Individual Income Tax Insights: Indiana Appellate Court Holds Religious Freedom Not a Defense to Criminal Tax Evasion


Indiana’s Religious Freedom Restoration Act (RFRA) cannot be used as a defense by an individual charged with tax evasion, according to the Indiana Court of Appeals in Tyms-Bey v. Indiana, No. 49A05-1603-CR-439, 2017 BL 10320 (Ind. Ct. App. Jan. 13, 2017). The case is the first of its kind—a challenge arguing that Indiana’s criminal tax law violated the state’s RFRA.

Vice President Mike Pence signed S.B. 101 into law on March 26, 2015, while he was still governor of Indiana. The bill was modeled on the federal RFRA and provides that “a governmental entity may not substantially burden a person's exercise of religion, even if the burden results from a rule of general applicability” unless the burden furthers a compelling government interest by the least restrictive means.

Rodney Tyms-Bey was charged with felony tax evasion in Indiana in 2014. The next year, Tyms-Bey filed a “notice of defense of religious freedom” on the day Indiana’s RFRA took effect. Indiana challenged the defense as improper. After a hearing, the trial court granted the state’s motion to strike the defense and Tyms-Bey appealed to the Indiana Court of Appeals.

The Court of Appeals’ opinion was issued Jan. 13, 2017, and rejected the potential use of Indiana’s RFRA as a defense in tax cases. The Court held that even if the burden of paying taxes was substantial, the state had a compelling interest in collecting tax revenue and “that the least restrictive means of furthering that compelling interest is uniform and mandatory participation in the income tax system.” This language mirrors the United States Tax Court’s opinion in Lippincott Adams v. Commissioner, Nos. 15535-96, 3437-97, 110 T.C. 137 (March 3, 1998), which rejected a taxpayer’s claim that the federal RFRA exempted her from federal income tax.

Besides Indiana, 18 other states have their own version of RFRA, according to CNN. The federal version was originally intended to apply to the federal government, the states and localities, but the U.S. Supreme Court held that application beyond the federal was unconstitutional in City of Boerne v. Flores, 521 U.S. 507 (1997). After that decision, states began passing similar versions of the federal RFRA so that the laws would apply to state government action.

This is the first time a state’s individual income tax laws have been challenged under a state RFRA. Tyms-Bey could end that possibility in Indiana, but will it foreclose the use of such a defense in other states? Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn.

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