                                 ____________

                                  No. 93-2267
                                 ____________

In re: Bruce Young;                   *
In re: Nancy Young                    *
                                      *
--------------------                  *
                                      *
Julia A. Christians,                  *
                                      *
                 Appellee,            *
                                      *
United States of America,             *
                                      *
                 Intervenor,          *
                                      *
     v.                               *
                                      *
Crystal Evangelical Free              *
Church,                               *
                                      *
                 Appellant.           *
                                      *
--------------------                  *
                                      *
Christian Legal Society; The          *
National Association of               *
Evangelicals; Americans United        * Appeal from the United States
for Separation of Church and          * District Court for the
State; Concerned Women for            * District of Minnesota
America; The Baptist Joint            *
Committee on Public Affairs;          *
The Southern Baptist Convention;*
The General Conference of             *
Seventh-Day Adventists;               *
The Evangelical Lutheran Church       *
in America;                           *
                                      *
                 Amici Curiae.        *
                                      *
United States Senator Orrin G.        *
Hatch; The Church of Jesus            *
Christ of Latter-Day Saints;          *
Catholic League for Religious         *
and Civil Rights; Traditional         *
Values Coalition; Worldwide           *
Church of God,                        *
                                      *
                 Amici Curiae.        *
                                     ____________

                        Submitted:     September 15, 1994

                            Filed:     May 6, 1996
                                     ____________

Before McMILLIAN and MAGILL, Circuit Judges, and BOGUE,* District
      Judge.
                              ____________


McMILLIAN, Circuit Judge.


      The Crystal Evangelical Free Church (hereinafter the church) appeals
from a final order entered in the District Court for the District of
Minnesota affirming an order entered in the Bankruptcy Court for the
District of Minnesota that required the church to turn over to trustee
Julia A. Christians certain funds debtors Bruce and Nancy Young had
contributed to the church as tithes during the year preceding the filing
of their petition for bankruptcy.         In re Young, 148 B.R. 886 (Bankr. D.
Minn. 1992), aff’d, 152 B.R. 939 (D. Minn. 1993).        For reversal, the church
argues    that   the   contributions    were   not   avoidable   under   11   U.S.C.
§ 548(a)(2) because the contributions were not made in exchange for less
than “reasonably equivalent value.”       The church also argues that requiring
it to turn over the contributions discriminates against religion and
violates the free exercise clause of the first amendment.         For the reasons
discussed below, we reverse the order of the district court.


BACKGROUND FACTS


      The facts are not disputed.         The debtors are active members of the
church.   For several years, as part of their religious




      *The Honorable Andrew W. Bogue, United States
      District Judge for the District of South Dakota,
      sitting by designation.

                                         -2-
belief and practice, the debtors voluntarily contributed certain funds as
tithes to the church; they did not receive money or tangible property in
exchange for their contributions.     Tithing is a spiritual and financial
practice.    Believers traditionally give a tithe, or tenth, of their income
to a religious organization such as a church.    See Lev. 27:1, 30, 32 (New
International Version) (“The Lord said to Moses . . . . A tithe of
everything from the land, whether grain from the soil or fruit from the
trees, belongs to the Lord; it is holy to the Lord . . . . The entire tithe
of the herd and flock-- every tenth animal that passes under the shepherd’s
rod-- will be holy to the Lord.”).      The church teaches that Christians
should offer regular contributions to support the work and message of the
church.     However, the church does not insist on a particular amount or
require payment of membership or attendance fees.   Members and non-members
are welcome at worship services and other church services whether they
tithe or not.    It is not disputed that the debtors are sincere in their
religious faith.


      In February 1992 the debtors filed a joint Chapter 7 bankruptcy
petition.     During the year preceding the filing of their Chapter 7
petition, and at a time when they were insolvent, they contributed a total
of $13,450.00 to the church.    The trustee filed this adversary proceeding
against the church in order to recover those contributions as “fraudulent




                                     -3-
transfers”   under   11   U.S.C.   §   548(a)(2)(A).1   The   parties   filed
cross-motions for summary




     1
      11 U.S.C. § 548(a) provides in part:

           (a) The trustee may avoid any transfer of an
     interest of the debtor in property, or any
     obligation incurred by the debtor, that was made or
     incurred on or within one year before the date of
     the filing of the petition, if the debtor
     voluntarily or involuntarily--
           . . . .

          (2)(A)     received less than a reasonably
     equivalent value in exchange for such transfer or
     obligation; and
          . . . .

           (B)(i) was insolvent on the date that such
     transfer was made or such obligation was incurred,
     or became insolvent as a result of such transfer or
     obligation.

                                       -4-
judgment.   In order to avoid transfers under 11 U.S.C. § 548(a)(2)(A), the
trustee must prove that (1) there was a transfer of the debtors’ interest
in property (2) made on or within a year preceding the filing of the
petition (3) while the debtors were insolvent (4) in exchange for which the
debtors received less than reasonably equivalent value.         The parties
stipulated to the existence of the first three factors; the only factor in
dispute was whether the debtors received “reasonably equivalent value” “in
exchange for” their contributions to the church.


DECISION OF THE BANKRUPTCY COURT


      The   bankruptcy court granted the trustee’s motion for summary
judgment and denied the church’s motion.      The bankruptcy court held that
the debtors’ contributions to the church were avoidable transfers under §
548(a)(2)(A) because the debtors did not receive “reasonably equivalent
value” “in exchange for” their contributions.      148 B.R. at 890-93.   The
bankruptcy court concluded that “value” referred solely to economic value,
that is, “property” in a physical or material sense, and that religious
services, theological programs and access to the church’s facilities did
not meet this economic definition of value.    Id. at 891, 895-96 (rejecting
In re Moses, 59 B.R. 815, 818 (Bankr. N.D. Ga. 1986) (Moses) (holding
church services constitute property within meaning of § 548), and In re
Missionary Baptist Foundation of America, 24 B.R. 973, 979 (Bankr. N.D.
Tex. 1982) (Upreach) (holding good will constituted reasonably equivalent
value in exchange for charitable contributions to church)).




                                    -5-
      The bankruptcy court also concluded that the contributions were not
economically beneficial to the debtors.                 148 B.R. at 893.         In the
bankruptcy court’s view, any benefit was strictly religious and thus merely
incidental and enjoyed by the debtors individually and not by either their
pre-petition or post-petition estate.              Id. at 893-94 & n.10.            The
bankruptcy court also noted that the judicial system cannot differentiate
between “religious” benefits and “secular” benefits, much less put a value
on those benefits, and that any value calculation would be “fraught with
the sort of entanglement that the Constitution forbids,” and that the
debtors’ contributions to the church were thus avoidable as fraudulent
transfers under § 548(a)(2)(A).            148 B.R. at 893-96 & n.13, 896 & n.17
(noting   potential       excessive   entanglement      problems   in   having   courts
calculate value of religious services, even though parties did themselves
did not raise first amendment concerns).


