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A taxing struggle

Exiled Grace members see hope in IRS decision



The Rev. Don Armstrong tells nearly 100 congregants gathered Sunday morning at Grace Church and St. Stephen's Parish that he won't tempt the Internal Revenue Service's wrath by making political endorsements.

He then draws quiet laughter when he comments, with apparent sarcasm, on the lengths to which he's gone to keep his political views secret.

Armstrong, of course, made political and legal noise last year when he led Grace's break from the U.S. Episcopal Church to align with an African bishop known for his anti-homosexual views. Since then, Armstrong has stayed firmly planted inside Grace's walls while facing investigation for possible theft and tax fraud.

Grace's division forced many church members into exile and triggered an ongoing legal battle about who owns the historic church property. Interestingly, exiled members are now drawing comfort from the same government agency Armstrong mentions in jest.

A letter from a case advocate within the Taxpayer Advocate Service of the IRS informs Grace members faithful to the U.S. church and the Bishop and Diocese of Colorado that they can continue using the same taxpayer identification number used by the church since at least 1965.

"Another entity has used your taxpayer identification number," the Sept. 10 letter states. "The IRS considers this a form of corporate identity theft."

David Watts, junior warden and finance committee chair for the exiled congregation, explains church leaders received an IRS bill in August for $11,833 in unpaid taxes and penalties.

"We were current [on taxes] and continue to be current," Watts says.

The IRS investigation cleared the tax bill, Watts says. It also offered a sliver of hope that the congregation, now gathering at First Christian Church, could eventually return to 601 N. Tejon St.

"This is the first determination by any governmental body that we are in the right," Watts says.

Armstrong is less impressed with the letter. Reached by phone Monday, he tells the Independent that it is "much ado about absolutely nothing" and insists, "We don't have any tax-paying problem."

He dismisses the exiled Grace members as a group of "CC [Colorado College] people" before asserting he is not speaking for attribution.

"You may not quote me on anything," he says. "You don't want to quote me."

In a follow-up e-mail to the Indy Tuesday morning, Armstrong accuses the rival group of conspiring to have the identification number "falsely" assigned to it, thus committing "corporate identity theft" itself.

ID numbers aside, the financial status of Armstrong's group is unclear. An Aug. 28 letter from vestry members requests contributions to cover more than $500,000 in operational and legal expenses: "We have enclosed a pledge card on which to indicate your personal response to God's calling to participate in the defense and ministry of the parish for the remainder of 2008," it reads.

County Clerk and Recorder Bob Balink, listed as the group's treasurer, did not return a call for comment.

An Episcopal court has convicted Armstrong of stealing nearly $400,000 from the parish. City police have been poring over church records for possible criminal charges, and federal charges tied to the issue of corporate identity theft remain possible. (Neither the IRS nor the U.S. Attorney's Office would comment on whether there is any such investigation.)

The legal squabble over church ownership is set for trial in February, with Armstrong's group, now affiliated with the Nigerian church through the Convocation of Anglicans in North America, facing off against the Bishop and Diocese of Colorado.

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