IRS Ends Tax Exemption of PTL, Wants $55 Million

The Internal Revenue Service today revoked the tax-exempt status of bankrupt PTL, dealing a serious blow to fund-raising efforts of the scandal-plagued ministry.

“Effective immediately, the Internal Revenue Service can no longer assure taxpayers of the deductibility of contributions to PTL,” the IRS said in a statement released at its regional headquarters in Atlanta.

The IRS claims that PTL has not acted like a ministry since 1980. The charismatic television ministry was noted for a variety of fund-raising schemes used to build hotels, a water park and a shopping mall and to allow founder Jim Bakker and his wife, Tammy Faye, to live the good life.

Les Witmer, a spokesman for the IRS regional office in Atlanta, said the action was taken because “we felt the organization has not operated within the guidelines . . . in its original charter.”

He said court papers filed in conjunction with PTL’s bankruptcy proceedings indicated that individuals in the organization had profited substantially from donations made to the ministry and that PTL had “excessive unrelated business income or income which was not really in keeping with the tax-exempt purpose.”

$55 Million in Back Taxes

The tax agency claims that PTL, already in bankruptcy court for more than $60 million in debts to other creditors, owes $55 million in back taxes. PTL disputes that amount but admits that some back taxes may be due.

PTL has been deeply in debt ever since Bakker resigned last year over a one-time sexual experience with former church secretary Jessica Hahn. Bakker turned the ministry he called his “baby” over to the Rev. Jerry Falwell, who filed a bankruptcy petition last June.

Revocation of the ministry’s tax-exempt status will probably cause contributions to dry up nearly completely.

Last week, U.S. Bankruptcy Judge Rufus Reynolds ordered PTL trustee David Clark to prepare a liquidation plan that would sell off ministry assets over the next three to five years to pay creditors.

Reynolds said PTL’s indebtedness may run as high as $125 million, and he said it is very unlikely that anything will be left once the creditors are satisfied.

Appeal Likely

Wednesday, the U.S. 4th Circuit Court of Appeals in Richmond, Va., upheld a lower court decision dissolving a preliminary injunction issued last December in U.S. Bankruptcy Court. That injunction had prevented the IRS from taking revocation action.

The IRS action means that individuals sending money to PTL will not be allowed to claim future contributions as a tax deduction. But R. Bradford Leggett, PTL’s Winston-Salem, N.C., attorney, said the ministry will probably appeal to the Court of Claims in Washington.

The IRS said such an appeal would at least temporarily protect contributions to PTL.

“If PTL initiates a proceeding in federal court to review the revocation action, contributions by individuals would still be deductible up to a limited amount--$1,000--during the litigation period,” it said.

Past contributions would be fully deductible up until today, but the IRS said that would not include contributions by those who were part of the ministry--meaning the Bakkers and others who had a hand in running PTL.