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United States v. Hartshorn 751 F.3d 1194 (10th Cir. June 2, 2014) 

Jun 2, 2014

The defendant appealed the district court’s issuance of an injunction against him, arguing that the court erred in concluding he promoted an abusive tax shelter through his Church of Compassionate Service. The court addressed, as a matter of first impression, the test used to determine whether a minister is acting as an agent of the church such that his earnings are tax-exempt. The court adopted a flexible approach under which courts may consider various factors pertinent to the relationships between the religious order and the minister, between the minister and the third-party employer, and between the employer and the order. In doing so, it rejected the requirement imposed by some courts, of a contractual relationship between the secular employer and the religious order. The court additionally rejected the defendant’s argument that the injunction was improper because he did not believe that his representations were false or fraudulent. The test for injunctive relief under § 7408 is satisfied if the defendant had reason to know his statements were false or fraudulent, regardless of what he actually knew or believed.