A federal district court in Pennsylvania rejected a truck driver's contention that his earnings were exempt from federal taxes because he was a church.
The taxpayer had established a church (that had been denied tax-exempt status by the IRS), and signed a vow of poverty which provided "I hereby make an irrevocable gift of all my possessions … and all my income whatsoever, regardless of the form of the income, to the church. Outside employment income is not personal income, but rather gift income to the church, and not of the individual."
The taxpayer established a checking account in the church's name into which all his secular earnings were deposited. Checks thereafter were drawn on the church account to pay for the personal expenses of the taxpayer. No taxable income was reported and no tax returns were filed.
In rejecting the taxpayer's claim, the court reaffirmed the "basic rule of tax law that an assignment of income by a taxpayer of compensation for services is ineffectual to relieve the taxpayer of tax liability regardless of the motivation behind the assignment." In addition, the alleged "vow of poverty" did not relieve the taxpayer of tax liability since "the manner in which he conducted his financial affairs was the same as it was before he was ordained."
The court also rejected the taxpayer's argument that subjecting him to income taxes violated his right to exercise his religion. The taxpayer, noted the court, was still free to operate his church and deposit his secular earnings in the church account. He simply could not avoid taxes through such a scheme. The court found the taxpayer guilty of three counts of income tax evasion. U.S. v. Washington, 672 F. Supp. 167 (M.D. Pa. 1987)
