Church Law and Tax 1989-05-01 Recent Developments Televangelists Richard R. Hammar, J.D., LL.M., CPA •

Church Law and Tax 1989-05-01 Recent Developments


The Subcommittee on Oversight of the House Ways and Means Committee recently released an IRS report summarizing its examination of 29 television ministries. The IRS report was made in response to a request by Subcommittee Chairman Pickle (D-Texas) for periodic status reports on examination and collection actions involving television ministries. In its report, the IRS noted that it has 100 special agents assigned to televangelist examinations on a nationwide basis. The IRS report states that “the 29 examinations … include six examination projects involving prominent television evangelists. These individuals broadcast religious programming and solicit contributions on a national and, in some cases, an international basis. Because of (1) the size and complexity of these organizations, (2) the inadequacy of books and records in most cases, (3) a lack of taxpayer cooperation in some cases, necessitating the use of summonses, and (4) the need to observe the procedural safeguards of Code section 7611 (which sets forth the special audit procedures applicable to entities that consider themselves to be churches), most of these examinations take several years to complete.” The report indicates that “two of the six examination projects involving prominent television evangelists have involved criminal investigations,” and that “civil issues in virtually all the cases involving prominent television evangelists focus on diversion of the tax exempt organization’s income for the private benefit of insiders. Typically, the diverted amounts are not reported as income by the evangelist involved and, if reported, would constitute in the opinion [of the IRS] unreasonable and excessive compensation for the services rendered.” The report’s conclusion that compensation paid to several televangelists is “unreasonable and excessive” suggests that the tax exempt status of several television ministries may be revoked, since an organization that pays unreasonable compensation to any officer or employee is not eligible for tax-exempt status under section 501(c)(3) of the Internal Revenue Code. The IRS report also expressed concern over the following issues: unreported income, unreported employment or payroll taxes, political activities, commercial activities, unsubstantiated deductions, unrelated business income, “church” status, and fraud. Chairman Pickle, in commenting on the IRS report, observed that “I believe that IRS enforcement of the tax laws is critical to the protection of the public, who contribute millions of dollars a year to these organizations with the belief that these funds are used for charitable purposes, not for the minister’s personal benefit.”

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