Powell v. U.S., No. 90-6034

• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)
• Writing for the Court: Before COX and DUBINA, Circuit Judges, and GODBOLD; DUBINA
• Citation: 945 F.2d 374
• Docket Number: No. 90-6034
• Decision Date: 22 October 1991
• Parties: -5831, 60 USLW 2311, 91-2 USTC P 50,514 George H. POWELL, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

Page 374

945 F.2d 374 68 A.F.T.R.2d 91-5831, 60 USLW 2311,
91-2 USTC P 50,514 George H. POWELL, Plaintiff-Appellant,
v.
UNITED STATES of America, Defendant-Appellee. No. 90-6034. United States Court of Appeals,
Eleventh Circuit. Oct. 22, 1991.

Page 375

Elizabeth St. Clair, Nicholas Poser, Rabinowitz, Boudin, Standard, Krinsky & Lieberman, New York City, for plaintiff-appellant.

Gary R. Allen, Chief, Brian C. Griffin, Janet Kay Jones, Robert S. Pomerance, Appellate Section, Tax Div., Dept. of Justice, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before COX and DUBINA, Circuit Judges, and GODBOLD, Senior Circuit Judge.

DUBINA, Circuit Judge:

The appellant, George H. Powell ("Powell"), appeals the district court's order of dismissal of Powell's complaint for failure to state a claim upon which relief could be granted. The record demonstrates that Powell did state a claim upon which, under certain factual scenarios, relief could be granted and, accordingly, we vacate the district court's order and remand this case for further proceedings.

I. BACKGROUND

A. Facts

Powell is a member of the Church of Scientology of Florida, ("the Church"). In exchange for participation in religious services, Powell made payments to the Church in the amounts of $5,781.00 in 1984 and $3,800.00 in 1985. ¹ He then claimed these payments as charitable deductions on his federal income tax returns under 26 U.S.C.A. § 170. ² On audit, the Internal Revenue Service ("IRS") disallowed the deductions, resulting in income tax deficiencies for 1984 and 1985, which Powell paid in full. Thereafter, Powell filed administrative claims for refunds of $1,386.00 for 1984 and $1,422.00 for 1985. The IRS failed to act on these claims.

B. Procedural History

Powell filed a complaint against the IRS alleging that the IRS is administratively inconsistent in its application of § 170 of the Internal Revenue Code ("IRC"). The IRS moved to dismiss the action and to stay discovery pending the ruling of the district court on the motion to dismiss. The district court granted the stay and eventually dismissed Powell's complaint for failure to state a claim upon which relief could be granted. Powell then perfected this appeal.

II. STANDARD OF REVIEW

When reviewing the dismissal of a complaint under Fed.R.Civ.P. 12(b)(6), we must accept Powell's allegations as true. A district court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984); see also Wright v. Newsome, 795 F.2d 964, 967 (11th Cir.1986) ("[W]e may not affirm unless it appears beyond doubt that the plaintiff can prove no set of facts

Page 376

in support of the claims in the complaint that would entitle him or her to relief.").

III. DISCUSSION

A. Allegations in Powell's Complaint

Powell alleges in his complaint that the IRS is administratively inconsistent in its application of § 170 of the IRC. Powell claims that he is entitled to a refund because it has been and still is the administrative practice of the IRS to allow tax deductions to members of other religious denominations who make contributions to their churches as a quid pro quo for participation in or to obtain the performance of religious services or benefits. Powell claims disallowance of these deductions for members of his religion constitutes unconstitutional discrimination.

Specifically, Powell alleges that it has been and still is the consistent administrative practice of the IRS to allow charitable contribution deductions to: (1) members of the Jewish religion for payments for High Holy Day tickets which allow members to participate in religious services; (2) members of the Mormon religion for mandatory tithes which are required in order to participate in the religious services of the Mormon faith; (3) members of the Roman Catholic religion for stipends paid in exchange for the saying of special masses; ³ and (4) members of certain Protestant religions who pay rental fees for the privilege of sitting in a specific pew at religious services.

Powell presented certain facts to the district court supporting his allegation that the IRS continues to adhere to a general policy of allowing deductions for payments made in a quid pro quo exchange for religious services. Powell offered a question and answer guidance package, in which an IRS Assistant Commissioner explained:

In contrast to tuition payments, religious observances generally are not regarded as yielding private benefits when attending the observances. The primary beneficiaries are viewed as being the general public and members of the faith. Thus, payments for saying masses, pew rents, tithes, and other payments involving fixed donations for similar religious services, are fully deductible contributions. ⁴

Further, Powell apprised that in 1919 the IRS gave its official approval to the deduction of fixed payments for certain religious services when it stated:

[T]he distinction of pew rents, assessments, church dues, and the like from basket collections is hardly warranted by the act. The act reads 'contributions' and 'gifts.' It is felt that all these come within the two terms.

In substance it is believed that these are simply methods of contributing although in form they may vary.

A.R.M. 2, 1 C.B. 150 (1919). In a 1970 ruling, the IRS reaffirmed its position stating: "pew rents, building fund assessments, and periodic dues paid to a church ... are all methods of making contributions to the church, and such payments are deductible as charitable contributions within the...