Indiana Court of Appeals Rules that State RFRA Does Not Provide Defense To Tax Evasion

January 15th, 2017

One of the most frustrating aspects of the debate over RFRA, and religious liberty more broadly, is the unqualified response that such laws are anti-LGBT. Without any further discussion, supporters of RFRA are labelled bigots. This instant dismissal obviates an important discussion of how RFRA operates, and how courts have interpreted them at the state and federal level over the past two decades. To this day, the media and scholars alike, without any actual analysis, dub Indiana’s RFRA (signed into law by Mike Pence) as hateful towards gays and lesbians. At the time of its enactment, I wrote a piece in National Review (that was among my most shared ever) explaining why these charges are simply (and deliberately) misleading:

Last week, Governor Mike Pence of Indiana signed into law the Indiana Religious Freedom Restoration Act (RFRA). Almost immediately, an uproar ensued, claiming that the law was discriminatory — that it provided a license for businesses to discriminate against gay and lesbian customers. Entirely lost in this kerfuffle has been the simple fact that the Indiana law is modeled on the 1993 federal law of the same name, and that counterparts have been adopted in 19 other states. Further, four federal courts of appeals and the Obama Justice Department have all taken the position that RFRA can be used as a defense in private suits involving the enforcement of laws that substantially burden free exercise of religion. Important debates over the intersection of faith and equality are impaired when they are overtaken by misguided rhetoric, rather than being informed by the history and context of how our legal system has treated this issue.

To my knowledge, there still has not been a single federal or state case where a court dismissed a discrimination claim filed by a gay or lesbian customers after a business raised RFRA as a defense. (Please correct me if I am wrong). In the noteworthy Elane Photography case, for example, the New Mexico Supreme Court ruled that the state RFRA offered no defense.

Now that the dust has settled, somewhat, let’s carefully study how Indiana courts have actually interpreted their own law. Tyms-Bey v. State of Indiana, (IN App., Jan. 13, 2017) presents the question of whether a person charged with tax fraud can raise RFRA as a defense (separate from the question of whether it was a valid defense). A divided panel of the Court of Appeals of Indiana held that the defense could not even be raised.

The majority opinion by Judge Baker explains the issue in the introduction:

Rodney Tyms-Bey brings this interlocutory appeal of the trial court’s order granting the State’s motion to strike his notice of defense under Indiana’s Religious Freedom Restoration Act (RFRA).1 Our legislature has carved out a statutory exception to RFRA protections when the government’s imposition of a burden furthers a compelling interest and is the least restrictive means of furthering that interest. We find as a matter of law that the State’s compelling interest in a uniform and mandatory taxation system falls into the statutory exception such that RFRA affords no relief to Tyms-Bey. Therefore, we affirm and remand for further proceedings.

The defendant was a self-professed “sovereign citizen,” who did not pay his taxes.

On July 1, 2015, the date Indiana’s RFRA statute took effect, Tyms-Bey filed a notice of defense of religious freedom. The State moved to strike the defense. On January 6, 2016, the trial court held a hearing on the motion to strike. At the hearing, Tyms-Bey refused to identify what religious practice or belief was burdened by the State’s actions and stated that he believed he was entitled to present his defense to a jury and would provide all evidence at trial. The State argued that a defense of religious freedom is unavailable as a defense to failure to pay taxes.

The analysis for the state RFRA, like its federal cousin, has three key elements: (1) has the applicant’s free exercise been substantially burdened; (2) does the government have a compelling interest; (3) has the government used the least restrictive means to accomplish that compelling interest. In Tyms-Bey, the Court assumed the first element (it’s awfully hard to dispute), so focused on the latter two:

We will assume solely for argument’s sake that Tyms-Bey pleaded a RFRA defense properly and met his burden of showing that this prosecution substantially burdens his exercise of religion. Having made those assumptions, we need decide only whether—as a matter of law—the State’s enforcement of its income tax laws is in furtherance of a compelling interest and is the least restrictive means of furthering that compelling interest. In other words, we must determine whether, viewing the situation in a light most favorable to a defendant facing criminal income tax penalties, that defendant could ever raise a successful RFRA defense. We hold that he could not.

Specifically, citing the Supreme Court’s decision in U.S. v. Lee, the court of appeals concluded that the state has a “compelling interest in the collection of taxes and the absolute necessity of uniform and mandatory participation in the tax system.”

