Davis v. United States (1990)
Encyclopedia
Davis v. United States, was a case before the United States Supreme Court.
A husband and wife, members of The Church of Jesus Christ of Latter-day Saints, transferred funds into the personal checking accounts of their two sons, who were called to service as full-time, unpaid missionaries
for the Church. The amount transferred equaled the amount the Church estimated would be needed to support this service. The sons used the transferred funds primarily to pay for rent, food, transportation, and personal needs while on their missions (in conformity with Church guidelines, which required such funds to be spent for only missionary work and forbade various leisure or personal activities). The sons submitted weekly reports of their total expenses for the week and month to date (even though these guidelines did not require the sons to obtain advance approval of each expenditure they made from their checking accounts).
Issues
In their 1984 amended federal income tax
return
for the years 1980 and 1981, the parents claimed these amounts as deductible charitable contribution
s. The Internal Revenue Service
disallowed the claims. The parents sued for refund of the claimed amounts pursuant to §170 of the Internal Revenue Code
(which allows a deduction for a charitable contribution or gift "to or for the use of" a qualified organization) or as unreimbursed expenditures made incident to the rendition of services to a charitable organization
under Treas. Reg.
§ 1.170A-1(g) (1989). In a second set of amended tax returns, filed in 1986, the parents limited their claimed charitable deductions to the amounts that had been indicated by the Church.
District court
The District Court
, granting summary judgment to the United States, held that the payments were not made "for the use of" the Church within the meaning of 26 USCS 170, and the payments did not qualify as "reasonable expenditures" incurred while providing services to the Church, so as to be deductible under Treas Reg 1.170A-1(g) ( 26 CFR 1.170A-1(g)), which provides that unreimbursed expenditures made incident to the rendition of services to an organization, contributions to which are deductible, may constitute a deductible contribution under 26 USCS 170 (664 F Supp 468).
Ninth circuit
The United States Court of Appeals for the Ninth Circuit
, affirming on appeal, held that the funds in question were not deductible under 26 USCS 170, as the Church lacked actual control over the disposition of the funds, and 26 CFR 1.170A-1(g) did not apply to the parents, as the regulation permits a deduction for unreimbursed expenses by only the taxpayer who performed the charitable service (861 F2d 558).
affirmed for a unanimous court, holding that for purposes of 26 USCS 170, these payments were not charitable contributions "for the use of" petitioners' church.
Background
FactsA husband and wife, members of The Church of Jesus Christ of Latter-day Saints, transferred funds into the personal checking accounts of their two sons, who were called to service as full-time, unpaid missionaries
Missionary (LDS Church)
The Church of Jesus Christ of Latter-day Saints is one of the most active modern practitioners of missionary work, with over 52,000 full-time missionaries worldwide, as of the end of 2010...
for the Church. The amount transferred equaled the amount the Church estimated would be needed to support this service. The sons used the transferred funds primarily to pay for rent, food, transportation, and personal needs while on their missions (in conformity with Church guidelines, which required such funds to be spent for only missionary work and forbade various leisure or personal activities). The sons submitted weekly reports of their total expenses for the week and month to date (even though these guidelines did not require the sons to obtain advance approval of each expenditure they made from their checking accounts).
Issues
In their 1984 amended federal income tax
Income tax in the United States
In the United States, a tax is imposed on income by the Federal, most states, and many local governments. The income tax is determined by applying a tax rate, which may increase as income increases, to taxable income as defined. Individuals and corporations are directly taxable, and estates and...
return
Tax return (United States)
Tax returns in the United States are reports filed with the Internal Revenue Service or with the state or local tax collection agency containing information used to calculate income tax or other taxes...
for the years 1980 and 1981, the parents claimed these amounts as deductible charitable contribution
Charitable contribution
Charitable contribution deductions for United States Federal Income Tax purposes are defined in section 170 of the Internal Revenue Code as contributions to or for the use of certain nonprofit enterprises. See...
s. The Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
disallowed the claims. The parents sued for refund of the claimed amounts pursuant to §170 of the Internal Revenue Code
Internal Revenue Code
The Internal Revenue Code is the domestic portion of Federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 of the United States Code...
