Tuesday, March 7, 2017

Religious Organizations, Refuge for Undocumented Immigrants, and Tax Exemption

By Professor Ellen P. Aprill

This op-ed originally appeared in the Los Angeles Daily Journal.

For many houses of worship, the Biblical injunction, “You should not wrong a stranger or oppress him, for you were strangers in the land of Egypt” (Exodus 22:21, JPS), constitutes an important religious doctrine. The Trump administration has announced plans for aggressive enforcement of immigration laws, plans that are expected to expand massively the number of people detained and deported. This new policy has forced many houses of worship and other religious organizations to consider whether their beliefs call upon them to grant refuge or so-called sanctuary to undocumented immigrants.

Under long-standing immigration laws, harboring undocumented immigrants carries the potential for both fines and imprisonment. An organization can lose its exempt status if its purpose is illegal. Moreover, illegal activity is deemed not to further an exempt purpose, and an organization can also lose its exempt status if a substantial part of its activities are not in furtherance of its exempt purpose. Houses of worship and religious organizations face some risk, at least in theory, of losing exemption for such activity. As a practical matter, loss of exemption is unlikely, but the organization needs to document the religious basis for its actions and the criteria it will use.

One piece of official IRS guidance offers important guidance. It involved an organization formed to educate the public on the principles of pacifism and nonviolent action, including civil disobedience. This 1975 “Revenue Ruling” explains that no Section 501(c)(3) organization can have an illegal purpose. The ruling’s analysis, however, emphasized the group’s primary activities of undertaking protest demonstrations and other nonviolent actions, including deliberately blocking traffic, disrupting the work of government, and preventing the movement of supplies, all breaches of the peace in violation of local ordinances. The ruling concluded that the organization’s activities “demonstrate an illegal purpose which is inconsistent with charitable ends.” The Tax Court in Church of Scientology of California v. Commissioner similarly concluded that pervasive illegal activities, including a number of felony convictions, constituted an illegal purpose and that the organization’s claimed status as a church did not protect it from application of the illegality doctrine. Giving refuge to undocumented immigrants, however, is unlikely to become a primary activity of a house of worship or other established religious organization such that it becomes one of the organization’s purposes. Even if the refuge activity does not constitute one of the organization’s purposes, the question of substantiality remains.

According to two pieces of unofficial guidance, a chapter in a 1985 IRS training text and a 1971 memorandum written by lawyers in the IRS Office of Chief Counsel, the nature of the acts is as important as their quantity in any determination of substantiality. The 1971 memorandum involved an organization alleged to be involved with organized crime, which was said to have used force and violence to silence a newspaper opposed to it. As examples, the 1985 chapter and the 1971 memorandum discuss robbing banks and planned violence or terrorism.

Giving refuge to the undocumented immigrant involves no violence. Still, a chapter in a 1994 IRS training text observes, that “illegal activity may be so serious that even an isolated incident would outweigh the organization’s other activities and be a basis for revocation or denial of exemption, regardless of the nature and extent of its activities as well as asserting that the government ‘has an interest in not subsidizing criminal activity.’” It notes as well that illegal activity can be so blatant as to demand action by the IRS.

As noted earlier, the applicable statutory provisions for harboring undocumented immigrants include criminal penalties with heavy penalties. More specifically, harboring an undocumented immigrant can, for each immigrant harbored, carry not only a fine, but also a prison term of up to five years. While any result would, of course, depend on the particular facts and circumstances of a refuge program, revocation based on serious or blatant illegal activities seems unlikely as a practical matter. Again, this activity does not seem to me to be equivalent to robbing banks or engaging in violence or terrorism. According to press reports, President Donald Trump’s Department of Homeland Security has announced that it will continue the policy of churches and schools being off-limits for enforcement actions. A 1977 memorandum from the IRS Office of Chief Counsel, which involved a tax-exempt trade association exempt under section 501(c)(6), states that an activity should be judicially determined to be illegal before revocation of exemption on the basis of illegal activity. Judicial determination, at least currently, seems unlikely for a house or worship or religiously affiliated school offering sanctuary.

In addition to the issues of purpose and substantiality involving illegality, another closely related doctrine, the public policy limitation, could also come into play, although this possibility seems unlikely. Bob Jones University v. United States denied exemption to a religious university that discriminated on the basis of race on the grounds that a tax-exempt charity must serve a public purpose and not be contrary to established public policy. The court found racial discrimination in education to be “contrary to a fundamental public policy,” violating “deeply and widely accepted views of elementary justice.” The Bob Jones opinion did not give any clear guidance as to when a public policy becomes “fundamental.” Also, the court observed in a footnote that the case dealt only with religious schools, not with churches or purely religious institutions. In addition, with possibly a few isolated exceptions, the IRS has not extended the public policy limitation beyond racial discrimination in education. Given that Trump’s immigration enforcement initiatives are new and a break with the previous administration, it is hard to imagine that opposition to this Trump administration change would be deemed to violate fundamental public policy.

Nonetheless, any house of worship or other religious organization deciding to offer refuge to undocumented immigrants should realize that such a decision is not completely free of risk. The organization should proceed with care and caution and carefully document the religious doctrines on which it is basing its decision, the criteria as to which undocumented immigrants they will or will not admit, and the limits they will put on refuge. It should also seek legal advice on its particular situation.

Ellen Aprill is the John E. Anderson Chair in Tax Law at Loyola Law School, Los Angeles, where she teaches Nonprofit Organizations and founded the Western Conference on Tax-Exempt Organizations.

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