Bubbling Well Church of Universal Love v. C.I.R., 80-7358
Decision Date | 27 November 1981 |
Docket Number | No. 80-7358,80-7358 |
Citation | 670 F.2d 104 |
Parties | 82-1 USTC P 9258 BUBBLING WELL CHURCH OF UNIVERSAL LOVE, INC., Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. |
Court | U.S. Court of Appeals — Ninth Circuit |
Peter R. Stromer, San Jose, Cal., for petitioner-appellant.
Ernest J. Brown, Washington, D. C., argued, for respondent-appellee; Michael L. Paup, Chief App. Sec., John F. Murray, Acting Asst. Atty. Gen., Robert A. Berstein, Richard N. Bush, Washington, D. C., on brief.
Appeal from the United States Tax Court.
Before SKOPIL and BOOCHEVER, Circuit Judges, and BILBY, * District Judge.
Bubbling Well Church of Universal Love (the Church) appeals the Tax Court's denial, 74 T.C. 531, of its application for tax exempt status under I.R.C. § 501(c)(3). Because the Church failed to show that no part of its net income inured to the benefit of private individuals, we affirm.
The Harberts' family are the sole employees and sole voting directors of the Church. In 1977, the $61,543 1977 Church budget included a $13,648 parsonage allowance, a $19,468 minister's living allowance, and $3,924 in other expenses paid to or for the Harberts. These payments were authorized by the three Harberts acting as the Board of Directors. The record showed few employee services received by the Church in exchange for the payments. The Church held Christmas and Easter services, and John Harberts made an unspecified number of ministerial visits, and performed one marriage and several burials. There was a statement that all three Harberts devoted 100% of their time to church activities, although Catherine and Dan Harberts' duties were not specified. The Church refused to itemize expenses of $17,000 for maintenance and supplies. Travel expenses of $2,529.26 were included covering a trip to Europe by the pastor "on church business, proselytizing new church members," however, no facts were detailed to explain the relationship between the taxpayer and the trip to Europe.
A precondition to I.R.C. § 501(c)(3) tax exempt status is that no part of an organization's net earnings inure to the benefit of a private person. Salaries may be paid, but unreasonable salaries constitute inurement of benefit. Birmingham Business College v. Commissioner, 276 F.2d 476, 480 (5th Cir. 1960). The Church supplied no evidence showing that the payments to its controlling members were reasonable. We agree with the Tax Court that the potential for abuse created by the Harberts' control of the church required open and candid disclosure of facts bearing on the exemption application. See Parker v. Commissioner, 365 F.2d 792, 799 (8th Cir. 1966); Founding Church of Scientology v. United States, 412 F.2d 1197, 1201-02 (Ct.Cl.1969) cert. denied, 397 U.S. 1009, 90 S.Ct. 1237, 25 L.Ed.2d 422 (1970) ( ). Basic Unit Ministry of Alma Karl Schurig v United States, 511 F.Supp. 166 (D.D.C.1981). A taxpayer must demonstrate that he is entitled to a § 501(c) exemption. Senior Citizens Stores, Inc. v. United States, 602 F.2d 711 (5th Cir. 1979); Christian Echoes National Ministry, Inc. v. United States, 470 F.2d 849 (10th Cir. 1972), cert. denied, 414 U.S. 864, 94 S.Ct. 41, 38 L.Ed.2d 84 (1973).
There was no proof in the record of any regular or substantial church activities. The absence of such evidence supports an inference that the benefits to the Harberts were unreasonable because few employee tasks were performed in return. See Mabee Petroleum Corp. v. United States, 203...
To continue reading
Request your trial-
Church of Scientology of California v. Comm'r of Internal Revenue
...opinion 647 F.2d 163 (2d Cir. 1981); Bubbling Well Church of Universal Love, Inc. v. Commissioner, 74 T.C. 531 (1980), affd. 670 F.2d 104 (9th Cir. 1981). For cases in other courts, see Founding Church of Scientology v. United States, 188 Ct. Cl. 490, 412 F.2d 1197 (1969), cert. denied 397 ......
-
Granzow v. C.I.R.
...752, 17 L.Ed.2d 674 (1967). The party claiming the exemption bears the burden of proof of entitlement. Bubbling Well Church of Universal Love v. Commissioner, 670 F.2d 104 (9th Cir.1981); Senior Citizens Stores, Inc. v. United States, 602 F.2d 711, 713 (5th Cir.1979); Kenner v. Commissioner......
-
Nationalist Movement v. Comm'r of Internal Revenue
...Universe v. United States, 4 Cl.Ct. 55, 62 (1983); see Bubbling Well Church v. Commissioner, 74 T.C. 531, 535 (1980), affd. 670 F.2d 104 (9th Cir.1981). In Save the Free Enterprise System, Inc. v. Commissioner, supra, the ostensible purposes of the organization centered around the preservat......
-
FIRST BAPTIST v. Beeson
...revocation where church transferred substantial funds to corporations controlled by its founder); Bubbling Well Church of Universal Love, Inc. v. Commissioner, 670 F.2d 104 (9th Cir.1981) (affirming denial of exemption when church failed to prove reasonableness of expenditures in relation t......
-
Opinion: Ultra Vires
...[10] Reg. § 1.501(c)(3)-1(d)(1)(ii). [11] Bubbling Well Church of Universal Love, Inc. v. Commissioner, 74 T.C. 531 (1980), aff'd, 670 F.2d 104 (9th Cir. 1981). [12] Id., 74 T.C. at 535. [13] Hosanna-Tabor Evangelical Lutheran Church and School v. Equal Employment Opportunity Commission, 13......
-
Chapter 14 - § 14.4 • CONTESTING ADVERSE IRS DETERMINATIONS THROUGH DECLARATORY JUDGMENT ACTIONS
...of time in which the IRS may issue a determination. See Bubbling Well Church of Universal Love v. Comm'r, 74 T.C. 531 (1980), aff'd, 670 F.2d 104 (9th Cir. 1981). Filing of Action Within 90 Days Following the issuance of the final adverse determination letter by the IRS, the requesting orga......