(which allows a deduction for a charitable contribution or gift "to or for the use of" a qualified organization) or as unreimbursed expenditures made incident to the rendition of services to a charitable organization
Charitable organization
A charitable organization is a type of non-profit organization . It differs from other types of NPOs in that it centers on philanthropic goals A charitable organization is a type of non-profit organization (NPO). It differs from other types of NPOs in that it centers on philanthropic goals A...
under Treas. Reg.
Treasury regulations
Treasury Regulations are the tax regulations issued by the United States Internal Revenue Service , a bureau of the United States Department of the Treasury. These regulations are the Treasury Department’s official interpretations of the Internal Revenue Code and are one source of U.S...
§ 1.170A-1(g) (1989). In a second set of amended tax returns, filed in 1986, the parents limited their claimed charitable deductions to the amounts that had been indicated by the Church.
District court
The District Court
United States district court
The United States district courts are the general trial courts of the United States federal court system. Both civil and criminal cases are filed in the district court, which is a court of law, equity, and admiralty. There is a United States bankruptcy court associated with each United States...
, granting summary judgment to the United States, held that the payments were not made "for the use of" the Church within the meaning of 26 USCS 170, and the payments did not qualify as "reasonable expenditures" incurred while providing services to the Church, so as to be deductible under Treas Reg 1.170A-1(g) ( 26 CFR 1.170A-1(g)), which provides that unreimbursed expenditures made incident to the rendition of services to an organization, contributions to which are deductible, may constitute a deductible contribution under 26 USCS 170 (664 F Supp 468).
Ninth circuit
The United States Court of Appeals for the Ninth Circuit
United States Court of Appeals for the Ninth Circuit
The United States Court of Appeals for the Ninth Circuit is a U.S. federal court with appellate jurisdiction over the district courts in the following districts:* District of Alaska* District of Arizona...
, affirming on appeal, held that the funds in question were not deductible under 26 USCS 170, as the Church lacked actual control over the disposition of the funds, and 26 CFR 1.170A-1(g) did not apply to the parents, as the regulation permits a deduction for unreimbursed expenses by only the taxpayer who performed the charitable service (861 F2d 558).
Opinion of the court
Justice O'ConnorSandra Day O'Connor
Sandra Day O'Connor is an American jurist who was the first female member of the Supreme Court of the United States. She served as an Associate Justice from 1981 until her retirement from the Court in 2006. O'Connor was appointed by President Ronald Reagan in 1981...
affirmed for a unanimous court, holding that for purposes of 26 USCS 170, these payments were not charitable contributions "for the use of" petitioners' church.
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- The court instead accepted the government's interpretation of the statute: that a contribution or gift is "for the use of" a qualified organization only when it is held in a legally enforceable trust for the organization or in a similar legal arrangement. The legislative history, the generally understood meaning of the language used, and the contemporaneous and longstanding construction all supported this interpretation.
- By contrast, petitioners deposited the funds directly into their sons' personal bank accounts. Although the sons promised to spend the money only on church-related expenses, they had no legal obligation to do so. Petitioners did not donate the funds in trust for the church. the parents were not entitled to a deduction under 26 CFR 1.170A-1(g), as that regulation allows taxpayers to claim deductions for only the expenditures made in connection with their own contributions of services to charities. Petitioners were unable to claim a deduction for the funds as unreimbursed expenditures incident to a contribution of charitable services under Treas. Reg. § 1.10A-1(g) (1989) since the expenditures were not incurred in connection with petitioners' own rendition of services -- they did not render the services.
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See also
- Charitable trustCharitable trustA charitable trust is an irrevocable trust established for charitable purposes, and is a more specific term than "charitable organization".-United States:...
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