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The U.S. Court of Appeals for the Federal Circuit has ruled that a religious organization that primarily holds Internet and radio worship services does not meet the U.S. Internal Revenue Service’s definition of a church. A three-judge panel on Monday unanimously upheld a ruling by the U.S. Court of Federal Claims, in a case brought by the Foundation of Human Understanding, founded by Roy Masters in 1963 and “based upon Judeo-Christian beliefs and the doctrine and teachings of its founder.” The foundation challenged an IRS determination that it did not meet the Internal Revenue Code’s definition of a “church.” Federal Circuit Judge William Bryson noted that neither Congress nor the IRS has issued much guidance regarding the code’s definition of “church.” He said that court precedents have emphasized the associational test, which defines a church as an organization whose members meet regularly for organized worship, and on the IRS’s 14 criteria for determining what is a church. Those criteria include that it has a recognized creed and form of worship; a formal code of doctrine and discipline; a membership not associated with any other church or denomination; ordained ministers selected after completing prescribed studies; and holds regular religious services The Federal Circuit panel deemed the associational test the most important. It agreed with the lower court that the foundation’s “electronic ministry” did not satisfy the test. “The fact that all the listeners simultaneously received the Foundation’s message over the radio or the Internet does not mean that those members associated with each other and worshiped communally,” Bryson wrote. Neither the foundation nor its lawyer — Marc Sellers of Schwabe Williamson & Wyatt in Portland, Ore. — returned calls for comment. Neither did the IRS. The Justice Department, which represented the agency, declined to comment through spokesman Charles Miller. The ruling leaves open the question of whether worship services that use modern versions of Internet chat rooms would constitute significant association to meet the association test, said Arthur Rieman, managing attorney of the Studio City, Calif.-based Law Firm for Non-Profits. “It would be a much tougher argument for the IRS to make that holding a prayer service in [an interactive chat room] type of environment does not constitute sufficient association,” said Rieman, who wasn’t involved in the case. Rieman noted that many of his nonprofit client organizations hold board meetings electronically under various state laws. “If my clients’ boards of directors can meet that way, is it much different than allowing a church congregation to congregate that way and hold a worship service?” he asked. “The IRS is going to have to address that sooner or later.” The IRS granted the foundation tax-exempt status as a non-profit in 1965. In 1983, the IRS denied the foundation’s application to be categorized as a church and the foundation appealed to the U.S. Tax Court. The tax court ruled that the foundation qualified as a church because it provided “regular religious services for established congregations [consisting of 50 to 350 persons] that [were] served by an organized ministry.” At the time, the foundation held regular services in its own buildings in Los Angeles and Grants Pass, Ore., and ran a school. It held seminars, meetings and other activities at a ranch it purchased in Oregon. During the 1990s, the church sold the Los Angeles and Grants Pass buildings, separately incorporated the school as a nondenominational Christian school and began holding fewer events at the ranch. The foundation relied more on broadcast media and the Internet to disseminate its teachings. In 2001, the IRS launched an inquiry into the foundation’s activities and determined that it could retain its tax-exempt status under Section 501(c)(3) but was not a church. Tax-exempt religious organizations must file more information with the IRS than do churches, and the agency has broader authority to investigate tax-exempt religious entities than churches.

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