Thursday, November 20, 2008

IRS Loses Round in Dispute with Megachurch

The Minneapolis Star-Tribune reports that a U.S. district magistrate judge sided with Mac Hammond's Living Word Christian Center in a dispute with the IRS. The IRS had requested information regarding the compensation of the church's senior pastor, Mac Hammond. The church refused to comply on the grounds that the IRS request was not made by a "high-ranking official" as required by the church audit provisions of the Internal Revenue Code (Section 7611). The IRS sued to enforce its request, but the magistrate judge has issued a recommendation siding with the church.

Frankly, I think the special audit rules for churches are an embarrassment, as is the exception for churches from filing the Form 990 required of all other exempt organizations. This special treatment for churches means that we have virtually no information on what they do, how they spend their money, etc. If churches want special tax treatment (e.g., exemption), it's not too much to ask them to let us know what they are doing with their financial resources. Yes, I understand the arguments regarding "excessive entanglement" and the free exercise clause, but you're going to have a hard time convincing me that neutral application of tax procedure to a church results in a violation of the First Amendment. Tell you what: let's change the law to require it, let churches litigate a test case, and see what the Supreme Court says about it, OK?

JDC

http://lawprofessors.typepad.com/nonprofit/2008/11/irs-loses-round.html

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