Monday, December 18, 2006

The Wages of Tax Evasion Is Jail (Part 2)

In last week’s blog, we reported on the conviction in federal court of creation evangelist Kent Hovind and his wife Jo of numerous federal tax offenses. Facing a maximum of over 200 years in prison, Mr. and Mrs. Hovind have sadly learned the truth that the wages of tax evasion is jail. This week’s blog continues the legal session from 2002, in which LLM Attorney Terry Lee Hamilton warned Baptist preachers of a “Federal Crackdown on Tax Evasion Schemes and Scams.” At the conclusion, Attorney Hamilton offers three simple recommendations designed with the purpose of keeping you from joining Kent and Jo Hovind in federal prison.


1. February 1, 1001 -- Justice Department obtains permanent injunction against Atlanta tax return preparer
A federal court issued a permanent injunction against HEH Financial Services, Inc., which had made a frivolous misrepresentation under Section 861 of the Internal Revenue Code that only income earned by U.S. citizens working abroad was subject to income tax. The defendant was ordered to turn over records identifying all clients.

2. February 21, 2002 -- Justice Department obtains permanent injunction prohibiting the sale of illegal tax plans
A federal court in Florida issued a permanent injunction against Joseph N. Sweet and EDM Enterprises, which had made the frivolous misrepresentations that paying federal income tax was voluntary and that wages are not income. The defendants were ordered to identify all persons who purchased their tax shelter plans.

3. March 5, 2002 -- Justice Department sues to halt fraudulent income tax scheme
The Department of Justice sued the Joy Foundation in Illinois for charging thousands of dollars for materials containing false or fraudulent statements about income tax laws, including a scheme for “customers to begin sending a series of letters to the IRS that will, the defendants claim, decrease the risk of IRS audit and defeat criminal charges based on willfulness.” The government asked the court “to turn over to the government a list of participants.”

4. March 27, 2002 -- Federal court in Tampa orders tax fraud promoter to stop preparing bogus tax returns, promoting fraudulent tax scheme
A federal court ordered David Bosset to stop preparing bogus tax returns and to stop promoting a fraudulent tax scheme in which he “claimed that only income from foreign sources is subject to United States income taxes.” The court ordered Bosset to provide the Justice Department a complete list of clients back to 1998.”

5. September 26, 2002 -- Justice Department sues Florida man to halt tax scam
The Department of Justice filed a lawsuit against Everte C. Farnell, one of the promoters who “falsely claim that income from sources in the United States is not subject to federal income tax.” A Department of Justice attorney explained that Promoters of this scam line their pockets, while getting their customers in serious trouble.”

Preachers preach about the wages of sin. What are the wages of tax evasion? In United States v. Sloan, 939 F.2d 499 (7th Cir. 1991), the Seventh Circuit Court of Appeals noted the following:

[Like moths to a flame, some people find themselves irresistibly drawn to the tax protester movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like moths, these people sometimes get burned.]

In the 1980’s, Congress stiffened the penalties, up to $25,000, against taxpayers who bring frivolous claims before the courts. In Coleman v. Commissioner, 791 F.2d 68 (7th Cir. 1986), the Seventh Circuit explained Congress’ rationale, as follows: “Once the legal system has resolved a claim, judges and lawyers must move on to other things. They cannot endlessly rehear stale arguments. . . [T]here is no constitutional right to bring frivolous suits.” Please consider a couple of penalties imposed by the Tax Court in the year 2000 against taxpayers (and even their lawyers!) who had filed frivolous lawsuits.

• $25,000 against the Defendant Nis family and $10,600 against their attorney for pursuing “a strategy of noncooperation and delay, undertaken behind a smokescreen of frivolous tax-protester arguments.”
• $25,000 against Defendant Madge for pursuing frivolous arguments that his income was not taxable and that only foreign income was taxable.

