The IRS denied a religious organization tax-exempt status because it served its members ayahuasca while it was awaiting a religious exemption from the Drug Enforcement Agency (DEA).1
Organizations that want to be classified as tax-exempt under §501(c)(3) have to demonstrate that their activities are legal and consistent with public policy. The organization in this case was a church whose members’ sincerely held beliefs involved the consumption of ayahuasca, a Schedule I controlled substance that contains DMT, which is a strong (and illegal) psychedelic drug.
Under the Controlled Substances Act (CSA), there is a specific process for religious exemptions that allow for the use of controlled substances. To obtain the exemption, a religious organization must apply through the DEA, or a federal court can also issue an exemption.
The Iowaska Church of Healing applied for both tax-exempt status and a DEA religious exemption from the CSA. However, while those applications were still pending, the church conducted Ayahuasca tea ceremonies for its members. The IRS denied the §501(c)(3) exemption because the church engaged in illegal activity without a CSA exemption. The church cited Gonzales v. O Centro Espirita Beneficente União do Vegetal,2 claiming that case recognized the use of ayahuasca in religious ceremonies as an exercise of religion under the First Amendment. But the IRS countered, and the court agreed, that the church had misinterpreted O Centro to mean they could use ayahuasca without the CSA exemption. Rather, that case found that an organization does not have to apply for an exemption from the DEA before seeking relief in the courts.
