SDA clinic suing Rev & Tax for assessing $16.2M in back taxesWritten by Janela Carrera
Guam - The Guam Seventh Day Adventist religious organization is suing the Department of Revenue and Taxation because of DRT's attempt to collect on $16.2 million in back taxes and penalties. But DRT says the money is business privilege tax SDA failed to pay for 11 tax years.
In September, representatives from DRT and the General Conference of Seventh-Day Adventists, met where DRT issued SDA an adverse notice for failing to pay millions of dollars in back taxes and penalties. Of the $16.2 million DRT assessed, $12.6 million is taxes owed relative to the SDA clinic with an additional $3.1 million in penalties; and $354,000 are for taxes owed relative to SDA’s Food Center with another $88,000 in penalties.
According to DRT, taxes are owed dating back to 1995.
But SDA is disputing the department’s adverse notice because although they operate a business in the form of a medical center and a food center, they are protected from having to pay taxes because they operate under the confines of a 501 (c)(3) or a non-profit organization.
In court papers, SDA says “the tax commissioner erred by failing to honor the certification of tax exemption issued to petitioner by the tax commissioner on May 13, 1985,” which was later confirmed in July 2008.
It appears to boil down to an interpretation of the law. Court documents state that DRT is interpreting the words “regular activities” incorrectly. SDA says DRT is under the mistaken presumption that regular activities of the non-profit are limited to religious activities.
However, according to SDA, the law allows for the exemption of “charitable, scientific and educational activities,” as a regular activity of a non-profit. And, according to SDA, the clinic and food center, are a part of their regular activities and have been so for more than half a century.
DRT erred in “failing to recognize that promotion of health, either through serving the ill and injured in a medical clinic or by improving nutrition through healthy dieting is a well-recognized charitable purpose,” court papers say.
In fact, SDA emphasizes that the clinic is not a money-making part of their organization and often is subsidized by the SDA church. “The medical staff of the clinic, all of whom are members of the seventh day Adventist church, commit to work for the clinic for terms of up to five years at substantially reduced salaries,” SDA says in their suit.
SDA is asking the court to reverse the adverse notice served upon them and to confirm that the general conference has no tax liabilities.
You can read the lawsuit by clicking on the file below.