T.C. Memo. 2007-355



                       UNITED STATES TAX COURT



             WILLIAM AND CATHY A. BENNETT, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 22010-05.               Filed December 3, 2007.



     Jeffrey D. Moffatt, for petitioners.

     Valerie L. Makarewicz, for respondent.



                          MEMORANDUM OPINION

     SWIFT, Judge:    Respondent determined a deficiency of $1,620

in petitioner William Bennett’s 2002 self-employment taxes.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect at all relevant times, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.
                                 -2-

     All references to petitioner in the singular are to

petitioner William Bennett.

     The issue for decision is whether petitioner timely filed a

proper ministerial exemption under section 1402(e) from self-

employment taxes on net income petitioner received in 2002 as a

minister.


                              Background

     Some of the facts have been stipulated and are so found.

     At the time the petition was filed, petitioners resided in

Lake Hughes, California.

     On June 1, 1996, petitioner was commissioned and licensed as

a senior pastor of the Neenach Bible Church.

     Regarding petitioners’ 1997 through 2002 Federal income tax

returns and self-employment tax liabilities, reflected in the

table below are the dates on which petitioners’ joint Federal

income tax returns were filed, the net income petitioner received

each year as a minister of the Neenach Bible Church, and the

self-employment taxes petitioner reported and paid in relation

thereto.    Also reflected in the table below are whether

petitioner, with each Federal income tax return, filed a Form

4361, Application for Exemption From Self-Employment Tax for Use

by Ministers, Members of Religious Orders and Christian Science

Practitioners, or a letter to respondent in lieu of a Form 4361,

and whether the Form 4361 or the letter included statements
                                                 -3-

certifying that petitioner was opposed to acceptance of public

retirement insurance such as Social Security and that petitioner

had informed the Neenach Bible Church of his opposition to such

public retirement insurance.                Lastly, reflected in the table

below is an indication of whether respondent acted on

petitioner’s Form 4361 or letter.


       Petitioners’ Filed Tax Returns                        Included Statements
        Filing   Ministerial SE Taxes        Related         Opposing   Informing   Respondent’s
Year     Date      Income       Paid      4361   Letter      Insurance   Church        Action

                    1
1997   6/12/2000     >$400      -0-        Yes         No      Yes         Yes             Not
                                                                                        processed

1998   4/15/1999    15,263      $4,191     No          Yes     No          No              Not
                                                                                        processed

1999   4/15/2000    14,400       -0-       Yes         Yes     Yes         Yes             Not
                                                                                        processed

2000   Not filed        -         -         -           -        -           -              -


2001   4/15/2002    10,727       -0-       Yes         Yes     Yes         Yes             Not
                                                                                        processed

2002   4/15/2003    10,461       -0-       Yes         No      Yes         Yes          Denied as
                                                                                        untimely2

       1
          Although there is some confusion as to the precise amount of ministerial
       income reported on petitioners’ 1997 joint Federal income tax return, the parties
       stipulated that petitioner in 1997 received as a minister net self-employment
       income of $400 or more.
       2
          While it does not affect our decision, it is unclear why respondent did not
       process petitioner’s Forms 4361 or letters for 1997, 1998, 1999, and 2001.



       As reflected in the table above:

              (1) In 1997, 1998, 1999, 2001, and 2002, petitioner
              received net ministerial income of $400 or more, and
              for 1998 petitioner reported and paid self-employment
              taxes thereon;

              (2) petitioners’ 1997 joint Federal income tax return
              and the related Form 4361 were not filed until June 12,
              2000;

              (3) the letter petitioner filed with petitioners’ 1998
              joint Federal income tax return on April 15, 1999, did
                               -4-

          not include statements certifying that petitioner was
          opposed to the acceptance of public retirement
          insurance and that petitioner had informed the Neenach
          Bible Church of his opposition thereto; and

          (4) with the filing of petitioners’ 2002 joint Federal
          income tax return, petitioner did not report or pay any
          self-employment taxes on the $10,461 ministerial income
          he received in 2002.


     On August 27, 2003, respondent mailed to petitioners a

letter relating to petitioners’ 2002 Federal income tax return,

stating that the due date for petitioner to timely file a Form

4361 had been April 15, 2001, that the Form 4361 petitioner filed

with his 2002 tax return was therefore untimely, and that

petitioner’s request for a ministerial exemption from self-

employment taxes was not approved.

