Exclusive: Ministry says questions about finance, structure are routine 07:19 AM CDT on Wednesday, July 6, 2005
The IRS is questioning televangelist Benny Hinn's organization about
its operations and finances – issues that underlie its tax-exempt
status as a church. The inquiry into the flamboyant faith
healer's ministry began a year ago, and the IRS has asked for dozens of
detailed answers, according to documents provided to The Dallas Morning News by
a watchdog group. The Trinity Foundation has investigated Mr. Hinn for
more than a decade and condemns his leadership as autocratic and his
lifestyle as lavish. The IRS wouldn't discuss the case,
and it's unclear whether the agency's concerns about the ministry,
which is estimated to raise more than $100 million annually, are close
to being resolved or will open an audit. A representative
for Benny Hinn Ministries confirmed that the inquiry is under way and
characterized it as routine, but an IRS spokesman said the agency is
"extremely careful" in questioning churches and starts an inquiry only
when it believes an organization "may have stepped over the line" of
tax regulations. Separately, The News found
that another watchdog group's complaint to the IRS – that the ministry
lacks financial oversight and independent governance – may have led the
agency to question the operation through what's called a church
tax-inquiry letter. While detractors argue that Mr. Hinn
improperly profits from a ministry that hasn't met the IRS definition
of a church for years, his public-relations contractor dismissed the
possibility that the tax exemptions – worth millions a year – could be
at risk. He repeatedly warned The News should "be very careful about what it reports."
Hinn spokesman Ronn Torossian said the ministry has "fully cooperated
with the IRS" and is not being audited. He said the agency each year
sends "thousands of letters of inquiry to a sampling of nonprofits."
Mr. Hinn's ministry, formally renamed the World Healing Center Church
in 2000, has had its administrative and mail-processing headquarters in
Grapevine since a year earlier, when the persuasive, self-trained
Pentecostal sold his church complex in Orlando, Fla. He
and his family soon moved to Orange County, Calif., and although he
promised to build a $30 million shrine to faith healing in Las Colinas
and raised money for it, the World Healing Center never materialized.
Mr. Hinn, 52, has few peers and many imitators in televangelism's
realm, and he's both revered and lampooned for his
money-and-miracle-based brand of preaching. Known for his
eccentric swirl of hair and a touch that topples the faithful like
dominoes on stadium stages, the Israeli-born son of Greek Orthodox
parents has built a worldwide ministry, one of the most popular and
most profitable, as well as one of the most panned. His ubiquitous This Is Your Day TV
show and nonstop globetrotting to lead lucrative crusades have
attracted millions of followers, as well as long-standing accusations
of unverified healings, unrestrained spending and unaccountability.
Mr. Hinn and his attorneys, who declined to be interviewed, have
regularly denied criticisms of concealed finances and such ostentation
as his mansion parsonage, maintaining the ministry uses proper
accounting. "I love my precious Lord too much to ever
trifle with the money entrusted to me by His dear people," Mr. Hinn
said in a March statement after the latest network news report
detailing the ministry's alleged exorbitance. Some of the
organization's secrecy appears to have been penetrated by the dedicated
digging – literally – of the Trinity Foundation, self-styled
televangelism monitors based in Dallas. Hinn ministry
responses to IRS questions and a purported salary list for ministry
officials are among many documents that Trinity members said they
salvaged recently from trash bins outside Hinn-related offices.
The salary document lists Mr. Hinn as CEO and his annual earnings as
$1.325 million. Attorneys for the ministry, in a letter to The News , said the document was either a fake or had been stolen.
Mr. Hinn acknowledged two years ago that his ministry took in donations
of $89 million in 2002, including TV, crusades and direct-mail, and
said the annual figure was growing at double-digit rates.
Last month on his program, produced at the ministry's studios in Aliso
Viejo, Calif., Mr. Hinn said his TV ministry "costs me $1.8 million
every five days," not counting his crusades. "Nobody wants that
burden," he said. He indicated he spent $7 million for
recent crusades to India and the Philippines and another $4 million in
Nigeria, where attendance reportedly was far below the 6 million to 8
million people a day that Mr. Hinn had predicted. Churches
don't have to pay taxes or make their finances public and don't even
have to apply for tax-exempt status – they can simply claim it.
