IRS requires pay, perks for evangelists to be "reasonable"

St. Louis Post-Dispatch/May 14, 2004
By Carolyn Tuft and Bill Smith

Note: This article has been republished with the permission
of the St. Louis Post-Dispatch

Federal law bars religious groups and charities from spending excessively on insiders - those who form and control the organization.

One lawyer calls it a "drop-dead prohibition."

Some tax experts say Joyce Meyer may be violating that law.

Wall Watchers, a North Carolina-based nonprofit group formed to monitor the finances of large Christian organizations, wants the Internal Revenue Service to investigate Meyer and some other TV preachers on exactly that point. Wall Watchers, formed in 1998, provides financial information of 500 Christian groups on the Internet. It's stated purpose is to educate donors about where their money is being spent.

Rusty Leonard, founder of Wall Watchers, said that if investigators determined that the TV preachers are compensating themselves at "extraordinarily high levels," the IRS should be prepared to revoke their tax-exempt church status.

Meyer and her lawyer, Tom Winters, say they aren't worried.

"Obviously, this is a big ministry, and the IRS can look at it at any time," Winters said. "But we're confident there are no problems. This ministry is so darn compliant with the IRS. This thing's clean."

Wall Watchers tax expert Rod Pitzer says federal law requires that any compensation - salary and perks, including housing for ministers - must be reasonable. "Reasonable" means that the benefits to Meyer and her family roughly equal what other ministers in the St. Louis area get from their congregations, Pitzer said.

For example, Pitzer said, Meyer's use of church money for five homes in South County - for Meyer and her husband, and for each of their four children - seems "abusive."

But Meyer says there's nothing wrong with the ministry paying about $4 million to purchase, renovate and maintain the five homes. As she sees it, the ministry-owned homes are simply parsonages for her church.

"Ministers either have a parsonage that their ministry pays for - like the Pope lives in the Vatican, which is very nice - or they can take a housing allowance and own their own house," Meyer said.

Winters said that under tax laws, Meyer could take tax-free housing allowances and then deduct the family housing expenses from their income taxes. The homes would belong to the Meyers and their children and not the ministry, he said.

Winters called the parsonage plan "a more conservative approach."

"To criticize them for doing it this way, it's just not right," he said.

Church audits are "sensitive"

Robert R. Thompson, a lawyer in Michigan who participated in some of the earliest investigations of TV ministers, said the law is clear: Private inurement - excessive benefits to anyone who founds or controls a ministry - is "a drop-dead prohibition."

"If even an ounce of private benefit is found," the IRS can act, he said.

But starting an IRS investigation is not easy. Religious groups get special treatment under the law because of the freedom-of-religion guarantee in the Constitution's First Amendment, and resulting court rulings and laws.

"We have to have serious allegations," said Bruce Philipson of St. Paul, Minn., the IRS regional group manager of tax-exempt organizations for this region. "Church audits are always going to be sensitive."

Before launching an investigation, the IRS must narrow the scope to be as specific as possible. It must get the approval of the agency's national director of exempt organizations. And it must give the ministry up to 90 days' notice before looking at any of its records.

Other measures hamper the IRS' reach. First, federal law allows religious groups to enjoy tax-free status without ever proving that they have a charitable purpose, as other nonprofits must.

Further, religious groups never have to report their finances publicly, as other nonprofits must.

Despite these safeguards for religious groups, Philipson said, the IRS usually can get approval to start an investigation when one is merited.

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