U.S. v. Freedom Church

• Decision Date: 28 December 1979
• Docket Number: No. 79-1281,79-1281
• Citation: 613 F.2d 316
• Parties: 80-1 USTC P 9132 UNITED STATES of America and Anthony Carsanaro, Revenue Agent, Internal Revenue Service, Petitioners-Appellees, v. The FREEDOM CHURCH and Reverend Richard M. Doncaster, Respondents-Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 316

613 F.2d 316

80-1 USTC P 9132

UNITED STATES of America and Anthony Carsanaro, Revenue Agent, Internal Revenue Service, Petitioners-Appellees, v. The FREEDOM CHURCH and Reverend Richard M. Doncaster Respondents-Appellants.

No. 79-1281.

United States Court of Appeals First Circuit.

Argued Oct. 5, 1979.

Decided Dec. 28, 1979.

Arthur H. Goldsmith, Boston, Mass., with whom Snyder & Weinstein, Boston, Mass., was on brief, for appellants.

Joseph S. Ackerstein, Sp. Asst. U. S. Atty., Boston, Mass., with whom Edward F. Harrington, U. S. Atty., Boston, Mass., and Charles E. Brookhart, Atty., Tax Div., Dept. of Justice, Washington, D. C., were on brief, for appellees.

Before CAMPBELL and BOWNES, Circuit Judges, and BONSAL, ^* Senior District Judge.

BOWNES, Circuit Judge.

This is an appeal from an order of the United States District Court for the District of Massachusetts enforcing an administrative summons issued by the Internal Revenue Service (IRS) to appellant Reverend Richard M. Doncaster, pursuant to an investigation of the tax liability of appellant The Freedom Church, of which Reverend Doncaster is pastor. The action was filed pursuant to 26 U.S.C. §§ 7402(b) ¹ and 7604(a). ² Jurisdiction on appeal is based on 28 U.S.C. § 1291. See Reisman v. Caplin, 375 U.S. 440, 445-46, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964).

There are three issues before us: the scope of the summons; whether it was error for the district court to infer that the records sought existed and Reverend Doncaster had possession of them; and whether there is a valid statutory basis for the summons.

The Freedom Church, located at 41 Aunt Dorah's Lane, Yarmouthport, Massachusetts had tax exempt status under 26 U.S.C. § 501(c)(3). As a church, it never had to apply for such status, 26 U.S.C. § 508(c), and received an automatic exemption from filing an annual tax return under 26 U.S.C. § 6033(a) (2)(A).

During the course of the IRS' investigation to determine the church's tax exempt status, a summons was issued under the authority of 26 U.S.C. § 7602 ³ directing Reverend Doncaster to appear before Revenue Agent Anthony Carsanaro and to produce for examination a detailed and extensive list of materials. ⁴ The purpose of the summons was to obtain evidence relating to the tax liability, if any, of The Freedom Church for the period of January 1, 1976, to "present date." Although Reverend Doncaster appeared at the IRS office in Hyannis, Massachusetts, on the date requested, he refused to answer any questions or produce any of the requested documents. The government and Agent Carsanaro then brought a petition in the district court for enforcement of its summons and an Order to Show Cause to be issued to Reverend Doncaster.

At the show cause hearing before the United States Magistrate, Reverend Doncaster, appearing Pro se, refused to answer any questions beyond his name, address, and occupation. His address was the same as the church and he acknowledged that he was the pastor of The Freedom Church. He stated that his refusals were grounded on the first, fourth, fifth, ninth, thirteenth, and fourteenth amendments to the Constitution. The magistrate ordered enforcement of the summons ⁵ and a hearing on this order was subsequently held before the United States District Judge. At that time Reverend Doncaster and The Freedom Church were represented by counsel. Counsel primarily argued that the magistrate's inference that Reverend Doncaster possessed the summoned documents was incorrect, claiming that the Reverend had met his burden of proving nonpossession. Appellants also contended that 26 U.S.C. § 7605(c) ⁶ prohibits the examination of a church's books of accounts for the purpose of determining tax exempt status, and raised a general objection that the summons was substantially overbroad. The district court overruled the objections and orally approved the magistrate's report. ⁷

