Opinion ID: 456694
Heading Depth: 1
Heading Rank: 1

Heading: Does the IRS have authority to summons church records?

Text: 12 The IRS's investigation in the instant suit is not primarily directed at determining whether the UCC should be granted IRC Sec. 501(c)(3) exempt status, rather the IRS seeks to determine the UCC's proper tax liability and to determine the deductibility of Coomes' claimed of Sec. 170 'contributions.' 'Coomes (also represented by counsel on appeal) first claims that the IRS cannot investigate the UCC unless the UCC claims tax exempt status. The IRS is authorized to investigate the tax liability of any 'person'. See IRC Sec. 7601. The Code broadly defines 'person' as 'includ[ing] an individual, a trust, estate, partnership, association, company or corporation.' IRC Sec. 7701(a)(1). Thus, if an entity such as the UCC has not been paying any taxes or is claimed by a taxpayer to be the object of charitable contributions, the IRS is empowered to investigate the status of the claimed charitable (or religious) entity, regardless of whether or not it claims to be tax exempt. See, e.g., Donaldson v. United States, 400 U.S. 517, 523-23 (1971) (IRS can subpoena third parties to determine the tax liability of a person under investigation); see also, United States v. Euge, 444 U.S. 707, 710-11 (1979) (IRS empowered to summon witnesses to produce evidence necessary for tax investigations). 13 In order to obtain compliance with their summonses, the IRS may seek enforcement in district court as long as its use of the summons is in 'good-faith pursuit' of the purposes authorized by Congress. IRC Secs. 7402(b) and 7604(a); United States v. Powell, 379 U.S. 48, 58 (1964); United States v. LaSalle National Bank, 437 U.S. 298, 308 (1978). A good-faith showing may be made through submission of an affidavit by the agent who issued the summons. United States v. Kis, 658 F.2d 526, 535-36 (7th Cir. 1981). Indeed, the IRS need only make a minimal showing that the summons was issued for a proper purpose, that the material sought is relevant and not already in the government's possession, and that the proper administrative steps have been taken. United States v. Will, 671 F.2d 963, 966 (6th Cir. 1982). The affidavit sworn out by IRS agent Michael Murphy, who is investigating this case, meets these requirements. 14 United States v. Dykema, 666 F.2d 1076 (7th Cir. 1981), appears on point. The district court had denied enforcement of an IRS summons directed to Dykema, pastor of the Christian Liberty Church. While it is unclear in Dykema whether the church concerned had initiated a request for tax-exempt status, among the objects of the broad IRS summons for church records was to determine whether it was a 'proper recipient of deductible contributions' and whether there was unrelated and unsupported business income involved. 666 F.2d at 1098. That court held clearly that 'records of other parties, including his employer, even though it be a church, may be examined if they are such as to throw light on his individual tax liability.' Id. at 1098, citing United States v. Grayson Co. State Bank, 656 F.2d 1070, 1976 (5th Cir. 1981). Grayson Co. State Bank held that 15 [I]n enforcement of an IRS summons under Section 7602 when the summons authority is necessary for 'the effective performance of congressionally imposed responsibilities to enforce the tax code, that authority should be upheld absent express statutory prohibition or substantial countervailing policies.' 16 656 F.2d at 1073, quoting United States v. Euge, 444 U.S. 707, 711 (1980). The defense to enforcement of the summons in the Grayson Co. State Bank case was based upon religious objection to producing bank records of a church. Once the tests of good faith, relevant inquiry and proper administrative steps were met in the issuance of the summons 'to investigate the correct tax liability of the minister,' the Grayson court held that the first amendment did not preclude enforcement of a summons to obtain complete bank records relating to financial activities of the church. 656 F.2d at 1073. 17 Accordingly, we hold that IRS here had ample authority to issue the summons in respect to a valid tax investigation, which was initiated in good faith; and that the summons should be enforced after proper administrative procedures had been followed. This authority under the Tax Code is upheld despite the first amendment defense raised by Coomes and despite the fact that the church itself did not instigate the IRS inquiry or investigation by seeking a tax exempt status certificate: 18 [a]llowing the IRS access to reformation to determine the correct tax liability of the taxpayer, the church's minister, does not restrict the church's freedom to espouse religious doctrine nor to solicit members or support. 19 United States v. Grayson Co. State Bank, 656 F.2d at 1074, citing United States v. Holmes, 614 F.2d 985, 989 (5th Cir. 1980). 20