Monday, April 17, 2023
God's Storehouse: Church Tax Inquiries, UBIT and Campaign Intervention
We previously blogged about God's Storehouse Topeka Church v. United States, a case in which a district court held that Commissioner (TE/GE) has sufficient authority to approve a church tax inquiry. I guess the proprietor behind the church/thrift store/coffee shop/campaign headquarters must be suing individually against every third party summons the Service issued, because still pending is another Magistrate's Recommendation in God's Storehouse Topeka Church v. United States (God's Storehouse II). The holding is not especially remarkable. Its only that a third party summons need only meet the requirements of IRC 7609, rather than 7611 (the Church Tax Audit Procedures). But the whole thing is a fun case raising what I think are not easy calls. First, what is a "church" for tax exemption purposes. As you might surmise from the pictures so far, patrons can buy used clothing, furniture, dishes, and books from the Church. Or get a cup of coffee and a donut at Judee's coffee shop inside God's Storehouse. Five days a week, and also on Sundays. So after making reference to the Kurtz factors , maintaining the judicial neutrality with which courts have discussed the factors, and the potential that the thrift and coffee shop might just be the substantial part, and if not, an unrelated part, of the organization's mission, the Court even passed on weather the sign depicted below is improper campaign intervention regardless of whether the organization is a church with a thrift shop, or a thrift shop with a church, or neither.
Rick Kloos, by the way, is the Senate Majority Whip in the Kansas Senate. No doubt the signs helped. And he is the pastor of the church that looks like a retail store and serves coffee. The Magistrate in God's Storehouse II didn't have to get deep into those substantive issues because the case is only about whether to quash a third party summons. But it might have been fun to see how a court would rule on these facts. Lloyd didn't think this smelled right at all, telling the Topeka Capital Journal that "Kloos has gone beyond just identifying himself with a charity, which he did found and runs, and is now using the charity property." It stinks, maybe, but I am not sure. From that part of the tripart organization that is the "Church" what could be done? The Church/Thrift Shop/Coffee Shop could not have prevented Kloos' truthful assertion that he founded the Church. We are talking about a candidate's campaign speech, too. Arguably the speech given the highest form of protection ever. We aren't talking about a Church's speech, though everybody knows Church's can do whatever they want with their tax exemption.
What about a longtime executive director of a well known nonprofit, like the Olympic Committee? Would it be campaign intervention if the candidate featured her prior management of the Olympic Committee. "I saved the Olympics, Vote for me!" What if Reverend/Manager/Coffee Connoisseur/Senate Majority Whip Kloos campaigned as the founder of Rainbow PUSH and Pastor of God's Chosen Church, like Jesse Jackson used to do? If his entire professional life was devoted to work through a nonprofit, would he be unable to say that and identify the nonprofit or nonprofits he founded or worked at over the years?