Tax stuff I think is interesting. It is either copied from my primary blog on forbes.com http://www.forbes.com/sites/peterjreilly/ or stuff that I did not put there because being on forbes is a good gig and they have, you know, standards. Also some guest posts.
Wednesday, July 30, 2014
Bishop Corletta Vaughn, Chief Apostle, Held Personally Responsible for Ministry's Payroll Withholding
Originally Published on forbes.com on October 27th,2011
Apostle Corletta J. Vaughn has been a trailblazer and forerunner among women in ministry for the last thirty-two years. From answering the call of God in 1974 to her elevation as a Bishop on November 5, 1995 in the West African country of Nigeria; God has used her life and ministry to impact the Body of Christ and serve a death blow to the kingdom of darkness
The website does not explain what Bishop Vaughn and her husband Gilbert are doing in North Carolina federal bankruptcy court. The most recent decision by the Court does not fully explain it either. I am just a tax blogger not an investigative reporter so you will have to go elsewhere to find out. The decision is interesting though. It is about Bishop Vaughn’s personal responsibility for a ministry’s payroll taxes.
Here is some of the story:
Go Tell It Evangelistic Ministry (“GTI”) failed to remit to the United States payroll taxes for the quarters ending June 30, 2002, September 30, 2002, December 31, 2002, March 31, 2003, June 30, 2003, September 30, 2003, December 31, 2003, and March 31, 2004. Ms. Vaughn founded GTI. GTI was incorporated in 1984 and is located in Detroit, Michigan. GTI is a 26 U.S.C. § 501(c)(3) organization and has no stockholders or owners. GTI was an umbrella entity that had oversight of five different divisions: (1) the Holy Ghost Full Gospel Church (the “Holy Ghost Church”); (2) Go Tell It Evangelistic Ministry; (3) Go Tell It Network; (4) Spread the Word Media; and (5) KFBC School. Ms. Vaughn was actively involved in all five of the divisions and was considered the “face” or spokesperson of GTI. Ms. Vaughn’s father founded the Holy Ghost Missionary Baptist Church in 1972. The Holy Ghost Church is a church that holds services twice a week. Ms. Vaughn became an associate minister of the Holy Ghost Church and her father trained her. Ms. Vaughn’s father passed away in 1993. Ms. Vaughn became the Senior Pastor of the Holy Ghost Church. Over time, Ms. Vaughn created the five divisions of GTI as outreach ministries. The five divisions kept separate monetary accounts and forwarded funds to GTI to cover expenses. At all relevant times, GTI’s officers were Ms. Vaughn, the President, CEO and Chief Apostle, Gilbert Vaughn, the Chief Financial Officer and Ruth Sinclair, the Comptroller.
The GTI Bylaws provide that the Chief Apostle shall act “as CEO over all spiritual and business matters.” Additionally, the bylaws provide that the Chief Apostle shall be the “Chief Executive Officer of the said organization and shall be a continuing member of all boards and committees.” The Chief Apostle “shall be an ex-officio member of all standing committees, and shall have the general powers and duties of supervision andmanagement usually vested in the office of president of a corporation.” The Holy Ghost Church Bylaws provide that the “Senior Pastor shall have general management of the affairs of the church and general supervision of the other officers.” The Senior Pastor shall be “an ex-officio member of all standing committees, and shall have the general powers and duties of supervison [sic] and management usually vested in the office of president of a corporation.” The Senior Pastor “shall be designated attorney-in-fact for the Church by virtue of his office.”
