown by the central organization. These terms are newly
defined to require either:

General supervision: established by annually obtaining, reviewing, and retaining

information on the finances, activities, and annual filing compliance of the subordinate
organization and transmitting written information to subordinates about maintaining tax-
exempt status;

or

Control: established by appointing a majority of the subordinate organization’s

governing body or where a majority of the subordinate organization’s governing body are
also members of the central organization’s governance.

For central organizations with a substantial number of subordinates, anywhere from

5,000 to more than 30,000 in the case of the church denominations represented here, the option
to provide control is unattainable. For theological reasons, except for perhaps a handful of
denominational entities closely tied to the group ruling holder, the central organizations cannot
select the boards of affiliates. As a practical matter, it would not be possible, or even good
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August 14, 2020

governance practice, to have significant overlap between the central and subordinate
organizations’ governance or for the central organization to be adequately informed to appoint
governing bodies in each of the subordinate organizations. Based on the sheer volume of
affiliated organizations, meeting this requirement would either devolve to a rubber-stamp process
of approving governance under significant administrative burden or require an active process that
unconstitutionally interfered where a church had chosen a polity of self-governing and
autonomous local churches and religious organizations. “Control” being contrary to the
governing theology is not a tenable choice.

Likewise, the newly-defined requirement of general supervision flies in the face of both
three-quarters of a century of history under the group ruling process and the religious structures
chosen by church denominations. Notably, although the term “subordinate” describes the
organizations attached to a central group ruling, the IRS has never required direct control or
supervision by the central organization, or even a parent-subsidiary corporate relationship. As
noted above, the Service has long considered the terms of general supervision or control within
the broader context of the relationship between subordinates and the group ruling holder. Nor,
despite frequent litigation attempts, does the tax-exempt relationship between central and
subordinate organizations displace corporate or liability law for purposes other than tax-
exemption.

As it has been maintained to date, the respective group rulings rely on subordinate
organizations providing information related to their tax-exempt status to the central organization,
which then has the responsibility to “see that the information is complete and certify to the IRS
that each subordinate is qualified” to be included under the terms of the ruling. 8 Notably, under
the current absence of a definition of “general supervision and control”, the Service explicitly
directs examiners to the 1987 Exempt Organizations Continuing Professional Education (EO
CPE) text for procedures that “expand[] upon” its directives. Notably though, the IRS does not
provide in the EO CPE text any requirement that central organizations have either constructive or
explicit supervision or control over the subordinate’s activities. It does not require a qualifying
tax relationship, such as a subsidiary or controlled corporation, nor does it require that if a
subordinate is incorporated the governance documents include any explicit relationship to or
control by the central organization. Of the specific information a central organization must
currently provide to the IRS, only two items go to establishing even a low level of supervision or
control relative to what is now proposed. 9

The existing Revenue Procedure and guidance has afforded church denominations access
to the group ruling process in a way that does not intrude on ecclesiastical determinations while

8
Carroll, supra note 3.
9
IRS Pub. 557, page 8 (Feb. 20, 2019) (items indicative of “general supervision and control”
include: 1) a sample copy of a governing instrument that is typical of one that would be
adopted by a subordinate (although it may not be actually used by the subordinate in fact);
and 2) an affirmation from the central organization that, to the best of its knowledge, the
description of activities and purposes provided by the subordinate is as stated).
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Comments on IRS Notice 2020-36
August 14, 2020

alleviating the IRS burden of reviewing hundreds of thousands of additional tax-exemption

applications. Under the proposed new definitions, those ecclesial relationships, particularly in
congregational denominations, would be clearly at odds with the requirements for compliance
with the group exemption program. To date, “general supervision” has been viewed by church
group ruling holders primarily through the lens of the central organization’s expression of its
religious beliefs, extending tax-exemption inclusion to those entities that carry out the actions of
its faith. That “central-subordinate” organization relationship is in the context of affirming
shared faith values. It is not one of enforced disclosure and evaluation of financial information or
the activities of the subordinates apart, from broad representations of compliance with the terms
of the group determination letter.

