## Facts

- The Foundation is a nonprofit religious organization recognized as tax-exempt under I.R.C. § 501(c)(3).
- In earlier litigation, it was found to qualify as a “church” based on physical worship facilities and regular religious services for established congregations served by an organized ministry.
- Over time, the Foundation sold or separated from key facilities and operations, including buildings used for services and a school that became separately incorporated.
- For tax years 1998–2000, the Foundation did not hold regular services at any single location; instead, it conducted 21 seminars nationwide over the three-year period.
- The Foundation operated an electronic ministry that broadcast sermons at scheduled times over radio and the internet, with some listener interaction (e.g., call-ins).
- After an IRS inquiry, the IRS concluded the Foundation remained a § 501(c)(3) religious organization but did not qualify as a “church” for purposes of the more favorable contribution-deduction limits applicable to churches.
- The Court of Federal Claims agreed with the IRS, and the Foundation appealed.

## Issues

1. Whether the Foundation qualified as a “church” under I.R.C. § 170(b)(1)(A)(i) for tax years 1998–2000 given its reliance on broadcasts and occasional seminars rather than regular, in-person congregational worship.
2. Whether applying criteria emphasizing regular congregational assembly and places of worship violates the First Amendment when evaluating “church” status for federal tax purposes.

## Decision

- The Federal Circuit affirmed the judgment that the Foundation did not qualify as a “church” under § 170(b)(1)(A)(i) for 1998–2000.
- The court treated the prior determination of church status as fact-bound and not controlling because the Foundation’s operations materially changed.
- Applying the associational concept of a church, the court found the Foundation lacked a regular congregation that assembled regularly for communal worship during the years at issue.
- The court held that scheduled broadcasts and publications did not substitute for a coherent body of believers regularly gathering for worship; the seminars reflected intermittent attendance rather than a stable congregation.
- The court rejected the Foundation’s First Amendment challenge, concluding the classification relied on neutral administrative criteria rather than religious judgments.
- The Foundation remained tax-exempt under § 501(c)(3) and treated as a publicly supported charity under § 170(b)(1)(A)(vi), but not as a church for the relevant years.

## Legal Principles

- “Church” under I.R.C. § 170(b)(1)(A)(i) is a narrower category than § 501(c)(3) religious-organization status and turns on organizational features associated with congregational worship.
- Courts commonly apply an “associational” understanding of a church: a body of believers that assembles regularly for communal worship.
- The IRS’s multi-factor criteria may inform the analysis, but factors tied to regular congregation, regular services, and established places of worship are central evidence.
- Prior determinations of church status do not fix status for later years when the organization’s structure and activities materially change.
- Using structural and associational criteria to administer tax classifications for “church” status is constitutionally permissible when applied as neutral, generally applicable standards.

## Conclusion

The Federal Circuit held that an organization may remain a tax-exempt religious charity yet fail to qualify as a “church” for contribution-deduction purposes when it lacks a regular, assembling congregation and relies primarily on broadcasts and intermittent seminars, and it further held that applying these neutral criteria does not violate the First Amendment.


Foundation of Human Understanding v. United States, 614 F.3d 1383 (Fed. Cir. 2010)