      The bankruptcy court also determined that, even assuming the debtors
received value, that value had not been received “in exchange for” their
contributions because no exchange took place.           Id. at 895-96.    As noted by
the bankruptcy court, the church made available worship services and
religious programs to all members, including the debtors, without in any
way linking those services to financial contributions.             Id. at 894 (noting
that debtors could not have received property in exchange for their
contributions for purposes of § 548(a) and at the same time treated those
contributions as charitable deductions under 26 U.S.C. § 170(c)(4)).                See
Hernandez v. Commissioner, 490 U.S. 680, 691 (1989) (quid pro quo is
inconsistent with charitable contribution); United States v. American Bar
Endowment, 477 U.S. 105, 118 (1986) (“The sine qua non of a charitable
contribution   is     a    transfer   of   money   or   property    without   adequate
consideration.”).         The bankruptcy court declared the transfers void and
ordered the trustee to recover from the church $13,450.00, plus interest
and costs.   The church appealed the decision of the bankruptcy court to the
district court.




                                           -6-
DECISION OF THE DISTRICT COURT


      On    appeal, the district court affirmed the bankruptcy court’s
statutory interpretation and analysis of § 548(a)(2)(A) and agreed that the
debtors    did   not    receive   “reasonably   equivalent   value”    for    their
contributions to the church.       152 B.R. at 948.    The district court also
found that neither the religious services nor the tax deductions for
charitable contributions constituted reasonably equivalent value under §
548(a)(2)(A).      Id. at 948-49.       The district court agreed with the
bankruptcy court’s decision not to follow Upreach and Moses.                 In the
district court’s view, good will and church services are not the kind of
“fairly concrete” benefits required to constitute reasonably equivalent
value, and neither case addressed the “in exchange for” requirement.            Id.
at 950.     The district court noted that church services and charitable
deductions were not given “in exchange for” the debtors’ contributions.
Id. at 949-50.         The district court also distinguished Moses from the
present case on the ground that in Moses the church had required the
contributions as a condition of the debtor’s employment as a deacon.            Id.
at 950.    In the present case the parties stipulated that the debtors were
not required to contribute in order to attend church services or otherwise
participate in church programs.


      On appeal in the district court, the church argued for the first time
that applying § 548(a) would violate the free exercise and establishment
clause of the first amendment.      The district court exercised its discretion
to consider the constitutional arguments and rejected them.           The district
court first held that the church had standing to raise the constitutional
rights of the debtors in addition to its own.      Id. at 950-51 (debtors could
not effectively assert their free exercise rights because they are not
parties in this proceeding).       The district court then applied Employment
Division v. Smith, 494 U.S. 872 (1990) (Smith), and held that the church’s
free exercise claim failed on the merits because the Bankruptcy Code was
a neutral law of general applicability




                                       -7-
which has only an incidental effect on religion.              152 B.R. at 953-54.       The
district court held in the alternative that, even if the pre-Smith free
exercise test applied, “[t]he government’s policy of allowing debtors to
get a fresh start while at the same time treating creditors as fairly as
possible qualifies as a compelling [governmental] interest.”                 Id. at 954.



      The   district    court   also   held   that       §   548(a)   did   not   unfairly
discriminate against religious contributions, id. at 954, and that the
debtors’ “hybrid” right to free speech and free exercise was not impaired
because limiting the amount an individual may contribute to a cause or
organization    only   marginally    restricts      the      contributor’s    ability    to
communicate that particular message.          Id.       The district court noted that
§548(a)(2)(A)    was   narrowly     drawn   and     content-neutral,        protected    an
important governmental interest in maximizing the debtors’ estate, and did
not violate the doctrine of separation of church and state.                  Id. at 954.



      Finally, the district court held that § 548(a) did not violate the
establishment clause.     Id. at 955.       The district court applied the Lemon
v. Kurtzman, 403 U.S. 602 (1971), entanglement test and found that § 548
has a secular purpose, to maximize the size of the debtor’s estate; its
primary effect neither advances nor inhibits religion; and its enforcement
does not threaten excessive entanglement between church and state.                      152
B.R. at 955.    The district court agreed with the bankruptcy court that
attempting to quantify the value received by the debtors in exchange for
their contributions to the church could lead to exactly the sort of
entanglement the Constitution forbids.            Id.    This appeal followed.
CERTIFICATION OF CONSTITUTIONAL QUESTION


      On November 13, 1993, after the district court had filed its decision
and while this appeal was pending, President Clinton signed the Religious
Freedom Restoration Act (RFRA), 42 U.S.C.




                                        -8-
§ 2000bb.2   For this reason, questions about the application of the RFRA
(or its constitutionality) were not presented to the district court.
Pursuant to the court’s request, the parties filed supplemental briefs
addressing the applicability of the RFRA.


      While preparing for oral argument, this court recognized, albeit
belatedly, that certification under 28 U.S.C. § 2403(a) was required
because the appeal questioned the constitutionality of a provision of the
bankruptcy code affecting the public interest and the United States was not
a party.   Accordingly, we removed the case from the argument calendar and
certified the appeal to the Attorney General and invited the United States
to intervene in the appeal on the question of constitutionality of 11
U.S.C. § 548(a) if it so desired.    See 28 U.S.C. § 2403(a); Fed. R. App.
P. 44; Fed. R. Civ. P. 24(c).   The parties had not requested the bankruptcy
court, the district court or this court to notify the Attorney General, and
the district court and the bankruptcy court had not realized that 28 U.S.C.
§ 2403 requires notification of the Attorney General whether or not it is
requested by the parties.   Nonetheless, “[f]ailure to notify the Attorney
General is not a jurisdictional defect, and belated notice satisfies any




      2
      The Religious Freedom Restoration Act, 42 U.S.C. § 2000bb,
provides in part:

            (a)    IN GENERAL-- Government shall not
      substantially burden a person’s exercise of
      religion even if the burden results from a rule of
      general applicability, except as provided in
      subsection (b).

            (b) EXCEPTION-- Government may substantially
      burden a person’s exercise of religion only if it
      demonstrates that application of the burden to the
      person--

                  (1)    is in furtherance of a
             compelling governmental interest; and

                  (2)    is the least restrictive
             means of furthering that compelling
             governmental interest.

                                    -9-
requirement.”      Tonya K. v. Board of Education, 847 F.2d 1243, 1247 (7th
Cir. 1988) (citations omitted).            Certification has occurred even after
judgment at the appellate level.           E.g., Merrill v. Town of Addison, 763
F.2d 80, 83 (2d Cir. 1985) (citing cases).           “The rule is designed to give
the Executive Branch both the time to make its views known and the
opportunity to intervene in order to take a direct appeal to the Supreme
Court       if   the    decision    should     be    adverse    to    the    statute’s
constitutionality.”      Tonya K. v. Board of Education, 847 F.2d at 1247.          No
practical purpose would have been served in remanding the case to the
bankruptcy court or the district court for purposes of certification, and
the belated certification did not prejudice or otherwise impair the ability
of the United States to fully present its views on the question of the
constitutionality of § 548(a).        See Merrill v. Town of Addison, 763 F.2d
at 83.


