10574: EXTENSIONS OF REMARKS May 1, 1984 EXTENSIONS OF REMARKS MILITARY APPRECIATION WEEK Week provides an excellent showcase Within this otherwise fine report, for this special relationship.e however, there is one element which lacks sufficient clarity. This was unin­ HON. CHARLES McC. MATHIAS, JR. tentional, but nonetheless requires clarification. OF MARYLAND CHURCH AUDIT PROCEDURES Regarding the scope of the provi­ IN THE SENATE OF THE UNITED STATES ACT sion, I would like to emphasize that Tuesday, May 1, 1984 the church audit procedures in this HON. MICKEY EDWARDS act will become effective at any point e Mr. MATHIAS. Mr. President, at which the tax status of a church, as during the week beginning May 5, the OF OKLAHOMA opposed to that of any individual, be­ people of Harford County, Md., will IN THE HOUSE OF REPRESENTATIVES comes the issue in any IRS investiga­ celebrate Military Appreciation Week. tion. This event is sponsored by the Har­ Tuesday, May 1, 1984 Thus, the IRS would be prohibited ford County Chamber of Commerce e Mr. EDWARDS of Oklahoma. Mr. from investigating or revoking the tax and is designed to celebrate the coop­ Speaker, as the sponsor of H.R. 2977, exempt status of a church or assessing erative relationship the county shares the Church Audit Procedures Act, I taxes against a church, without follow­ with the U.S. Army at Aberdeen Prov­ am pleased to inform my colleagues ing these church audit procedures. ing Grounds. The week's events will be that a compromise version of this im­ This jurisdictional question may highlighted by special exhibitions, portant legislation has been drafted arise in connection with investigations commerations and civic activities. after months of consultation with reli­ of individuals who may contribute to a The Aberdeen Proving Ground, lo­ gious leaders and officials of the church. cated on 80,000 acres of land on the Treasury Department. This compro­ Mr. Speaker, I hope that the over banks of the Susquehanna and Gun­ mise preserves the integrity of the 170 House cosponsors of the Church powder Rivers and the Chesapeake original bill, by providing needed pro­ Audit Procedures Act will enthusiasti­ Bay, is famous for the contributions it tection for churches from unnecessary cally support the compromise we have has made to our Nation's defense. It IRS investigations and audits and at achieved and will join me in encourag­ has also had a significant and benefi­ the same time, addresses concerns ex­ ing the House conferees to agree to cial impact on Maryland's economy. pressed by the Internal Revenue Serv­ retain the language as added in the The Aberdeen Proving Ground was ice and the Treasury Department re­ Senate. established in 1917 by a Presidential garding administrative applications of DEFICIT REDUCTION ACT OF 1984 proclamation that called for acquisi­ the act. tion of the land as a weapons testing The compromise language was at­ [Explanation of provisions approved by the facility. The first official testing came tached by unanimous vote in the committee on Mar. 21, 1984] 2 years later and since then APG has Senate Finance Committee to the Def­ [Church audits <sec. 872 of the bill and Sees. become one of the most diversified icit Reduction Act of 1984 and was 6501, 7428 and 7605(c) of the Code)] military installations in the country. subsequently adopted by the full REASONS FOR CHANGE Today, in addition to developing and Senate. testing advanced weaponry like the The battle to provide churches with The committee's actions concerning new Abrams M1 main battle tank, it is church audits were motivated by two com­ adequate protection from the excesses peting considerations. First, the committee involved in a number of projects rang­ of Government has brought together is aware of the special problems that arise ing from ballistics development to bio­ an impressive coalition of Members of when the Internal Revenue Service <or any medical research on the safety and Congress and organizations represent­ governmental agency) examines the records health of soldiers. Current testing pro­ ing all parts of the political spectrum. of a church, including problems of separa­ grams include the testing of tank I am delighted that we have been able tion of church and state and the special re­ maintenance, antitank vehicles and to achieve this important agreement, lationship of a church to its members. the new Divad gun. but regret that the House Ways and These problems may be compounded by the relative inexperience of churches in dealing Aberdeen Proving Ground plays a Means Committee was not able to ad­ with the IRS and the resulting occasional key role in the economic life of north­ dress this issue prior to passage of misunderstandings between churches and eastern Maryland, and is of particular H.R. 4170, the Tax Reform Act. It is the IRS. While present law imposes