Nothing like a Tax Court decision with dueling Bible verses. The taxpayer had something from Malachi –Will a man rob God? Yet ye have robbed me. But ye say, Wherein have we robbed thee? In tithes and offerings. The Tax Court countered with something from Matthew, which is rather more familiar – Render therefore to Caesar the things that are Caesar’s, and to God the things that are God’s. Here is the story.
George Thompson was in Tax Court not to appeal the amount of tax that he owed. That was not in dispute. It was nearly $900,000. There were company payroll taxes that he was personally responsible for from 2004, 2005 and 2007. There were also individual income taxes going back as far as 1992. Mr. Thompson was arguing about how much he was able to pay.
If you fail to pay your taxes, there is some chance that you will forfeit your liberty. As a practical matter, that is pretty unusual. More likely than not you will end up dealing with IRS collections rather than CID. The IRS collections people cannot arrest you, but they do have some nasty things they can do. Their liens will louse up your title to property and devastate your credit rating. Then there are levies. They come and take your stuff or tell people who are supposed to pay you to pay them instead – or else. Collections used to be the Wild West of tax practice. Most horror stories about the IRS come from collections activities.
The Taxpayer Bill of Rights brought order to the frontier, but at a serious cost in terms of the amount of process in the system. There can be a significant amount of process in determining what your correct tax is. You file, get audited, appeal the determination of the auditor within the IRS, file a petition in Tax Court, appeal the decision of the Tax Court. It can take a long time. The Home Concrete decision by the Supreme Court in 2012 concerned 1999 taxes. All that process just determines the tax. It does not make you pay it.
Most people just pay whatever the correct tax is. If they don’t the collections people will start asking them, nicely at first, to pay. Ultimately they will start threatening to do the liens and the levies, but you have a chance to convince them that even though you owe the tax, you simply cannot afford to pay it. If you don’t agree with the IRS determination of what you can afford, you can request a Collection Due Process Hearing. The results of the CDP hearing can be appealed to Tax Court. That’s why Mr. Thompson was in Tax Court.
Mr. Thompson offered to pay $3,000 per month. The agent, whose determination he was appealing, had determined that he could afford $8,389 per month. The argument comes down to what goes on Form 433-A. On Form 433-A you list out your monthly income and your monthly living expenses. The difference is how much you can afford to pay. The IRS settlement officer thought that Mr. Thompson could get by on about $10,000 per month (That is net of an allowance for current taxes). Mr. Thompson indicated that he needed about $15,000 per month. The difference was college expenses for one of his kids and tithing. You can count private school expenses in your monthly offer if the resulting net will pay the back tax bill off in five years. $3,000 per month will not put a big dent in nearly $900,000 in only five years so the college expense was not allowed. The really interesting question was tithing.
Petitioner has been a member of the Church of Jesus Christ of Latter-Day Saints (Church) his entire life and has regularly contributed 10% of his monthly income to the Church. Petitioner is actively involved in the Church and holds a position as a shift coordinator in the Church’s Manhattan Temple. Additionally, petitioner is a stake scouting coordinator for the Church and is responsible for overseeing six scout troops in different congregations in New Jersey. Petitioner was not compensated by the Church for his shift coordinator or stake scouting coordinator responsibilities.
The Mormons take tithing very seriously. They are very well organized about it. Members are supposed to meet with their bishop for a tithing settlement. Here is a training session on what is supposed to happen in a tithing settlement. At the end the bishop will mark you as a full tithe payer – or not. If you are not a full tithe payer you cannot be admitted to the temple, much less hold offices. (The offices are unpaid, which has some relevance). Mr. Thompson had a letter from his bishop explaining this to the Tax Court. The tithing rule is so strict that some have argued that Mormons should not be able to deduct their tithes as charitable contributions, since there is, in effect, a quid-pro-quo. That argument has not gone anywhere.
Mr. Thompson argued that the tithe was a necessary expense since it was required to hold his church offices. That argument might have worked if he was a minister, who was required to tithe as a a condition of his paid employment.
Petitioner argues that the settlement officer’s classification of his tithing as a conditional expense violates the Free Exercise Clause of the First Amendment because if he is not able to tithe then his Church will require him to resign his ministerial positions with the Church. Petitioner contends that the settlement officer’s classification of petitioner’s tithe as a conditional expense is tantamount to the settlement officer deciding who can be a minister in petitioner’s Church.
The Court was not buying that argument:
However, petitioner overlooks the fact that it is his Church who is requiring him to resign his positions if he does not tithe. The settlement officer did not require petitioner to resign his positions nor did she pressure the Church to require petitioner to resign. The Free Exercise Clause prohibits the Government from interfering in a church’s selection of its ministers.
Laws of general applicability that require persons to meet certain general requirements of citizenship, such as paying taxes, cannot be avoided by the fact that they indirectly make it more difficult to fulfill a purely religious duty, such as a member tithing a certain amount to his church or making a pilgrimage to a shrine in a foreign country.
When it comes to religious matters I like to consult my blogging buddy, Reverend William Thornton whose blog on Southern Baptist issues is temporarily dormant. Southern Baptists also talk about tithing, although they are not nearly as organized about it as the Mormons. I asked him if he thought it made sense for somebody to hold back on paying back taxes to be able to tithe. He wrote that he didn’t think tithing should affect somebody’s bill to the government. Are there any religious leaders out there who think otherwise ?
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Originally published on Forbes.com Mar 8th, 2013