Henson v. Comm'r of Internal Revenue

• Decision Date: 05 August 1976
• Docket Number: Docket Nos. 8283-74,296-75.
• Parties: JULIA C. HENSON, PETITIONER1 v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

66 T.C. 835

JULIA C. HENSON, PETITIONER1

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket Nos. 8283-74

296-75.

United States Tax Court

Filed August 5, 1976.

Petitioner, a devotee of Sai Baba, is opposed to life, retirement, and medical insurance on religious grounds. Held: Petitioner is not exempt from the tax on self-employment income under sec. 1402(h), I.R.C. 1954. The exemption provisions of sec. 1402(h) are not unconstitutionally narrow in scope. Ilbert Phillips, for the petitioner.

Stephen W. Simpson and James D. Vandever, for the respondent.

OPINION

DRENNEN, Judge:

Respondent determined deficiencies in petitioner's income tax for the years 1972 and 1973 in the respective amounts of $226 and $681. The sole issue presented is whether petitioner is liable for the tax on self-employment income under sections 1401 and 1402; I.R.C. 1954,² for the years at issue.

All of the facts have been stipulated and are summarized below. The stipulation of facts together with exhibits attached thereto are incorporated herein by this reference.

Petitioner Julia C. Henson maintained her legal residence in Los Angeles, Calif., at the time of filing the petition herein. Petitioner filed timely Federal income tax returns for the taxable years 1972 and 1973 with the Internal Revenue Service in Fresno, Calif.

During the taxable years at issue petitioner was a self-employed bookkeeper. She earned $3,012.75 in 1972 and $8,511.25 in 1973, of ‘self-employment income’ within the meaning of section 1402(b), but paid no self-employment taxes for either of those years.

Respondent determined deficiencies in petitioner's income tax based upon her liability for self-employment tax and issued notices of deficiency on July 16, 1974, for the taxable year 1972 and on October 11, 1974, for the taxable year 1973.

On August 15, 1973, petitioner filed T.D. Form 4029 (Application for Exemption from Tax on Self-Employment Income), based upon her membership in the Sai Baba Society. The Social Security Administration considered petitioner's application and recommended that it be disapproved. On January 6, 1976, petitioner's application was formally disapproved by the District Director of the Fresno Internal Revenue Service Center.

Since December 1972 petitioner has been a devotee of Sai Baba. Sai Baba is a living religious figure in the Country of India who was born on November 23; 1926, and was worshiped as a holy figure before December 31, 1950. Some of the teachings of Sai Baba have been translated and are contained in seven volumes entitled ‘Sathya Sai Speaks.’ One of the tenets and teachings of Sai Baba is that individuals should rely upon God to provide their needs rather than on public or private institutions of man.

As an adherent to and based on the tenets and teachings of Sai Baba, petitioner is opposed to the acceptance of the benefits of any private or public insurance which makes payments in the event of death, disability, old age, or retirement, or which makes payments toward the cost of, or provides services for, medical care. Petitioner is conscientiously opposed to any form of insurance since she feels that it is detrimental to her spirtual growth and her relationship with God. Petitioner was conscientiously opposed to any form of insurance or public assistance prior to becoming a devotee of Sai Baba, but it was her exposure to Sai Baba's teachings that gave her the strength to take a firm stand on the matter. Petitioner does not carry any form of public or private insurance which would make payment in the event of her death, disability, retirement, or old age, nor does she carry medical care insurance. However, petitioner does provide insurance for her employees and does recommend insurance to her clients who are not devotees of Sai Baba.

Petitioner has no religious scruples against payment of taxes, except those which are designed to provide insurance or insurance benefits.

It is not the practice of the Sai Baba Society to make reasonable provisions for its dependent members in view of the general level of living of such members. Apparently, this was the basis for respondent's deficiency determination.

Section 1402(h)³ provides an exemption from the imposition of the self-employment tax. Under subsection (h)(1)(D) one of the stated requirements which must be satisfied to come within the terms of the exemption is a finding by the Secretary of Health, Education, and Welfare that ‘it is the practice, and has been for a period of time which he deems to be substantial, for members of (the claimed religious) sect or division thereof to make provision for their dependent members which in his judgment is reasonable in view of their general level of living.’

Obviously, petitioner does not meet the requirements for exemption under section 1402(h)(1)(D) because it is stipulated that the Sai Baba Society does not provide for its dependent members. Petitioner does not contend otherwise. However, she does contend that somehow this Court should ignore or eliminate the requirement of paragraph (D) and conclude that she does qualify for exemption under section 1402(h). This we cannot do; Congress enacted the provision and we cannot write it out of the law.

Petitioner also levels an attack upon this Code section based on provisions of article I and V of the Constitution of the United States.⁴ Essentially, petitioner makes three arguments in support of her views: (1) That the exemption provided in section 1402(h) is unconstitutionally narrow since it is limited to members of religious sects which make reasonable provisions for their dependent members and thus unlawfully discriminates against petitioner in violation of the fifth amendment; (2) that the inclusion of members of certain religious sects within the exemption and the exclusion of members of other religious sects serves to advance the included religions in violation of the establishment clause of the first amendment; and (3) that petitioner is denied the right not to participate in the Social Security insurance program while members of other religious groups with the same beliefs can refuse to participate in violation of petitioner's rights under the free exercise clause of the first amendment.

This Court has previously considered the arguments made herein by petitioner in William E. Palmer, 52 T.C. 310 (1969), and several subsequent Memorandum Opinions⁵ and has upheld the constitutionality of the statute. In Palmer we recognized that the Social Security Act had been held to be constitutional and went on to hold that this particular tax did not constitute an unlawful encroachment upon the free exercise of the taxpayer's religion. We also concluded that the exemption provisions of section 1402(h) were not unconstitutional as violative of due process of law because they were in keeping with the acknowledged authority of Congress to provide for the overall public welfare through the Social Security Act; Congress has great latitude in formulating classifications within a taxing statute and the classifications provided in section 1402(h) are not so arbitrary as to be violative of due process of law.

Petitioner's attempt to distinguish the facts herein from those in Palmer is futile. We perceive no distinction...