We find that the uniform and mandatory tax system as a whole, which incorporates the criminal penalties at issue here, is the least restrictive means of furthering the government’s compelling interest in collecting revenue.

We adopt the analysis of the Lee Court and hold as a matter of law that, in the context of Indiana’s RFRA, there is a compelling governmental interest in collecting income tax revenue. Moreover, we hold as a matter of law that the least restrictive means of furthering that compelling interest is uniform and mandatory participation in the income tax system.

Judge Najam dissented from the controlling opinion, and draws the important distinction between having the ability to raise a defense, and whether that defense would actually succeed:

Tyms-Bey’s alleged RFRA defense may ultimately not succeed, but he is entitled to his day in court. The majority’s holding that, in effect, Tyms-Bey has not stated a claim under RFRA and that he is not even entitled to present evidence in support of his alleged defense is too quick to dispose of Tyms-Bey’s claim and denies him the particularized adjudication that is expressly afforded to him by Indiana’s RFRA. Moreover, in enacting Indiana’s RFRA, our legislature explicitly reserved to itself, and withheld from our judiciary, the right to declare categorical exemptions from RFRA’s application. The majority’s holding disregards that command and categorically removes tax-based actions from RFRA’s application.

The dissent proceeds to discuss that RFRA was designed to go beyond Smith, and that relying on the pre-Smith case of Lee is problematic.

Rather than following Burwell, the majority instead concludes that Lee, a pre- Smith case, and its progeny more accurately reflect our legislature’s intent when it enacted RFRA. I cannot agree and must conclude that the majority’s assessment that Indiana’s RFRA adds nothing to pre-Smith jurisprudence is contrary to RFRA. As the Burwell Court recognized, Lee is “a free exercise, not a RFRA, case.”  . . . . Moreover, Indiana’s RFRA contains the exact same language that the Court in Burwell, considering the federal RFRA, held to provide broader protection to the exercise of religion than Lee and its progeny, and Indiana’s RFRA expressly codifies and expands upon the holding in Burwell.

Yes, never forget, Indiana’s RFRA was framed identically to the federal RFRA.

Accordingly, I would hold that Burwell, not Lee, best reflects the intent of our legislature in enacting RFRA. And this is significant here because, as Burwell explains, RFRA demands a fact-sensitive, “particularized” assessment of the claimed religious exemption, while Lee does not. . . . In other words, the General Assembly expressly reserved to itself the right to exempt statutes from RFRA’s application and expressly commanded the judiciary to not “construe[]” statutes “to be exempt from th[at] application.” Id. Those commands are consistent with the case-by-case, particularized adjudications the Burwell Court described as fundamental to RFRA. See 134 S. Ct. at 2779-80. And there is no state statute that expressly exempts tax evasion prosecutions from the application of RFRA.

In short, the dissent contends that the court was premature to dismiss the RFRA defense:

Indeed, in its motion to strike Tyms-Bey’s RFRA defense, the State acknowledged that he “has not yet identified what religion he belongs to, how the tenets of that religion relate to Indiana’s income tax regime[,] or how that tax negatively impacts the practice of his religion.” Id. at 36.

The dissents conclusion speaks to the Hobby Lobby parade of horribles that simply has never arrived:

Without question, the majority is concerned, as were the dissenters in Burwell, that RFRA will wreck “havoc” on judicial proceedings and be a “radical” departure from the status quo. Burwell, 134 S. Ct. at 2787, 2805 (Ginsburg, J., dissenting). But “[t]he wisdom of [our legislature’s] judgment on this matter is not our concern. Our responsibility is to enforce RFRA as written, and under the standard that RFRA prescribes . . . .” Id. at 2785 (majority opinion). And it is certainly not the judiciary’s role to construe actions as exempt from RFRA when our legislature has expressly reserved that right to itself. See I.C. § 34-13-9-2.

And even if he can raise the defense, it may not succeed:

At the end of the day, Tyms-Bey’s exercise-of-religion defense may not prevail. But we cannot say as a matter of law that Tyms-Bey can prove no set of facts in support of his RFRA defense that would entitle him to relief. The issue is not whether a RFRA claimant will ultimately prevail but whether he is entitled to offer evidence to support his claim. In other words, Tyms-Bey is entitled to his day in court and to the same due process as any other criminal defendant, including his right to present his affirmative defense to a jury. Otherwise, RFRA is for naught and offers no more protection to the exercise of religion than does the First Amendment.

This paragraph is a crystalline explication of why the fuss about state RFRAs are so misleading.