A federal judge ruled yesterday that the IRS may not impose a 50 percent tax penalty against Philadelphia's Quakers for refusing to pay a levy on the wages of an employee who is a "war-tax protester."
In what he called an "issue of first impression," U.S. District Judge Stewart Dalzell ruled that the Internal Revenue Service's penalty against the Philadelphia Yearly Meeting of the Religious Society of Friends may violate the 11-year-old federal Religious Freedom Restoration Act.
Dalzell's ruling was mixed. The judge affirmed the IRS's tax lien against Quaker peace activist Priscilla L. Adams, 50, of Willingboro, Burlington County. The IRS claims Adams owes $20,152 in taxes from the 1986 to 1996 tax years.
With interest and penalties, that amount had swollen to $49,188 by Dec. 22.
Dalzell wrote that the U.S. Court of Appeals for the Third Circuit ruled in 1999 that the "routine administration of the federal income tax system requires uniform assessments and mandatory participation."
What the Third Circuit and other appeals courts have not addressed, Dalzell added, was how the RFRA - the acronym of the 1993 federal law - governs the methods the IRS chooses among to collect the tax judgment against an individual.
"There may well be a case in which the [IRS] can choose between two means of satisfying a taxpayer's delinquency, one of which substantially burdens the free exercise of religion (perhaps that of a third party, as here) and one of which does not," Dalzell wrote.
Gregory S. Hrebiniak, the Justice Department Tax Division lawyer who filed the suit against Friends in July, could not be reached.
In court filings, the government maintained that Friends deserved the 50 percent penalty because in 1990 the group litigated - and lost - the question of whether it was required to garnishee the wages of tax-protester employees to pay back taxes to the IRS. Thus, the government said, the Philadelphia Yearly Meeting was "on notice" that its stand was unreasonable.
"How can the IRS argue that it is unreasonable of the Friends to maintain a reasonable religious belief?" asked Peter Goldberger, the lawyer who defended the Quakers in the 1990 tax case.
Goldberger noted that pacifism has always been a core Friends' tenet, as is the Friends' practice of collectively reaching a "consensus" before deciding whether to support a member's religious-based tax protest.
Founded in 1681, the Philadelphia Yearly Meeting administers about 100 Quaker meetings in eastern Pennsylvania, South Jersey, Delaware and eastern Maryland with about 13,000 members.
In past years, the IRS obtained a judgment against the Philadelphia Yearly Meeting for the unpaid taxes of employee tax-resisters and withdrew the money from a church bank account.
Last year's lawsuit, however, renewed the IRS' claim it was entitled to a 50 percent penalty against the church for refusing to garnishee and forward to the government Adams' back taxes.