[Editor’s note: A second copy of this report appears here. That copy includes the supporting material referenced in the report. This copy includes the immediate radio responses, beginning on page 5 below. This also includes handwritten annotations throughout which are not on the other copy.]
B5e(14a)
[Handwritten notation above text: “To Carolyn Layton – duplicate copy”]
Law Office Report #22
March 17, 1978
Page 1
from June [Crym]
TAXES
This report concerns the shipment of supplies to Tish [Leroy] which is coming via Ujara [Don Sly] in crates #107, 108 and 109, labeled Ben Barrett, Kathy Barrett and Ronnie Berryman/ and some separate items which are being shipped with this report because they need to be taken care of soon and the supplies being sent over will take a while to sort through.
1. 1977 income tax returns to be filed for people over there: Enclosed with this report are W-2’s which have arrived in the mail for people who are over there. These are the only ones which have come in; as more come in we will send them over. Attached also is a list of all W-2’s which have come in; Betty has assigned each person a number and if you have any messages or questions concerning these people, you can refer on the radio to this report and their individual #. [Check mark in margin; also notation of “TL [Tish Leroy] OK”]
In crate #109 is the bulk of the 1976 income tax returns sent for reference; there may be some carryover in crate #108. These are all we could find in the files here. As more turn up, we will send them over. However, the state of the files is such that individual tax return files are stuck in everywhere, in no order, and it may take time to recover them. In the meantime, it appears that most people file short forms anyway so there should be no problem as long as you have a W-2. I will specify individual problems I know about later on in this report. [Last two lines bracketed, with two marginal note: “Right” and “wait for mail tax [two words illegible]” ; also notation of “TL OK”]
2. Sending over supplies to Tish: Because of the incredible bulk of material involved, this will take some time. We have removed the cabinets from the building to a place of more confidentiality; we need the keys for these cabinets so we can lock them. SEND THEM BACK: Betty tells me Tish took them with her when it was thought they would be shipped. Shipping costs are so large, and the records are the kind which should be carefully watched all the way there to ensure their arrival, that we are considering packing them in duffel bags and sending out from time to time. If we do this, we need to know if (1) you want the needs slips; (2) you want the boxes of canceled checks; (3) you want the 4 drawers worth of Apostolic receipts of money orders, filed for each member. We sent the equivalent of one file drawer of Apostolic over in the Ujara shipment, but we had to stuff those receipts in manila envelopes simply because of the weight. [Notes in margin: “Need acctg [accounting] work sheets [two words illegible]”; and “See Tish” ; also notation of “TL OK”]
We tried to send recap sheets mostly and a minimum of receipts; however, in going back I found many recaps that will need still to be sent, 1976 records. This is going to be a gradual thing, I’m afraid, mainly because of the restrictions on weight. The airline has cut back the weight limit to 77 lbs for the standard charge, a crate weighs 30 lbs alone, so we are going to do as many duffel bags as possible.
[Several handwritten notes at bottom of page: “Speed this up!”; “don’t send papers in duffel bags”; “Note: automatic delay in application for filing returns when people are out of the country”; “[illegible word] of the folders & put in white plastic bags with tape. Send folders separately in the crate – This way harder to deal with. I’ll know what it is when I see it!”]