     On October 13, 2005, respondent mailed to petitioners a

notice of deficiency relating to petitioners’ 2002 joint Federal

income taxes in which respondent determined a deficiency of

$1,620 based on self-employment taxes allegedly due on

petitioner’s 2002 net income as a minister.1


                           Discussion

     Income earned by an individual in the performance of

services as a nonemployee, ordained, commissioned, and licensed

minister of a church is subject to self-employment taxes unless

     1
        The record herein does not indicate whether respondent
determined tax deficiencies against petitioner for self-
employment taxes relating to years prior to 2002.
                                 -5-

the individual qualifies under section 1402(e) for an exemption

therefrom.   See sec. 1402(c)(2)(D), (c)(4), (e).

     Section 1402(e) and the related regulations provide specific

procedures to be followed by ministers who wish to qualify for

exemption from self-employment taxes.

     First, a Form 4361 or comparable letter is required to be

filed by a minister no later than the due date (including

extensions) applicable to the filing of the minister’s Federal

income tax return for the second year in which the minister

receives $400 or more of net self-employment income relating to

his or her ministerial duties.   Sec. 1402(e)(3).    The time

limitation imposed by section 1402(e)(3) is mandatory and is to

be complied with strictly.   Wingo v. Commissioner, 

,

930 (1987); sec. 1.1402(e)-3A, Income Tax Regs.

     Second, a Form 4361 or letter in lieu thereof is to include

a statement certifying that the minister is conscientiously or on

religious principles opposed to the acceptance of public

insurance such as Social Security.     Sec. 1402(e)(1).

     Third, a Form 4361 or letter is to include an additional

statement certifying that the minister has informed the

ordaining, commissioning, or licensing body of the church of

which he is a minister that he is opposed to such insurance.

      If a minister timely files and if respondent approves a Form

4361,2 the approved ministerial exemption will be retroactively

effective for the first 2 years for which the minister received

ministerial net income from self-employment of $400 or more and

will remain effective for all subsequent taxable years.      Sec.

1402(e)(4).   An approved ministerial exemption is irrevocable.3

from a minister, in lieu of a Form

4361, a letter if the letter is timely filed and if the letter

includes the required certification statements.   2 Audit,

Internal Revenue Manual (CCH), sec. 4.19.6.3.1(3), at 10,779-749-

11.

      Petitioner bears the burden of proof to establish that a

Form 4361 or letter was timely filed.4   Rule 142(a); Treadway v.

Commissioner, T.C. Memo. 1984-153.

      2
        A timely filed Form 4361 must be formally approved by
respondent through a verification process. Sec. 1402(e)(2); sec.
1.1402(e)-5A(c)(1), Income Tax Regs.
      3
        An approved ministerial exemption is irrevocable unless a
minister after Dec. 31, 1999, elects to revoke a previously
approved ministerial exemption. Ticket to Work and Work
Incentives Improvement Act of 1999, Pub. L. 106-170, sec. 403,
113 Stat. 1910.
      4
        Petitioners make no argument that petitioners qualify
under sec. 7491 for a shift in the burden of proof.
                                  -7-

         Petitioner claims that in or around 1980 (1980) he first

and timely filed with respondent a Form 4361, that it was

approved by respondent, that it was irrevocable, and therefore

that petitioner is entitled to exemption from self-employment

taxes on his net ministerial income received in 2002.5

     Alternatively, petitioner claims that even if respondent

never received the Form 4361 petitioner allegedly filed with

respondent in 1980, because respondent indicated in his

August 27, 2003, letter to petitioner an April 15, 2001, due date

for petitioner to timely file a Form 4361, respondent should be

held to that date, and the Form 4361 and letter that petitioner

filed on April 15, 2000, with his 1999 joint Federal income tax

return should have been treated as timely, should have been

approved by respondent, and should be effective to exempt

petitioner’s 2002 net ministerial income from self-employment

taxes.

     Respondent disputes that petitioner in 1980 filed a Form

4361 and that respondent ever has approved any Form 4361 filed by

petitioner.     Further, respondent claims that because petitioner’s

ministerial income in both 1997 and 1998 exceeded $400, April 15,

1999, was the due date for petitioner timely to file a proper

Form 4361 and that because petitioner by that date did not file a

     5
        We note that the record contains no evidence that
petitioner in 1980 received ministerial income.
                                 -8-

timely Form 4361 or equivalent letter with the required

certification statements, petitioner’s 2002 net income as a

minister does not qualify for exemption from self-employment

taxes.

