A taxpayer who dedicated his life to evangelization, using normal interactions in life to open discussions regarding his religious beliefs to all around him, found that the Tax Court did not agree with his view that this made his various expenses incurred for meals, travel and other items were automatically deductible. (Oliveri v. Commissioner, TC Memo 2019-57, May 28, 2019)[1]

The opinion begins by describing what Mr Oliveri has done since retiring from the U.S. Air Force in 1986 after serving for more than 26 years:

Since 1987 petitioner has dedicated his life to being an evangelist. Petitioner seeks to spread the teachings of the Catholic Church through random interactions with members of the general public. He considers all of his contact with members of the public to be opportunities for evangelism. He wears a large and visible crucifix at all times which identifies his religious affiliation and commitment to evangelism. Petitioner evangelizes people he happens to see when he engages in otherwise personal activities, such as when he eats in restaurants, travels, and pilots private planes. He usually does not know in advance whom he will evangelize. Petitioner evangelizes and discusses his faith with friends, members of his extended family, and members of the religious organization that he founded, see infra, and the Catholic Church.[2]

He formed the Brothers and Sisters of Divine Mercy (BSDM).  Although the mission statement of the organization said it was responsible to “the Pontifical Council of the Laity, a dicastery of the Catholic Church” there was no record of any formal relationship between the Catholic Church and this organization.  As well, he did not seek or obtain any approval for his activities from the Catholic Church, nor did he report on his activities to the Church.[3]

The taxpayer claimed a charitable deduction for expenses related to the various activities he engaged in.  The IRS argued that even though the taxpayer may have used some of these activities to engage in evangelizing, the activities were generally personal in nature and, in any event, were not incurred at the direction of or under the supervision of any charitable organization.

The Tax Court generally agreed with the IRS in this case.  The Court notes that for expenses that have both a personal and charitable component, the expense is deductible only if the charity receives the primary benefit of the expenditure and the expense would not have been incurred absent the charitable use of the item.[4] 

For travel and related expenses, the Tax Court notes additional restrictions apply:

Costs of traveling away from home (including transportation, meals, and lodging) are not deductible unless they qualify as expenses deductible, as relevant here, under section 170 and regulations thereunder. Sec. 1.262-1(b)(5), Income Tax Regs. A charitable deduction for unreimbursed travel expenses is denied where the taxpayer derives substantive personal pleasure while on trips. Saltzman v. Commissioner, 54 T.C. at 725. For purposes of rendering donated services, “while away from home” has the same meaning as in section 162(a)(2). Sec. 1.170A-1(g), Income Tax Regs. If the purpose of a trip is primarily personal, the travel expenses are not deductible even though the taxpayer performs charitable services while at the destination. See sec. 1.162-2(b), Income Tax Regs. Meals and other travel expenses are not deductible where there is a substantial direct personal benefit to the taxpayer. See Seed v. Commissioner, 57 T.C. at 275-276; Sheffels v. United States, 264 F. Supp. 85 (E.D. Wash. 1967), aff'd, 405 F.2d 924 (9th Cir. 1969); see also sec. 1.170A-1(g), Income Tax Regs.[5]

Unfortunately for the taxpayer, the Court found that his expenses were generally incurred for personal reasons, and the evangelization took place if the conditions allowed for it.  But the principal purposes of his expenditures were generally personal.

For instance, he incurred substantial expenses related to training flights, something he admitted he enjoyed—not surprising, given his long tenure with the U.S. Air Force.  The Court found that the purpose of these flights was primarily personal, despite the fact that he would, as the occasion permitted, use the flights to allow him to evangelize people at small airports and in distant places who would not otherwise hear him preach.[6]

Similarly, the fact that he might initiate conversations regarding his religion with or give counseling to people in the restaurants he ate in, including the wait staff, did not convert the personal expense of obtaining a meal into a charitable contribution.[7]

The expenses in question must be incurred under the coordination, supervision or oversight by the qualified charitable organization.  The Tax Court’s opinion notes that the following factors are considered in determining if there are close enough ties to the religious organization:

• The strength of the taxpayer’s affiliation with the exempt organization;

• The exempt organization’s ability to initiate or request services from the taxpayer;

• The supervision of the taxpayer’s work by the exempt organization; and

• The taxpayer’s accountability to the exempt organization.