        Following certification, the United States decided to intervene in
the case and filed a brief supporting the position of the trustee and
defending the constitutionality of § 548(a)(2)(A) under both Smith and the
RFRA.       Several amicus briefs were filed in support of the church’s
position.3       Oral   arguments   were     held   in   September   1994.   However,
immediately before oral argument, the United States ended its participation
in the case as intervenor and withdrew its brief.               The decision of the
United States to withdraw surprised the parties and the court, but counsel
for the trustee was substituted for the United States at the last moment
and ably presented oral argument.




        3
      Amicus briefs were filed in support of the church on behalf
of the Christian Legal Society, the National Association of
Evangelicals, Americans United for Separation of Church and State,
Concerned Women for America, the Baptist Joint Committee on Public
Affairs, the Southern Baptist Convention, the General Conference of
Seventh-Day Adventists, and the Evangelical Lutheran Church in
America; the Church of Jesus Christ of Latter-Day Saints; and
United States Senator Orrin G. Hatch.

                                           -10-
STANDARD OF REVIEW


      We review the grant of summary judgment de novo.   The question before
the district court, and this court on appeal, is whether the record, when
viewed in the light most favorable to the non-moving party, shows that
there is no genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law.    Fed. R. Civ. P. 56(c).    The
moving party bears the initial burden of identifying “those portions of
‘the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any,’ which it believes demonstrate
the absence of a genuine issue of material fact.”         Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56(c)).      Once
the moving party has met this burden, the non-moving party cannot simply
rest on the allegations in the pleadings; rather, the non-movant “must set
forth specific facts showing that there is a genuine issue for trial.”
Fed. R. Civ. P. 56(e).     Although we view the facts in the light most
favorable to the non-moving party, in order to defeat a motion for summary
judgment, the non-movant cannot simply create a factual dispute; rather,
there must be a genuine dispute over those facts that could actually affect
the outcome of the lawsuit.


      In the present case, there are no genuine issues of material fact in
dispute because the parties stipulated to the relevant facts and because
the issues raise only questions of law.


      The church’s principal argument on appeal is that requiring the
church to return these contributions violates the free exercise clause of
the first amendment.   The church relied on Smith in its main brief but also
raised a RFRA compelling governmental interest argument in its supplemental
brief.   The church also argues that the district court erred in applying
11 U.S.C. § 548 to these contributions and in finding that the debtors did
not receive




                                    -11-
“reasonably equivalent value” “in exchange” for their contributions to the
church.    We will discuss the statutory arguments first.


“FRAUDULENT” TRANSFERS UNDER 11 U.S.C. § 548(a)(2)


      The section of the bankruptcy code under which the trustee recovered
the contributions at issue, 11 U.S.C. § 548, is captioned “fraudulent
transfers and obligations.”     As a preliminary matter, the church argues
that this caption is not merely “unfortunate” but significant because the
purpose of the section is to avoid transfers made with fraudulent intent
or at least under circumstances under which a transfer may be considered
fraudulent.   The church argues that the section was not drafted with bona
fide charitable contributions in mind and that in the present case there
is no question of fraudulent intent.   The church notes that the debtors did
not change the frequency or amount or the recipient of their contributions
in the face of their changing financial circumstances.


      The term “fraudulent” in the caption of 11 U.S.C. § 548 is inapposite
and, at least with respect to § 548(a)(2), can certainly be misleading.
In re Newman, 183 B.R. 239, 245 & n.9 (Bankr. D. Kan. 1995).       It may be,
as the district court noted, that “describing the [debtors’ contributions]
as ‘avoidable transfers’ rather than ‘fraudulent transfers’ may be more
appropriate because it lessens the [unwarranted] inference of culpability.”
152 B.R. at 950.     Fraudulent intent is not required to recover transfers
made within one year of the bankruptcy filing under § 548(a)(2).      Compare
11 U.S.C. § 548(a)(1) (under which fraudulent intent is required to avoid
transfers).    Section § 548(a)(2) requires only “constructive fraud,” not
actual intent to defraud.    “A transfer is constructively fraudulent if an
insolvent debtor transfers some of its property for less than reasonably
equivalent value.”    In re Newman, 183 B.R. at 245 n.9.   In the present case
the trustee has not accused the debtors and the church of any improper
conduct,




                                     -12-
much less actual fraud.        What is important, however, is not the misleading
caption but that the trustee was not required to prove actual fraud in
order to recover the contributions under § 548(a)(2)(A).            We next consider
the church’s substantive statutory argument.


       In order to find a fraudulent transfer, or, more accurately, an
avoidable transfer, has occurred under 11 U.S.C. § 548(a)(2), the trustee
must prove by a preponderance of the evidence that (1) there was a transfer
of an interest of the debtor in property, (2) the transfer was made within
one year before the date of the filing of the petition, (3) the debtor was
insolvent on the date the transfer was made, and (4) the debtor received
less than a reasonable equivalent value in exchange for the transfer.              152
B.R.   at    945 (citations omitted).            In the present case the parties
stipulated that the first three elements were satisfied, and the only issue
was whether the debtors had received “reasonably equivalent value” “in
exchange for” their contributions to the church.           Id.   As noted above, the
district court concluded that the debtors’ contributions were gratuitous
transfers, id. at 948, and that religious or spiritual support did not
constitute “reasonably equivalent value.”             Id. at 949-50.    The district
court also concluded that, even assuming the church services did constitute
“reasonably equivalent value,” in the present case the church’s services
had not been provided “in exchange for” the debtors’ contributions because
the parties stipulated that the church services were available regardless
of whether or not they made any contributions.             Id.


       On appeal the church argues the district court erroneously defined
“value” to include only tangible property and ignored how the debtors
valued what they received from the church.           The church argues that “value”
includes indirect economic benefits and that the debtors received “value”
in   the    form   of   tax   deductions   for    charitable   contributions,   church
membership and spiritual




                                           -13-
counseling, and, more concretely, access to church facilities because
contributions from the debtors and others helped pay for the church’s
operating expenses.   The church also argues that the district court erred
in concluding that the contributions were not made “in exchange for” the
indirect economic benefits the debtors received in the form of church
services.   The church argues a nexus existed between the contributions and
those benefits because the debtors made the contributions during the same
time period they received the benefits.


