Earlier this month, I wrote about President Donald Trump's promise to eliminate the Johnson Amendment, a 63-year-old provision of the U.S. tax code that forbids the endorsement of political candidates by churches and other non-profit, 501(c)3 charities.
Opponents of repeal say churches could become another place where dark money used in political campaigns can hide. Conservative Christians complain of restricted speech — even as they admit, I wrote, that the Internal Revenue Service has rarely cracked down on political speech from the pulpit.
It was that last point that drew a note from Lewis Regenstein, who reported that his lawyer father, Louis Regenstein Jr., had fended off an IRS inquiry on behalf of Ebenezer Baptist Church in Atlanta. Probably in the late ‘60s, at the outset of the Nixon Administration.
Regenstein the Younger pointed me to a citation in "The Sex of a Hippopotamus: A Unique History of Taxes and Accounting," written by Jay Starkman, who has been a certified public accountant in Atlanta for 40 years.
For a numbers man, Starkman is a lively writer. The working thesis of his 2008 book (now out of print) is that accountants can be exciting human beings, even heroes sometimes, while tax law and tax enforcement cut to the core of what our society is.
The book indeed had a single paragraph on the aborted IRS investigation into Ebenezer. But Starkman had written pages on the 1960 trial of Martin Luther King Jr.
“Nobody knows this story,” Starkman told me – exaggerating only slightly. In his massive biography of King and his times, Taylor Branch brushes past the incident.
Starkman found much of the narrative lodged in King’s papers at Boston University.
In December 1959, King announced he and his family would be moving from Montgomery to Atlanta, where he would share Ebenezer’s pulpit with his father.
The Alabama revenue department decided King needed a going-away present. Not the federal IRS, but the state of Alabama. State auditors rushed examinations of King’s 1956, 1957, and 1958 tax returns.
“Under pressure from supervisors, tax auditor Lloyd Hale disputed gifts King received, reclassifying them as income,” Starkman wrote. A $500 gift to repair King’s firebombed home in 1956, $1,500 to cover hospital costs from a 1958 stabbing were converted to income – and taxed accordingly.
King was assessed $1,722.23 in back taxes and interest. The civil rights leader quickly paid up. And was arrested anyway, on charges of falsifying his ’56 and ’58 returns. The bond was $2,000.
You forget the sharp minds that were behind segregation back in the day. The Alabama Department of Revenue quickly revised its bill – downward, to $1,667.83.
In a sane world, Alabama would have remitted King a check for $54.40 and called it quits. But the South had stepped well into looking-glass territory.
Alabama demanded an entirely new check, while keeping the old one. You see what was happening? With his jail bond, state authorities had tied up $5,490.06 of MLK’s scarce resources. That was no accident, and no small sum at the time.
King’s defense was complicated by the fact that, like many great men, he was a sloppy manager of his own money.
“I went to Boston, and I pulled the papers. And sure enough, there I found the letters between the accountant and the lawyer. They had gone through all the papers, trying to reconstruct everything,” Starkman said. “And there was the smoking gun that he kept lousy records.”
In Alabama, income tax evasion was only a misdemeanor. But perjury — swearing to a false return — was a felony, with each count punishable by one to five years in prison.
King’s defense team, including a CPA from Atlanta, was thoroughly African-American, which you can take as a sign that King was anticipating that he would have to rely on an appeals court for his acquittal.
The six-day trial was in May. As evidence, Alabama prosecutors introduced 1,400 exhibits. King’s defenders were able to prove that some of the documents dated January were actually prepared after King was indicted in February. The state auditor conceded there was no evidence of fraud.
That said, the “not guilty” verdict from the jury – after three hours and 43 minutes of deliberation — was still a surprise. King may not have been the first black man acquitted by an Alabama jury, but he was certainly one of the chosen few.
“Something happened to that jury,” King said afterwards. “It said no matter how much they must suppress me, they must tell the truth.”
Starkman’s account includes no explanations from individual jurors. It’s possible that they simply melted away. Perhaps, like Huck Finn, they thought less of themselves, even guilty, for doing right when society required otherwise. But the choice that faced them was clear. On one side was a black man’s life and livelihood. On the other was the use of the state’s power of taxation to destroy.
In the South of 1960, siding with an African-American amounted a seismic shift. “King is the only person ever charged in Alabama with perjury in filing state income tax returns,” Starkman wrote.
But that wasn’t the end of his chapter on the matter. As we said, in addition to undermining his credibility, part of Alabama’s strategy had been to tie up King’s cash reserves. (The CPA that King hired in his own defense quickly discovered there was no money to pay him.)
So several of King’s friends, including the Revs. Joseph Lowery and Ralph David Abernathy, took out an ad in the New York Times, detailing their struggles in Alabama and asking for donations.
Alabama authorities, including Lester Sullivan, Montgomery’s commissioner of public affairs, sued the civil rights leaders and the newspaper for libel. The case went to the U.S. Supreme Court in 1963.
The justices found for the defendants. The New York Times v. Sullivan was a landmark decision in American libel law that established new constitutional protections to newspapers and anyone else who dabbles in free expression.
“It began with a tax audit,” Starkman concluded.
But if you’ve made it this far, you’ve earned one more tidbit of information – about the title of his book.
Assessing the implications of badly written tax law is as difficult as determining the sex of a mostly submerged hippopotamus, Starkman said.
And you thought accountants were dull creatures.