Southern Faith Ministries, Inc. v. Geithner

• Court: District Court, District of Columbia
• Decided: October 6, 2009
• Docket: Civil Action No. 2009-0515
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

SOUTHERN FAITH MINISTRIES, INC., : : Plaintiff, : : v. : Civil Action No. 09-0515 (JR) : TIMOTHY F. GEITHNER, Secretary, : U.S. Department of the Treasury, : et al., : : Defendants. :

MEMORANDUM OPINION

Churches are generally exempt from federal taxation. The

Internal Revenue Service, however, may inquire into the validity

of a claim of exemption and investigate potentially taxable

actions. To avoid excessive intrusion and entanglement into

religious affairs, Congress has placed limits on that authority.

The IRS may not examine a church without first conducting a

“church tax inquiry.” 28 U.S.C. § 7611(b). And, before

conducting a church tax inquiry, an “appropriate high-level

Treasury official” must reasonably believe and record in writing

that the church may not be exempt or may be engaging in taxable

activities. 28 U.S.C. § 7611(a)(2).

The Internal Revenue Code defines “appropriate high-level

Treasury official” as the “Secretary of the Treasury or any

delegate of the Secretary whose rank is no lower than that of a

principal Internal Revenue officer for an internal revenue

region.” 28 U.S.C. § 7611(h)(7). The IRS, by regulation, had earlier determined that a “Regional Commissioner” met that

requirement, Treas. Reg. § 301.7611-1T, Q&A (1), but in 1998

Congress restructured the IRS away from a geographic approach

toward a topic-based organization and eliminated the position of

“Regional Commissioner.” See Internal Revenue Service

Restructuring and Reform Act of 1998, Pub. L. No. 105-206, §

1001(a), 112 Stat. 685 (1998). Congress did not amend the

definition of “appropriate high-level Treasury official” for

purposes of the church tax inquiry.

The present case involves an IRS church tax inquiry into the

affairs of Southern Faith Ministries that was initiated in July

2006.1 Marsha A. Ramirez, who was then Director of Exempt

Organizations Examination (“DEOE”), approved the inquiry.

Southern Faith Ministries deems the inquiry faulty because the

DEOE is not an “appropriate high-level Treasury official” under

the statute. See United States v. Living Word Christian Ctr.,

2009 U.S. Dist. LEXIS 6902 (D. Minn. 2009) (refusing to enforce

IRS summons because DEOE was not an “appropriate high-level

Treasury official”). Although the IRS holds to its position that

the DEOE’s approval is sufficient for a church tax inquiry, the

IRS has proposed regulations that would kick the approval one

level up to the Director of Exempt Organizations (“DEO”), the

1 Southern Faith Ministries has not had its tax exemption status revoked, nor has it been taxed for any particular acts.

- 2 - person to whom the DEOE reports. See Amendments to the

Regulations Regarding Questions and Answers Relating to Church

Tax Inquiries and Examinations, 74 Fed. Reg. 149 (proposed July

31, 2009) (to be codified at 26 C.F.R. part 301). Southern Faith

Ministries seeks a writ of mandamus requiring a reasonable belief

determination from an “appropriate high-level Treasury official”

before the IRS can continue its church tax inquiry.

Setting aside the strangeness of the form of relief

plaintiff seeks,2 even assuming that the DEOE is not an

“appropriate high-level Treasury official” under the Internal

Revenue Code, Southern Faith Ministries’ complaint must be

dismissed. A remedy for IRS noncompliance with the church tax

inquiry statute is available only in the context of a summons

enforcement proceeding. Even then, all a court can do is stay

the church tax inquiry until the noncompliance is corrected.

Section 7611(e)(2) states:

Remedy to be exclusive. No suit may be maintained and no defense may be raised in any proceeding (other than as provided in paragraph (1)), by reason of any noncompliance by the Secretary with the requirements of this section.

The referenced paragraph (1) provides that, in the case of

noncompliance, “any proceeding to compel compliance with any

summons with respect to such inquiry or examination shall be

2 Mandamus does not lie to require a government official to perform a purely discretionary act. See Shoshone-Bannock Tribes v. Reno, 56 F.3d 1476, 1479 (D.C. Cir. 1995).

- 3 - stayed” until the noncompliance is corrected. 26 U.S.C. §

7611(e)(1). The present case does not involve a summons or a

summons enforcement proceeding. The IRS has issued no summons to

Southern Faith Ministries. On the plain language of the statute,

that ends the matter. See Music Square Church v. United States,

218 F.3d 1367, 1370 (Fed. Cir. 2000) (“Accordingly, we must

acknowledge the clear intention expressed by Congress, that there

is to be no judicial remedy for the IRS’ failure to comply with

any of the requirements in section 7611, aside from the exclusive

remedy described in subsection 7611(e)(1)”). Southern Faith

Ministries cites the Living Word opinion in its favor, but of

course that case did involve a summons enforcement proceeding.

See Living Word, 2009 U.S. Dist. LEXIS 6902, *5 (finding the

enforceability of the IRS summons to depend on the IRS’s

interpretation that the DEOE is an appropriate high-level

Treasury official).

If and when it is served with an IRS summons, Southern Faith

Ministries may present its objection that the proper official did

not approve the church tax inquiry. 26 U.S.C. § 7611(e)(1). If

and when its tax exempt status is revoked, Southern Faith

Ministries may challenge that conclusion in a declaratory

judgment action. 26 U.S.C. § 7428. If and when its activities

are taxed, Southern Faith Ministries may institute a refund

- 4 - action. 26 U.S.C. § 7422. Those “if’s” are not present here and

those “when’s” are not now.

Southern Faith Ministries’ complaint will be dismissed. A

separate order accompanies this memorandum opinion.

JAMES ROBERTSON United States District Judge

- 5 -