      Title 11 U.S.C. § 548(d)(2)(A) defines “value” as “property, or
satisfaction or securing of a present or antecedent debt of the debtor, but
does not include an unperformed promise to furnish support to the debtor
or the relative of the debtor.”   In the present case it was undisputed that
the church did not satisfy or secure a present or antecedent debt of the
debtors; the only issue was whether the debtors received some sort of
“property” or “property right,” and therefore “value,” from the church.
The bankruptcy court decided that the debtors did not receive any economic
benefit from the church services.     148 B.R. at 893-94.    The bankruptcy
court noted that although the debtors received substantial spiritual
comfort from the church services, id. at 891 n.7, the church services did
not provide them, much less their pre-petition estates, with any “tangible
or recognizable economic benefit,” “marketable financial value or economic
utility from a creditor’s point of view.”   Id. at 894.   We agree that the
bankruptcy court over-emphasized the financial or economic considerations
in defining “value” under § 548.    “[T]he requirement of economic benefit
to the debtor does not demand consideration that replaces the transferred
property with something else tangible or leviable that can be sold to
satisfy the debtor’s creditor’s claims.”    2 David G. Epstein, Bankruptcy
§ 6-49, at 23 (1992).


      Unlike the bankruptcy court, however, the district court did not
define “value” only in terms of tangible property or marketable




                                    -14-
financial value.     The district court correctly examined “all aspects of the
transaction and carefully measure[d] the value of all benefits and burdens
to the debtor, direct or indirect,” including “indirect economic benefits.”
152 B.R. at 945.       The district court required only that the indirect
economic benefits be “fairly concrete.”            Id., citing In re Minnesota
Utility Contracting, Inc., 110 B.R. 414, 420 (D. Minn. 1990) (MUC) (bank
required corporation to grant bank a security interest in its assets to
extend additional line of credit to a second corporation owned by same
shareholders; indirect economic benefit to first corporation could be
“reasonably equivalent value” as long as indirect economic benefit was
“fairly concrete”; no evidence that first corporation received any indirect
economic benefits).     What “fairly concrete” means is not clear.          However,
the district court clearly did not define “property” in general, or
“indirect economic benefit” in particular, only in terms of legal or
equitable   rights    or   ownership   interest.     Compare   148   B.R.    at   891
(bankruptcy court arguably limited “property” to legal or equitable rights
and things subject to ownership) with id. at 893-94 (value requires
transfer of economic benefit to debtor’s estate); cf. In re Newman, 183
B.R. at 247 (noting that tithing does not give debtors enforceable property
right, contract right or equitable right to attend or partake in services
offered by church).


      In any event, in the present case, whether the debtors received any
economic benefit from the church services is beside the point.                    Even




                                       -15-
assuming that the debtors received “reasonably equivalent value,”4 the
stipulated facts in the present case




      4
      Finding that the church services had some economic benefit
and that the debtors made the contributions in exchange for those
services would call into doubt treating those contributions as
deductible charitable contributions. See Hernandez v. Commissioner,
490 U.S. 680, 690-91 (1989) (charitable contributions are only
deductible if made without adequate consideration; payments made to
a religious organization in exchange for a benefit to the taxpayer,
even a “purely religious” benefit, do not qualify as charitable
contributions).

     For purposes of analysis, we have also assumed that the
contributions and the church services were reasonably equivalent
and thus need not take up the constitutionally suspect and
difficult task of attempting to value the church services.

                                 -16-
precluded any finding that the debtors made their contributions “in
exchange for” the church services.       152 B.R. at 949; 148 B.R. at 893.
Section 548 contemplates a quid pro quo.       In the present case the parties’
stipulations are inconsistent with a quid pro quo.       The debtors stipulated
that they made the contributions out of a sense of religious obligation and
not in order to attend church (or receive a tax deduction).            The parties
also stipulated that the church services were available to all regardless
of whether any contributions were made. In other words, the debtors’
contributions    were   purely   voluntary   and   in   no   way    linked    to   the
availability of church services.     Similarly, the church conducted worship
services   and   provided   other   services    independent    of    the     debtors’
contributions.   Under the stipulated facts, there was no quid pro quo, no
exchange of contributions for church services.5


      Because the debtors did not receive the church services “in exchange
for” their contributions, the contributions were avoidable




      5
      In fact, as one would expect, given the religious context,
the absence of any nexus between tithing and the availability of
religious services is typical of the case law in this area. See,
e.g., In re Tessier, 190 B.R. 396, 399 (Bankr. D. Mont. 1995)
(church would welcome and fully accept debtors without or without
tithing); In re Newman, 183 B.R. 239, 248 (Bankr. D. Kan. 1995)
(noting that debtors would have tithed in same amount even if
church reduced services and that church would have provided
services to debtors even if they had reduced their tithe or not
tithed at all); In re Lees, No. 94-10523-13, 1994 WESTLAW 871932,
at *2 (Bankr. D. Mont. 1994) (no indication that debtors could no
longer attend or would lose any privileges at church if reduced or
eliminated tithing); In re Packham, 126 B.R. 603, 608 (Bankr. D.
Utah 1991) (only speculation by debtors that the church would deny
them a temple recommend if they failed to tithe). But cf. In re
Moses, 59 B.R. 815, 818 (Bankr. N.D. Ga. 1986) (contributions
required as condition of debtor’s employment by the church as a
deacon).

                                     -17-
transfers and were recoverable by the trustee under 11 U.S.C. § 548(a)(2).



FREE EXERCISE OF RELIGION


      Having concluded that the debtors’ contributions were avoidable
transfers and recoverable by the trustee under bankruptcy law, we turn now
to the church’s first amendment arguments.          The parties’ arguments on the
merits are related and, to a certain degree, repetitive.             Because we hold
that requiring the church to return the debtors’ contributions violates the
RFRA, we do not reach the merits of the constitutional issues.


      As   noted   above,   even   though     the   church    did    not   raise   any
constitutional arguments in the bankruptcy court and raised them for the
first time on appeal in the district court, the district court exercised
its discretion to consider the constitutional arguments on appeal.                 The
trustee argues that this is not the kind of extraordinary case that
warrants an exception to the general rule that a reviewing court should not
consider issues raised for the first time on appeal.           E.g., United States
Trustee v. Harris, 960 F.2d 74, 78 (8th Cir. 1992).                 We hold that the
district   court   did   not   abuse   its    discretion      in    considering    the
constitutional arguments raised by the church for the first time on appeal.
The constitutional arguments raised by the church for the first time on
appeal involved purely legal issues.         No additional evidence or argument
would have affected the outcome of the case.                 E.g., Universal Title
Insurance Co. v. United States, 942 F.2d 1311, 1314-15 (8th Cir. 1991).