     The record before us does not establish that petitioner in

1980 filed a Form 4361.    Petitioner’s evidence and testimony are

inconsistent as to petitioner’s alleged 1980 filing of a Form

4361.    Petitioner produced no documentation to corroborate that

in 1980 he filed a Form 4361.

     Respondent searched relevant files in respondent’s

Ministerial Unit in respondent’s Philadelphia Service Center,

which processes all Forms 4361 filed with respondent and which

maintains individual folders containing Forms 4361 relating to

petitioner and to other ministers.     The folder relating to

petitioner does not contain any Form 4361 filed by petitioner in

1980.    Respondent also conducted a search of his other files and

archives for petitioner’s allegedly filed Form 4361, but

respondent’s search yielded no Form 4361 filed by petitioner in

1980.

     Petitioner relies on evidence from the Social Security

Administration (SSA) indicating that petitioner contributed to

Social Security and paid employment taxes for every year since

1973, except for 1980, 1981, 1982, 1989, 1997, 2001, 2002, and

2005.    Petitioner alleges that the fact that he failed to pay
                               -9-

employment taxes in some years proves that petitioner in 1980

must have received an approved ministerial exemption.   However,

petitioner’s failure to pay employment taxes in some years could

be attributed to a number of reasons (e.g., unemployment).

     The fact that petitioner for 1998 actually reported and paid

self-employment taxes of $4,191 on his ministerial income cuts

against petitioner’s claim that petitioner himself believed that

in 1980 he had filed a Form 4361 that was approved by respondent

and that he understood he was exempt from self-employment taxes

on his ministerial income for all later years.

     Further, after approving or disapproving a Form 4361,

respondent is to submit to the SSA a copy of the approved or

disapproved Form 4361, and there is in evidence a Certificate of

Lack of Record from the SSA indicating that the SSA has no record

of any Form 4361 filed by petitioner in 1980.

     Petitioner argues incorrectly that petitioner’s due date for

filing a Form 4361 was April 15, 2001, not April 15, 1999.

Petitioner’s argument is based on respondent’s August 27, 2003,

letter disapproving petitioner’s filed Form 4361 for 2002, and

stating incorrectly that the deadline for petitioner to file a

Form 4361 had been the due date for petitioner’s 2000 Federal

income tax return (i.e., April 15, 2001).   While it is unclear

why respondent’s August 27, 2003, letter provided an incorrect

due date, it is clear from the record and it has been stipulated
                              -10-

by the parties that in 1997 and 1998 petitioner received as a

minister net self-employment income of $400 or more.

Accordingly, respondent’s position is correct that April 15,

1999, the due date for petitioners’ 1998 Federal income tax

return (1998 being the second year in which petitioner received

net ministerial income of $400 or more) was the due date for

petitioner timely to file a proper Form 4361 or letter.

     Petitioner has failed to establish that petitioner on or

before April 15, 1999, filed with respondent a proper Form 4361

or letter, and we discern no basis for holding respondent to the

April 15, 2001, due date incorrectly set forth in respondent’s

August 27, 2003, letter relating to a later year (i.e., to 2002).

     As stated, with regard to 1980, the record before us does

not establish that petitioner in 1980 filed a Form 4361 or letter

with respondent.

     The Forms 4361 and letters relating to petitioners’ 1997,

1998, 1999, 2001, and 2002 tax returns were all either untimely

filed after the April 15, 1999, due date or did not include the

required certification statements and therefore properly were not

approved by respondent.6

     6
        Because respondent did not process petitioner’s Forms
4361 or letters relating to petitioners’ 1997, 1998, 1999, and
2001 Federal income tax returns, these Forms 4361 and letters
were effectively not approved by respondent.
                                 -11-

     Petitioner possesses several additional copies of different

Forms 4361 prepared and signed by petitioner and dated prior to

April 15, 1999, but petitioner has produced no evidence that

these Forms 4361 were ever properly addressed, stamped, mailed,

and filed by petitioner with respondent prior to April 15, 1999.

     Because petitioner has failed to establish that he ever

timely filed a proper Form 4361 or letter to qualify for a

ministerial exemption from self-employment taxes, we conclude

that petitioner’s 2002 net income as a minister is not exempt

from self-employment taxes.

     To reflect the foregoing,


                                        Decision will be entered for

                                 respondent.