Church Responds To Allegations Made By Former Employee In IRS Complaint

Dec 17, 2019, 12:47 PM | Updated: 8:17 pm

SALT LAKE CITY, Utah — David A. Nielsen, a former employee for the investment arm of The Church of Jesus Christ of Latter-day Saints, filed an IRS complaint last month alleging the church should be forced to pay taxes on returns made from invested tithing funds and challenging the faith’s investment strategy, humanitarian efforts and tax-exemption status.

Meanwhile, Nielsen’s twin brother has posted to YouTube videos and a link to 74 pages of documents he said Nielsen took from his former employer to back his claims. Lars Nielsen spoke to the Washington Post, which was first to publish a story on the IRS complaint Monday evening.

Reaction to that story brought reaction from the church in a statement released Tuesday morning:

“We take seriously the responsibility to care for the tithes and donations received from members. The vast majority of these funds are used immediately to meet the needs of the growing church including more meetinghouses, temples, education, humanitarian work and missionary efforts throughout the world. Over many years, a portion is methodically safeguarded through wise financial management and the building of a prudent reserve for the future. This is a sound doctrinal and financial principle taught by the Savior in the Parable of the Talents and lived by the church and its members. All church funds exist for no other reason than to support the church’s divinely appointed mission.

“Claims being currently circulated are based on a narrow perspective and limited information. The church complies with all applicable law governing our donations, investments, taxes and reserves. We continue to welcome the opportunity to work with officials to address questions they may have.”

David Nielsen, 41, resigned from church employment in August because, according to the Post, his wife and children had left church membership. Nielsen alleges in the complaint that Ensign Peak Advisors, the church’s investment arm, has holdings worth between $99 billion and $101 billion. He claims Ensign Peak is not meeting IRS regulations for using a percentage of its funds annually for religious, educational or charitable purposes.

Nielsen is seeking a whistleblower’s reward of a percentage of any back taxes the IRS recovers, according to the Post.

The church offered no specific comment about the complaint or Nielsen prior to the Post’s story. Instead it directed the Post and other media to past comments by church leaders about church finances. Leaders previously have said the faith provides $40 million a year to address famines, respond to natural disasters, aid refugees, give medical care and training and more through its humanitarian arm, Latter-day Saint Charities.

Latter-day Saint Charities reported in February that the figure is even larger. Its 2018 annual report says the charity has provided more than $2.2 billion, or an average of $64.7 million a year, in 197 countries since its creation in 1985.

“Latter-day Saint Charities has provided more than $2 billion in aid to assist those in need throughout the world,” President Russell M. Nelson said two months ago at the church’s semiannual general conference. “This assistance is offered to recipients regardless of their church affiliation, nationality, race, sexual orientation, gender, or political persuasion.”

The church also operates other charitable concerns. For example, local bishops and branch presidents — leaders of the faith’s 30,500 individual congregations around the world — help members with food, housing and other welfare needs on a daily basis.

Nonprofit groups, including religious organizations, are exempted from paying taxes on income in the United States. Ensign Peak Advisors is an integrated auxiliary and supporting organization of the church and is tax exempt.

David Nielsen did not speak to the Washington Post and has not commented publicly. In his letter, he asked the IRS to remove Ensign Peak’s tax-exempt status and compel it to pay billions in back taxes.

His twin, Lars, a Minnesota-based health care consultant, posted videos this week in which he accused church leaders of making fraudulent statements, derided BYU — his alma mater — for penny pinching and mocked the religious reasons cited by Ensign Peak and church leaders for having a large reserve fund.

The Nielsens claimed that Ensign Peak made two payments from the fund that violate federal tax rules.

They claimed that in 2009 Ensign Peak bailed out Beneficial Financial Group, a life insurance company owned by the church’s for-profit arm, Deseret Management Corp., which also owns the Deseret News. They alleged that Ensign Peak delivered $600 million to Beneficial in 2009.

In fact, Beneficial made full disclosure to the Utah Department of Insurance that Deseret Management Corp., its owner, provided $594 million to Beneficial during the 2008 financial crisis to strengthen its balance sheet. Those public filings are on file with Utah Department of Insurance and were reported in two articles published by the Deseret News at the time.

Since 2009, Beneficial has paid dividends of almost a half billion dollars back to Deseret Management Corp., according to public filings at the Utah Department of Insurance.

