Ministry’s Payroll Tax Battle is Nothing New for Bankruptcy Court

Last October, Chief Apostle Bishop Corletta Vaughn of Go Tell It Ministry went to bankruptcy court trying to avoid responsibility for some of the organization’s unpaid payroll taxes. Her case, however, did not go over so well for her.

Ms. Vaughn defended her innocence by claiming that her responsibilities for the church rested only on the spiritual matters, not the business end. Ms. Vaughn should have been aware that documentary evidence is far more substantial than her word. Perhaps the “spiritual” aspect of things just doesn’t stand up in court. The evidence shows that Ms. Vaughn had control over the business matters of the church, from check signing to hiring and firing of employees.

Ms. Vaughn and her lawyers have recently reappeared in court to appeal the bankruptcy court’s decision on the payroll taxes. They appeared in the United States District Court for the Eastern District of North Carolina. The appeal is based on the First Amendment establishment clause, which has become a popular claim from religious institutions in various cases.

The appeal relies on whether the court violated Ms. Vaughn’s and Go Tell It Ministry’s rights under the free exercise clause and the establishment cause of the First Amendment, based on whether or not Ms. Vaughn was a responsible person for the business, based on US Code: Section 6672, which specifies the failure to collect and pay over tax, or an attempt to evade or defeat tax. Those appealing the case argued that the bankruptcy court’s decision expected the religious organization to act in a specific way. Particularly, the appellants believed that the court’s decision established a state regulated religion through judicial fiat.

Their argument is that because the court cited Go Tell it Ministry’s bylaws, it was ordering what the President, CEO, and Chief apostle of the religious organization must do. However, just because the court was applying roles to the organization in order for the company to correctly adhere to tax matters, this does not mean that the court was challenging any of the organization’s ecclesiastical decisions or religious customs, grounds to religious regulation. The appellants are asking the court to take a far jump and assume that the citation of the bylaws as part of the responsible person analysis of the US Code: Section 6672, violates the First Amendment, a particularly far stretch.

What the bankruptcy court did exactly was to authorize the Chief Apostle, Ms. Vaughn, to have supervision over business matters. This decision was not based on what the court believe Ms. Vaughn should be doing, but rather what she had been doing previously within the organization, such as signing a $178,000 construction loan, signing a corporate resolution authorizing a bank account with First Federal Bank, etc., which are particularly business matters normally conducted by an individual with financial power within an organization. Thus, the decision is not necessarily forcing Ms. Vaughn to now be invested in secular affairs since she was prior to the case.

The final word: Ms. Vaughn is still personally liable for payroll taxes, not because the court ordered her too, but because the court was aligning what she had been doing in the past with her position within the organization. Many religious organizations with pastors of such significance face similar problems in disagreements with the IRS. For more information and/or assistance with payroll tax procedures, contact a trustworthy tax attorney today.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Leave a Comment