Note: This is the first of two parts. Read part two here.
The hotel conference room is packed on an October morning. Participants can barely take notes between the page flips and bits of advice called out from the front of the room.
There, moving between the podium and the first rows of tables, is H. Michael Chitwood, whose promotional materials deem the "authority" on church tax law.
Many in the room believe Chitwood — with his blue suit and white hair swept back — stands between them and a serious tax violation.
Throughout the day-long conference near Atlanta last year, the Chattanooga businessman sprinkles in his various catchphrases, well-worn strings of words among his millions of social media followers and thousands of clients.
"It's not what you know that will hurt you," Chitwood told the crowd in the hotel. "It's what you don't know."
What the participants at the conference do not know, and what hundreds of churches across the country do not know, is the full story about Chitwood — the story tax records, lawsuits, internal emails and legal experts tell.
A review of Chitwood's advice and products compared to guidance from national tax experts suggests he overemphasizes the risks of IRS enforcement during his nonprofit conferences. His statements help turn church leaders from across the country into clients of his private, for-profit accounting service, which has been fined or cited for misleading the public about its credentials or conducting unlicensed activity. Chitwood's network of businesses and nonprofits have made him millions of dollars despite several of those nonprofits having faced accusations of being run for his personal benefit.
Chitwood denied scaring churches or exaggerating any threats they might face. He maintains he is not deceiving anyone. Chitwood said he took over the business from his father, and God called them both to this work.
"We felt like we had a calling to help these ministers because there was a real lack of knowledge with ministers and church check writers and financial secretaries," Chitwood told the Times Free Press. "And so when dad had it, then he turned it over to me, then we kindly expanded the business."
PROFITS AND NONPROFITS
Chitwood oversees multiple organizations based in Chattanooga with a nationwide reach, among them nonprofits such as Church Management and Tax Conference, Celebration Church, Potential Church, Wealthy Place Church and the International Congress of Churches and Ministers.
He also oversees the for-profit accounting firm Chitwood & Chitwood, which specializes in church accounting. The Chattanooga businessman has ties to organizations like Save America's Churches and the Legacy Insurance group. He promotes himself as a wealth-building coach and hosts seminars on the subject priced at $995 per person.
Chitwood claims he is responsible for creating more than 1,000 "certified millionaires." On social media, he attracts millions of followers for things like his Millionaire Club International, which seeks to teach people to have financial windfalls of their own, encouraging them to believe in God and support his organizations.
In a YouTube video posted on his page in 2018, Chitwood fanned himself with a stack of bills and told viewers what a real son does for the father. "When he sees me, he pays honor," Chitwood says in the video. "He don't just give me a quarter. He gives me a whole stack."
Church Management has held seminars in cities throughout the United States for nearly 50 years, Chitwood told the Times Free Press. By his account, Chitwood's business works with thousands of churches. Most are independent, meaning they lack oversight from or affiliation with a larger denomination. Chitwood said churches request his seminars and services.
When the Times Free Press attended, the conference fee was $139 with a $50 workbook. The seminars are now offered online for a $149 fee with a $20 digital notebook. Participants are encouraged to use Chitwood's accounting services. They can also buy his books and CD set on church building that sells for $2,795 or his "Certified Master Life Coaching System" priced at $15,500. Chitwood also sells "succesessories," which include a $40 lapel pin.
In 2010, multiple CPAs filed a complaint with the National Association of State Boards of Accountancy about Chitwood's conference. The complaint alleged inaccuracy in conference materials and excessive marketing.
"The emphasis throughout the conference was on the purchasing of Chitwood & Chitwood products, rather than learning about the new IRS regulations," the NASBA complaint reads, in part.
IRS rules bar nonprofits from operating for the benefit of individuals beyond the scope of the organization or to unjustly enrich themselves at the organization's expense.
Chitwood said the claims of the complaint were "totally false" and that his conference has had no other problems. NASBA officials could not comment on the content or outcome of the complaint since the process is confidential, a spokesperson said.
During his October 2019 conference on tax law, Chitwood told participants the things they learned that day would not be enough to protect them. Church tax law is so complicated people should outsource their finances to experts, he said.
"Somebody needs to write that word down, 'outsource,'" Chitwood told the crowd. "Who do you want me to outsource to? Well, who do you think? There's a lot of good firms but I mean, I'm in business. I want you to outsource to me."
Chitwood then led the conference audience to respond "Chitwood" in unison.
Chitwood told the Times Free Press he did nothing wrong.
"We are telling them that we are a firm that specializes in churches and ministries," Chitwood said.
Chitwood's seminars are certified by a group called the Financial Oversight Board for Churches and Ministers. A certificate from the group is included in each of Chitwood's workbooks and says Chitwood's organization is in financial compliance and qualified to teach seminars.