Requiring more would be inconsistent with both polity and theology for the
denominations joining these comments. In most cases, their governing instruments extend no
further than to require restatement of religious beliefs as expressed in specific confessional or
canonical documents. Affiliated organizations, whether local churches, other entities, schools,
charities, or other entities, are not required to deliver granular information on their finances and
activities to the holder of the group ruling. In many cases, the foundational beliefs of the
denomination not only do not support the authority of the central organization to demand such
details, but outright prohibit them from imposing such requirements on the autonomous and self-
governing entities affiliated within the faith community. Much of this has been discussed in the
context of the uniform governing instrument objections above, but applies equally to the inability
to comply with the proposed definitions of general supervision and control.

Further, the Proposed Revenue Procedure attempts to mitigate the effect of compliance
required by grandfathering in existing subordinate organizations to a group ruling. But applying
this solely to subordinate organizations added after the effective date of the Revenue Procedure
does nothing to alleviate the harms done by this requirement. At a minimum, it creates the
unacceptable outcome that newly-added organizations must choose adherence to the
denominational standard of self-governance embedded in the religious belief structure and
permitted to pre-existing church organizations at the cost of conducting their own tax-exemption
process and continued compliance. Under these group rulings, the vast majority of subordinate
organizations already qualify separately for tax-exemption as churches which are not required to
seek a determination letter. Instead, they choose to enter into the group ruling of their
denomination to verify their affiliation and tax-exemption to the public for receipt of grants or
other sources of funds such as Amazon Smiles, which would be lost if the proposed procedure
becomes final.

For these reasons, the Proposed Revenue Procedure must provide for a definition of
control and supervision that accounts for the limits imposed by church polity and the practical
considerations of religious group ruling holders.

IV. The Proposed Revenue Procedure Violates RFRA and the First Amendment

America’s religions are, first and foremost, communities of faith. They take legal form to
function within broader society, but that secular identity does not supplant their ecclesiastical
identity or its constitutional significance. A denomination is formed when groups of local
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August 14, 2020

congregations or regional churches agree to come together in communion with each other for the
common purpose of discerning and carrying out the will of God, an intention reflected in the
ecclesial structures and governance of the church body. One of the most venerable rights of
religious institutions in the United States is self-governance. Serbian Eastern Orthodox Church
v. Milivojevich, 426 U.S. 696, 708-09 (1976). This right is fundamental to the nature of religious
institutions which may choose a wide variety of legal forms, from an unincorporated association
to a complex network of corporations, to reflect the doctrinal self-understanding of that faith
community. The First Amendment protects “freedom for religious organizations, an
independence from secular control or manipulation—in short, power to decide for themselves,
free from state interference, matters of church government as well as those of faith and doctrine.”
Kedroff v. St. Nicholas Cathedral, 344 U.S. 94, 116 (1952).

One leading treatise in this area notes more than a dozen identifiable religious structures.
William W. Bassett, W. Cole Durham Jr., Robert T. Smith, Religious Organizations and the
Law, § 8:19 (2017). Such variations reflect differing ecclesiologies, based on differing
theological convictions as to how each church should exist and carry out its mission in the world.
The choice of organizational form therefore embodies a theological judgment by each religious
community, grounded in its own religious convictions, and based on its Scripture, its tradition,
and other doctrinal sources. “The traditional denominations each have their own intricate
principles of governance, as to which the state has no rights of visitation. Church governance is
founded in scripture, modified by reformers over almost two millennia.” Schmidt v. Bishop, 779
F.Supp. 321, 332 (S.D.N.Y. 1991).

As demonstrated in the examples of the denominational agencies joining in these

comments, structure reflects fundamental religious belief translated into practice. How a
denomination chooses to organize and govern itself is a matter of religious doctrine, often the
result of centuries of struggle among faith communities. Through various organizations, each
denomination allocates or withholds power to persons and entities within the denomination with
the expectation that each part of the church will function in a particular way. In other words, the
churches themselves decide who may and who may not exercise authority within the church. As
the above commentary describes it:

The relationships between persons and groups within the churches, often constrained to
the legal forms of agency, delegated authority, and scope of employment patterns as a
method of establishing liability and legal accountability, are more correctly understood in
terms of covenant, fellowship and mission.