limita­ importance to Harford County. It is my hope that the House-Senate con­ tions on the examination of church records, the major employer in Harford and its ferees which will meet to reconcile dif­ these limitations are somewhat vague and neighboring counties with over 8,000 ferences between the House and rely heavily on internal IRS procedures to civilian employees and almost 6,000 Senate measures will agree to retain protect the rights of a church in the audit the church audit procedures language process. Additionally, there is some uncer­ military personnel. tainty regarding the scope of the investiga­ For the 7th year the growing Har­ adopted by the Senate. tions to which the existing law applies and ford County Chamber of Commerce So that my House colleagues may be the nature of the records which are protect­ continues to recognize the APG's im­ fully informed about the contents of ed by the law. portance to the county during Military the revised version of the Church While desiring to protect churches from Appreciation Week. The week begins Audit Procedures Act, I have inserted undue interference, the committee recog­ with a dinner on May 5 and concludes below the Senate Finance Committee's nizes that an increasing number of taxpay­ the following Saturday when an open report language describing those pro­ ers have, in recent years, utilized the church house and field demonstration will be visions. I endorse this report language form primarily as a tax-avoidance device. The committee believes that the IRS must observed by thousands. and commend the work of the Senate retain an unhindered ability to pursue indi­ The cooperation that exists among sponsor, Senator GRAssLEY, the Fi­ viduals who use the church form in this APG, the county chamber, county nance Committee and the Joint Com­ manner. businesses, and local persons is unique mittee on Taxation for their superb The bill attempts to resolve these compet­ in our country. Military Appreciation work. ing considerations by providing a detailed e This "bullet" symbol identifies statements or insertions which are not spoken by the Member on the floor. May 1, 1984 EXTENSIONS OF REMA.RKS 10575 series of rules that the IRS is to follow in the applicable administrative and Constitu­ gional counsel into account when determin­ investigating churches, both as to their tax­ tional rights of the organization in connec­ ing whether to proceed with the examina­ exempt status and as to the existence of un­ tion with the audit <including the right to a tion of church books and records. pre-examination conference regarding the related business income. These provisions Additional notice and offer of IRS emphasize the need for a speedy determina­ organization's tax liabilities and the right to tion of church tax liabilities and, where pos­ request relevant material under the Free­ con.terence sible, a determination without unnecessary dom of Information Act>, and <3> an expla­ At the same time that the regional coun­ examination of church books and records. nation of the concerns which gave rise to sel is notified of a proposed examination, The committee believes that these provi­ the investigation and the general subject the regional commissioner is required to sions will protect the rights of legitimate tnatter of the investigation. send a second notice <in addition to the com­ churches without unduly hindering IRS in­ The explanation of the church's adminis­ mencement of investigation notice) to the vestigations of tax-avoidance schemes trative and Constitutional rights <item (2)) organization whose records are to be exam­ posing as religious organizations. Further, may be of a general nature and need not ex­ ined. This second notice is required to in­ the committee believes that the adoption of plain all possible legal and Constitutional clude <1> a restatement of the information detailed statutory rules will reduce misun­ aspects of a church audit. However, this contained in the commencement of investi­ derstandings between churches and the IRS statement should include a brief general de­ gation notice (discussed above), adjusted for and allow for a more stable and cooperative scription of the various stages of the church any change in the relevant facts and circum­ audit process. audit procedures contained in this bill (in­ stances during the intervening period, <2> a The bill effectively incorporates the cluding the right to a pre-examination con­ description of all church records and activi­ present-law examination rules in the new ference) and the principle of separation of ties which the IRS seeks to examine, and (3) provisions regarding church audits. Thus, church and state under the First Amend­ an offer of an opportunity to request copies there will be no diminution of any rights ment. of any relevant materials in the possession presently held by a church.