Leave Your Conscience at the Court: Religious Tax Protest Before and After RFRA
Samuel D. Brunson
This article is part of our “The Religious Freedom Restoration Act at Thirty” series. If you’d like to explore other articles in this series, click here.
The Society of Friends — popularly known as the Quakers — emerged in England in the wake of the Thirty Years’ War. In its earliest years, the Quakers formally proposed what came to be known as their Peace Testimony, a declaration that they abjured violence and refused to participate in war, whether on behalf of the Kingdom of God or any earthly state. Quakers who violated the Peace Testimony (by, for example, joining the military) could be disowned by their meeting (in essence, their congregation), at least temporarily. The religious injunction to abjure violence extended beyond prohibiting a Quaker from taking up arms. A Quaker violated the Peace Testimony by contributing financially to war, including through the payment of taxes. During the American Revolution, most Quakers refused to pay war taxes, even though their refusal often ended with them jailed, their property seized and sold to pay their tax bill.
By the nineteenth century, the Quaker dedication to the Peace Testimony had begun to waver. Ardent abolitionists, many Quakers enlisted in the Union Army during the Civil War, and few faced ecclesiastical repercussions. By World War I, leading Quakers supported the war and a majority of young Quakers served on active duty. After the close of World War I, the Society of Friends began to again emphasize its opposition to war and violence. Quakers worked with the government to create a formal system for those claiming conscientious objector status. This system meant Quakers’ religious refusal to fight did not put them directly in conflict with their legal obligations.
But while the state excused Quakers from fighting in the war, it did not excuse them from paying for it. As a practical matter, the lack of a conscientious tax objector status did not matter prior to World War II. In the federal income tax’s earliest years, the tax was a “class tax,” applying to only the wealthiest Americans. With the skyrocketing expenses of fighting World War II,, the income tax became a “mass tax,” paid by an increasing percentage of Americans. Suddenly Quakers — like other Americans — were paying taxes that helped fund the country’s war machine, in violation of their increasingly important Peace Testimony. In the wake of the Vietnam War, Quakers and their supporters attempted to create a financial analogue to conscientious objection. With help from University of Michigan law professor Joseph Sax and law student Michael Hall, Quaker pacifist David Bassett drafted a bill that would ensure the government allocated conscientious objectors’ tax payments to non-military spending. Since the 1970s, the Peace Tax Fund bill has been repeatedly introduced in Congress, but has yet to pass.
Without a legislative exemption, some Quakers turned to self-help. By the 1980s, thousands of Quakers vocally refused to pay taxes that might fund war. Their methods of tax protest differed; some protestors chose to withhold a percentage of their tax liability (generally calculated to match the percentage of the federal budget that went to fund the Pentagon) from their tax payments. Others paid a portion of their tax liability to charitable organizations instead of to the government. Some refused to pay taxes altogether, on the theory that money is fungible and the government could use any revenue to fund wars. No matter what route the Quaker tax protestors chose, however, their protest violated the law. The IRS could garnish Quakers’ wages, file suit against them to collect the deficient taxes, and even impose interest and financial penalties for nonpayment.
The IRS’s financial punishment of Quakers was lawful unless, of course, the Free Exercise Clause of the Constitution required the government to grant them a religious accommodation. As early as 1961, Quakers argued to the IRS and in federal courts that they had a Free Exercise right to avoid supporting the military through their taxes. The courts responded in a unified voice: they did not. In Muste v. Commissioner, the United States Tax Court acknowledged Muste’s nearly half-century of opposition to war and his sincere religious opposition to funding it. The First Amendment, he argued, gave him “immunity from paying taxes which are to be used in part for war or preparation for war.”
The tax court was cognizant of the “exceedingly grave and delicate duty” it had in ruling on the constitutional issue in front of it. In fulfilling its duty, the court determined that a statute did not violate the Free Exercise Clause unless it “directly restrict[ed]” religious practice. The tax code did not directly restrict Muste’s ability to practice his religion, and so requiring Muste to pay taxes did not violate his First Amendment rights, even if the government’s use of these taxes went against his sincerely held religious beliefs.