In United States v. Remple, the federal district court for Arkansas considered frivolous arguments filed by the Rempels, noting the following:

[It is apparent to the court from some of the papers filed by the Rempels that they have at least had access to some of the publications of tax protester organizations. The publications of these organizations have a bad habit of giving lots of advice without explaining the consequences which can flow from the assertion of totally discredited positions and/or meritless factual positions.]

As mentioned in the opening paragraph of this section, “tax evaders are not only breaking the law but also becoming a poor testimony for the name of our Lord and Savior Jesus Christ.” Sadly, enticing tax evasion schemes and scams will continue to lure many Christians into making decisions that could cost them dearly, not only in loss of dollars, but also in loss of reputation.

LLM makes three simple recommendations:
1. As a good Christian and patriotic American, abide by the tax laws of America.
2. As a good steward, be a tax minimizer, not a tax evader.
3. If you are intrigued or enticed by any scheme such as those listed above, please seek competent legal counsel. Our staff will gladly review any documents supplied to LLM on behalf of a concerned Independent Baptist preacher to determine if those documents give “. . . lots of advice without explaining the consequences which can flow from the assertion of totally discredited positions. . . .”

Monday, December 11, 2006

The Wages of Tax Evasion Is Jail (Part 1)

In the December 2006 issue of Light on the Law, a publication of Lighthouse Legal Ministries, LLM Attorney Terry Lee Hamilton reported on a sad day in American legal history:

[On November 2, 2006, creation evangelist Kent Hovind and his wife Jo were found guilty by a 12-person jury in a Florida federal court of numerous federal tax offenses. He faces a maximum of 288 years in prison, and she a maximum of 225 years. In previous seminars, Attorney Hamilton has pointed out that Mr. Hovind was following discredited legal theories which resulted in the conviction of several others. We are sad to see such a man (and his wife) follow the same path and now face the same consequences.]

In 2002, at LLM’s Eighth Annual Lighthouse Legal Seminar, Attorney Hamilton conducted a legal session on the topic of “Federal Crackdown on Tax Evasion Schemes and Scams.” The following is from the first part of that legal session:


In November 1995, when Lighthouse Legal Ministries covered Taxes for Pastor and Church at its first legal seminar, the first specific topic covered in that session was entitled, “The Tithe Is the Lord’s; the Tax Is the Government’s.” LLM’s position then is the same as it is now: “As good stewards, we should be tax minimizers, not tax protesters.”

The government is both Biblically and legally authorized to assess and collect taxes against individuals. Tax protesters and tax evaders are not only breaking the law but also becoming a poor testimony for the name of our Lord Jesus Christ.

For the last several years, there has been much talk about a huge overhaul of the methods by which America assesses and collects taxes. Until that time, we must abide by the current system of tax laws.

Before you read the following information, allow me to take two disclaimers:
• I have never been an employee of the IRS.
• I have never been a tax preparer.
My only interest is helping preachers save money and avoid having to pay huge back tax payments, huge interest payments, and huge penalties.


Some of the persons and organizations which perpetrate tax schemes and tax scams eloquently, but falsely, claim that the IRS is a rogue agency which intentionally misrepresents the nation’s tax law to unlawfully gouge unwitting taxpayers. Such arguments, frankly, are laughable.
• The IRS enforces laws passed by Congress.
• The IRS is accountable to and reports to Congress annually and as requested by Congress.

On April 11, 2002, Charles O. Rossotti, Commissioner of the Internal Revenue Service, reported to Congress on the continued efforts of the IRS to “identify and combat actively promoted tax schemes,” declaring that such an effort “is our highest compliance priority.” The IRS is not only taking enforcement action against promoters of tax schemes, but also identifying and taking “enforcement action against participating taxpayers, including audits, civil penalties and criminal investigations.” Commissioner Rossotti cited four broad categories of tax schemes, as follows:
1. False description of the law to claim exemption from tax.
2. Misrepresentation of the facts to claim improper deductions and credits.
3. Use of trusts and/or offshore bank accounts to hide income.
4. Abusive tax avoidance transactions.


