DocketNumber: Docket No. 4585-82X
Citation Numbers: 80 T.C. 292, 1983 U.S. Tax Ct. LEXIS 123, 80 T.C. No. 7
Judges: Nims
Filed Date: 1/25/1983
Status: Precedential
Modified Date: 1/13/2023
*123 Petitioner is a church which respondent has previously found to be exempt from taxation. In 1980, respondent sought to reexamine petitioner's exempt status. Respondent requested certain information from petitioner, warning that failure to provide such information might result in the revocation of petitioner's exemption. Petitioner refused to provide the information and in several letters requested that respondent cease his examination. Respondent neither ceased his examination nor issued a notice of proposed revocation of exemption. On Mar. 1, 1982, petitioner filed a petition in this Court invoking our declaratory judgment jurisdiction under
*292 OPINION
Petitioner brought an action for a declaratory judgment pursuant to
*293 Based on the undisputed allegations of the petition and copies of four letters introduced by the petitioner, 2 the pertinent facts for the purposes of this motion are as follows.
*128 Petitioner is a California nonprofit corporation whose principal place of business was at Northridge, Calif., at the time the petition was filed.
On April 16, 1973, respondent issued a determination letter approving petitioner's application to receive recognition of its exempt status as a church described in
As one of its activities, petitioner operates a missionary radio station in "Free Lebanon" whose broadcast facilities are occasionally used by Major Saad Haddad, "President of Free Lebanon." Under the Carter Administration, the U.S. State Department unsuccessfully attempted to persuade petitioner to shut down these broadcast facilities. In a July 10, 1980, article by columnist Jack Anderson, the following sentence appeared: "At least one concerned member of Congress has requested an IRS investigation of High Adventure Ministries to determine if it is violating its religious tax exempt status by engaging in political activities."
On or about July 28, 1980, the Los Angeles district of the Internal Revenue Service notified petitioner that it was to be investigated.
On October 8, 1980, the District Director for the Los Angeles key district wrote to petitioner*129 asking it to respond to certain questions. On October 22, 1980, petitioner's attorney wrote to the District Director objecting to the series of question, indicating that petitioner considered the questions to constitute an examination of it in violation of the Constitution and *294 the procedural statutory safeguards afforded churches under section 7605(c). The questions were not answered.
On December 5, 1980, the District Director again wrote the petitioner, assuring the petitioner that the Internal Revenue Service was only attempting to obtain information necessary to administer the provisions of the Internal Revenue Code which provide for exemption from Federal income tax. The District Director repeated his request that petitioner answer the questions and stated:
If you fail to respond to this second written request for the necessary information, you will have failed to support your claim that your organization is described in
By a letter dated March 27, 1981, the acting Regional Commissioner for the Western Region notified the petitioner that he had authorized the Los Angeles district to examine petitioner's books and religious activities under the provisions of sections 7602 and 7605(c). On April 19, 1981, petitioner's attorney wrote a letter to the Commissioner of Internal Revenue in Washington, D.C., requesting a ruling "that such authorization was improperly granted and that said authorization be withdrawn." This letter then went on to describe petitioner's operation of its radio station in "Free Lebanon" and the station's possible use by Major Saad Haddad. Petitioner's attorney argued that the alleged use of the radio station was not political action on behalf of a "candidate for public office" as that term is used in
In the closing paragraphs of this letter, petitioner's attorney wrote:
Another area which bears passing comment is that of the revocation by the Internal Revenue Service of Ministries exempt status. Since Ministries is *295 an organization described in
Ministries is now, and at all relevant times has been, operating consonant with its status under
Accordingly, it is respectfully requested that the letter from the Acting Regional Commissioner dated March 27, 1981 to Ministries be withdrawn and the authorization to examine Ministries be denied.
On September 25, 1981, petitioner's attorney wrote a letter to the Examination Branch of the Exempt Organizations Division of the Office of the Assistant Commissioner (Employee Plans and Exempt Organizations) in Washington, D.C. This letter, in its entirety, stated:
I have received your letter dated August 6, 1981, in response to a request for a ruling previously made. In your letter it was stated that the action taken by the Western Region in relation to my client was proper. The letter did not indicate that in fact a ruling on the original request dated April 19, 1981, was made. If it was so intended, the original request also asked for a hearing thereon, but no such hearing has been profferred [sic]. Because there appears to be some misunderstanding in this situation, I would like to restate*133 the request so that a definite stated decision on this matter can be made.
On the information presented to you:
1. Does the phrase "candidate for public office" have the same meaning in
2. Does full scale involvement on behalf of a candidate for a foreign political office constitute intervention or participation in a "political campaign on behalf of any candidate for public office" as that phrase is used in
3. Can a
4. If the answer to #3 is yes, how is the situation at all different from the abuses manifested in the Watergate scandal?