Yet, the oversight board's website is paid for by Chitwood & Chitwood. The address for the oversight board listed on its application for membership is the same address as Chitwood & Chitwood.
Chitwood acknowledged paying for the group's website but said the oversight board is independent.
At least one of the oversight board members listed on its website, Ron Phillips Sr., pastor emeritus of Abba's House, has appeared alongside Chitwood in charge-for-admission spiritual seminars, such as a three-day spiritual warfare faith conference in December 2019.
Phillips has also served on the board of governors of the International Congress of Churches and Ministers. He appears in a promotional video for Chitwood's organization, saying Chitwood does his taxes and helped him through an audit letter he received from the IRS.
Phillips declined to be interviewed or provide a copy of the IRS letter he says he received. Phillips said through a spokesperson that he is retired and is not interested in attention, although he said in a November 2019 interview that he preaches throughout the Southeast and is finishing a book.
Alexander Draft, who oversees three churches in Virginia and the Carolinas, attended multiple Chitwood conferences on church growth and wealth management in the past three years. Draft even helped organize a Chitwood conference. The experience left a sour taste in his mouth, he said. Draft said he was sold a bill of goods after being told Chitwood would help grow his church, his business and his wealth.
"You go to the conference and hear the same thing and the same promises and it just never came through," Draft said. "But it was always about get these books and get this book and get that and go through this seminar. And I went through some of the ones he had. I paid the money. You pay the money, and I still don't get no results."
Draft estimates he spent nearly $2,000 on Chitwood's seminars and books. When Draft confronted the Chattanooga businessman about what Draft believed were the unkept promises of what he was buying, Chitwood gave him another set of books. Draft said he was told if he passed a test in the book, he would get a special code to apply for a church grant.
ABOUT THIS STORY
This investigation took more than a year to report and included a review of more than 1,000 pages of tax returns, internal emails, lawsuits, marketing materials and documents obtained through open records requests. The Times Free Press paid full admission to Chitwood’s October 2019 church conference near Atlanta. Chitwood responded to questions for this story for more than an hour in November 2019 and for more than two hours in the presence of his attorneys in August 2020.
'PASTOR IN JAIL'
Through his seminars, Chitwood encourages churches to apply for 501(c)(3) nonprofit tax-exempt status from the IRS. He repeatedly claims the IRS is aggressively targeting churches for tax fraud and that churches need protection.
His church-overseeing nonprofit, International Congress of Churches and Ministers, charges churches nearly $2,000 to apply for the exemption if assistance is needed, along with creating the church's articles of incorporation and bylaws. He then charges churches an additional $250 a year to remain in his group. Church leaders can also pay Chitwood's nonprofit to receive ministerial credentials with a $150 application and $60 annual fee.
Tax experts from across the country said some of Chitwood's advice to churches, including that the IRS is aggressively investigating them, is misleading.
Churches in America are tax-exempt by simply existing. They do not need official IRS recognition, though the IRS says that churches can get official recognition so members can be certain their donations will be tax-exempt.
The IRS spells out 14 possible criteria for qualifying as a church, including "recognized creed and form of worship," "regular religious services" and having "established places of worship." The agency uses a combination of these characteristics with other characteristics to determine whether a group is a church for tax purposes.
Pete Evans, part of the church watchdog group Trinity Foundation, said throughout U.S. history the IRS has remained hesitant to meddle in the affairs of churches by questioning their status as a church or removing their exemption.
"Church status is about the most protected status that any organization can have," Evans said.
Churches do not file annual tax returns, so there is no federal computer system to flag inconsistencies and start an inquiry. The IRS is most often alerted about church tax issues by a whistleblower in the church or a media report, said Frank Sommerville, a Texas-based CPA and editorial adviser at Church Law & Tax.
At the same time, the IRS's standards for a church investigation are extremely high. In the past decade, the IRS has not punished the hundreds of churches increasingly weighing in on politics, a likely violation of their tax-exempt status, said Samuel D. Brunson, professor of tax law at Loyola University Chicago.
"[The IRS] is not going to be running around arresting pastors unless the pastor is embezzling money or committing fraud," he said. "It's very, very unlikely that the IRS is going to come knocking to audit a church."
The Times Free Press is continuing to investigate H. Michael Chitwood’s ministries and business dealings. If you have information that can help please contact the reporter at email@example.com or call 423-757-6249.
During his presentation last year, Chitwood told the church leaders there are two kinds of prison ministries: the ones where you go into the prison to minister and the ones where you are in the prison and minister.
Chitwood told the crowd a tax mistake can give a pastor a "federally funded prison ministry."