It was a sad day when creation evangelist Kent Hovind learned the truth of the title of this blog article—The Wages of Tax Evasion Is Jail. I do not want any Baptist preachers (and their wives) joining Kent and Jo Hovind in a federal prison. In our next posting, I will finish reprinting the 2002 legal article on “Federal Crackdown on Tax Evasion Schemes and Scams.”

Friday, September 29, 2006

What Church Schools in Ohio Should Do Today

The victory for church schools in Ohio was achieved through the grace of God and through the faithful stand of church leaders in Ohio, particularly Pastor Randall Townsend, president of Christian Schools of Ohio, and Pastor Keith Hamblen, president of Buckeye Christian Schools Association. Through their efforts, the Ohio Department of Education issued a letter on September 27, 2006, revoking the department's earlier letters which were so threatening to church schools and parents.

The department's letter was issued by Attorney Matthew J. DeTemple, Chief Legal Counsel, basically setting forth what the Minimum Standards have been for church schools since 1983. Since the letter overrules the department's earlier letters and updates the schools' obligations under the Minimum Standards, we have taken the liberty to reproduce the letter in its entirety. After reading the letter, please read the additional comments which I make, setting forth what church schools in Ohio should do today.


Pastor Randall Townsend
President, Christian Schools of Ohio
1944 Meriline Avenue
Dayton, OH 45420

Re: Registration of non-chartered, non-tax supported schools, pursuant to Ohio Administrative Code Section 3301-35-08

Dear Pastor Townsend:

This letter responds to your inquiries concerning the above-reference registration process. As you are aware, Ohio Administrative Code ("O.A.C.") Section 3301-35-08 provides that a school, "which is not chartered or seeking a charter from the state board of education because of truly held religious beliefs, shall annually certify in a report to the parents of its pupils that the school meets Ohio minimum standards for non-chartered, non-tax supported schools...." The applicable minimum standards set forth in subsections (A) - (H) of O.A.C. Section 3301-35-08 are the following:

(A) School Year. The school shall be open for instruction with pupils in attendance for not less than one hundred eighty-two days each school year acccording to section 3313.48 of the Revised Code.

(B) School day. The school day for pupils in grades one through twelve shall be no less than five hours exclusive of the noon recess according to section 3313.48 of the Revised Code.

(C) Pupil Attendance. Pupil attendance shall be reported to facilitate administration of laws relating to compulsory education and the employment of minors. Parents shall be responsible for reporting their child's school enrollment or withdrawal. An individual in charge of the non-chartered, non-tax supported school may, as a matter of convenience, provide a report for the parent.

(1) The attendance report shall include the name, age, and place of residence of each pupil below eighteen years of age.

(2) The report shall be made to the treasurer of the board of education of the city, exempted village, or local school district in which the pupil resides.

(3) The report shall be made within the first two weeks of the beginning of each school year. In the case of pupil withdrawal or entrance during the school year, notice shall be given to the treasurer of the appropriate board(s) of education. Such notice shall be given withing the first week of the next school month.

(D) Teacher and administrator qualificaitons. Teachers and administrators shall have received a bachelor's degree or the equivalent therof from a recognized college or university.

(E) Courses of study. Each non-chartered, non-tax supported school shall have courses of study for the following subjects:

(1) Language arts;

(2) Geography, the history of the United States and Ohio, and national, state, and local government;

(3) Mathematics;

(4) Science;

(5) Health;

(6) Physical education;

(7) The fine arts, including music;

(8) First aid, safety, and fire prevention;

(9) Other subjects as prescribed by the non-chartered, non-tax supported school.

(F) Public promotion. Each non-chartered, non-tax suported school shall follow regular procedures for promotion from grade to grade of pupils who have met the school's educational requirements.

