Lutheran Social Service of Minnesota v. United States

Lutheran Social Service of Minnesota (LSS) (plaintiff) was a tax-exempt social-service agency affiliated with the Lutheran Church. LSS provided childcare, adoption services, individual and family counseling, residential care for mentally ill and developmentally disabled individuals, and other social services. LSS charged fees based on its clients’ ability to pay. Services were available to all, regardless of the recipient’s religious beliefs, and LSS’s counselors were not required to counsel according to any religious orientation. LSS filed a Form 990 tax return for exempt organizations two months after the deadline. The United States Internal Revenue Service (IRS) (defendant) assessed a late fee, which LSS paid. LSS then filed a claim for refund on the grounds that it was exempt from filing Form 990 because it was a church as defined in the Internal Revenue Code (code). The IRS denied the claim, and LSS brought an action for declaratory judgment. LSS contended the services it offered were religious because they constituted a manifestation of religious belief, a form of worship, and a means of spreading the Christian faith according to the tenets of the Lutheran Church. LSS also argued it was exempt from the filing requirement as an integrated auxiliary of a church and that the definition of independent auxiliary found in the treasury regulations contravened the code. The district court entered summary judgment in favor of the IRS, and LSS appealed.