Tuesday, July 3, 2018
The United States District Court for the Eastern District of Louisiana recently held in Rowe v. United States that the special rules applicable to church tax inquiries and examinations under Internal Revenue Code 7611 do not apply when the IRS seeks church financial records relating to an investigation into the tax liability not of the church but its pastors. The taxpayers in the case, Dr. Herbert H. Rowe and his wife Dr. Carol G. Rowe, are pastors at the Upperroom Bible Church in New Orleans. According to the court, the Rowes had not filed a federal income tax return from 1996 to 2011 (the last year being the one under investigation for them), although they filed a tax return for 2011 after the investigation began. As part of its investigation, the IRS issued broad summonses for records relating to church bank accounts at two banks. The court concluded that the plain language of section 7611 meant that section did not apply to investigations relating to the tax liability of parties other than the church itself, and cited a number of decisions reaching that conclusion with respect to summons directed at church financial records. The court then concluded that the normal rules for such summonses supported their issuance, and therefore denied the Rowes' petition to quash the summonses and granted the government's motion to dismiss that petition.