The test looks at whether the activities are properly coordinated with the exempt organization.[8]

The opinion notes that the taxpayer’s activities generally do not show sufficient coordination.  His actions were mostly random and not conducted in coordination with either BSDM or the Catholic Church, so the expenses were to or for the use of those organizations.[9]

The taxpayer also did not have contemporaneous written acknowledgements regarding the expenditures for which a charitable deduction is being claimed.  The opinion notes:

Charitable contributions of unreimbursed out-of-pocket expenses of less than $250 are governed by section 1.170A-13(a), Income Tax Regs. Van Dusen v. Commissioner, 136 T.C. at 531. No deduction is allowed under section 170(a) for a contribution of $250 or more unless the taxpayer substantiates the contribution with a contemporaneous written acknowledgment from the donee organization.9 Sec. 170(f)(8)(A); Van Dusen v. Commissioner, 136 T.C. at 536. A taxpayer who incurs unreimbursed expenditures incident to the rendition of services is treated as having obtained a contemporaneous written acknowledgment of those expenditures if the taxpayer (1) has adequate records to substantiate the amounts of the expenditures; and (2) obtains (a) a statement prepared by the donee organization containing a description of the services provided by the taxpayer, (b) a statement of whether the donee organization provides any goods or services in consideration, in whole or in part, for the unreimbursed expenditures, and (c) a description and good faith estimate of the value of those goods or services, and if the donee organization provides any intangible religious benefits, a statement to that effect. Sec. 1.170A-13(f)(10), Income Tax Regs.[10]

This particular requirement is one that likely trips up a lot of taxpayers who incur expenses on behalf of a charity, since often they will retain only documentation of the expenditure but will not obtain the specific acknowledgement of the charity with regard to the donative purpose of the expenditure.

He also made numerous gifts to individuals of cash, as well as distributed books and videos he purchased to help spread his message.  However, since these payments were not coordinated with an exempt organization, these transfers would not represent deductible expenses incurred for a charity.[11]

The taxpayer objected that the disallowance of these deductions were in violation of his First Amendment rights, arguing the IRS was characterizing it as not a religious activity.  But the Tax Court noted that the IRS said no such thing.  The opinion notes:

Petitioner contends that respondent is characterizing his evangelism as if it were not a religious activity and that respondent’s characterization violates the First Amendment. Petitioner mischaracterizes respondent’s position, which is that petitioner’s expenses for evangelistic activities are not deductible as charitable contributions under section 170, not that they are not religious activities. Not all religious activities are services “to or for the use of” a religious organization for purposes of section 170. See, e.g., Churukian v. Commissioner, T.C. Memo. 1980-205. Contrary to petitioner’s view, respondent’s contentions neither require inquiry into the sincerity of petitioner’s religious beliefs nor cause entanglement with the “intricacies of petitioner’s religious activity”.[12]

Nothing in the case suggests that the taxpayer was not sincere in his devotion to evangelizing his faith, nor that he didn’t actively look for opportunities to communicate that faith when conducting various activities.  But the tax law requires complying with specific rules to obtain any tax deduction for payments or expenses related to that activity, generally needing to have a connection with an organization that meets the requirements to be recognized as a tax exempt organization under IRC §501(c)(3).

The same basic requirement applies to any action that would seem to advance the purposes that can serve as the basis for an organization to obtain §501(c)(3) status.  The fact that an action is of a religious nature does not change the basic requirements to conduct the activities in coordinated fashion with an eligible §501(c)(3) organization.

[1] https://www.ustaxcourt.gov/USTCInOP/OpinionViewer.aspx?ID=11951, retrieved from U.S. Tax Court website may 29, 2019

[2] Oliveri v. Commissioner, TC Memo 2019-57, May 28, 2019, PDF of opinion from US Tax Court website, pp. 3-4

[3] Ibid, pp. 4-5

[4] Ibid, p. 22

[5] Ibid, p. 23

[6] Ibid, pp. 30-31

[7] Ibid, p. 33

[8] Ibid, p. 24

[9] Ibid, p. 26

[10] Ibid, pp. 27-28

[11] Ibid, pp. 35-36

[12] Ibid, p. 40