Justice Department Sues to Stop Oregon Woman from Promoting Religious Non-Profit Corporation Scheme

The United States has sued an Oregon City, Oregon woman to bar her from promoting an alleged tax fraud scheme, the Justice Department announced today.  The government’s complaint alleges that Priscilla E. Schrock promotes the formation and use of “Religious Non-Profit Corporations” (RNPCs), which Schrock falsely informs her customers are exempt from tax laws.  According to the complaint, Schrock claims that by assigning income to the RNPC, the customer can avoid paying federal income tax on their income.  Schrock also tells her customers that transferring assets to an RNPC protects the assets from the Internal Revenue Service (IRS) collection action, the complaint alleges.  The suit asks the court to bar Schrock from promoting and selling the scheme and to order her to provide a list of her customers’ names, addresses, telephone numbers and email addresses to the Justice Department.

According to the complaint, Schrock promotes the scheme through an Oregon City based entity called South Beach Missions.  The complaint also alleges that the U.S.  District Court for the District of Oregon previously enjoined a similar scheme that John D. Fitzgerald promoted.  According to the complaint, Fitzgerald and Schrock are friends and some of Fitzgerald’s former customers are now Schrock’s customers. 

According to the complaint, Schrock and South Beach Missions know or have reason to know the statements they make about RNPCs, aka corporations sole, are false sham non-profit corporations.  The IRS has issued guidance regarding sham non-profits and advised the public to be aware of tax evasion schemes that misuse corporation sole laws.  The IRS has specifically advised that “[a] taxpayer cannot use a corporation sole created to avoid or evade income taxes as a means to exclude the taxpayer’s personal income from tax.” 

Abusive tax schemes and return preparer fraud are on the IRS’s Dirty Dozen Tax Scams for 2016.  The IRS has some tips on their website for choosing a tax preparer and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.  Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.