5. Can an audit of a
*296 6. What legitimate audit purpose is served by the Service's request for the names and addresses of contributors?
7. Can the I.R.S. audit an organization and request information that either the I.R.S. or some other government agency already has in its possession?
8. Can an audit*134 of a
I trust that this sufficiently delineates the request so that a ruling thereon would be forthcoming. If it is contemplated that an adverse ruling is to be issued, it is requested that a hearing thereon be held.
On December 16, 1981, an Internal Revenue agent, exempt organization specialist, working in the Los Angeles District Director's office responded to petitioner's letter of September 25, 1981, in the following letter:
Your letter has been referred to me for appropriate action. I have been advised that our National Office and Regional Office will not respond to the questions posed in your letter.
Your letter refers to
It appears that you are aware of information concerning the organization in the possession of*135 other Federal agencies that I am not aware of. If other Federal agencies do have such information, it would be extremely difficult for me to obtain. As you know, every organization which is exempt from tax, whether or not it is required to file an annual information return, is required by section 1.6033-2(h)(2) of the regulations to submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of subchapter F (
It appears that the principal issues to be resolved by my examination are whether the organization has engaged in activities which are illegal or otherwise contrary to public policy, precluding exemption from tax as an organization described in
I would like to begin the examination*136 during the week of January 25, 1982. Please call me (after January 10, 1982) before January 19, 1982, to make arrangements for the date, time, and location for the examination.
Except as otherwise provided in section 6501 of the Code, the limitation period prescribed by law for assessing tax for the 1978 tax year may expire soon, and I am required to solicit a consent to extend the limitation period at *297 this time. By extending the limitation period, the organization will have sufficient time, if it chooses, to exercise its administrative appeal rights in the event an adverse determination concerning its exempt status and/or a tax liability is recommended.
I would appreciate your extending the limitation period by signing both copies of the enclosed FORM 872 and returning them to me by January 11, 1982. Please use the enclosed self-addressed envelope for this purpose. Upon acceptance of the consent, a copy will be returned to you for your records.
On March 1, 1982, petitioner filed a petition in this Court invoking our jurisdiction under
Respondent moved to dismiss the petition for lack of jurisdiction on the ground that petitioner had not previously requested from him a redetermination of its exempt status or, alternatively, that petitioner had not exhausted its administrative remedies. Petitioner argues that its April 19, 1981, letter or, alternatively, its September 25, 1981, letter constituted its request for a determination. Further, petitioner contends respondent has failed to act on its request for over 270 days and has refused it either National Office or Regional Office consideration. Consequently, petitioner*138 argues, it has exhausted its administrative remedies.
At the outset, we note that where the respondent has failed to issue a notice of determination, the burden of proof with respect to jurisdictional matters under
*140 When the Commissioner has reason to doubt whether an organization previously determined to be exempt remains entitled to its exempt status, a key district Office 4 of the Internal Revenue Service conducts an investigation. If the key District Director concludes that the organization's exemption ruling or determination letter should be revoked or modified, he will advise the organization, in writing, of the proposed action and the reasons therefor.
Where the organization seeks to protest the proposed*141 action, the Procedural Rules require that the organization must submit to the key District Director, within 30 days, a statement of the facts, law, and arguments in support of its continued ex emption.
In certain cases, the key District Director or Appeals Office must request technical advice from the National Office; in other cases, the organization may request the key District Director or Appeals Office to seek National Office technical advice.
*300 Ultimately, if an appeal is not taken or is unsuccessful, a final notice of revocation will be issued.
In
In
As is evident from the letters petitioner has introduced herein, petitioner is in a far different procedural setting than was the organization in
The key District Director's letter of December 5, 1980, cannot be construed as a notice of proposed revocation. It contains no statements proposing that the petitioner's exemption should be revoked or explaining the reasons therefor. See
Petitioner, admittedly, has not supplied that information to the key District Director, but there is no evidence in this record that the key District Director has ever gone through with his threat and issued a notice of proposed revocation. Indeed, the December 16, 1981, letter from the District Director's office makes it clear that that Office had not yet at that date reached a decision on petitioner's status: "By extending the limitation period, the organization*145 will have sufficient time, if it chooses, to exercise its administrative appeal rights in the event an adverse determination concerning its exempt status and/or a tax liability is recommended."
Accordingly, it seems to us that petitioner is requesting us to consider whether this mere threat to issue a notice of proposed revocation gives rise to an actual controversy regarding its exempt status within the meaning of
In determining whether the "actual controversy" requirement of
While there may indeed be an adverse controversy between the parties herein regarding whether petitioner should be examined, we cannot find that there exists a similar adverse controversy of sufficient immediacy and reality regarding petitioner's exempt status. The question of petitioner's exempt status is at least one step removed from the question of the examination: Even if the petitioner continues to fail to cooperate with the examination, there is no guarantee that the key District Director will determine that its exemption should be revoked. There is no assurance that the issues petitioner raises regarding its radio station and Major Haddad are of concern to respondent. It is equally not clear that respondent even disputes petitioner's position on these issues.