A church pastor's income and benefits also are tax-exempt as long as
they're deemed reasonable. Like all nonprofits, however, churches must
follow federal rules in financial and other matters.
Starting an inquiry requires triple approval – from an IRS lawyer, a
three-person committee and the director of the exempt organizations
division, now located in Dallas. Besides ordering that violations be
corrected, the IRS can revoke tax exemptions, seek back taxes and
impose penalties. "There has to be solid evidence of
wrongdoing before the IRS looks at removing tax-exempt status," said
Kenn Vargas, an IRS spokesman in Austin. "It's not done often,
especially with churches." The "probe and response" of an
inquiry can go back and forth for many months, resulting in the IRS
either satisfying its concerns and closing the case or undertaking the
next step and auditing the group. A revocation means
donations are no longer tax-deductible. "That's the most devastating
problem," said Connie Smith, a lawyer for a Denver law firm that
represents scores of religious organizations. For
churches, a primary tax-exempt no-no is known as inurement – one or
more persons getting substantial financial benefit from the operation.
Other common complaints include conducting prohibited political or
for-profit business activity.
The IRS wouldn't provide an official to talk about tax-inquiry dealings
with churches. "It's just extremely sensitive," said Phil Beasley, a
spokesman in Dallas. During an inquiry, the IRS can also
use 14 recognized factors to determine whether a group constitutes a
church and, by definition, should be tax exempt. Those flexible
criteria include having regular congregations, services and places of
worship, members not associated with other churches and religious
instruction for its ministers and youngsters. Mr. Hinn's
critics contend that his ministry falls short on all those counts, that
he keeps tight control of his small board by nominating and dismissing
the other two or three directors and that he has relatives in highly
paid jobs. The ministry has been the subject of critical
news reports for years. Detractors of Mr. Hinn's controversial
prosperity theology, vast TV fundraising and a lifestyle of private
jets and hotel suites view the IRS action as an overdue accounting.
Wall Watchers, an advocacy group for religious donors, recently issued
an alert about the Hinn ministry through its Ministry Watch Web site.
"The IRS should examine the organization and revoke its church status,"
said Rod Pitzer, Wall Watchers' research director. "The organization is
set up for Benny Hinn, for his private inurement." Wall
Watchers, based in North Carolina, sent a letter to the IRS early last
year calling for an investigation of the Hinn Ministry, Mr. Pitzer
said. "It's set up fraudulently as a church," he said.
"It's akin to a dictatorship, and when there's no accountability and
one person is in charge, it leads to a lot of abuses." In
August, the IRS announced an initiative to stop what it called the
increasing abuses by tax-exempt groups that pay excessive compensation
and benefits to insiders. The agency planned to contact nearly 2,000
organizations as part of the enforcement project, which started at the
end of July. The Hinn ministry received a tax-inquiry
letter dated June 30, 2004, according to a 17-page draft of its
February response to the inquiry – a document the Trinity Foundation
said it found in the trash bin of the ministry's attorneys in Irving.
The ministry also has accountants in the Dallas area. Trinity has a
track record of digging through trash bins as a strategy against
televangelists. Ole Anthony, Trinity's director, said the
group has sent copies of the recovered documents, as well as briefs of
its own, to the IRS, answering the questions posed to the Hinn ministry
and arguing, point by point, why the ministry should lose its tax
exemptions. "Every red flag in the universe will go off when the IRS sees what he really gets," Mr. Anthony said.
But church tax issues aren't black and white, said Milt Cerny, a former
IRS officer in the exempt organizations division. Churches aren't
necessarily "contained within four walls," he said. "If
the pastor lives in an expensive house and gets a million-dollar salary
... the service would have to establish that it was unreasonable," said
Mr. Cerny, who was not told of the Hinn inquiry. The draft
response from Hinn attorneys shows that the IRS asked about operations
that would support its church designation. The inquiry
asked, "Who controls the organization?" It questioned financial
oversight and whether officers sell books, videos and CDs. The IRS also
asked about a ministry subsidiary holding title to the oceanside
parsonage, which Dateline NBC reported in March to be
worth $10 million. As for regular services and a place of worship, the
draft refers to employee gatherings at the Grapevine headquarters and
at the California property where This Is Your Day is taped.