Before discussing the specific issues raised on appeal, we review the law governing enforcement of a summons issued pursuant to 26 U.S.C. § 7602. The Supreme Court has recently held that, in order to enforce an IRS summons in district court, the summons must issue prior to a recommendation by the IRS for criminal prosecution relative to the subject matter of the summons and the IRS must use its summons authority in good faith pursuit of the purposes of 26 U.S.C. § 7602. United States v. LaSalle National Bank, 437 U.S. 298, 318, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978). The good faith of the IRS in issuing a summons is tested by four criteria set out in United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964): the IRS must show (1) that the investigation will be conducted pursuant to a legitimate purpose; (2) that the inquiry may be relevant to the purpose; (3) that the information sought is not already in the possession of the IRS; and (4) that the administrative steps required by the Internal Revenue Code have been followed. At the enforcement proceeding, the summonee is entitled to " 'challenge the summons on any appropriate ground,' Reisman v. Caplin, 375 U.S. 440, at 449 (84 S.Ct. 508, at 513) (1964)." Powell at 58, 85 S.Ct. at 255. The burden of proving an abuse of the court's process or the absence of one of the Powell elements of good faith is on the summonee. United States v. LaSalle National Bank, 437 U.S. at 316, 98 S.Ct. 2357; United States v. Powell, 379 U.S. at 58, 85 S.Ct. 248; United States v. Church of Scientology of California, 520 F.2d 818, 824 (9th Cir. 1975). And, as we said in United States v. Salter, 432 F.2d 697, 700 (1st Cir. 1970), "Some Evidence supporting respondent's allegations should be introduced" (emphasis in original).

I.

The first challenge to the summons involves its scope. Appellants object to the volume and type of material requested as an infringement on the free exercise of religion and freedom of association of Reverend Doncaster and his congregants. Additionally, it is claimed that the second Powell element is not met, in that certain items, particularly membership and contributors lists, are not relevant to an investigation of tax exempt status. At the hearing before the district court judge, counsel for appellants made a "general objection" to the summons' being "substantially overbroad." The quoted words constitute appellants' entire argument below on the issues of first amendment privilege and relevancy. The magistrate gave Reverend Doncaster the opportunity to rebut the IRS' showing, and he did not use it. When the hearing before the magistrate was reconvened after a two-week continuance, Reverend Doncaster persisted in his refusal to answer questions, declining even to allege IRS bad faith, much less produce any evidence. "To ascertain whether there is any basis for questioning the summons, the traditional show cause order is an effective and appropriate procedural tool." United States v. Newman, 441 F.2d 165, 169 (5th Cir. 1971). Appellants chose not to avail themselves of the magistrate's forum for offering proof. And, even at the hearing before the district court, appellants' counsel engaged only in oral argument, choosing to raise legal objections to the magistrate's rulings rather than in any way attempting to meet the summonee's burden of producing facts to show an abuse of process or lack of good faith by the IRS.

Appellants also claim that the broad request for documents by the government constitutes an impermissible entanglement of church and state. They rely on Walz v. Tax Commissioner, 397 U.S. 664, 90 S.Ct. 1409, 25 L.Ed.2d 697 (1970); Lemon v. Kurtzman, 403 U.S. 602, 91 S.Ct. 2105, 29 L.Ed.2d 745 (1971); Tilton v. Richardson, 403 U.S. 672, 91 S.Ct. 2091, 29 L.Ed.2d 790 (1971); and Surinach v. Pesquera DeBusquets, 604 F.2d 73 (1st Cir. 1979). Where unconstitutional entanglement has been found, it has been in the government's continuing monitoring or potential for regulating the religious activities under scrutiny. See Surinach v. Pesquera DeBusquets, supra. In the present case, the IRS does not seek to regulate or in any way become involved in the religious activities or control the financial matters of the church. It merely seeks to make a determination, based on all available and pertinent data, of the church's tax exempt status. As the Supreme Court has held, in determining whether there is excessive entanglement, the question is "whether particular acts in question are intended to establish or interfere with religious beliefs and practices or have the effect of doing so." Walz v. Tax Commissioner, 397 U.S. at 669, 90 S.Ct. at 1412. There is nothing in the record below to indicate that the Internal Revenue Service had such an impermissible intention or the summons would have such an effect were appellants to comply with it. Enforcement of the summons, therefore, does not violate the religion clauses of the first amendment.

Appellants' other first amendment claim is that the IRS request for membership and contributors lists violates the right of the congregants to freedom of association. See Bates v. City of Little Rock, 361 U.S. 516, 80 S.Ct. 412, 4 L.Ed.2d 480 (1960); NAACP v. Alabama, 357 U.S. 449, 78 S.Ct. 1163, 2 L.Ed.2d 1488 (1958). In Bates, the Supreme Court found that a city ordinance requiring that the local branch of the NAACP disclose its membership impinged on the members' freedom of association, where known members were subjected to threats and harassment and where there was evidence that fear of reprisal from disclosure had induced members to withdraw and prospective members to decide against joining. Bates v. City of Little Rock, 361 U.S. at 523-24, 80 S.Ct. 412. The Tax Court recently held in a case similar to the one at bar:

It seems clear that, particularly where the Government shows a need for the information, that the party asserting the constitutional privilege must show that disclosure of the information will be prejudicial to those asserting the privilege,...