B5e(14b)
Law Office Report #22
March 17, 1978
Page 2
from June
3. Individual tax problems:
a. Ben Bowers: Hopefully this will be resolved by the time it gets to you, but here’s what I’ve been trying to say on the radio: Ben and Christine Tally [Talley] were married, divorced in 1977. During the marriage, there was a trust fund set up consisting of her estate. Interest accrued on that trust fund, and every month or so statements would come in from the bank telling about the account, and interest accumulated. No one here seems to know whatever happened with that account, whether it was closed down or what, and if that happened in 1977. [Word “closed” circled, with marginal note: “Yes; was in B of A [Bank of America] then”]Ben is going to file the long form and itemizes his deductions, including interest on savings. Does this trust account still figure in the itemizations for 1977? How would we or he go about finding out the interest accumulated in 1977, if any? Where would we look on this end? I have the estate file for Christine, but the latest receipts from the bank are dated 12/76. [Paragraph bracketed with note, “Ask Christine’]
Ben also wants receipts from us for his rent, food, medical expenses and church donations. The donations are simple; I can do the standard donation letter I have been doing, based on 10% estimation. However, since our records were stolen in May, 1977, and that is just about the time he left, how are we to supply receipts for such itemizations without being inconsistent? Can we just make estimations and give the same reason as we do in the church donation letter? [Paragraph bracketed with notes, “No way! Tish”; “church donation only 50% of his income, exact [illegible word] of the large donation”; words in paragraph “rent, food” underlined with notation, “No – not deductible items”]
[Handwritten notation between two paragraphs: “worked out”]
b. Alfreda Sappho – wants to do long form and itemize deductions, and wants same as Ben, receipts from us re rent, food, church donations. The general problem is: what do we do with communal people who work and want to file long form to itemize deductions? I do not believe there are many, if any besides her and Ben, at least none have come to us yet. But Alfreda is becoming very difficult to deal with on this issue, and says she’ll go to H&R Block. I am going to tell her to see H&R Block and find out what they need for itemizations, then come back and tell us specifically. But I anticipate it will be much like Ben’s case, and would like some kind of guidance on how to deal with such cases. [Paragraph bracketed with notation, “No. Donation only. TL”; words in paragraph “rent, food” underlined with notation, “No – not deductible”; following the clause, “I do not believe there are many,” notation to refer to bottom of page for note, “Let me know (1) name (2) earnings total (3) total FICA and W.T. [withholding tax] (4) total state inc tax withheld & total CS I paid – we’ll do returns & send back to her pronto or give figures by #over radio”]
c. We are returning to you the problems which we first listed on law office report #7, 12/22/77, plus some additions, as these people are all over there and should be dealt with over there. The additions are Leon Perry, a bill for $135 from IRS, which Harold originally asked Tish about and no response has been sent him from here; a notice to Walter Cartmell, which does not appear to be a charge but an information notice about a previous return he filed which requires some corrections; a charge to Annette Jones of $686 for incorrect 1975 return. The rest are those we already wrote you about: Robert & Vernetta Christian; Shirley Ann Edwards (Newell); Alvaray Satterwhite; Mary Shavers; Cleve & Helen Swinny; Al & Mary Tschetter. These may be easier to deal with after you have located their individual income tax files which are coming to you via Ujara. [Notation under paragraph: “Let it be – I’ll respond to S.F.”]
B5e(14c)
Law Office Report #22
March 17, 1978
Page 3
from June
4. Discussions with Marshall Bentzman re audit of PT: [Notation at end of sentence: “Get all of Tish’s records down here immed!”] He is presently researching issue of right of feds to search records of churches; Martha is writing this up in more detail, my general impression is that the feds have the burden of proof and must justify their reasons for examining church records; [Marginal note: “Right”] that they can only examine in order to determine that the church is indeed a church and functioning as such; and the magic key is the suspicion that the church may be practicing in unrelated business income. [Marginal note: “Wrong, key if [balance of note illegible]”] This is not new to us, but I agree with his approach in saying that we would defend all the way; we should not acquiesce but instead demand that they prove their intentions first. [Marginal note: “Wrong, [balance of note illegible]”] This is all for the purpose of dragging the thing on. Tonight I xeroxed pieces of the IRS Code, which may have already been reviewed by Ed and Sarah; also attached is a copy of the Scientology case which found that the summons issued by the IRS to examine records was insufficient; that the Scientologists case raised sufficient doubt about the IRS’s intent and harassment. IRS Code section 7605 deals with restrictions on examination of church records by IRS; USA v. Church of Scientology case is attached. As Bentzman explained, looking at the Code this way is only piecemeal and to get a real picture of the whole thing requires a lot of background research. You can tell Ed and Sarah that I tried to “sheparadize” [shepardize] the Scientology case but could find nothing; that does not mean that there was nothing, there may well have been recent decisions but we were in a rush at Eric’s and I didn’t have time to get into it. We should ask Bentzman; he did hint that he will be writing up some opinion letters on this whole area of unrelated business income which will include the Scientology case.
