• What are the legal consequences if a minister fails to pay taxes, file tax returns, and keep any records as to his income and expenses? This was the issue before a federal district court in Colorado. A minister did not pay taxes, file returns, or maintain records for four years because of his convictions that only federal employees are subject to the income tax, and ministers are exempt from paying taxes on the basis of the first amendment guaranty of religious freedom. The IRS audited the minister, and "reconstructed" his income and expenses on the basis of Department of Labor statistics. It then assessed income taxes and self-employment taxes for the years in question, as well as a delinquency penalty of 25%, a negligence penalty of 5%, and a penalty for underpayment of estimated taxes. The IRS rejected the minister's claims that he was not subject to tax. The minister appealed the IRS assessments, and the federal court upheld the IRS position. It categorically rejected the minister's claims that only federal employees are subject to tax, or that clergy are exempt from paying taxes. The court observed that "imposing income taxes on individuals whose religious tenets forbid the payment of those taxes does not violate the first amendment." The court stressed that "all taxpayers have a duty to maintain adequate and accurate tax records," and that if a taxpayer attempts to evade taxes by not keeping records "the federal government is entitled to reconstruct his gross receipts and costs to arrive at an assessment for the unreported income." The court approved of the use of Department of Labor statistics to reconstruct the minister's income. It acknowledged that this method "may result in some inaccuracies, such imperfections are permissible." The court also rejected the minister's claim that the IRS could not impose a lien against his residence. The minister claimed that he had "given" his home to his church several years before. The court rejected this claim since the alleged gift had never been "memorialized" in any written document or deed. The court also noted that the minister and his family continued to live in the residence, and pay property taxes, for several years after the alleged gift. United States v. Gonzalez, 91-1 U.S.T.C. ¶ 50,100 (D. Colo. 1991).
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