Southern Church of Universal Bhd. Assembled, Inc. v. Comm'r of Internal Revenue, Docket No. 14064-78X.
| Decision Date | 10 September 1980 |
| Docket Number | Docket No. 14064-78X. |
| Citation | 74 T.C. 1223 |
| Parties | THE SOUTHERN CHURCH of UNIVERSAL BROTHERHOOD ASSEMBLED, INC., PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Petitioner, having been denied tax-exempt status as a religious organization under sec. 501(c)(3), I.R.C. 1954, as amended, petitioned the Court for a declaratory judgment pursuant to sec. 7428. Petitioner's minister contributed virtually all of the church's income, and in turn, the church paid the minister's living expenses. Held: Petitioner is not entitled to tax-exempt status under sec. 501(c)(3). The administrative record does not establish that petitioner serves a public rather than a private purpose. W. L. Wooten, for the petitioner.
Stephen E. Sokolic, for the respondent.
This is an action for declaratory judgment pursuant to section 7428.1 Petitioner, the Southern Church of Universal Brotherhood Assembled (TSCUBA, hereinafter referred to as the church), filed an application for recognition of exemption from Federal income tax on February 27, 1978, seeking exemption under section 501(c)(3) and claiming to be a church. Upon completion of the administrative consideration of petitioner's status, respondent on June 5, 1978, issued a proposed adverse ruling providing in part:
Based on all information submitted, it appears that part of your net earnings inure to the benefit of your minister since funds are provided to meet his personal expenses. Further, the organization appears to be serving a private rather than a public interest, since the funding of your organization almost entirely by contributions from one person, your minister, and the subsequent paying of expenses for his residence and his food expenses have the effect of reducing his Federal income tax liability.
Therefore, we have concluded that you are not an organization which is described in section 501(c)(3) of the Code. Accordingly, you are required to file income tax returns on Form 1120.
Following the issuance of the final adverse determination letter on December 12, 1978, petitioner timely filed the present action seeking a declaratory judgment that it is entitled to exemption as a church. The administrative record has been stipulated and the controlling facts are here summarized.
Petitioner was incorporated in Maryland in August 1976. The articles of incorporation recite that petitioner is organized to operate a church for religious purposes. The articles provide that the authorized number and qualification of members of the corporation, the different classes of membership, if any, and the voting and other rights and privileges of the members shall be set forth in the bylaws. Section 11 of the bylaws states that there shall be two classes of members of the corporation. Regular memberships are limited to 25 and consist of those persons elected by the board of trustees. Regular members are entitled to one vote at all membership meetings. Associate members include anyone affiliated with the corporation. Associate members are not entitled to vote.
Since the time of incorporation, petitioner has had the same five trustee-members, none of whom are related to each other by blood or marriage. All of the members are officers in the corporation. The president and minister is Mr. Wooten. The tenets of the church were described in its application for tax-exempt status as follows:
Our mission is to establish and operate a church dedicated to the Universality of the Brotherhood of man. Our continuing sermon will use as its text the Chesapeake Bay, its rivers and estuaries to demonstrate the indiscriminate provision of food, energy, water and minerals to all mankind resident within the tide water areas of the Bay by our bountiful Father.
The church's activities consist of meetings of members with reception, invocation, meditation, silent prayer, announcements, and benediction. No sacerdotal functions are performed, as they are not part of the tenets of the church. Petitioner also proposes to conduct “marine learning institutes,” or MLIs, which are boat outings to collect material from the Chesapeake Bay to demonstrate the laws of God by which things work and the divine rules for getting things done. The church presently owns a Ventura Cat sailboat which can carry a combined passenger and crew weight of 500 pounds, but intends to purchase a larger boat to conduct the MLIs.
Petitioner is affiliated with the Acquarian Church of the Brothers and Sisters of Jesus Christ (TACT). Petitioner sends monthly accounts of its collections to TACT, but except for yearly dues, submits no contributions to TACT. TACT advocates affiliation with it as a way to protect one's tax freedom and lead a holy, tax-free life.
TACT ordained Mr. Wooten. The requirement for ordination was that Mr. Wooten speak English. Mr. Wooten devotes 20 hours a week to church activities and 40 hours a week to outside employment. He and his family own the residence that constitutes the parsonage and the place where services are held. Petitioner pays the utilities, fuel, maintenance, and repair expenses of the parsonage. Further, it provides the Wooten family with food, postage, stationery, pots and pans, dishes, glassware, sheets, blankets, towels, and curtains. Section 19 of the bylaws provides that in lieu of a parsonage allowance, the minister shall have “occupancy and free use of the houses, grounds, glebes, books, paintings and other property made available by his separate congregation.” Mr. Wooten draws no salary for his services.
For the year 1976, the church's total income was $6,987.84, $6,573 of which was donated by Mr. Wooten. Over $4,495 was expended on the items enumerated above. In 1977, petitioner's gross income was $14,373.33, $14,372 of which was donated by Mr. Wooten. Petitioner spent more than $10,000 on the above items. A breakdown of expenses for 1976 and 1977 is provided below:
+-------------------------------------------+
¦Expenses ¦1976 ¦1977 ¦
+-----------------------+---------+---------¦
¦ ¦ ¦ ¦
+-----------------------+---------+---------¦
¦Utilities and fuel ¦$1,383.65¦$2,141.24¦
+-----------------------+---------+---------¦
¦Maintenance and repair ¦544.22 ¦3,552.89 ¦
+-----------------------+---------+---------¦
¦Supplies and sustenance¦2,469.99 ¦3,982.09 ¦
+-----------------------+---------+---------¦
¦Tax and insurance ¦98.00 ¦488.50 ¦
+-----------------------+---------+---------¦
¦Transportation ¦1,334.29 ¦2,207.61 ¦
+-----------------------+---------+---------¦
¦Travel ¦588.49 ¦1,147.20 ¦
+-----------------------+---------+---------¦
¦Library ¦144.20 ¦210.80 ¦
+-----------------------+---------+---------¦
¦Donation ¦--- ¦32.00 ¦
+-----------------------+---------+---------¦
¦Total expenses ¦6,562.84 ¦13,762.33¦
+-------------------------------------------+
Respondent twice requested additional information to assist in evaluating the church's application, which Mr. Wooten promptly supplied. Respondent issued a final adverse determination letter on December 12, 1978. Its administrative remedies exhausted, petitioner timely filed a petition for a declaratory judgment with this Court. The evidence before the Court consists of the pleadings and the administrative record.
To qualify for exemption under section 501(c)(3),2 petitioner has the burden of showing, inter alia, (1) that it was organized and operated exclusively for religious or charitable purposes (i.e., that it served a public and not a private purpose, sec. 1.501(c)(3)-1(d)(1)(ii), Income Tax Regs.); and (2) that no part of its earnings inured to the benefit of a private individual or shareholder. Even for an organization claiming the benefits of section 501(c)(3) as a religious organization, “exemption is a privilege, a matter of grace rather than right.” Christian Echoes National Ministry, Inc. v. United States, 470 F.2d 849, 857 (10th Cir. 1972), cert. denied 414 U.S. 864 (1973). After careful consideration of all the evidence of record, we are not satisfied that petitioner has made the requisite showing.
We do not believe that the church served a public purpose, as required by the statute. Sec. 1.501(c)(3)-1(d), Income Tax Regs. Instead, the administrative record contains ample evidence that the church served the private purposes of its minister, Mr. Wooten. First, the membership was limited to 25, and there actually were only 5 members, the same 5 who served as officers and trustees...
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