Justice Department shows no compassion for church's alleged tax shenanigans
by AccountingWEB on
The U.S. Department of Justice earlier this month asked a federal court to permanently bar Kevin Hartshorn from promoting an allegedly false church-based tax fraud scheme involving his Orem, Utah-based organization, Church of Compassionate Service.
The suit alleges that Hartshorn, who works as a senior minister for the church, falsely promises members of the organization that they can legally reduce or eliminate their federal income taxes, avoid filing federal income tax returns, and put their income and assets beyond the reach of the Internal Revenue Service by becoming ministers in the Church of Compassionate Service.
The government complaint also asserts that the Church of Compassionate Service claims its members are ministers who are required to take a vow of poverty, thereby supposedly eliminating their taxable income. The suit alleges the purported vows of poverty are false and the members continue to have access to their income notwithstanding the purported vow.
“We just do compassionate service,” Hartshorn told The Associated Press. “We’re a service organization for people who commit and organize their lives in a way to do that, just like any religious order out there. We’ve done everything to be compliant with the Internal Revenue Service. It’s all about compassionate service.”
Hartshorn reportedly takes title to the assets of ministers who sign up, such as their homes, and has them deposit their earnings in church accounts. He gives them debit cards, providing them access to their earnings, according to the Secular News Daily. However, the Justice Department noted that converting property to parsonages has long been rejected as a tax-avoidance scheme.
Hartshorn reportedly has not paid taxes himself since 1986, yet claims that he has grossed up to $1 million per month from check-cashing shops in Washington State and a number of other businesses, the Secular News Daily reported.
The government’s complaint noted that before becoming a church-owning man, Hartshorn created the International Academy of Lymphology. By joining for $5,000, people could become certified lymphologists, and then create LLCs as a tax shelter.
"Tax laws are quite clear what constitutes a legitimate contribution," the Reverend Jessica A. Hatch, interim minister at St. Mary's Episcopal, told the Daily Herald in Provo, Utah. "This is illegal with any kind of a non-profit. There are very clear procedures. This sounds very intentional."