October 26, 2009

Churches Let Off-For Now

The IRS can be its own worst enemy sometimes. In two separate cases involving investigations into potential violations of tax laws by churches, the IRS had to withdraw its case due to its own laws and procedures. To understand how this comes about, you need to know a bit of history.

In 1984, Congress passed the Church Audit Procedures Act. One of the provisions in this act states that any IRS official bringing a case against a church must be ranked no lower than 'principal Internal Revenue officer for an internal revenue region'. This obviously limits the number of people who can investigate churches.

However in 1998, the Internal Revenue Service Restructuring and Reform Act was passed in which internal revenue regions and their principal officers were abolished and the IRS was instead divided into sections that were in charge of servicing various categories of taxpayers. One such category was tax-exempt organizations like churches.

The effect of these Acts is that it takes personnel of a certain ranking to be authorized to investigate churches.

Thus when the IRS initiated investigations into two churches, namely Warroad Community Church and Living Word Christian Center, the agency had to comply with these Acts of law that govern its operations. Warroad Community Church was being investigated because of flouting tax laws in using its pulpit to endorse political candidates for public office. Last year, the pastor of Warroad Community Church, Pastor Gus Booth openly endorsed presidential candidate John McCain when preaching over the pulpit. That action allegedly resulted in financial gains for the church thus violating tax laws that prohibit electioneering.

Back in 2007, the Minnesota Monitor as it was called then, identified alleged questionable accounting practices by the Living Word Christian Center, a church in Brooklyn which also gave rise to an IRS investigation.

But both these investigations had to be called off due to procedural issues in which the IRS was not able to find a member of their staff with the appropriate ranking to legally conduct the investigations. Thus this year, the Alliance Defense Fund (ADF) a legal group that is associated with Focus on the Family is organizing a 'Pulpit Initiative' on Sunday, September 27th that encourages pastors of participating churches to endorse candidates for public office from the pulpit.

Such actions may not be able to be carried out for long as the IRS is formulating reforms of its own procedures and rules aimed at making the Director of Exempt Organizations the main person authorized to investigate any tax law violations by churches. But the process of approving these reforms will be lengthy as it involves a public comment period and hearings.

In the meantime, things remain status quo between churches and the IRS.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

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