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Universal Life Church, Inc. v. United States (In re Universal Life Church, Inc.)

United States Court of Appeals for the Ninth Circuit

August 14, 1997, Argued, Submitted, San Francisco, California ; October 6, 1997, Filed

Nos. 96-15122, 96-15123


 [*1296]  OPINION

THOMAS, Circuit Judge:

A religious organization seeks to have an Internal Revenue Service ("IRS") revocation of its tax-exempt status declared void as violative of bankruptcy's automatic stay. We hold that the IRS's administrative actions were permissible under the police and regulatory power exception to the automatic stay and [**2]  affirm.

Universal Life Church, Inc. ("Church"), is a California nonprofit corporation. The IRS denied the Church's application for tax exempt status in 1969 and again in 1970 on the ground that the Church had engaged in activities outside the religious activities contemplated by I.R.C. § 501(c)(3). After paying the taxes and interest due for fiscal year ending April 30, 1969, the Church brought a suit for refund and prevailed.  Universal Life Church, Inc. v. United States, 372 F. Supp. 770 (E.D. Cal. 1974). The district court found that the contested activities (ordination of ministers, granting of church charters, and issuance of honorary doctorates) were not a substantial enough part of the Church's activities to justify denying the exemption. Id. at 775-76.

In 1984, the IRS revoked the Church's tax exempt status for the fiscal years ending April 30, 1978 through April 30, 1981. The Church brought a declaratory judgment action in the Court of Federal Claims with respect to its tax-exempt status for these years. The Court of Federal Claims upheld the revocation on the ground that the Church had not been operated solely for tax-exempt purposes as required by I.R.C. § [**3]  501(c)(3); it gave tax advice to its ministers and failed to control the non-exempt activities of its congregations. Universal Life Church, Inc. v. United States, 13 Cl. Ct. 567 (1987), aff'd, 862 F.2d 321 (Fed. Cir. 1988).

The Church then commenced an action in the Tax Court for a redetermination of the deficiencies asserted by the Commissioner of Internal Revenue ("Commissioner") for these years. Universal Life Church, Inc. v. Commissioner, Tax Ct. dkt. no. 8288-85. The parties reached a settlement, and the Tax Court entered a judgment based on the settlement determining the deficiencies against the Church for fiscal years 1978-1980.

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128 F.3d 1294 *; 1997 U.S. App. LEXIS 36358 **; 97-2 U.S. Tax Cas. (CCH) P50,764; 80 A.F.T.R.2d (RIA) 97-6872; 97 Cal. Daily Op. Service 7845; 38 Collier Bankr. Cas. 2d (MB) 1235; 31 Bankr. Ct. Dec. 695; Bankr. L. Rep. (CCH) P77,526; 97 Daily Journal DAR 15641

In re: UNIVERSAL LIFE CHURCH, INC., a California non-profit corporation, Debtor. UNIVERSAL LIFE CHURCH, INC., a California non-profit corporation, Appellant, v. UNITED STATES OF AMERICA, Appellee.

Subsequent History:  [**1]  As Amended on Denial of Rehearing December 30, 1997.

Prior History: Appeals from the United States District Court for the Eastern District of California. D.C. No. CV-93-05893-OWW. Oliver W. Wanger, District Judge, Presiding.

Original Opinion Previously Reported at: 1997 U.S. App. LEXIS 27266.

Disposition: AFFIRMED IN PART AND DISMISSED IN PART. Petition for rehearing denied.


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