Petitioner argues that, if we decline to hear its case, it then lacks a forum to have its controversy regarding the propriety of respondent's examination litigated before a proposed revocation is issued. Aside from our previously expressed demurrer to petitioner's other assertions, we doubt whether petitioner's assertion regarding lack of a forum is totally accurate. We note that the Court of Appeals for the Ninth Circuit has recently held that section 7605(c) does not bar a summons requiring the production of a church's books of account in order that the IRS may determine whether the church still qualifies for tax-exempt status. In addition, the Court affirmed the District Court's decision that the church must produce its corporate minute books in order for the IRS to determine whether the church still qualified for tax-exempt status.
In any event, we cannot enlarge the jurisdiction of this Court merely to provide petitioner with a remedy. The statute is clear on its face that the controversy which we may hear under
We also find no merit in petitioner's argument that its April 19, 1981, and September 25, 1981, letters constituted requests for a second determination of its exempt status. These letters were not addressed to the key District Director, as proper requests for determinations should be. See
Finally, with regard to the September 25, 1981, *149 letter, 270 days had not elapsed between the time it was sent and the date the petition was filed (Mar. 1, 1982). Accordingly, even if this last letter were considered a request for a new determination, the necessary jurisdictional period in cases of respondent's failure to rule had not expired at the time the petition was filed. See
One other note. Respondent has argued that petitioner cannot be said to have exhausted its administrative remedies for a suit under
*150
1. Unless otherwise indicated, all section references are to the Internal Revenue Code of 1954 as amended. All references to Rules are to the Tax Court Rules of Practice and Procedure, except as hereinafter noted.↩
2. Respondent moved to dismiss this case prior to filing his answer. Accordingly, respondent as yet has neither admitted nor denied the numerous allegations in the petition. The facts above which we derive from the petition, however, were not disputed in respondent's motion.
The remaining facts we derive from copies of four letters introduced by the petitioner (two attached to the petition and two attached to petitioner's objection to respondent's motion). Respondent did not dispute the authenticity of these documents or the accuracy of statements contained therein referring to other correspondence between the parties. As the four letters constitute a part of the correspondence between the parties, they would constitute a part of the administrative record in this case. Rule 210(b)(11). Ordinarily, it should be noted, an index to the contents of the administrative record is submitted by the respondent at the time he files his answer; Rule 213(a)(3); the administrative record itself is filed with the Court within 30 days after service of the answer. Rule 217(b).↩
3.
(a) Creation of Remedy. -- In a case of actual controversy involving -- (1) a determination by the Secretary -- (A) with respect to the initial qualification or continuing qualification of an organization as an organization described in * * * * (2) a failure by the Secretary to make a determination with respect to an issue referred to in paragraph (1), upon the filing of an appropriate pleading, the United States Tax Court, the United States Court of Claims, or the district court of the United States for the District of Columbia may make a declaration with respect to such initial qualification or continuing qualification or with respect to such initial classification or continuing classification. Any such declaration shall have the force and effect of a decision of the Tax Court or a final judgment or decree of the district court or the Court of Claims, as the case may be, and shall be reviewable as such. For purposes of this section, a determination with respect to a continuing qualification or continuing classification includes any revocation of or other change in a qualification or classification.
(b) Limitations. -- * * * * (2) Exhaustion of administrative remedies. -- A declaratory judgment or decree under this section shall not be issued in any proceeding unless the Tax Court, the Court of Claims, or the district Court of the United States for the District of Columbia determines that the organization involved has exhausted administrative remedies available to it within the Internal Revenue Service. An organization requesting the determination of an issue referred to in subsection (a)(1) shall be deemed to have exhausted its administrative remedies with respect to a failure by the Secretary to make a determination with respect to such issue at the expiration of 270 days after the date on which the request for such determination was made if the organization has taken, in a timely manner, all reasonable steps to secure such determination.↩
4. For purposes of issuing proposed determination letters regarding exempt status, the country is divided into 19 key districts. These key districts are set out at
5. This requirement is supported by the legislative history of
Create (Christian, Research, Education, Action, Technical ... , 634 F.2d 803 ( 1981 )
Ohio County and Independent Agriculture Societies, Delaware ... , 610 F.2d 448 ( 1979 )
united-states-of-america-and-charles-w-brown-revenue-agent , 692 F.2d 629 ( 1982 )
Urantia Foundation v. Commissioner of Internal Revenue , 684 F.2d 521 ( 1982 )
Maryland Casualty Co. v. Pacific Coal & Oil Co. , 61 S. Ct. 510 ( 1941 )