The General Conference of Seventh-day Adventists and the Department of Revenue and Taxation have reached an agreement in the civil suit challenging the department's findings on the organization's tax statements.
The parties have agreed to a judgement that will state the tax deductions in question have been proven and that, as a result, there will be no assessment of unpaid taxes or penalties against the SDA.
The organization will then transfer operations of the SDA clinic into a Guam corporation rather than as part of the church nonprofit. The new corporation will file as an organization exempt from income taxes and the filing is expected to be implemented in 2019.
The agreement brings to a close a yearlong lawsuit initiated by SDA in the District Court of Guam.
Deficiencies alleged in statements
SDA was disputing Rev and Tax's findings of deficiencies in the organization's 2011 and 2012 income tax statements. The deficiencies total about $546,000, with Rev and Tax imposing about $208,000 in penalties.
According to the tax agency, the SDA's clinic, restaurant and grocery store were not related to its tax-exempt purpose and thus the income generated from those activities should be subject to local income tax law.
SDA, in its complaint, stated that the clinic is operated by its mission on Guam and is part of the religious organization's charity efforts. The clinic also offers low-cost treatment.
SDA lawyers presented their initial case on Monday, covering several financial documents in detail and even proceeding with a live accounting in the courtroom as part of efforts to prove the deductions are valid.
GovGuam was to present its witness on Tuesday, but proceeded to speak with SDA attorneys behind the closed doors of the judge's chamber before both parties reappeared to state the provisions of the agreement on the record before the public.