A promotional email from Chitwood's organization sent in January features a priest in handcuffs and says thousands of IRS agents have "been released to go after churches." A 2017 post on Chitwood's Facebook page features an image of three men labeled IRS agents and includes the caption "Just because your heart is right with God Doesn't mean your books are right with the IRS! These guys will put you in prison!" The post also features a photo of a man in an orange jumpsuit. In an April 2018 tweet, Chitwood said, "GET UR HOUSE of Worship in Order or GO TO JAIL!"
Many of the cases Chitwood promotes on his websites and social media pages lack certain context. For example, in a February 2017 Facebook post, his Church Management organization posted a screenshot of a news broadcast from Tulsa, Oklahoma, about Pastor Willard Jones receiving a three-year prison sentence. The post included the caption "IRS PUTS PASTOR IN JAIL. Why did he go to jail? What did the IRS find in his/her books?" The post does not include information about how Jones embezzled nearly $1 million from charity to buy luxuries such as a Rolex watch and mink coat.
BAD FOR BUSINESS
In an interview with the Times Free Press, Chitwood acknowledged churches do not need to apply for formal 501(c)(3) status, but said he believes churches need to get the official tax-exemption letter. There could be confusion about whether donations are tax-deductible if the IRS does not recognize the church on an individual's tax return. This could lead members to stop donating or leave the church, he said.
Chitwood claims the IRS is auditing individuals "all the time."
Yet, the IRS is facing employee shortages, outdated equipment and budget cuts. In the past 10 years, the organization has lost $2 billion in funding and lost a third of its auditors, according to a 2018 ProPublica investigation. Additionally, the agency did 675,000 fewer audits in 2017 than in 2010, a drop of 42% in the overall audit rate.
A 2013 study from two University of Dayton researchers found that among the approximately 335,000 churches in the United States, the probability of an IRS audit over a 10-year period was 0.014%, a tenth of the probability that an individual taxpayer would be audited. The number of church audits in the years studied ranged from 17 to several dozen. More than 60% of the audits conducted on churches resulted in no negative consequences for the house of worship, the study found.
In 2016, Chitwood sent thousands of letters to churches across the country headlined in red saying "Compliance Violation" and stamped "OFFICIAL NOTICE."
"Our experience reveals, you may not have filed all your IRS Tax Forms and penalties may be assessed," the letter reads. " You must bring your Church into compliance now — before it's too late!"
The letter told the churches to call a compliance officer immediately. The phone number listed for help was for Chitwood's church management nonprofit.
Chitwood said in an interview the letters are meant to get a pastor's attention, not to mislead anyone.
"We're not sending it to you to really scare you but we are sending it to you to let you know that you need to check these items," Chitwood said.
A Minnesota-based CPA who works for multiple former Chitwood clients told the Times Free Press that they came to him frightened that a single mistake would result in their bankruptcy and imprisonment.
Chitwood repeatedly said in an interview that he does not intentionally try to frighten anyone.
"When we speak a message to a group, if they know that they're doing something wrong, then obviously they're going to take the position that we scared them," he said. "But we don't intentionally try to scare anybody. What we do is we try to put the news out there about what it is."
Scaring people would be bad for business, Chitwood said.
Since 2001, the earliest year tax records are publicly available, Chitwood's Church Management and Tax Conference generated more than $51.8 million in revenue. The nonprofit owns a Cessna 525 jet, valued at around $5 million today, according to Federal Aviation Administration records.
Being a nonprofit, CMTC's revenues must be used within the organization. Between 2001 and 2010, Deborah Chitwood, the former director and Chitwood's wife, was paid more than $115,000 a year to lead the organization and Michael Chitwood made between $180,000 and $550,000 a year to work as a speaker, according to tax records.
After his wife's death in 2011, Chitwood assumed official control of the organization. Since then, the organization has paid him salaries between $74,400 and $156,000, along with an annual nontaxable housing allowance of between $106,000 and $171,900.
In total, between 2001 and 2019, Chitwood has made more than $7.3 million from his CMTC salary, related work and untaxed benefits, though with other business ventures this likely represents only part of Chitwood's income.
Chitwood owns multiple residential properties in Chattanooga near Hamilton Place valued, in total, at more than $500,000, as well as a 6,400-square-foot, five bedroom, five bathroom house in Fort Lauderdale, Florida, valued at more than $2.5 million.
CHITWOOD & CHITWOOD
The Chitwood & Chitwood accounting service has been the focus of multiple complaints with federal and local governments, as well as lawsuits. In 2016, the Tennessee Department of Commerce & Insurance found Chitwood was advertising CPA services without having a CPA on staff. Chitwood's business originally denied it was breaking the law but later admitted to it and paid a $1,000 civil penalty, according to documents obtained through a Tennessee Public Records Act request.
