DC Circuit: No Tax-Exempt Status for Church Promoting Psychedelics Unless It Has Received DEA or Judicial Exemption

In Iowaska Church of Healing v. Werfel, (DC Cir., June 21, 2024), the U.S. Court of Appeals for the District of Columbia Circuit upheld the IRS's denial of tax-exempt status to a church whose practices revolved around the use of the psychedelic Ayahuasca.  According to the court:

The Church’s purpose and mission revolve primarily around the consumption of Ayahuasca and embracing certain spiritual benefits that the Church’s members believe follow from Ayahuasca consumption.  

The church contended that denial of tax-exempt status violated the Religious Freedom Restoration Act. However, the court concluded that the church lacked standing to assert a RFRA claim because it did not show sufficient economic injury, and it had waived other theories of standing.

Additionally, the church argued that it qualified for an exemption under Internal Revenue Code §501(c)(3) because it was organized for religious purposes. The court said, however, that tax-exempt status can be denied if its purposes or activities are illegal.  Use of Ayahuasca in religious ceremonies is legal only if the Drug Enforcement Agency or a federal court has issued the church an exemption from the Controlled Substances Act. The church had received no exemption. The court rejected the church's argument that the Supreme Court's 2006 O Centro decision made the use of Ayahuasca presumptively legal for churches. the court concluded:

... [T]he IRS was correct in concluding that the Church’s Ayahuasca use foreclosed its eligibility for tax-exempt status.

Religion Is Relevant In Trial For Marketing Unlicensed Drug

In United States v. Grenon, (SD FL, June 12, 2023), a Florida federal district court, ruled on a motion in liwas through which the government was seeking to exclude various pieces of evidence in the criminal trial of defendants for manufacturing, marketing and distributing an unlicensed drug. The court summarized the charges against defendants:

Defendants are members of Genesis II Church of Health and Healing ... which the Government alleges is “an explicitly nonreligious entity that [Defendant, Mark Scott Grenon] co-founded[.]”...

Under the guise of Genesis, Defendants promoted MMS as a miracle cure to various illnesses and ailments, even though “[w]hen ingested orally as directed by [] Defendants, MMS became chlorine dioxide, a powerful bleaching agent typically used for industrial water treatment or bleaching textiles, pulp, and paper.”...

The court ruled in part:

The Government first seeks to prevent Defendants from suggesting that their conduct was “a religious exercise, constitutionally protected under the First Amendment.”...

... [C]onsidering the Government’s accusations regarding Defendants and Genesis..., it would likely be impossible to conduct this trial without discussion of Defendants’ alleged religion, as well as their personal beliefs regarding the First Amendment...

The court also refused to preclude defendants from raising a defense under RFRA, but did rule that the applicability of RFRA is a pure question of law so that no jury instruction on the applicability of RFRA should be permitted.

Free Exercise Defense To Food and Drug Act Indictment Rejected

In United States v. Girod, 2016 U.S. Dist. LEXIS 82365 (ED KY, June 24, 2016), a Kentucky federal district court refused to dismiss an indictment under the Food, Drug and Cosmetic Act against defendant who claimed that his religious faith rejects FDA testing.  Defendant was charged with operating an establishment that manufactured and marketed products for the treatment of skin disorders, cancer, sinus infections, and other ailments, without required registration with the FDA. (See opinion at 2016 U.S. Dist. LEXIS 81047, June 22, 2016). The court held that defendant did not properly raise his free exercise objection, but that even if he had he had not shown that the Act imposes a substantial burden on his exercise of religion.