As a pastor at First Meliorite Church, Dr. Michael John Kell, 68, of Vinings, Georgia, took a “vow of poverty.” However, these vows did not prevent Kell from engaging in a 20-year tax evasion scheme, over the course of which Kell concealed more than $2 million in income from the IRS. By directing funds into financial accounts that were under control of the church – a church Kell founded – the pastor managed, at least for a time, to maintain the appearance of earning no income. In reality, Kell was using the hidden funds to finance a “lavish lifestyle,” which, according to a press release issued by the Department of Justice (DOJ) at the time of Kell’s arraignment, was marked by luxuries like “overseas vacations, dining out, high-end clothing purchases, online dating services, and private school tuition for his children.” While the U.S. Tax Code does feature some special rules for ministers – for instance, a “housing allowance” which is excludable from income taxes – Kell’s actions went far beyond any provisions of the law, resulting in an investigation, trial, and ultimately, prison sentence.
The DOJ identified Kell as both pastor and founder of First Meliorite Church, which Kell “claimed to be a branch of the Universal Life Church.” However, it appears that Kell was motivated not by a religious passion, but rather a financial passion. Prosecutors argued that Kell established the church to conceal income derived from his other career, which involved “develop[ing] numerous patented technologies and work[ing] as a consultant.”
Kell earned millions by providing these services. However, rather than depositing the funds into a personal bank account, Kell funneled the money through various “bank accounts belonging to the church.” Far from fulfilling an ascetic “vow of poverty,” Kell used the funds to indulge in an extravagant material lifestyle – residing, for instance, in a multimillion-dollar, 4,500-square-foot home. In an attempt to thwart various creditors, including the IRS, Kell repeatedly “transferred ownership of his… residence… to various entities he created and controlled.”
In addition to rerouting his income through church accounts and hiding property from creditors, Kell also failed to file income tax returns for a period of “several years,” according to the DOJ’s more recent press release featuring updates on the case. Other sources, like the Atlanta Journal-Constitution (AJC), indicated that Kell “hadn’t filed a state income tax return since 1995” as of 2001, which equates to at least half a dozen unfiled returns.
By repeatedly and intentionally failing to file a tax return, Kell systematically defrauded the federal government, resulting in an investigation which culminated in Kell’s arraignment – ironically (or perhaps fittingly), less than a week before Tax Day 2016. To provide some quick legal context before continuing, an “arraignment” is an early-stage court hearing at which the defendant is formally presented with the charge, or list of charges, against them. Kell admitted to the allegations, entering a plea deal with prosecutors.
Over two years later, in October 2018, Kell was sentenced for his crimes. Appearing before U.S. District Court Judge Eleanor L. Ross, Kell was ordered to pay IRS restitution in the amount of approximately $321,878. He was also ordered to serve an 18-month sentence in federal prison.
As our tax evasion attorneys mentioned earlier, the Internal Revenue Code (IRC) does contain several provisions unique to ministers, clergy members, and religious institutions. These provisions, when utilized appropriately, can help pastors, ministers, rabbis, and others lawfully minimize their tax liabilities. However, as with any aspect of the tax code, it is imperative for clergy members to use these provisions in a way that ensures compliance with the law.
With offices throughout Northern and Southern California, the Tax Law Office of David W. Klasing is a full-service tax firm providing, criminal tax defense representation, and non-filer assistance for taxpayers who need to get caught up on tax filings. With more than 20 years of experience and an accomplished team featuring both CPAs and tax attorneys, the Tax Law Office of David W. Klasing can provide dedicated and comprehensive support. For a reduced-rate consultation about the tax services we offer, contact us online or call today at (800) 681-1295.
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