5. Audit of the Ranch: attached is a copy of the letter received by the ranch. Bonnie [Beck] tells us they have been given an extension till June ’78 to produce information and records. She is now combing through all the old records we have been able to find and will be preparing recap sheets, etc. and compare to those already in existence. One of the problems that has come up was that Harold’s and Tish’s figures didn’t jive for the 1977 income and disbursements; also, Bonnie can’t understand why Tish’s figures of income seem to be based on more patients than there were in actuality. [Word “Bonnie” circled; Paragraph bracketed, with note at end, “& transp[ortation] income”]
6. David Smith: The reason he gave us which he will not elaborate on on the radio which he says will keep him here 18 months is that he never filed his income taxes for 1972 through the present. However, we don’t really believe that is the real reason, as he was looking for excuses after we (me and Sandy [Bradshaw]) explained that people can file their taxes in Guyana, there’s no problem with that. He obviously wanted an out to remain here. He said that Tim Stoen had advised him in the past not to file his taxes because of his receipt over the years of increments on the property and estate to which he is an heir in Colorado along with 5 other relatives. After we put aside the tax reason, he said he wanted to get a job. We asked why he didn’t want to see his children; he said they weren’t his children, he’d given to the temple, and anyway at least 2 of them he doubted were his anyway. Looking in the tax files, I came across the application he apparently filed for extension of time to file IRS return in 1976, in his letter to
B5e(14d)
Law Office Report #22
March 17, 1978
Page 4
from June
his sister asking her for income amounts he received in 1972 through 1976 on the property. Also enclosed is W-2 for 1976.
I don’t know what will be the outcome of this situation; the night after he spoke on the radio, he testified, but said nothing specific, just said Jim was the doctor of all doctors, and that was it. My impression was that he was making a public display of “loyalty” so the people would think he was okay, but I would suspect this guy from the get go, of possibly being involved with Stoen in some way. [Note at end of paragraph: “He knew of the press attack before it came down. Told me he got it from his son who visited us maybe 2 weeks before for a few hours. Also once was very insistent to see the corporate documents for Apostolic but [illegible name] showed him.”]
7. See Law Office Report #13, item #11 re Edwards house – would you please return via mail the Authorization I sent over to be signed by the Edwards. We have a potential buyer of the lot, and this thing is tied up with the insurance investigation. We need permission of the owners and the mortgage holders before the property can be demolished and sold. Attached is another Authorization in case the first one got misplaced.
******pleasant 73’s*****
sorry, there’s more:
8. Letter from Kay Henderson re donations – see attached. This has already been discussed on the radio with Mildred. This is for your information and additional instructions, should there be any.
9. 1978 Church Exemption, due by March 31 for Mendocino County PT building – please have Ed review this and advise how to fill it out; is there any difference now that no church services are being held there? [Marginal note: “No”] ALSO: in January, we sent over, not in a law office report but in reports sent over by Martha, the 1978 Church Exemption form for San Francisco County. The touchy thing about this one is that it asks specific questions re how many people living in the building. When we sent it over, we figured most people would be out of here and the building would be pretty vacant; but that is not the case and as apostolic apartments are closing down, people are moving into the church more. A rough count would say maybe 30 are living here now. How do we fill this out? This is also due March 31. [Marginal note for paragraph: “We did forms. Fill out same way. Same as last year”; underlined note after paragraph: “People in church.”]
B5e(14)
[page 5]
Radio Responses – Law Office Report of 17 March 1978 – #22
1) Received the crates okay. Not necessarily so on the “short forms” – some will be filing long forms – wait for items being mailed out of here next week. (I would not mention tax returns are being mailed now… it will alert USA to watch our mail more carefully than usual…)
2) Read the items put in the crates from the files. Send the manila folders from them in a separate crate; take the folders and put each batch in a separate white, opaque plastic bag and tape it shut. The opaque banks can be gotten from Safeway. IS WORTH THE COST!!! {Handwritten “X” in margin}
Repeat: Folder by folder. Take the material out of a folder and place it in an opaque plastic bag … Seal it with heavy duty tape. This will decrease the weight and will remove the defining captions from the material … The crates will hold more material this way… SEND THE FOLDERS “AFTER” THE CRATES HAVE ARRIVED HERE WITH THE MATERIAL IN IT… I HAVE REASON FOR SAYING THIS, FOR DOING IT THIS WAY.
[Each of following three paragraphs checked off in margin]
(1) – no – burn them well!
(2) – Yes – but send those in luggage that is carried topside. Seal in individual envelopes addressed to TISH LEROY ONLY VIA BUFORD OR KATSARIS…
(3) – Fine the way you did with the others. Yes, send them. Put them in the manila envelopes. This can be sent in a duffel bag if the entire contents is placed in a large, heavy duty clear plastic bag, so it is airtight from water which could happen in hold of our boat coming up the river. It leaks a little.