"Are there live audiences for some of these shows?" asks a note in the
ministry's response, one of many internal questions that hadn't yet
been answered. "What is the basic evolution ... from a
bricks and mortar church in Orlando to the facilities in Texas and
California to the television/broadcast ministry ... ?" asks another of
the internal notes. The document has handwritten initials
throughout, matching the names of ministry attorneys and officials who
ostensibly were to provide the necessary answers. Each
page is labeled "2/1/05 DRAFT." David Middlebrook, an attorney for Mr.
Hinn, called the document "a working draft" in "a routine tax inquiry"
in a court affidavit during an earlier fight to keep it from being
publicized.
The ministry's temporary restraining order against a Houston TV station
– while Mr. Hinn held a crusade there – was quickly overturned, but the
station didn't report the IRS inquiry. Trinity later showed what it
said were the original documents to The News and gave copies to the paper.
One document shows that the ministry has paid more than $112,000 a
month on the 10-year lease of a Gulfstream III jet. Other
documents indicate that Mr. Hinn was paid $360,000 last year as a
consultant for Clarion Call Marketing, which was incorporated in 2003
with Mr. Middlebrook as its registered agent. The salary
document, which Trinity said it found in February, had been shredded
into long strips but was reassembled by Trinity. The sheet shows 12
ministry employees making between $135,000 and $180,000 a year.
Mr. Hinn's wife, Suzanne, is referred to as the pastor's assistant at
$166,000 a year. Their daughter, Jessica Koulianos, is listed as
"assistant" at $65,000; her husband, Michael, a "partner relations
specialist" at $90,000. Other documents show Mr.
Middlebrook's firm billing the ministry for 373 hours of work in a
one-month period last fall. Though the attorney didn't
want to be interviewed, he has written about tax-inquiry issues
repeatedly in a column for Church Executive magazine.
"The IRS has contacted one or more of our church clients recently" at
least partly due to its initiative examining tax-exempt compensation,
Mr. Middlebrook wrote in October. "Having the IRS penalize your church
or remove its church designation could have profound financial
consequences. You do not want your member-donor base to come to believe
that you or your pastor makes too much money or that the church is not
being operated in proper nonprofit fashion." In November,
he wrote about how the IRS defines a church and a case in which a
designation was revoked, partially because its structure "tended to
personally benefit the founder's family." "The lack of
regular church services with a body of believers that assemble
regularly," he wrote, "dictated the IRS response." And in
last month's issue, he warned church lawyers and accountants to take
care to destroy documents because often those "thrown in the trash
dumpster are considered abandoned." "Beware of 'dumpster
divers' – people who look through trash dumpsters for confidential
documents," Mr. Middlebrook wrote. Paul Nelson, head of
the Evangelical Council for Financial Accountability, said the Hinn
ministry seems to have invited IRS scrutiny. "If I was their counsel, I would say that," he said. "I don't think anybody envisioned a $10 million parsonage. "That's absolutely grotesque." E-mail mwrolstad@dallasnews.com 1970 – As a high school senior, Benny Hinn leaves his family's Greek Orthodox faith for Pentecostalism. 1983 – He establishes Orlando Christian Center in Florida. 1990 – Mr. Hinn begins monthly faith-healing crusades in the U.S. and abroad. 1999 – He makes a surprise announcement that he is moving his ministry to Dallas-Fort Worth.
1999 – Mr. Hinn announces that his Orlando center has been sold to a
neighboring church. He promises a $30 million faith-healing memorial in
the Dallas area that is never built. 2000 – He opens new administrative offices for World Healing Center Church in Grapevine. 2001 – He begins construction on a multimillion-dollar oceanside parsonage in Orange County, Calif. 2003 – Mr. Hinn acknowledges that his ministry took in a record $89 million in donations in 2002. 2004 – His ministry receives a tax-inquiry letter from the IRS. 2005 – A spokesman confirms that the inquiry continues but hasn't become an audit.
Occupation: Senior pastor, president and chairman for life of Benny
Hinn Ministries in Grapevine; operates World Media Center in Orange
County, Calif. Born: Dec. 3, 1952, in Jaffa, Israel
Education: Attended Catholic schools in Israel and public high school
in Toronto; did not graduate and has no formal religious training Family: Wife, Suzanne, and four children Residence: Dana Point, Calif.
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