The opinion of the court was delivered by: GREEN
In this action, plaintiff seeks a declaratory judgment pursuant to 26 U.S.C. § 7428 that it continues to qualify as an exempt organization under section 501(c)(3) of the Internal Revenue Code of 1954 ("Code"), 26 U.S.C. § 501(c)(3). This matter is before the Court on the trial memorandum of the United States of America, the affidavits and documents submitted by plaintiff and its members, and the entire record herein, including the administrative record. For the reasons stated below, the Court revokes retroactively the exempt status of plaintiff, effective for all tax years beginning with 1978.
On March 8, 1979, plaintiff Freedom Church of Revelation ("Freedom Church") applied for recognition as a tax-exempt organization pursuant to section 501(c)(3) of the Code. Administrative Record ("A.R."), Internal Revenue Service ("IRS") Form 1023. On June 8, 1979, the Commissioner of IRS determined that plaintiff was exempt under section 501(c)(3), based upon information supplied by plaintiff in its application for recognition of exemption, as well as the assumption that plaintiff would operate in the manner it had represented in its application. Exhibit A attached to Complaint.
On October 14, 1979, following an examination of plaintiff's operations, the IRS informed plaintiff that it was proposing to revoke plaintiff's exemption under section 501(c)(3). Plaintiff appealed this proposed revocation to the IRS. On September 30, 1982, plaintiff received a final determination that its recognition as a tax-exempt organization under section 501(c)(3) had been revoked, effective for the tax year 1978 and all subsequent years. Exhibit B attached to Complaint.
In revoking the tax-exempt status of plaintiff, the IRS gave the following reasons:
1. You are not organized and operated exclusively for religious, charitable, educational or any other § 501(c)(3) purpose.
2. You are not organized and operated exclusively for public purposes.
3. You are operated for the benefit of private individuals.
As a result of this decision, on December 28, 1982, plaintiff filed the instant action under the declaratory judgment provisions of 26 U.S.C. § 7428. At a status conference on April 18, 1983, plaintiff's counsel informed the Court that Freedom Church wished to supplement the administrative record in this case and that it would move to reopen the administrative record for this purpose. At a subsequent status conference on July 5, 1983, however, the Court was informed that plaintiff had not moved to reopen the administrative record and had not submitted any additional documents to the IRS. As a result, the Court indicated that any documents plaintiff wished to include in the administrative record would have to be submitted to the IRS by July 19, 1983. On July 19, 1983, a letter and exhibits were delivered to IRS. After examining these additional documents, the IRS concluded that there was no basis to disturb its original determination that plaintiff's tax-exempt status should be revoked.
In lieu of trial in this matter, the parties agreed to submit their respective cases on the papers. Plaintiff was given an opportunity to submit any additional briefing or documents to the Court on or before November 23, 1983, and the Government was given the opportunity to respond to plaintiff's submissions and to submit its own papers on or before November 30, 1983. Thereafter, the leaders and members of Freedom Church submitted affidavits and letters, a cassette entitled "Faith" by Bishop Linda Jane Ann, and various publications of the church, including copies of the Fellowship News. In response, the Government submitted a trial memorandum, the administrative record, and supplemental exhibits.
Section 501(a) of the Code exempts certain organizations from taxation, including those organizations described in Section 501(c)(3) as follows:
Corporations . . . organized and operated exclusively for religious, charitable, scientific . . . or educational purposes . . . no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation . . . and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.
Section 7428(a) of the Code states in relevant part:
(a) Creation of remedy. -- In the case of actual ...