BASIC UNIT MINISTRY, ETC. v. United States, Civ. A. No. 79-3307.

• Decision Date: 21 January 1981
• Docket Number: Civ. A. No. 79-3307.
• Citation: 511 F. Supp. 166
• Parties: The BASIC UNIT MINISTRY OF ALMA KARL SCHURIG, Plaintiff, v. UNITED STATES of America et al., Defendants.
• Court: U.S. District Court — District of Columbia

511 F. Supp. 166

The BASIC UNIT MINISTRY OF ALMA KARL SCHURIG, Plaintiff, v. UNITED STATES of America et al., Defendants.

Civ. A. No. 79-3307.

United States District Court, District of Columbia.

January 21, 1981.

Alma Karl Schurig, pro se.

John J. McCarthy and Suzanne G. Duvall, Tax Division, Dept. of Justice, Washington, D. C., for defendants.

MEMORANDUM

JOHN LEWIS SMITH, Jr., District Judge.

Plaintiff, a nonprofit Utah corporation, seeks a ruling regarding its qualification as a tax-exempt religious organization under 26 U.S.C. § 501(c)(3) (1976). Defendants are the United States and the Commissioner of the Internal Revenue Service. Jurisdiction is premised upon 28 U.S.C. § 1346(e) (1976). Under 26 U.S.C. § 7428, the remedy of a declaratory judgment is available to taxpayers seeking a tax exempt classification. Presently before the Court are cross motions for summary judgment and defendants' motion to dismiss the Commissioner as an improper party.

As an initial matter, the motion to dismiss the Commissioner is granted. The jurisdictional provision enabling this action, 28 U.S.C. § 1346(e), provides only for suits against the United States, not against its officers.

At issue in the summary judgment motions is the propriety of defendant's determination that plaintiff was not eligible for exemption. The record reveals that in October of 1977 plaintiff applied for an exemption from taxation. At the time it was comprised of six members. Two were the husband and wife founders (the Schurigs) and the remaining four were members of their family. Mr. Schurig is the Presiding Officer of the organization. Plaintiff now claims fifteen total members. Membership is subject to majority vote of the members and to the approval of the Presiding Officer, other than membership by birth or marriage. The stated purpose of the organization is to carry on religious and charitable work and to develop the physical, mental, social, emotional, and spiritual welfare of its members. Plaintiff claims that its members engage in extensive religious services and education, Sunday school activities, that they administer emotional, spiritual, and financial assistance to the needy, and carry on extensive missionary work. Plaintiff has stated that approximately thirty per cent of its income is spent on exempt purposes not including the maintenance of its members. This money is spent on purposes such as aid to underprivileged peoples, missionary support, welfare contributions, and chapel maintenance and construction. Plaintiff has offered no details on these disbursements.

Plaintiff also has a definite economic structure. Pursuant to its constitution, members must voluntarily renounce ownership of their personal property by deeding and assigning such property and their income to the organization. The Presiding Officer approves checkwriting privileges to draw on plaintiff's funds. Withdrawing members may reclaim their property only at the discretion of plaintiff. Members must serve in "stewardships" on behalf of plaintiff, which often consist of apparently non-religious services performed for third parties who pay the salaries of members directly to plaintiff without withholding taxes. Plaintiff in turn pays all the living expenses of the members. It appears that 70% of plaintiff's expenditures go to the support of its members.

Sections 501(a) and (c) of the Internal Revenue Code allow tax exemptions for organizations that are organized and operated exclusively for religious, charitable, and other specified exempt purposes, provided that no part of the net earnings of the organization inure to the benefit of any private shareholders or individual. Treasury Regulation Section 1.501(c)(3)-1(a)(1) requires that in order to be exempt pursuant to Section 501(c)(3), an organization must be both organized and operated exclusively for any one or more of the purposes enumerated in that Code section. An organization is not operated exclusively for such exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Treas. Reg. Sec. 1.501(c)(3)-1(c)(2). Pursuant to Treas. Reg. Sec. 1.501(c)(3)-1(d)(1)(ii), an organization is not organized or operated exclusively for one or more of the specified exempt purposes unless it serves a public rather than a private interest.

Applying these principles to the facts offered by plaintiff, defendant denied the application for exemption. In its final action of September 5, 1979, defendant premised the denial on two grounds relevant here: that plaintiff was operated for private benefit, and that a portion of its net earnings inured to private...