Ayahuasca-Using Church’s Tax Status Claim Faces Skeptical Court

An Iowa church that used a psychedelic drug in its sacrament faced an uphill battle Monday trying to convince a federal appeals panel that it remains entitled to a tax exemption as a religious organization.

The IRS denied tax exempt status to the Iowaska Church of Healing, whose members consume the Sacrament of Ayahuasca, a tea containing the Schedule I hallucinogen dimethyltryptamine, as part of their religious practice. ICH appealed after a federal district court agreed with the government that the church couldn’t be tax exempt because its practices likely violated the Controlled Substances Act.

There’s “no question” that the substance in the sacrament violates public policy, and the IRS has no authority to give an exemption to the CSA, D.C. Circuit Judge Harry T. Edwards told ICH during oral arguments.

“It is the law of the land, whether you think it should or should not be the law of the land,” Edwards said. “I don’t know how you can challenge what the IRS has done. They’ve done what they are mandated to do: they looked at public policy, this violates public policy, and that’s that.”

ICH counsel Simon Steel, of Dentons US LLP, didn’t concede that the sacrament violates the law. Rather, he said, the practice is protected by the 1993 Religious Freedom Restoration Act, which requires the government to satisfy a strict scrutiny standard in order to treat the sacrament as illegal.

IRS counsel Kathleen E. Lyon told the panel that Steel’s argument “gets the burden of proof backwards” under RFRA, and that ICH carries the burden to prove that it is entitled to tax exemption.

“It can’t make that showing here because it is not obtained an exemption from the CSA, either from the DEA or through judicial relief under RFRA,” said Lyon, who was a week removed from arguing on behalf of the IRS at the First Circuit in a separate case.

Judges Robert L. Wilkins and Karen LeCraft Henderson also sat on the US Court of Appeals for the D.C. Circuit panel.

The Chacruna Institute for Psychedelic Plant Medicines and the Sacred Plant Alliance filed an amicus brief supporting ICH.

The case is Iowaska Church of Healing v. Werfel, D.C. Cir., No. 23-05122, oral argument 3/11/24.