Religious Organizations, supra at § 8:2. These are choices beyond the authority of the State,
including the IRS, to impair or constrain.

For this reason, what the IRS proposes violates rights assured to the commenters under
the Religious Freedom Restoration Act. 42 U.S.C. §2000bb, et seq. “RFRA was designed to
provide very broad protection for religious liberty.” Hobby Lobby v. Burwell, 573 U.S. 682, 693
(2014). “[RFRA] prohibits the Federal Government from substantially burdening a person's
exercise of religion, unless the Government demonstrates that application of the burden to the
person represents the least restrictive means of advancing a compelling interest.” Gonzalez v. O
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August 14, 2020

Centro Spirito, 546 U.S. 418, 423 (2006) (internal quotation marks omitted). Plainly the choices
to follow their beliefs or risk the loss of their group rulings is a substantial burden.

The process of evaluating rights under RFRA would thus shift to the IRS to demonstrate
that the least restrictive way to accomplish a truly compelling interest is to deny the
accommodation. The rationale for the proposal highlights the IRS’s desire “to reduce the
administrative burden and increase the efficiency of the group exemption letter program….”
Notice 2020-36 “Background” found at https://www.irs.gov/pub/irs-drop/n-20-36.pdf. Here, the
IRS would achieve greater administrative consistency and convenience for itself, at the expense
of the religious community. Administrative convenience is not a compelling interest. O Centro
Spirito, 546 U.S. at 435-36 (rejecting plea for uniformity in administration of the drug laws).
RFRA expressly contemplates the denial of a government exemption can violate its provisions.
42 U.S.C. §2000bb-4.

As noted above, historically the IRS implemented the group exemption letter program
flexibly, expressly recognizing that it was accommodating the reality that religious organizations
could not assure uniformity and supervision or control. But the failure to accommodate not only
would burden the central church agencies, but also would add a truly substantial burden on the
IRS which would have to evaluate hundreds of thousands of additional applications.

In other contexts, both the Supreme Court and the Administration have recognized efforts
to protect rights assured under RFRA. Recently in Little Sisters of the Poor v. Pennsylvania,
591 U.S. ___, No. 19-431 (July 8, 2020), the Court upheld a regulatory carve out under authority
assured to administrators in the Department of Health and Human Services under the Patient
Protection and Affordable Care Act. In doing so the Court noted that the subject matter of the
contested statutory provision was “capable of violating RFRA” and that under settled case law
the government was obliged to “accept the sincerely held … objections of religious entities.”
Little Sisters, Slip op. at 20. Paraphrasing the Court and substituting “IRS” for “HHS,” “[i]t is
hard to see how the [IRS] could promulgate rules consistent with these decisions if they did not
overtly consider these entities’ rights under RFRA.” Id. at 21.

Not a single syllable of the Proposed Revenue Procedure displays any recognition that
these new procedures will create burdens for religious organzations or signals the IRS’s resolve
to accommodate them. These proposals stand in sharp contrast to the proactive approach to
relieve burdens on religious agencies that would have occurred under the Small Business
Administration affiliation rules. Those rules made sense when applied to commercial institutions,
but created substantial burdens when applied to religious communities. SBA waived them citing
RFRA. Small Business Administration, Interim Final Rule, Business Loan Program Temporary
Changes; Paycheck Protection Program, 85 Fed. Reg. 20817, 20819-20 (April 15, 2020).

Even if RFRA were not dispositive, the First Amendment would bar the IRS from
effectively dictating polity and structure matters inside a denomination. The IRS cannot close
the Group Exemption process to all churches except those able to eccelsiologically impose
specific civil forms on subordinates. This would operate as distinct preference for the most rigid
kind of hierarchy in violation of the First Amendment. Larson v. Valente, 456 U.S. 228, 246
(1982) (ordinance only regulating religious organizations soliciting more than fifty percent of
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August 14, 2020

operating funds from the public is unconstitutional as a denominational preference); Lutheran

Social Service of Minnesota v. United States, 758 F.2d 1283 (8th Cir. 1985).

