Tuesday, February 24, 2009

Options for IRS In Future Investigation of Living Word Christian Center Are Complex

BNA's Feb. 20 Daily Report for Executives [subscription required] discusses the options available to the Internal Revenue Service after the Minnesota federal district court decision last month in United States v. Living Word Christian Center. (See prior posting.) In the case, the court held that current IRS procedures for opening tax investigations of churches does not comply with legal requirement for pre-approval by a high-level Treasury official. One option for the government is appealing the decision to the 8th Circuit. A letter (full text from BNA, subscription required) to the Department of Justice from Living Word's lawyer, Walter Pickhardt, outlines problems that would be presented if IRS simply attempts to open a new investigation authorized by a higher level official. IRS regulations call for any investigation of tax-exempt status to focus on the three most recent tax years. Thus different years would be involved in any new probe (with only one overlapping year). Also, according to Pickhardt, IRS Regulations would preclude using information already furnished by Living Word as the basis for "reasonable belief" that a new investigation should be undertaken.