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.