at the discretion of plaintiff. Members must serve in "stewardships" on behalf of plaintiff, which often consist of apparently non-religious services performed for third parties who pay the salaries of members directly to plaintiff without withholding taxes. Plaintiff in turn pays all the living expenses of the members. It appears that 70% of plaintiff's expenditures go to the support of its members.
Sections 501(a) and (c) of the Internal Revenue Code allow tax exemptions for organizations that are organized and operated exclusively for religious, charitable, and other specified exempt purposes, provided that no part of the net earnings of the organization inure to the benefit of any private shareholders or individual. Treasury Regulation Section 1.501(c)(3)-1(a)(1) requires that in order to be exempt pursuant to Section 501(c)(3), an organization must be both organized and operated exclusively for any one or more of the purposes enumerated in that Code section. An organization is not operated exclusively for such exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Treas. Reg. Sec. 1.501(c)(3)-1(c)(2). Pursuant to Treas. Reg. Sec. 1.501(c)(3)-1(d) (1)(ii), an organization is not organized or operated exclusively for one or more of the specified exempt purposes unless it serves a public rather than a private interest.
Applying these principles to the facts offered by plaintiff, defendant denied the application for exemption. In its final action of September 5, 1979, defendant premised the denial on two grounds relevant here: that plaintiff was operated for private benefit, and that a portion of its net earnings inured to private individuals. Defendant also determined that plaintiff is not a church, but that finding will be in issue only if the Court finds that defendant's first two conclusions were erroneous. See American Guidance Foundation, Inc. v. U.S., 490 F. Supp. 304, 306 (D.D.C.1980) appeal docketed July 18, 1980.
In actions for declaratory judgments such as this, the scope of review is confined to the administrative record unless good cause is shown. Big Mama Rag, Inc. v. U.S., 494 F. Supp. 473, 474 n.1 (D.D.C.1979); rev'd on other grounds, 80-2 U.S.T.C. para. 9674 (1980). The standard of review is de novo. Id. Since defendant relies in its motion here on the same reasons given plaintiff in the final administrative action, the burden is upon plaintiff to show that defendant's determination is wrong. Basic Bible Church v. U.S., 74 T.C. 846 at 855 & n.7 (1980).
It is apparent from the record presented that plaintiff has not carried that burden here. It has not shown that it operated for other than the private interest of its members, nor that its earnings do not inure to its members. In factual situations such as there, where there is evident potential for abuse of the exemption provisions and avoidance of taxes, plaintiff must openly and candidly disclose all facts bearing upon the operation and the finances of the organization. Bubbling Well Church v. Commissioner, 74 T.C. 531, 535 (1980). That has not been done. Plaintiff did not proffer sufficiently detailed evidence as to the nature of the charitable disbursements, or as to the extent of the maintenance and support of the members. The services which plaintiff claims its members performed for it are characterized more by generalizations than specifics. And finally, plaintiff refuses to reveal the charitable actions it takes. Each time defendant requested additional information, plaintiff responded that it had already provided the data, or that it was unable to furnish anything further. While it did offer to answer any questions that defendant might have, that asserted readiness misconstrues the burden of plaintiff, in both the administrative proceedings and before this Court, to positively demonstrate that it qualifies for the exemption. Accordingly, plaintiff is not entitled to the privilege of tax exempt status.
Plaintiff also asserts that its First Amendment rights have been violated by the denial of exempt status. There is no serious contention or evidence that defendant is in any way biased or has acted in a biased manner against this particular plaintiff. Since religious organizations may be taxed, it follows that the government may decide to grant reasonable exemptions to qualifying organizations while continuing to tax those who fail to meet the qualifications. Parker v. Commissioner, 365 F.2d 792, 795 (8th Cir. 1966); cert. denied 385 U.S. 1026, 87 S. Ct. 752, 17 L. Ed. 2d 674. In view of the fact that plaintiff has not shown that it meets the relevant qualifications, defendant's motion for summary judgment will be granted, and plaintiff's denied.
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