The decided cases show that labelling a matter “secular” or within the “subject matter
jurisdiction” of the State is not the end of the constitutional inquiry. In Gonzales v. Archbishop
of Manila, 280 U.S. 1, 15-6 (1929), although the Court rejected a challenge to its subject matter
jurisdiction noting that the construction of a testamentary trust was a common task of civil
courts, the Court recognized the limits to its judicial power when to construe the trust required it
to resolve a question committed to religious authorities. Similarly, courts have recognized that
“secular” matters in church administration, such as in the area of financial management, may
reflect a series of value judgments based on religious doctrine and the internal law of religious
bodies. E.g., Bible Way Church v. Beards, 680 A.2d 419, 428-29 (D.C. 1996). Here, no one
doubts the authority of the State to set terms of tax exemption, but those terms must not
effectively rewrite a church’s self-understanding as a condition of qualification for exemption.

In a historic confrontation, the United States Supreme Court found South Carolina's
treatment of Mrs. Sherbet's unemployment claim unconstitutional in 1963 because the State
forced her to choose between following her religious beliefs and obtaining unemployment
compensation. Certainly, she was not compelled to violate her religious beliefs. She had a
choice: be available for work on Saturday (eligible for benefits) or keep holy her Sabbath (not
eligible). Forcing her to choose between following the law of her religious denomination and
losing a state benefit or following the law of the state and risking ecclesiastical punishments was
unconstitutional. “[T]o condition the availability of benefits upon this appellant's willingness to
violate a cardinal principle of her religious faith effectively penalizes the free exercise of her
constitutional liberties….” Sherbert v. Verner, 374 U.S. 398, 406 (1963). See Thomas v. Review
Board, 450 U.S. 707, 718 (1981). The same choice confronts the denominational agencies here:
the IRS would expressly condition the continued availability of the group ruling on the
denominational agencies’ willingness to violate the law of the faith community and take other
actions in the ecclesiastical realm, which is beyond competence of the IRS to order.

In sum, what the IRS proposes is a set of new norms that would require these faith
communities to exercise oversight and supervision of religious entities that, unlike secular
charities, are already exempt by law in ways that are anathema to them. The requirement of a
uniform governing instrument, without further accommodation or allowance for polity as a
religious expression of belief, would infringe on a church’s right to determine its internal
governance in the way most compatible with its beliefs and mission. The result would constrain
the religious choices exercised by churches that reflect their faith and pastoral missions. A
uniform governing instrument requirement compels the denominational agencies to make
choices about form and structure that do not respect those churches’ own identities and beliefs or
to lose their group ruling. Rather to preserve their group ruling they must agree to surrender to
an inauthentic conformity dictated by governmental agency administration. Similarly, the extra
layer of supervision and control that would be required would force a choice of evils on these
denominations. In doing so the Proposed Revenue Procedure violates the first principles of
religious self-governance assured under the First Amendment.

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August 14, 2020

V. Conclusion

A Revenue Procedure that does not continue to accommodate the variety of religious
expression in the United States violates rights protected under RFRA and the First Amendment.
IRS is obliged to continue a process respectful of those rights and the limitations on the
government’s authority. For the above stated reasons, we urge the IRS not to adopt provisions of
the Proposed Revenue Procedure that would violate the protected rights of the religious group
ruling holders joined here in this letter of comment. 10 We would be pleased to discuss these
issues further with representatives of the IRS and to respond to any questions.

Respectfully submitted,

Mark E. Chopko
Chair, Nonprofit & Religious Organizations
Stradley Ronon Stevens & Young LLP

Jennifer Gniady
Counsel
Stradley Ronon Stevens & Young LLP

On behalf of the following denominations:

Evangelical Lutheran Church in America
General Synod of the United Church of Christ
General Council on Finance and Administration of The United Methodist Church
Protestant Episcopal Church in the United States of America
General Synod of the Reformed Church in America

cc: Denominational Representatives

10
In addition, we note that separate comments have been submitted by the Southern Baptist
Convention, Presbyterian Church (USA) and the United States Catholic Conference of
Bishops concerning Notice 2020-36. While our focus is specific to the denominations here,
we further agree with the points made in those letters and believe they support the issues that
are raised here concerning the need to modify the proposed procedures in order to avoid
infringement on the free exercise of religious organizations.
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