In Iowaska Church of Healing v. United States, (D DC, March 31, 2023), the D.C. federal district court upheld the IRS's refusal to grant §501(c)(3) non-profit status to a church that promotes the religious use of Ayahuasca, a tea brewed from plants containing a drug that is illegal under the federal Controlled Substances Act. The church, which has 20 members located around the world, applied to the Drug enforcement Administration for a religious exemption from CSA provisions. After four years, that application is still pending. The court said in part:
The IRS correctly concluded that, until plaintiff obtains a CSA exemption, its promotion and use of Ayahuasca remains illegal under federal law, and plaintiff is neither organized nor operated exclusively for public purposes. As a result, plaintiff is not entitled to an exemption from income tax under section 501(c)(3).
Plaintiff had argued that the Supreme Court's decision in the O'Centro case entitled it to a tax exemption. The court responded:
[T]he holding in O Centro stands only for the principle that obtaining a CSA exception for religious use of Ayahuasca is possible, if such use is in fact a sincere religious exercise. The flaw in plaintiff’s reliance on O Centro here, is that plaintiff has still not obtained that CSA exception—and whether plaintiff’s showing made to the DEA is sufficient to qualify for this exemption remains an open question that is not before this Court. O Centro simply does not stand for plaintiff’s asserted holding, that all Ayahuasca use is necessarily religious, and that case certainly does not establish that all organizations making use of Ayahuasca are entitled to an exemption from income tax, which is the issue pending here.