An attorney representing Chitwood's business told the Tennessee Board of Accountancy the Chitwood & Chitwood organization "does not hold itself out to be an accounting firm or to provide any services which require licensure," according to a summary of the case. Chitwood & Chitwood had been cited twice before for unlicensed activity.
During a 2010 trial of a Chitwood accounting client charged with tax evasion, conspiracy and fraud, a consultant with Chitwood's firm testified that "neither he nor any other employee at the company has a degree in finance, accounting or law." Chitwood told the Times Free Press his firm hires outside CPAs on contract.
In 2002, a former employee sued Chitwood & Chitwood, alleging she was fired after raising concerns about racist comments made by a coworker. The case was dismissed with Chitwood & Chitwood paying all her legal costs.
Trinity Foundation, the Texas-based group that investigates church wrongdoing, has seen Chitwood's name on multiple investigations of other church leaders, including one on the evangelist Todd Coontz. In January 2019, Coontz was sentenced to five years in prison for hiding nearly $2 million in income from the government, according to reporting from the Charlotte Observer. Coontz was charging his church ministry's business accounts to fund his lifestyle, which included multi-million-dollar homes and multiple high-end cars.
The Trinity Foundation investigation of Coontz found Chitwood drafted and filed the incorporation papers for Coontz's ministry.
Chitwood client Phil Driscoll, winner of the 1985 Grammy award for best gospel performance by a duo or group with Debby Boone, went to federal prison in 2007 for tax evasion. On the stand during the 2006 trial, Chitwood said he advised his client "not to use any ministry funds for private use, or if he did to declare it."
Chitwood has also done the taxes for the ministry of the Rev. Floyd Flake, a New York City pastor who was previously charged with tax evasion and embezzlement and faced scrutiny for not declaring income from his role as the leader of a major church despite income showing up in other tax filings.
AN ENLARGED HEART
A 2009 lawsuit against Chitwood accused the Chattanooga businessman of running a fraudulent nonprofit for his personal benefit.
The lawsuit, filed by Dr. David Oruma, alleged Chitwood befriended Oruma and became his financial adviser. Chitwood directed Oruma, a Nigerian immigrant, to stop donating to various ministries because they were misusing the money and instead donate his money to Chitwood's nonprofits, the lawsuit claimed.
Oruma said in nearly three years he donated more than $250,000 to Chitwood on top of other financial investments Oruma provided Chitwood that were allegedly misused.
According to the lawsuit, Chitwood referred to Oruma as his "spiritual son" and repeatedly advised Oruma to donate more because the doctor could "either give the money to God or to the government." Oruma alleged Chitwood misused his position as a financial adviser to pressure Oruma into giving money to Chitwood's nonprofits.
The lawsuit also alleged Chitwood was running his nonprofit for his private benefit, to get clients for his private accounting service and sell other Chitwood products.
Chitwood's activity amounted to a violation of the Racketeer Influenced and Corrupt Organizations Act, a federal law used in the 1970s to go after the Mafia, the lawsuit alleged.
"As a result of Dr. Chitwood's operation of CMTC for the private benefit and private inurement of Dr. Chitwood, CMTC is not a legitimate tax-exempt organization but is instead a sham tax-exempt organization," the lawsuit said.
Chitwood's attorney at the time, Gary Henry, told the Times Free Press that Oruma's lawsuit was in retaliation for an earlier lawsuit Chitwood filed against Oruma over a car Chitwood allegedly sold Oruma and that Oruma stopped making payments on.
"This was, in our view, a retaliatory lawsuit because we wanted the car back," Henry said.
The attorney said Oruma's lawsuit — with its allegations of fraud and violating the RICO Act — lacked substance.
Whether Oruma's lawsuit had substance was never determined. It was never argued in court.
On Dec. 18, 2009, the same day Oruma filed his lawsuit, he was found dead in his car.
The doctor was 47 years old and in great shape, without any history of sickness or heart issues, said Oruma's son, Michael. Around the time he died, his father was very stressed about something, Michael Oruma said. The doctor would come home at night and not talk to anyone, just go into his room and pray.
An autopsy by the Davidson County medical examiner found no signs of trauma or foul play and determined it was death from an enlarged heart.
In Nigerian culture there is often focus on demons and evil spirits, Michael Oruma said. He still struggles to understand how his father could die suddenly when he was otherwise healthy.
"Being from Africa, we say the devil was it," he said.
Contact Wyatt Massey at firstname.lastname@example.org or 423-757-6249. Follow him on Twitter @news4mass.