(G) Pupil health and safety. Each non-chartered, non-tax supported school shall comply with state and local health, fire, and safety laws.

(H) Pupils attending a non-chartered, non-tax supported school are not entitled to pupil transportation as provided pursuant to section 3327.01 of the Revised Code, and pupils attending a non-chartered, non-tax supported school are not entitled to auxiliary services as provided pursuant to section 3317.06 of the Revised Code.

O.A.C. Section 3301-35-08 further provides that "a copy of said report shall be filed with the Ohio department of education on or before the thirtieth of September of each year." Please be advised that, in accordance with O.A.C. Section 3301-35-08, the Ohio Department of Education ("ODE") will accept from a school desiring to be registered as an "08" school a copy of a certification made by the school in a report to parents that the school meets the above-referenced Ohio minimum standards.

In order for a school to properly "certify" in a report to parents that the school meets the applicable minimum standards, said report must be signed by the individual making such certification, and the full name of said individual must be identifiable (i.e., typed beneath the signature). Accordingly, a school desiring to be registered as an "08 school" for the 2006-2007 school year should, on or before September 30th, 2006, file with ODE a copy of its signed, annual certification to parents.

To properly register as an "08 school," ODE also needs the name of the school, it address, its telephone number (a P.O. Box will not serve as an address), and the school district in which the school is located. This information is required so that ODE and local public school districts can comply with the "Child Find" obligations of the Individuals with Disabilities Education Improvement Act (IDEIA) of 2004.

Certifications should be sent to the attention of Dr. Janet Schilk, Director, Office of Educational Reform, 25 South Front Street, Mail Stop 401, Columbus, Ohio 43215. The facsimile number for the Office of Educational Reform is (614) 995-3869. If you have any further questions, please contact me at (614) 466-4705.

Very truly your,

Matthew J. DeTemple
Chief Legal Counsel



The following matters should be addressed today.

1. REVISED LETTER. Assuming that the church has already filed its annual letter with the state, the church school should revise its annual letter as described below, give a copy of the revised letter to your parents, and fax a copy of the revised letter to Dr. Janet Schilk at 614-995-3869.

2. DUE DATE. The revised letter is due on September 30, 2006. Because of the time period in which the department finally changed its position, the due date for filing the revised letter has been extended by the department to October 6, 2006.

3. SIGNED AND CERTIFIED. The Minimum Standards require that the church school "annually certify in a report to the parents of its pupils that the school meets Ohio minimum standards for non-chartered, non-tax supported schools cited in paragraphs (A) to (H) of this rule." Accordingly, I suggest that you make a slight modification in your annual letter's opening paragraph, as follows:

"Our school, which is not chartered or seeking a charter from the State Board of Education because of truly held religious beliefs, hereby certifies in this report to the parents of its pupils that the school meets Ohio minimum standards for non-chartered, non-tax supported schools cited in paragraphs (A) to (H) of this rule, as follows:"

In addition, I recommend that the administrator sign his full name next to where his typed name appears in the heading of this letter.

4. NAME, ADDRESS, AND SCHOOL DISTRICT. LLM has always recommended that the name and address of the school appear on the annual report. In his September 27, 2006, letter, Attorney DeTemple requests, for the department's convenience, that the church school also list "the school district in which the school is located." Since this information could already be determined by the school's address, I see no problem honoring such a request.

I would suggest that the annual report include a new sentence concluding the letter, phrased as follows: "As our school address indicates, our school is located in the _________ school district."

Please call me at 440-964-0236 if you have any questions or problems with respect to this administrative resolution. We wish to thank Pastors Townsend, Hamblen, and Folger, as well as Rev. Daniel Whisner of Ohio Legislative Watch, for their faithful stand in this difficult matter. As we look forward to a prosperous school year, we all give God all the honor and glory.

Last Minute Victory in Church School Crisis

We rejoice in the Lord that the church school crisis in Ohio has been averted at the last minute. For background on this glorious victory, please see the blog dated June 16, 2006, entitled "Beware of NEW State Education Form."