STANDING


      The trustee also argues the church lacks standing to raise the free
exercise rights of the debtors, who were not parties in the adversary
proceeding in bankruptcy court or on appeal in the




                                       -18-
district court (or on appeal in this court).    We hold that the church has
standing to raise the free exercise rights of the debtors.         See In re
Newman, 183 B.R. at 249.     This issue involves the concept of third-party
standing.      Standing is a jurisdictional prerequisite, and in general
parties must raise their own legal rights.    However, a litigant can raise
the free exercise rights of a third party if the third party cannot
effectively assert those rights.     McGowan v. Maryland, 366 U.S. 420, 430
(1961) (department store challenging Sunday closing law could not raise
free exercise rights of patrons).     We agree with the district court that
the debtors could not have effectively asserted their free exercise rights.
The trustee, representing the debtors’ estates, and the church were the
parties in this adversary proceeding; the debtors were not.       As noted by
the district court, there was no indication that the debtors were able to
assert their free exercise rights in another forum.         In addition, the
interests of the church and the debtors, who are members of the church,
were   sufficiently similar so that the church would be an effective
representative of the debtors’ free exercise rights.


RETROACTIVE APPLICATION OF RFRA


       Although the RFRA was enacted after the district court’s decision,
the RFRA provides that it “applies to all Federal and State law, and the
implementation of that law, whether statutory or otherwise, and whether
adopted before or after November 16, 1993.”       RFRA § 6(a), 42 U.S.C. §
2000bb–3(a).    The RFRA defines the term “government” broadly to include “a
branch, department, agency, instrumentality, and official (or other person
acting under color of law) of the United States, a State, or a subdivision
of a State.”    Id. § 5(1), 42 U.S.C. § 2000bb-2(1).   The bankruptcy code is
federal law, the federal courts are a branch of the United States, and our
decision in the present case would involve the implementation of federal
bankruptcy law.     We and other circuits have held that the RFRA applies
retroactively in other contexts.




                                     -19-
E.g., Hamilton v. Schriro, 74 F.3d 1545, 1549 (8th Cir. 1996); Holterman
v. Helling, 70 F.3d 1276 (8th Cir. 1995) (table); Brown-El v. Harris, 26
F.3d 68, 69 (8th Cir. 1994); see also Flores v. City of Boerne, 73 F.3d
1352, 1355 (5th Cir. 1996) (city historic preservation ordinance); Droz v.
Commissioner, 48 F.3d 1120 (9th Cir. 1995) (Social Security taxes), cert.
denied, 116 S. Ct. 698 (1996).    Bankruptcy courts in other jurisdictions
have applied the RFRA retroactively.    See, e.g., In re Tessier, 190 B.R.
396, 403 (Bankr. D. Mont. 1995) (applying RFRA to protect tithing, but
holding RFRA is unconstitutional); In re Newman, 183 B.R. at 251 (holding
RFRA does not protect tithing).


RFRA


       On the merits the church argues that requiring the return of these
contributions unfairly discriminates against religion in general and, more
specifically, against religions (and the members of those religions) that
believe in tithing.   The church argues that exempting a personal residence
or tools of a trade or household goods, see 11 U.S.C. § 522(d), but not
religious contributions discriminates against religion.    The church also
argues that requiring the return of contributions discriminates against
religions on the basis of the way in which they are supported.        Some
religions, like the church, emphasize tithing; others rely upon personal
services, contributions from the public, fees for services, donations, or
membership dues.   The church also argues that, even among those religions
that rely upon donations, religions like the church that encourage tithing
at the traditional level of 10% are much more attractive to a trustee
looking for potential assets than other religions.   Brief for Appellant at
13 (table listing average % of household income donated to charity by
denomination as 1.3 to 3.8%, much less than 10%).


       For the reasons discussed below, we hold that the recovery of the
contributions substantially burdens the debtors’ free exercise




                                   -20-
of their religion and is not in furtherance of a compelling governmental
interest and therefore violates the RFRA.        In light of this holding and
because the RFRA is more protective of the right of free exercise than
Smith, see, e.g., Flores v. City of Boerne, 73 F.3d at 1361 (describing
RFRA as “a substantive expansion of First Amendment doctrine” and in effect
“an assignment by Congress of a higher value to free-exercise-secured
freedoms than the value assigned by the courts-- that is, strict scrutiny
versus a form of intermediate scrutiny”), we need not consider whether the
recovery of the contributions violates Smith.          The parties did not raise
the question of the constitutionality of the RFRA, and we do not consider
the constitutionality of the RFRA.      See id. at 1356-64 (holding Congress
has authority under § 5 of fourteenth amendment to enact RFRA and RFRA does
not usurp judiciary’s power to interpret the Constitution).          This circuit
has   applied     the   RFRA   in   other    cases     without   questioning   its
constitutionality and thus has at least implicitly held that the RFRA is
constitutional.    But cf. Hamilton v. Schriro, 74 F.3d at 1557 (McMillian,
J., dissenting) (arguing that the RFRA is unconstitutional because Congress
does not have power under § 5 of the fourteenth amendment to enact RFRA);
Tessier, 190 B.R. at 405-07 (holding RFRA is inconsistent with Smith and
violates the separation of powers doctrine).


       In Smith the Supreme Court held that the first amendment’s free
exercise clause does not bar application of a facially neutral law of
general application to religiously motivated conduct.            494 U.S. at 881.
In Smith two members of the Native American Church claimed that the state
unfairly denied them unemployment compensation because their religious use
of peyote was determined to be misconduct.           The Court held that the free
exercise clause did not bar the state from prohibiting sacramental peyote
use   and therefore denying unemployment benefits to Native Americans
discharged for using peyote.    Id. at 890.    The Court expressly rejected the
application of the compelling governmental interest and least restrictive
means test set forth in cases like Sherbert




                                      -21-
v. Verner, 374 U.S. 398 (1963), as unworkable and unnecessary in free
exercise analysis.   494 U.S. at 885, 886-90.   Justice Scalia explained that
whereas application of the compelling governmental interest test in fields
such as equal protection or free speech produces constitutional norms, in
the free exercise context it produces a “constitutional anomaly,” that is,
a private right to ignore generally applicable laws.    Id. at 886 (footnote
omitted).    Justice Scalia emphasized that “‘[i]t is not within the judicial
ken to question the centrality of particular beliefs or practices to a
faith, or the validity of particular litigants’ interpretations of those
creeds.’”    Id. at 887, citing Hernandez v. Commissioner, 490 U.S. at 699.
Justice Scalia cautioned that “courts must not presume to determine the
place of a particular belief in a religion or the plausibility of a
religious claim.”    494 U.S. at 887.


      Concerned that Smith did not adequately protect free exercise rights,
in 1993 Congress passed the RFRA expressly in response to Smith.    Congress
intended “to restore the compelling [governmental] interest test” as set
forth in Sherbert v. Verner and Wisconsin v. Yoder, 406 U.S. 205 (1972),
“to guarantee its application in all cases where free exercise of religion
is substantially burdened” and “to provide a claim or defense to persons
whose religious exercise is substantially burdened by government,” 42
U.S.C. § 2000bb(b)(1), (2), “even if the burden results from a rule of
general applicability.”    Id. § 2000bb-1(a).


