IRS Tax-Exemption Lawsuit

American Atheists and two co-plaintiffs today filed in U.S. District Court in the Eastern District of Kentucky a lawsuit demanding that the Internal Revenue Service (IRS) stop giving preferential treatment to churches and religious organizations via the process of receiving non-profit tax-exempt status under the Internal Revue Code (IRC) procedures and definitions.

“American Atheists receives tax-exempt status under Internal Revenue Code 501(c)(3),” said American Atheists President David Silverman, “but because the organization is not classified as religious it costs American Atheists, along with all other secular non-profits, significantly more money each year to keep that status. In this lawsuit, American Atheists and the other plaintiffs are  demanding that all tax-exempt organizations, including those characterized as religious by the IRS, have the same requirements to achieve tax-exempt status.”

For example, in order to qualify for nonprofit tax-exempt status, any religious or secular organization must demonstrate it exists to benefit the public. After that basic element is established, religious non- profits are almost always declared automatically tax-exempt under the current IRC rules and definitions. However, secular non-profits face a lengthy application and a fee, which can be as high as $850. 

“Religious organizations and churches are treated differently from secular organizations,” explained American Atheists National Legal Director Edwin Kagin. “The exemptions are applied in a way that discriminates solely on the basis of whether an entity’s members express beliefs and practices accepted as religious. The IRS treats your organization better if you profess belief in a supernatural deity.”

The lawsuit also covers discrepancies in how secular and religious organizations are treated in maintaining their tax-exempt statuses. Secular nonprofits complete Form 990 annually, which details information about finances, donors, volunteers, and personnel; the IRS estimates it requires 211 hours to complete the Form 990, which is then public information. Religious nonprofits are exempted from filing the Form 990, so there is no public record about their finances, donors, volunteers, or personnel.

“The IRS hands religious organizations a fundraising advantage,” Silverman said. “It puts American Atheists at a significant disadvantage when it comes to fundraising because many Americans choose not to reveal their atheism for fear of prejudice and discrimination.”

American Atheists and its co-plaintiffs are asking the Court to find that such disparity of treatment between religious and secular non-profit organizations is unconstitutional and require the IRS to make the tax-exempt filing process uniform for all nonprofit organizations.

The lawsuit can be found in its entirety here.

You can help support this case by making a tax deductible donation to our $100,000 Equal Taxation Legal Fund today. Select "Fair Taxes Legal Fund Match" from the Program Designation and you gift will be matched, dollar for dollar, to help us pay legal fees associated with this landmark case.