The threat to church schools in Ohio was so serious (one preacher called it "catastrophic") that Lighthouse Legal Ministries had already started preparing a complaint to file in federal district court to seek a preliminary and permanent injunction. Indeed, on the day that the settlement was reached, LLM Attorney Hamilton was preparing to fax a demand letter to the State Superintendent of Public Instruction.

To gain a better understanding of the efforts made by concerned Christian leaders to resolve this serious threat, we hereby reprint the demand letter that was never sent.

DEMAND LETTER that was never sent

September 27, 2006

Dr. Susan Tave Zelman
Superintendent of Public Instruction
25 South Front Street
7th Floor
Columbus, OH 43215-4183


Dr. Janet M. Schilk, Director
Office of Educational Reform
Ohio Department of Education
25 South Front Street
Mail Stop 401
Columbus, OH 43215-4183

Re: Violation of constitutional rights of church schools and parents
which have a non-chartered, non-tax supported 08 church school

Dear Drs. Zelman and Schilk:

Please know that this office has been retained by Pastor Randall Townsend, Bible Baptist Church, Dayton, Ohio, and by Pastor Kevin Folger, Cleveland Baptist Church, Cleveland, Ohio, which churches have operated and continue to operate a non-chartered, non-tax supported 08 church school which is being threatened with “delisting” by your department and whose parents are being threatened with having their children “considered truant” by your department, despite the church schools’ long standing compliance with the State Minimum Standards as set forth in OAC 3301-35-08. As a consequence, these pastors, churches, and parents seek redress and relief.

1. The State of Ohio had a long and largely successful history of avoiding undue governmental interference with church schools until the 1970s, when the Department of Education issued highly detailed Minimum Standards which were applied to the burgeoning fundamentalist church school movement.

2. In the mid 1970s, Pastor Levi Whisner and several other parents at Tabernacle Christian School in Bradford, Ohio, were prosecuted for truancy violations because they failed to follow the new Minimum Standards which violated their truly held religious beliefs. After their conviction and a couple of appeals, the Ohio Supreme Court issued its landmark decision in State of Ohio v. Whisner, 1 OO3d 105, 47 OS2d 181, 351 NE2d 750 (1976), ruling that that the pervasive Minimum Standards unduly burdened the free exercise of religion.

3. The decision in the Whisner case led to several years of rule making by the State Board of
Education, resulting ultimately in Section 3301-35-08, Minimum Standards for Non-Chartered, Non-Tax Supported Schools. My clients have followed those Minimum Standards, as evidenced by annual letters from the Department of Education.

4. Although the Minimum Standards have continued to exist in substantially the same form for nearly a quarter of a century, and although no new regulations have been passed by the State Board of Education, in her June 9 and August 14, 2006, letters to my clients, Dr. Schilk, on behalf of the Ohio Department of Education, threatened the following actions as of September 30, 2006:

• To “delist” all 08 schools which do not fill out of the information on the state’s new mandatory reporting form, even though much of the information is not required by OAC 3301-35-08.
• That students enrolled in such 08 schools would “be considered truant.”

5. The department’s actions were unsettling, even catastrophic according to one preacher. In the Whisner spirit of seeking an administrative resolution, my clients and other concerned leaders called, wrote, and met with state officials on several occasions, seeking to explain how the department’s actions not only violated the Minimum Standards, but also the constitutional rights of parents and schools.