The second payment challenged by the Nielsens was made as part of the church’s City Creek development in Utah’s capital city. The Nielsens alleged that Ensign Peak Advisors improperly sent $1.4 billion from 2010 to 2014 to the church entity funding City Creek, Property Reserve Inc. The church did invest in the housing and parking elements of City Creek while Taubman Centers, Inc., a nationally recognized shopping center developer, owns and operates the shopping center.

The Nielsens also said church leaders should exempt church members from paying tithing or give them a rebate because the church could cover its operations with the investment income of its reserves.

While tithing is a source of income for the church, it is regarded within the faith as much more than a financial principle. Tithing is a biblical principle practiced in many faiths with components far beyond church operations. Abraham and Jacob paid 10% of their increase to God, and Jesus Christ also taught the principle. Muslims and Christians including Latter-day Saints believe tithing is inherently important because it sanctifies the individual.

The church teaches its members to be self-reliant and build a personal or familial reserve. Its leaders say the church follows the same principles.

Presiding Bishop Gérald Caussé referred to those principles last year in a public talk and published later in a book, “The church applies this same principle in its own savings and investments. In addition to food and emergency supplies, the church also sets aside funds each year for future needs. These funds are added to church reserves, which include stocks and bonds, taxable businesses, agricultural interests and commercial and residential property. Investments can be accessed in times of hardship or to meet the emerging needs of a growing, global faith in its mission to preach the gospel to all nations and prepare for the Second Coming of Jesus Christ.”

In 2018 the church published this Q&A on church finances.

KSL 5 TV Live

Top Stories

Local News

Handcuffs in a jail cell FILE PHOTO (Ravell Call/Deseret News)...
Pat Reavy

7 arrested in drug trafficking investigation in Utah and Salt Lake counties

Utah County law enforcers served search warrants on four homes simultaneously last week, resulting in the arrests of seven people and the seizure of multiple pounds of meth and heroin.
21 hours ago
First responders on the scene of the motorcyclist who fell about 50 feet. (Washington County Sherif...
Michael Houck

Rescue crews save woman stuck in remote area and motorcyclist who fell 50 feet

Washington County officials responded to two different search & rescue operations on Sunday.
21 hours ago
Michael Houck

Backcountry skier dies after slipping, falling near Lisa Falls

A man is dead after tumbling a "significant distance" while backcountry skiing in Little Cottonwood Canyon on Saturday.
21 hours ago
USU student Max Shulga during Saturday night's game....
Shelby Lofton

Utah State community responds to ‘Russia’ chants directed at Ukrainian player

Some USU students say that the Colorado State University students crossed a line that goes beyond simple trash talk during a game.
21 hours ago
The collapsed awning at the Wing Pointe Apartments (Heber City Police Department)...
Michael Houck

Snow collapses awning at a Heber apartment complex

Six cars were trapped under a collapsed awning after the Sunday afternoon snowfall. 
21 hours ago
Image of the scene where police witnessed a wrong-way driver crash in Salt Lake City (Salt Lake Cit...
Chandler Holt, KSL Newsradio

SLCPD officer witnesses wrong-way drunk driver crash into embankment

A Salt Lake City police officer witnessed the truck crossing the medium several times before losing control and crashing into an embankment Saturday night.
21 hours ago

Sponsored Articles

vintage photo of lighting showroom featuring chandeliers, lamps, wall lights and mirrors...
Lighting Design

History of Lighting Design | Over 25 Years of Providing Utah With the Latest Trends and Styles

Read about the history of Lighting Design, a family-owned and operated business that paved the way for the lighting industry in Utah.
Fiber Optical cables connected to an optic ports and Network cables connected to ethernet ports...
Brian Huston, CE and Anthony Perkins, BICSI

Why Every Business Needs a Structured Cabling System

A structured cabling system benefits businesses by giving you faster processing speeds and making your network more efficient and reliable.
notebook with password notes highlighted...
PC Laptops

How to Create Strong Passwords You Can Actually Remember

Learn how you can create strong passwords that are actually easy to remember! In a short time you can create new ones in seconds.
house with for rent sign posted...
Chase Harrington, president and COO of Entrata

Top 5 Reasons You May Want to Consider Apartment Life Over Owning a Home

There are many benefits of renting that can be overshadowed by the allure of buying a home. Here are five reasons why renting might be right for you.
Festive kitchen in Christmas decorations. Christmas dining room....
Lighting Design

6 Holiday Decor Trends to Try in 2022

We've rounded out the top 6 holiday decor trends for 2022 so you can be ahead of the game before you start shopping. 
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to Choose What MBA Program is Right for You: Take this Quiz Before You Apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Church Responds To Allegations Made By Former Employee In IRS Complaint