Subsequent cases continued to develop and refine the constitutional analysis, but the end result remained fixed. By the end of the 1970s, the Sixth Circuit explained in Graves v. Commissioner that Congress did not enact the income tax with the intent of burdening religious practice. Rather, the tax was “levied uniformly against persons of various beliefs, and those of no belief.” Irrespective of how Congress chose to spend its revenue, the imposition of taxes did not constitute an “unreasonable burden on the free exercise of [Quakers’] religious beliefs.”
A handful of non-Quaker conscientious tax objectors protested the court’s interpretation but had no more luck than the Quakers. In Schehl v. Commissioner, a taxpayer argued that paying “monies to the government which promote war, militarism and unnecessary and illegal military expenditures, in effect promotes a theocracy of war” and would “prohibit the exercise of his beliefs as a Roman Catholic Christian.”
The court declaring his sincere religious argument frivolous created real consequences for Schehl. A taxpayer who takes a frivolous position on their tax return is subject to statutorily-prescribed penalties. If the taxpayer proceeds to asset those frivolous positions in court, the penalties increase.
By the early 1980s, it was abundantly clear that the Free Exercise Clause of the First Amendment did not allow taxpayers to withhold tax payments because they objected to government spending. In Randall v. Commissioner, the Eleventh Circuit listed eleven cases from a variety of federal courts that had rejected a First Amendment right to decline to pay taxes. The Eleventh Circuit joined its voice to theirs in that rejection.Even against this tsunami of precedent, some Quakers and other religious pacifists continued to conscientiously object to paying taxes that would fund religiously objectionable pursuits. By the mid-1980s, if not earlier, the legal futility of these objections had become unavoidably clear. Religious taxpayers who insisted on following their conscience and refusing to indirectly fund objectionable spending faced interest, penalties, and, in some cases, imprisonment.
Then, in 1993, the Supreme Court decided Employment Division v. Smith. Smith was not a tax case; rather, the litigants were requesting a religious accommodation for the sacramental use of peyote. The Supreme Court denied that accommodation, explaining that even where a law burdened religious practice, the Court held, as long as it was facially neutral and generally applied—that is, it was not targeted at religious practice—it did not violate the Free Exercise Clause of the First Amendment.
While Smith concerned the religious use of peyote, the Court adopted the approach earlier courts had used in deciding that the First Amendment did not protect the nonpayment of taxes. And the case was not devoid of tax: the Court used religious tax objectors as an illustration of how accommodation should, and should not, work. It explained that “if prohibiting the exercise of religion … is not the object of the tax but merely the incidental effect of a generally applicable and otherwise valid provision, the First Amendment has not been offended.” Smith, then, affirmed that the unanimous decisions of courts looking at religious objections to tax had been correct.
In response to Smith, President Clinton signed the Religious Freedoms Restoration Act (RFRA). This law was meant to reverse the Supreme Court’s decision. Under RFRA, even a facially-neutral, generally-applicable law cannot burden an individual’s exercise of religion unless the law both furthers a “compelling government interest” and it is the “least restrictive means” of doing so. While the courts had definitively ruled that the Free Exercise Clause did not allow taxpayers to decline to pay taxes, RFRA called into question the continued viability of those rulings. After all, they were decided on the grounds that the federal income tax was a generally-applicable law, neutrally applied. But RFRA demanded more. Perhaps it provided a second bite at the apple for religious tax protestors and conscientious tax objectors.
And some Quakers used that second bite. In Packard v. U.S., Rosa Packard sued the government to recover tax penalties that the IRS had assessed against her. Packard had been a tax protestor for sixteen years; she filed tax returns but refused to pay, based on her “deeply held religious beliefs” as a Quaker that she could not financially support war efforts. The government collected taxes, interest, and penalties by levying on her bank accounts. Packard conceded that the government had the right to collect taxes, a concession that three decades of (pre-RFRA) case law had made clear. But, she argued, it had no right to impose or collect penalties because she had reasonable cause (based on her sincere religious beliefs) for refusing to pay. The district court rejected her reasonable cause argument. It also rejected her Free Exercise claim, based on the mountain of precedent going against that position.