NOTE: ALL ACCOUNTING PAPERS, WORKSHEETS, ETC. – other than receipts, should be shipped in crates only and placed in the heavy duty plastic bags inside of that. GET THE PT AND APOSTOLIC ITEMS OVER HERE IMMEDIATELY… ALL SHOULD COME OVER AS SOON AS POSSIBLE, BY USING NO MANILA FOLDERS, AND EACH INDIVIDUAL FOLDER IN A PLASTIC BAG and sealed with the strong brown tape, or masking tape. {Handwritten “X” in margin}
(I cannot stress enough to send me records of the work I did with Sandy!)
– all of #1 she will recognize it.
– acct closed. Not a tax issue anymore. It has been handled. Was not his income to start with. {Handwritten “X” in margin}
Church contributions received only, nothing more! Rents and food are not deductible. Records were stolen in May 76 as I recall…
Tell Alfreda to send me (radio) referring to this report, item 3b … for name, the EARNINGS, FICA TAX, WITHHOLDING TAX, STATE INCOME TAX WITHHELD, STATE [ILLEGIBLE ABBREVIATION] WITHHELD – on receipt of this, I will do the returns and you can give it back to them in the short or long form, by the # of items on the return.
– I am responding individually to this batch; it came in today. Tell them we are doing the returns here. Don’t pay anything unless specifically directed to. Will itemize any payments and why.
4) If there is any other problems mentioned in lines 7 and 8 of this paragraph, would only mean a tax assessment; not illegal for churches to do this – the Catholic Church has more of this in any church on planet. Is not the issue! Political is the issue. Gene [Chaikin] and I agree on this.
5) Will bring you a detailed memo on this. NEEDS VERY CAREFUL, AND SPECIAL INSTRUCTIONS.
6) Failure to file his taxes – as listed here – would me [mean] all the MORE REASON THAT HE SHOULD WANT TO LEAVE THE COUNTRY. No problem filing from here. People filed from any place on the globe. The US govt has made this very simple and even extends the time. TO MY KNOWLEDGE he never got the 76 information.
Better to get him out of there and down here if possible.
[Page 6]
7 – Edwards form
8) I agree with Ed on this. The letter after May 1976 refers to all contributions received prior to this date. We had the church records stolen. We do recall that she was a good contributor – and regularly, our treasurer seems to recall. However for contributions under $100 we asked them to get receipts, if they needed it, or to save their canceled checks.
For the amounts she gave by check, her old bank statements would list the 150.00 items clearly, in the photocopy system of bank could retrieve them from their microfilm system. WE HAVE NO WAY OF VERIFYING ANYTHING ELSE. And, she can’t amend prior returns without IRS permission – and they are not likely to give her “permission” to amend without damage to us in some way. I WOULD HOLD THE LINE. CAN STATE WE KNOW SHE CONTRIBUTED, THE TREASURER REMEMBERS, BUT HAVE NO AMOUNT. As to the personal items, those records were stolen also, that recorded it. If she asked for no receipt, we would not have given one.
9) I agree with Ed. tl
IN RE ITEM #6 – TELL THEM TO PHOTOCOPY ALL TAX RETURNS THEY REFER TO. I PRESUME SHE MEANS 76 INCOME SINCE 77 returns not done yet. Also, I did not do any income fitures – Harold and Ellen were handling this; I was doing Apostolic from Feb 77 on thru August 15… I did none of the 76 returns, unless I did something after Aug 15-77… Not likely! Send down photocopies and I will sift it . THAT IS TOO TOUCHY FOR HER TO DEAL WITH WITHOUT HISTORY OF PREVIOUS AUDIT EXPERIENCE… SEND ME THE PAPERS IN DAD’S NEXT CASE COMING DOWN. URGENT TO DO THIS. TOO MUCH $$$ INVOLVED.
Buford: Dad mentioned “quick sale” – should get that place sold and get Claire out of there. Let me then deal with the auditors by mail – would be much better! I will probably put in for another extension just to delay the matter, using excuse Richard is not there, and his former accountant is working on getting it all together, and he will return to settle it. (LIE, but tell them this later so they will not tie up anything or stop her from moving)