Huge Catholic Church Fine Lifted but Tax Suit Survives

The Supreme Court lifted a pending $100,000-a-day fine against the Roman Catholic Church on Monday but did not kill a bitterly fought lawsuit that challenges the tax-exempt status of the church and its many affiliates.

The case now returns to an appeals court in New York to decide whether an abortion rights group has legal standing to contest the Internal Revenue Service policy that gives the church a tax exemption. The group contends that the church has used its funds to back anti-abortion political candidates and that this political activity violates IRS policy for religious organizations.

Both sides in the bitter battle characterized the high court ruling as akin to a tie. Neither side won anything except the right to fight on.

“Compared with the alternative, we are pleased,” said a subdued Charles H. Wilson, an attorney who represented the church. If the church had lost, it would have faced the choice of paying the huge daily fine or turning over thousands of pages of internal documents on the use of its funds.

‘Not a Victory or Defeat’

“This is a delaying action. It was not a victory or defeat,” said Lawrence Lader, president of Abortion Rights Mobilization Inc., the group that is challenging the church’s tax exemption.

The case began five years ago when the abortion rights group filed suit against the IRS, contending that the government was not enforcing its laws on tax-exempt religious groups and was permitting the church to subsidize anti-abortion political candidates.

The courts routinely throw out taxpayer suits that challenge IRS actions but U.S. District Judge Robert L. Carter in New York concluded that this suit was different. To have legal standing, the plaintiff must allege that he is suffering a real injury, and the abortion rights group was contending that its political operations were being hurt by the IRS’ alleged subsidy of anti-abortion candidates. Carter allowed the suit to proceed and ruled that church officials must turn over internal documents to demonstrate whether it was funding anti-abortion candidates.

Church Withholds Documents

The Catholic Conference, which represents the church and its affiliates in the United States, refused to turn over the documents and Carter assessed a fine of $100,000 a day for contempt of court.

The U.S. 2nd Circuit Court of Appeals upheld the action, ruling 2 to 1 that the church, which was not named as a defendant with the IRS in the original suit, did not have legal standing to challenge the contempt order. Moreover, it said, there is a “colorable basis” for believing that the suit is a valid one.

But the appeals court did not specifically address whether the abortion rights group had legal standing to challenge the IRS decision in the first place.

In its 8-1 ruling Monday in the case (U.S. Catholic Conference vs. Abortion Rights Mobilization Inc., 87-416), the high court said only that the church has standing in the appeals court to challenge the underlying standing of the abortion rights group. If the543256688rights group can legally pursue the case, the fine could be reimposed.

Prison Contractor Ruling

In another ruling that undercuts the movement to contract prison services to private companies, the court said contractors working for prisons act as state employees and can be sued just like the state.

A North Carolina prison inmate had contended that his treatment by a private doctor working under contract to the state was so poor that his constitutional rights were violated. An appeals court dismissed the suit on grounds that the doctor was immune from such suits because he was a private physician, not a state employee. But the justices unanimously disagreed and said a contractor working for the state is a state employee (West vs. Atkins, 87-5096). In some states, officials have argued that prison services should be contracted out to avoid the strict legal liability faced by government agents.