      The threshold inquiry under the RFRA is whether the governmental
action in question “substantially burdens” a person’s religious practice.
This is a question of law which we review de novo.      Hamilton v. Schriro,
74 F.3d at 1552.       The individual has the burden of establishing the
existence of substantial burden.        42 U.S.C. § 2000bb-1(a).      “[T]he
governmental action must burden a religious belief rather than a philosophy
or a way of life.     [T]he burdened belief must be sincerely held by the
[person].”    Werner v.




                                     -22-
McCotter, 49 F.3d 1476, 1480 n.1 (10th Cir.) (citing Wisconsin v. Yoder,
406 U.S. at 215-19), cert. denied, 115 S. Ct. 2625 (1995).                  In order to be
considered        a    “substantial”       burden,    the    governmental        action     must
“significantly inhibit or constrain conduct or expression that manifests
some central tenet of a [person’s] individual [religious] beliefs; must
meaningfully curtail a [person’s] ability to express adherence to his or
her faith; or must deny a [person] reasonable opportunities to engage in
those activities that are fundamental to a [person’s] religion.”                          Werner
v. McCotter, 49 F.3d at 1480.               Assuming for purposes of analysis that
courts can constitutionally determine the parameters of religious belief,
what beliefs are important or fundamental, and whether a particular
practice is of only minimal religious significance, defining substantial
burden broadly to include religiously motivated as well as religiously
compelled    conduct        is   consistent   with    the    RFRA’s    purpose     to   restore
pre-Smith free exercise case law.              See Sasnett v. Sullivan, 908 F. Supp.
1429, 1440-45 (W.D. Wis. 1995) (extensive discussion of “substantial
burden” requirement).


      For purposes of analysis, we can assume that the recovery of these
contributions would substantially burden the debtors’ free exercise of
religion.    Even though the church encourages but does not compel tithing,
the debtors consider tithing to be an important expression of their
sincerely held religious beliefs.              In other words, in the present case,
tithing is religiously motivated, but not religiously compelled, practice.
Permitting the government to recover these contributions would effectively
prevent the debtors from tithing, at least for the year immediately
preceding the filing of the bankruptcy petitions.                     We do not think it is
relevant that the debtors can continue to tithe or that there are other
ways in which the debtors can express their religious beliefs that are not
affected     by       the   governmental    action.         It   is   sufficient    that     the
governmental          action     in   question       meaningfully        curtails,        albeit
retroactively, a religious practice of more than minimal




                                              -23-
significance in a way that is not merely incidental.            Cf. In re Tessier,
190 B.R. at 403-04 (debtors testified that even though church would not
sanction them for failing to tithe, their faithful exercise of their
religion is “contingent” upon their continuing to tithe; holding that not
allowing debtors to tithe under Chapter 13 plan substantially burdens free
exercise right; however, noting that Chapter 7 trustee may attack religious
giving by bringing a fraudulent transfer action against the religious
institution under 11 U.S.C. § 548(a), as was done in the present case, or
by dismissing the Chapter 7 case for substantial abuse under 11 U.S.C. §
707(b)).    But cf. In re Newman, 183 B.R. at 251 (recovery of tithes already
paid does not substantially burden free exercise because it does not
prevent debtors from continuing to tithe; no evidence that 11 U.S.C.
§   548(a)(2) prevented debtors, or any other member of church, from
fulfilling their personally-held religious obligation to tithe at any
time).


        The next question is whether there is a compelling governmental
interest.        Once the individual has shown that the governmental action
substantially burdens his or her free exercise right, the government must
demonstrate that the substantial burden is in furtherance of a compelling
governmental interest and is the least restrictive means of furthering that
compelling governmental interest.        42 U.S.C. § 2000bb-1(a), (b).     These are
questions of law which we review de novo.         Hamilton v. Schriro, 74 F.3d at
1552.    The    RFRA   does   not   define   “compelling   governmental   interest.”
Compelling governmental interests have been described in a post-Smith
establishment clause case as “interests of the highest order.”            Church of
the Lukumi Babalu Aye, Inc. v. City of Hialeah, 113 S. Ct. 2217, 2233
(1993).        However, pre-Smith case law is instructive.            For example,
Hernandez v. Commissioner, 490 U.S. at 699, held that the governmental has
a compelling interest in maintaining the tax system.          United States v. Lee,
455 U.S. 252, 258-59 (1982), held that the government has a compelling
interest in enforcing participation in the social security system.              Case
law




                                          -24-
has recognized a compelling governmental interest in maintaining national
security and public safety, Gillette v. United States, 401 U.S. 437 (1971);
Prince v. Massachusetts, 321 U.S. 158, 165 (1944).      Wisconsin v. Yoder, 406
U.S. at 213, held that the government has a compelling interest in
providing public education.     However, in Sherbert v. Verner, 374 U.S. at
406, the Court found no compelling governmental interest in preventing
fraud in the unemployment compensation system.         Cases applying the RFRA
have held that the government has a compelling interest in enforcing
participation in the social security system, Droz v. Commissioner, 48 F.3d
at 1122-23, and in maintaining safety and security in prisons, Hamilton v.
Schriro, 74 F.3d at 1554, and schools, Cheema v. Thompson, 67 F.3d 883, 885
(9th Cir. 1995) (ban on wearing of ceremonial knives on campus), as well
as in providing public education, Fleischfresser v. Directors of School
District 200, 15 F.3d 680, 690 (7th Cir. 1994) (reading skills program
described as anti-Christian).


      In the present case the question is whether the bankruptcy code in
general   and   §   548(a)(2)(A)   in    particular   constitute   a   compelling
governmental interest.   The trustee argues the bankruptcy code in general,
and § 548(a)(2)(A) in particular, furthers the compelling governmental
interests in allowing debtors to get a fresh start while at the same time
protecting the interests of creditors by maximizing the debtor’s estate.
The bankruptcy cases decided under the RFRA are split.         In In re Newman,
183 B.R. at 252, a case which, like the present case, involved an adversary
proceeding brought by the Chapter 7 trustee to recover as fraudulent
transfers under 11 U.S.C. § 548(a)(2) sums that the debtors had contributed
to their church, the bankruptcy court concluded that § 548(a), and the
Bankruptcy Code as a whole, served a compelling governmental interest.        The
Newman court specifically noted the important policies of allowing debtors
to get a fresh start, treating creditors as fairly as possible, and the
administration of the bankruptcy system, as well as the




                                        -25-
historical importance of recovery of fraudulent transfers to bankruptcy
law.     Id.   Cf. In re Navarro, 83 B.R. 348, 353 (Bankr. E.D. Pa. 1988)
(pre-RFRA; administration of bankruptcy system and protection of legitimate
interests of creditors are compelling governmental interests).                 The Newman
court also found that 11 U.S.C. § 548(a)(2) was the least restrictive means
of furthering the compelling governmental interest.                183 B.R. at 252.