6. During negotiations with departmental officials, they made frequent reference to two problems which have led them to follow this year’s course of conduct:

• The rising number of homeschoolers posing as non-chartered, non-tax supported 08 schools in order to be eligible for the Post-Secondary Enrollment Option (PSEO).
My clients, which are non-chartered, non-tax supported 08 church schools, believe that the department and local school officials should apply home school regulations to tax-supported homeschoolers, and not violate the constitutional rights of hundreds of 08 church schools and thousands of parents.
• New federal reporting requirements under recent “changes in the Federal IDEIA regulations.” Even assuming that the new federal law requires the states to collect
information from 08 church schools, such information seeking must be done by the least drastic means, not Dr. Schilk’s most drastic means. In the case of one of my clients, the local school district sent a letter to the church school asking if they wanted to participate in the IDEIA program, which would grant federal funds to the church school or its students; the church school merely replied that it chose not to participate because, as an non-chartered, non-tax supported 08 church school, it would violate its truly held religious beliefs to accept government funding.

7. During the course of negotiations, the department apparently recently agreed to eliminate the form requirement, as long as the (unnecessary) information was supplied in a letter.

• While appreciating that concession, my clients continue to believe that such information
is not required under the Minimum Standards and still violates the constitution.
• That concession creates its own scheduling dilemma in that the September 30 deadline
will pass before the department could provide that option to 08 schools and give them time to respond.

Despite the efforts of my clients and other concerned parties, the department continues to threaten the following constitutional rights (see Whisner) of pastors, church schools, and parents:

• Violation of the free exercise of religious liberty.
• Violation of parental right to direct the upbringing and education of their children.

As a result of the egregious violation of the rights of my clients’ constitutional rights, they demand the following:

(1) Payment of $3,000.00 to each client for out-of-pocket expenses, humiliation, embarrassment, and inconvenience suffered as a result of the department’s actions;
(2) Attorney fees to date;
(3) Written assurance that the department will continue to enforce the Minimum Standards as it has in the past and will no longer threaten non-chartered, non-tax supported 08 church schools (and their parents) which are in compliance with the Minimum Standards.

Should your department not be inclined to accept this demand, my clients will have no other option but to proceed with litigation, which will include attorney’s fees pursuant to 42 U.S.C. § 1988. I look forward to your amicable response and successful administrative resolution within two weeks of the date of this letter.

Sincerely yours,

Terry Lee Hamilton

cc: Pastor Randall Townsend
Pastor Kevin Folger
Pastor Keith Hamblen
Rev. Daniel Whisner


Praise the Lord that LLM's demand letter was never sent. As we rejoice in this major victory, we still have work to do. Please see the companion blog dated this same date. God bless you!

Monday, September 25, 2006

Seven Do's and Don'ts for Political Campaigning by Churches

At LLM's 12th Annual Legal Seminar on November 14, 2006, we will be covering the IRS crackdown on political activities by churches. In anticipation of the upcoming Congressional elections earlier in November, Attorney Hamilton provides the following Seven Do's and Don'ts for Political Campaigning by Churches.


1. DO invite all candidates for a political office to speak to the congregation for the purpose of voter education (all candidates do not have to appear).

2. DO, before each candidate speaks to the congregation, inform the congregation that the views expressed by each candidate are those of the candidate, not the church, and that the church does not endorse any candidate.

3. DO, as a leader of a religious organization, freely express your views on political campaigns in (1) either a public forum outside of the church setting or (2) even to your congregation in the church setting.

4. DO, when making such public comments, inform the listeners or readers that you are speaking for yourself as an individual and that your comments are strictly personal and not intended to represent the church.

5. DO conduct a neutral voter registration drive at the church.

6. DO distribute a compilation of voting records in a non-partisan manner for the purpose of voter education.

7. DO speak out on public policy issues in an educational manner.


1. DON’T make contributions to political campaign funds.

2. DON’T engage in fund raising on behalf of a candidate.

3. DON’T provide a public forum, on a partisan basis, for candidates to express their views.

4. DON’T make public statements either outside the church or within the church in favor of or in opposition to a candidate.

5. DON’T conduct a partisan voter registration drive at the church.

6. DON’T distribute a partisan voters education guide.

7. DON’T place a newspaper ad urging voters to vote for or against a candidate.