In 1999, Ruth Adams (“Ms. Adams”) was appointed as GTI’s Fiscal Administrator. Prior to her appointment as Fiscal Administrator, Ms. Adams was a Trustee and Elder of the Holy Ghost Church. She was also involved in the accounting and financial duties of GTI as a volunteer. In 1999, Ms. Adams discovered there was a problem with payroll tax accounting and payments with respect to GTI. It became apparent that the hired employee responsible for payroll had not been remitting the proper amount of employment taxes to the United States. Ms. Adams made Ms. Vaughn aware that the employment taxes were not being paid. In response, Ms. Vaughn created the Fiscal Affairs Department and the Fiscal Administrator position. The Fiscal Affairs Department and the Fiscal Administrator consolidated the accounting and financial functions of the five different divisions under one department. Ms. Adams was to oversee the payroll and accounting functions of GTI and eventually pay off any outstanding tax liabilities. In 2000, GTI entered into a payment Plan with the IRS, regarding GTI’s failure to remit employment taxes for the quarter ending March 31, 2002. These quarter payments were paid off in November 2002. Although, GTI paid off the amount owed for the quarter ending March 31, 2002, it failed to pay employment taxes for the second, third and fourth quarters of 2002 and the first and second quarter of 2003.
Ms. Vaughn regularly traveled the country doing speaking engagements for GTI’s outreach ministires. On January 6, 2003, Ms. Vaughn’s husband became ill. In April, 2003, Ms. Vaughn and her husband moved to North Carolina. In May 2003, Ms. Vaughn resigned as Senior Pastor and began caring for her husband. Throughout this period, Ms. Vaughn remained the CEO and President of GTI.
In June 2003, Ms. Vaughn returned to Michigan to deal with GTI’s significant financial difficulties. During this visit, Ms. Vaughn sent an inter-office memorandum directing that “no disbursements to vendors or to staff are to be made until further notice except to Pastor Clifton Jefferson and myself, effective immediately.” As a result, many of GTI’s employees, including Ms. Adams resigned.
The Court agreed with the IRS that Bishop Vaughn was a responsible person with respect to the ministry’s payroll taxes:
The Court finds that the Debtors have failed to carry their burden of disproving that Ms. Vaughn was a “responsible person” under Section 6672. Ms. Vaughn was CEO and President of GTI during the periods at issue and possessed decisionmaking authority over GTI’s finances. Even after she resigned as Pastor and Board Member of the Holy Ghost Church, she remained CEO and President of GTI. Additionally, Ms. Vaughn continued receiving a salary from GTI, even after she moved to North Carolina to care for her husband. According to Schedule I, Ms. Vaughn’s estimated average monthly income at the time the case was filed was $11,800.00.
At the hearing, Ms. Vaughn testified that she was the spiritual head of the organization, and therefore she was prohibited from participating in the financial management of GTI. GTI’s bylaws, however, provide for Ms. Vaughn’s decisionmaking authority over the business matters of GTI. The bylaws provide that Chief Apostle Vaughn shall act as CEO over all spiritual and business matters. (emphasis added). Additionally, the bylaws provide that the Chief Apostle shall be the CEO of GTI and shall be a continuing member of all boards and committees. The Chief Apostle shall preside at all meetings if present, of the Board of Governors and the Board of Presbytery and shall see that all orders and resolutions of the Boards are carried into effect. Further, the bylaws provide that the Chief Apostle “shall execute in the name of the Church all deeds, bonds, mortgages, contracts, and other documents authorized by the Board of Governors” and shall have the general powers and duties of supervision and management usually vested in the office of president of a corporation.” The terms of the bylaws, provide for Ms. Vaughn’s decisionmaking authority and authorize her to supervise the business matters of GTI.
Throughout her testimony, Ms. Vaughn contended that her primary responsibilities rested with the spiritual nature of the church and not the business matters of the church. The documentary evidence however, presents a different picture. The documentary evidence clearly shows Ms. Vaughn had control over the business matters of GTI. The documentary evidence shows she exercised authority over matters such as check-signing, loan procurement and hiring and firing.
I think that religious organizations with a strong pastor governance model are prone to problems like this. Earlier this year I wrote about Rev. Tom Chambers, who appears to have been a humble godly man who managed to accidently stumble into doing most of the things that people who set up phony churches do. The Tax Court was only able to partially save him from himself. Both the Reverend Chambers and Bishop Vaughn would have been well served by consulting the prinicples of the Evangelical Council for Financial Accountability when they established their governance models.