        In comparison, the bankruptcy court in In re Tessier, 190 B.R. at
405, found no compelling governmental interest.               However, In re Tessier
arguably interpreted the compelling governmental interest requirement more
narrowly than In re Newman to include in the free exercise context “only
those interests pertaining to survival of the republic or the physical
safety    of   its    citizens.”        Id.      In    re   Tessier   is    procedurally
distinguishable from the present case because it involved a Chapter 13
trustee’s objection to the debtors’ reorganization plan.               Nonetheless, it
is substantively similar to the present case because the trustee objected
to the debtors’ charitable contribution of $100 per month to their church,
in other words, a tithe.              The Tessier court acknowledged that “the
government clearly has interests in . . . providing the debtor with a fresh
start, efficiently administering bankruptcy cases, [and] protecting the
interests of creditors,” but concluded that such interests fell “short of
direct national security and public safety concerns.”                 Id.   The Tessier
court    concluded     that   these   interests,      although    “rational,    and    even
important,” were “not sufficiently grave to deserve the ‘compelling’ label
when balanced against a parishioner’s free exercise of religion.”                      Id.,
citing Sherbert v. Verner, 374 U.S. at 406 (the key compelling governmental
interest case which rejected the government’s claim that preventing fraud
in unemployment compensation was a compelling governmental interest).                   The
Tessier court then held that the RFRA was unconstitutional, and thus had
no   effect    on    the   bankruptcy   code,    because    its   restoration     of    the
substantial burden/ compelling governmental interest test was inconsistent
with Smith’s “valid and neutral law of general




                                          -26-
applicability” test for free exercise claims and violated the separation
of powers doctrine.    190 B.R. at 405-07.


      We agree with In re Tessier that the interests advanced by the
bankruptcy system are not compelling under the RFRA.      Although we would not
necessarily interpret compelling governmental interests as narrowly as the
Tessier court did, we agree that bankruptcy is not comparable to national
security or public safety.     We also agree that allowing debtors to get a
fresh start or protecting the interests of creditors is not comparable to
the collection of revenue through the tax system or the fiscal integrity
of the social security system, which have been recognized as compelling
governmental interests in the face of a religious exercise claim.           See,
e.g., Droz v. Commissioner, 48 F.3d at 1122-24.         Moreover, we cannot see
how the recognition of what is in effect a free exercise exception to the
avoidance of fraudulent transfers can undermine the integrity of the
bankruptcy system as a whole; its effect will necessarily be limited to the
debtor’s creditors, who will as a result have fewer assets available to
apply to the outstanding liabilities, and not all creditors or even all
debtors.    This is not to say that the recognition of a free exercise
exception   under   these   circumstances   may   not   have   adverse   economic
consequences for both creditors and debtors; for example, creditors may be
more cautious in doing business with those who tithe or make contributions
to religious organizations.


      Because we hold that allowing debtors a fresh start and protecting
the interests of creditors are not compelling governmental interests under
the RFRA, we need not reach the question of whether the governmental action
is the least restrictive means of furthering the compelling governmental
interest.


      In sum, we hold that because the substantial burden on the debtors’
free exercise of religion is not furthered by a compelling




                                     -27-
governmental interest, the RFRA provides a defense against the order of the
district court permitting the trustee to avoid the debtors’ contributions
to the church under 11 U.S.C. § 548(a)(2)(A).   The trustee is not entitled
to recover $13,450 from the church.


      Accordingly, the order of the district court is reversed.


BOGUE, Senior District Judge, dissenting.


      While I agree with the majority's holding that the debtors did not
receive reasonably equivalent value in exchange for the debtor's financial
contributions to the church, I cannot agree with the decision on the merits
under RFRA1, and therefore respectfully dissent.




     1
      I understand that the constitutionality of RFRA is not before
us as this case is currently postured. That notwithstanding, I
feel compelled to note the unusual specter of employing the
analytical framework of RFRA, where the author of the majority
opinion has indicated his belief that RFRA is unconstitutional.
Hamilton v. Schriro, 74 F.3d 1545, 1557 (8th Cir. 1996)(McMillian,
J., dissenting). Having reviewed and studied the author's thorough
opinion in Hamilton, I am inclined to agree with his position.
Further, cases relied on by the majority, regardless of the
resolution on some issues, have ultimately found RFRA to be
unconstitutional. In Re Tessier, 190 B.R. 396, 406-07 (Bankr. D.
Mont. 1995). The constitutionality issue is particularly relevant
in that employing RFRA, as opposed to the analysis under Employment
Division v. Smith, 494 U.S. 872 (1990), "caused" the reversal in
the current case, at least as I understand the Smith case. Put
another way, "but for the passage of RFRA, the [church] could not
have succeeded on [its] free exercise challenge to [11 U.S.C.
§ 5489(a)(2)]." Hamilton, 74 F.3d at 1561 (acknowledging that pre-
RFRA standards were much less onerous as far as the government was
concerned).
      Given the statute's dubious constitutionality, I believe we
should have requested supplementary briefing and hearing, along
with    certification    to   the   Attorney    General,   on   the
constitutionality of RFRA.

                                   -28-
      The first step in RFRA analysis requires the plaintiff to establish
that the challenged government action "substantially burdens" their free
exercise of religion.     If there is no substantial burden, the inquiry ends
and the challenger's petition must fail.      In re Newman, 183 B.R. 239, 251
(Bankr. D. Kan. 1995) ("If there is no substantial burden, RFRA does not
apply.").   Courts have articulated various standards required to make a
showing of substantial burden.


      I agree with the majority that RFRA does not compel the church to
show that tithing is "required" by the church in order to prove a
substantial burden.       It is enough if the allegedly impinged conduct is
motivated by a sincerely held religious belief.      Sasnett v. Sullivan, 908
F. Supp. 1429, 1444 (rejecting a "religiously mandated" test in favor of
a "religiously motivated" test for purposes of determining substantial
burden).2   That being said, it is important that the substantial burden
step in the RFRA analysis is not reduced to a perfunctory determination or
foregone conclusion.      A searching inquiry is required to "protect[] the
government from having to justify its regulations under a compelling
interest standard if the burden on the asserted practice is incidental or
de minimis."   Id.


      As    stated   by    the   majority,   the   governmental   action   must
"significantly inhibit or constrain conduct or expression that manifests
some central tenet of a [person's] individual [religious] beliefs; must
meaningfully curtail a [person's] ability to express adherence to his or
her faith; or must deny a [person] reasonable opportunities to engage in
those activities that are fundamental to a [person's] religion."      Slip op.
at 21.   Although it is undisputed




     2
      I also share the majority's concern as to whether courts can
constitutionally determine "the parameters of religious belief,
what beliefs are important or fundamental, and whether a particular
practice is of only minimal religious significance ... ." Slip op.
at 21.

                                      -29-
that the debtors sincerely believe in tithing and that tithing is central
to the religion they practice, I would conclude that the trustee's action
of recovering monies tithed during the year the debtors were insolvent does
not substantially burden the free exercise of their religion.