But Packard had one more argument, which the court characterized as her “only new argument”: RFRA had changed the legal landscape. Even if she owed the taxes she had refused to pay, RFRA excused her from paying penalties. Packard could not argue that the government lacked a compelling interest in collecting taxes, but she could—and did—argue that assessing penalties was not the least restrictive means it could use in its collection efforts. In fact, she said, penalties were a terrible way to encourage the payment of taxes—they had not caused her to pay taxes for almost twenty years. Levying on bank accounts constituted the least restrictive means of collecting taxes.
If the court agreed, RFRA would not prevent the government from collecting the taxes she owed, but it would not allow the government to use penalties as a stick in collecting from conscientious tax objectors. The court, however, did not accept her argument. To levy on a bank account required that a bank account exist. Moreover, taking penalties off the table would make tax evasion virtually costless; at worst, the government would levy a tax protestor’s bank account, collecting the same amount as if the taxpayer had paid in the first instance. RFRA, the court held, did not effect any change in the way the tax law applied to religious tax protestors, notwithstanding its explicit attempt to overrule the reasoning in Smith.
A year later, two Courts of Appeals confirmed that RFRA did not change the preexisting Free Exercise jurisprudence with respect to Quakers and religious tax objectors. In Browne v. U.S., the Second Circuit characterized the voluntary compliance underlying the federal income tax as the “least restrictive means by which the IRS furthers the compelling governmental interest in uniform, mandatory participation in the federal income tax system.” And in Adams v. Commissioner, the Third Circuit took seriously the idea that RFRA meant to return Free Exercise jurisprudence to its pre-Smith status. Based on earlier case law, the Third Circuit found that the government had a compelling interest in collecting tax revenue and, based on its need for uniform tax administration, Congress — not the courts — should determine any exceptions.
On the strength of this deep well of judicial precedent, in 2005, the IRS officially designated as frivolous the refusal to pay taxes because of religious objections to government spending. While it never explicitly referred to the Free Exercise Clause or RFRA, it warned taxpayers that it would aggressively assert penalties against religious tax protestors. And those penalties can be substantial — an accuracy-related penalty of 20% of the amount the taxpayer should have paid in taxes, a civil fraud penalty of 75%, a $500 penalty for filing a fraudulent return and, if the taxpayer makes their religious argument in tax court, a penalty of up to $25,000. The IRS also warned of potential criminal prosecution.
Where does this leave Quakers and others whose religion forbids them from paying taxes that will fund religiously-objectionable spending? It leaves them in the same place pre-Smith and post-RFRA: a bind. As the Packard court explained, if Packard “wishes to engage in civil disobedience, she must expect to pay the price.” The price of a religious taxpayer following their conscience is potentially substantial, and, by its design and implementation, RFRA did nothing to make it easier. Unless and until the legislature provides a means by which religious conscientious objectors can ensure their taxes do not fund religiously-objectionable spending, Quakers in the United States will continue to pay for the military, irrespective of their Peace Testimony.♦
Samuel D. Brunson is the Associate Dean for Faculty Research and Development and Georgia Reithal Professor of Law at the Loyola University Chicago School of Law. Professor Brunson researches and writes about the federal income tax and nonprofit organizations. Much of his research deals with the intersection of religion and the tax system. He also researches how the federal income tax both regulates and fails to regulate tax-exempt organizations. He has been published by Cambridge University Press and his scholarship has appeared in, among other places, the Northwestern University Law Review, the Minnesota Law Review, the Indiana Law Journal, and Tax Notes.
Brunson, Samuel D. “Leave Your Conscience at the Court: Religious Tax Protest Before and After RFRA.” Canopy Forum, October 31, 2023. https://canopyforum.org/2023/10/31/leave-your-conscience-at-the-court-religious-tax-protest-before-and-after-rfra/.