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May 30, 1986


The opinion of the court was delivered by: GESELL


 The Internal Revenue Service (IRS) revoked the tax-exempt status of plaintiff Church of Gospel Ministry, Inc. (CGM) on February 14, 1985, effective retroactively from the date CGM was founded in 1973. CGM now invokes this Court's special jurisdiction under 26 U.S.C. § 7428 seeking de novo review and a declaratory judgment that CGM is, and has always been, a corporation organized and operated exclusively for religious and charitable purposes and therefore qualified for federal income tax exemption under 26 U.S.C. § 501(c)(3) and qualified to receive deductible charitable contributions under 26 U.S.C. § 170(c)(2). CGM has exhausted its administrative remedies. At a bench trial a record containing depositions, live testimony and joint exhibits was developed and after oral argument the Court makes the following findings of fact and conclusions of law.

 CGM places classified advertisements in newspapers nationwide which read:

 Anyone who answers the advertisement receives an application to become an ordained minister. To be ordained and receive credentials as a CGM minister applicants need only give their name and address and sign a statement that they are truly sincere in their will to serve the Lord. The application explains:

The CHURCH OF GOSPEL MINISTRY has no traditional doctrine. We believe that everyone has the right to serve according to his own conviction. We recognize the right of every minister to serve GOD in his own way. . . . You will be entitled to preach the Gospel according to the dictation of your heart and use the title, "Reverend." *fn2"

 All applications are granted by mail unless the applicant is obviously insincere or appears to be a minor or prison inmate. *fn3"

 Ordination and a pocket card, which serves as CGM's credentials of ministry, are free but donations are strongly encouraged. For a donation of $10 or more, CGM offers a large certificate of ordination and for a donation of $15 or more, it will send a gold-embossed certificate. CGM actively does whatever is necessary under the local laws of each of the fifty states to assure that its ministers are recognized as ordained ministers authorized to perform marriages, memorial services, baptism, and other ministerial functions.

 The application for ordination is followed by additional mailings and requests for donations. Ministers are encouraged to "counsel individuals with personal as well as spiritual problems" and are offered a certificate designating them as a "Pastoral Counselor" in exchange for a donation of $10 or more. *fn4" Ministers may receive an Honorary Doctorate of Divinity by donating $10 or more and filing out a one-page application in which they declare that they believe they are qualified for the degree, indicate how many hours they study the Bible, and explain what ministry means to them. *fn5" CGM also sends out an appeal asking all ministers to help with CGM's increasing expenses by sending a $15 donation for a annual license showing that they are an active minister. *fn6" For a monthly fee ministers may form an independent church chartered as a branch of CGM. *fn7"

 In addition, CGM sends out mailings selling Bibles, marriage manuals, marriage certificates, and baptismal certificates. *fn8" It also distributes newsletters which report on the work of CGM, contain general statements of Christian faith and encouragement, and solicit donations. *fn9"

 CGM exercises no control over its ministers or charter churches. It tells its new ministers that it "has no doctrine beyond belief in the existence of God, the Divinity of Christ and the Power of Prayer . . . We accept the fact that more than 300 sects with faithful adherents can be found throughout the United States. We quarrel with no one." *fn10" CGM's founder sees it as a refuge for people who have become disgruntled with their own church or who just experience a desire at some stage of their life to become a minister. He was formerly in the mail order business and relies on his knowledge of mail order techniques to promote CGM.

 CGM is run from offices in California by its president and secretary and their wives with the assistance of about half a dozen employees. CGM's officers testified that their primary activity is distributing the various mailings described above and answering the responses. Donations are used, as stated in the mailings, to pay advertising, mailing and operational expenses and salaries. Some of the remaining funds are to assist an orphanage in Mexico by sending cash, food, and other aid. Approximately 10-15% of CGM's gross income of $200,000 to $250,000 has been sent to charity in recent years and it has been the primary supporter of the Mexican orphanage. The only services conducted by CGM are brief weekday morning services attended by some of its employees at one of its corporate offices.

 In order to establish that it is qualified for tax-exempt status, CGM has the burden of proving three elements contested by the IRS: (1) that CGM is a corporation operated primarily for religious and/or charitable purposes, 26 U.S.C. §§ 170(c)(2)(B), 501(c)(3); 26 C.F.R. § 1.501(c)(3)-1(c)(1); (2) that no part of CGM's net earnings inure to the benefit of any private shareholder or individual, 26 U.S.C. §§ 170(c)(2)(C), 501(c)(3); 26 C.F.R. § 1.501(c)(3)-1(c)(2), and (3) that CGM maintains records sufficient to demonstrate that it is entitled to tax-exempt status, 26 U.S.C. § 6001; 26 C.F.R. §§ 1.6000-1(c), 31.6001-1. *fn11"

 The testimony and exhibits are sufficient to establish that CGM was organized and has been operated for religious and charitable purposes. Its primary activity appears to be to solicit donations by licensing ministers who indicate they have some kind of general religious belief. Ministers are then sent periodic mailings soliciting contributions and encouraging them to pursue the will of God as they understand it. Such activity, when carried out to promote such religious beliefs, is religious activity. Cf. Universal Life Church, Inc. v. United States, 372 F. Supp. 770 (E.D. Ca. 1974). The donations ...

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