      In coming to this conclusion, I note that the act of tithing by the
debtors in the year preceding their filing for Chapter 7 protection was in
fact executed, i.e., regardless of the eventual outcome, they were given
the opportunity to practice their religion as they chose during the year
they were insolvent.    There was no "constraint of conduct or expression"
respecting a central tenet of their belief, nor a curtailment of their
ability to "express adherence" to their faith, nor were they denied
reasonable   opportunities   to   "engage   in   those   activities"   that   were
fundamental to their religion.     They engaged in the conduct and activity
of tithing and fully expressed adherence in their sincere belief in tithing
to the church.   Unfortunately, the debtors were insolvent during the year
preceding February 1992 when they filed a joint Chapter 7 bankruptcy
petition.    As such the trustee properly sought to recover that for which
the debtors did not receive reasonably equivalent value in exchange for
their contributions to the church.
      The trustee's act of recovering the tithes from the church under 11
U.S.C. § 548 (a)(2) does not change the fact that the debtors did all they
could in the way of expressing and practicing their religious beliefs.           I
agree with the court in In Re Newman, which reasoned:


      there is no evidence that section 548(a) prevents the
      debtors or any other church member from tithing. Indeed,
      the present record certainly does not suggest that
      section 548 prevented these debtors from tithing.
      Equally important, the church has no records which might
      show that other members did not tithe because of section
      548 since no one ever checks to see if members actually
      do tithe. The funds the trustee seeks to recover have




                                     -30-
      already been tithed to the defendant. The debtors, in
      all likelihood, continue to tithe to the defendant. The
      debtors fulfilled their religious obligation by tithing
      in the year prior to their bankruptcy filing.        The
      statute, by its own operation, does nothing to prevent
      the debtors' fulfillment of their personally held
      religious obligation to tithe and, therefore, does not
      place a "substantial burden" on the debtors' practice of
      their religion.


In Re Newman, 183 B.R. at 251 (emphasis added).3


      Further   evidence   of   the   lack   of   substantial   burden   is   the
uncontroverted fact that tithing is not required to fully participate in
church services.   As noted by the majority, the parties have stipulated
that church services were available to all persons regardless of whether
any contributions were made.    The fact that the debtors' purely voluntary
tithes were ordered retroactively recovered by the trustee does not change
the fact that the debtors can attend church services, participate in church
programs, and worship and believe as they choose.        They can continue to
tithe as has been their custom, assuming no additional




     3
      It cannot be denied that the work of religious organizations
may be more important now than ever before.           Contributing,
financially or otherwise, to further the mission of a religious
organization is a laudatory practice. That being said, religious
contributions cannot be considered beyond reproach or regulation in
all circumstances. United States v. Lee, 455 U.S. 252, 261; 102
S. Ct. 1051, 1057; 71 L. Ed. 2d 127 (1982) ("... every person
cannot be shielded from all burdens incident to exercising every
aspect of the right to practice religious beliefs. When followers
of a particular sect enter into commercial activity as a matter of
choice, the limits they accept on their own conduct as a matter of
conscience and faith are not to be superimposed on the statutory
schemes which are binding on others in that activity.").        The
debtors should be commended for their commitment to contributing to
the church. There is no dishonor in the fact that the tithes they
offered during insolvency ought to be recovered by the trustee.
The reality is that the tithed money should be part of the estate
available to creditors, who in good faith, advanced money, goods or
services to the debtors upon the condition of repayment.

                                      -31-
bankruptcy filings.   Given these facts, I cannot conclude the debtor's free
exercise of religion was substantially burdened.


      In my view, the church's failure to demonstrate a substantial burden
would end the inquiry and would require affirmance.     Yet even if section
548 worked a substantial burden on the debtors' religious practice, I would
conclude that the statute serves a compelling governmental interest and is
the least restrictive means of achieving said interest.


      Although stated in dicta, I agree with the district court's view that
the bankruptcy code and § 548(a)(2)(A) furthers the compelling governmental
interest in allowing debtors to get a fresh start while at the same time
protecting the interests of creditors by maximizing the debtor's estate.
In re Young, 152 B.R. 939, 954 (Bankr. D. Minn 1993); accord In re Newman,
183 B.R. at 252 ("Section 548(a), and the Bankruptcy Code as a whole, serve
a compelling governmental interest.);      In Re Navarro, 83 B.R. 348, 353
(Bankr. E.D.Pa. 1988)(the "administration of the bankruptcy system and
protection of the legitimate interests of creditors" serves a compelling
governmental interest).


      It can be fairly said that our nation's economy depends extensively
on the availability of credit to individuals and businesses.     Bankruptcy
is an extraordinary remedy for insolvent debtors and oftentimes harsh on
creditors.   One of the creditor's few protections are recovery statutes
like section 548, which as of today includes a free exercise exception for
religious giving in the year preceding filing for bankruptcy.


      The majority may be correct when it admonishes that today's decision
may not, by itself, undermine the integrity of the bankruptcy system as a
whole.   But I share the majority's apprehension that credit transactions
involving persons with views similar to the current debtors may hereinafter
involve a more




                                    -32-
probing   and   delicate   inquiry.     Given   today's     holding,   are   cautious
potential   creditors      (including    government    or     government-sponsored
creditors) now expected to question applicants in depth regarding the
highly personal activity of religious giving?        And what if said application
is denied on the grounds that the applicant's religious giving makes
extending credit an unwarranted risk?      Pragmatic issues aside, it is enough
that all of society has a compelling interest in maintaining the balance
between debtors and creditors in its current state.


      Finally, I would find that section 548(a)(2) is the least restrictive
means of furthering the above-articulated compelling interest.               Like the
present action, In re Newman also involved a trustee's attempted recovery
of tithed funds under 11 U.S.C. § 548(a)(2).              In finding that section
548(a)(2) passes the least restrictive means test, the court noted:


      The portion of the statute at issue in this case only
      allows for recovery those transfers of the debtor's
      property which occurred within one year of the
      bankruptcy filing, occurred while the debtor was
      insolvent, and that were not given in exchange for
      reasonably equivalent value. Clearly, the statute was
      drawn in such a way as to balance the ability of the
      debtor to dispose of property with the need to protect
      unsecured creditors. For example, if in this case the
      debtors had not been insolvent on the dates that the
      transfers to the defendant took place, then the
      transfers would not be recoverable. Only when all of
      the requirements of § 548(a)(2) are met is the trustee
      able to recover the transfer.


In re Newman, 83 B.R. at 252.


      The statute contains four specific elements, all of which are
satisfied by the trustee in this case.         The statute is narrowly tailored,
and the trustee closely followed the proper procedures set forth in the
Bankruptcy Code for avoiding and recovering the donations, and took no
action against these debtors which would not




                                        -33-
be taken against any other transferee in the same factual situation.


     In conclusion, I would hold that the trustee has satisfied the
requirements   of    RFRA   and   would   affirm   the   district   court.



     A true copy.
           Attest:
                    CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                   -34-
