According to the case reporter, Imam Pasha Shaluddin was a pillar of his community and Masjid in Newark. Imam Pasha founded a nonprofit religious corporation in 1988, the Islamic Center of Passaic. He started the organization with no constitution or bylaws. Imam Pasha had complete control. Consolidated control, by the way, is typical of how some people have formed Masajid in the United States. Someone starts it, runs it, and controls the whole thing. Completely normal.
Imam Pasha’s community purchased a building in Patterson, New Jersey. It was partially rented commercial space, the revenue from which would fund most of the Masjid on the same property.
Imam Pasha’s wife served as the Finance Director of the Islamic Center. When Imam Pasha passed away in 2013, his wife, according to the appellate panel, “was under the mistaken impression she inherited Islamic Center and its property from her husband.” The wife “also appears to have believed she was vested with sole control of Islamic Center.”
Why would she believe this? She may not have been unreasonable in thinking she controlled the organization. The Masjid started as a personal fiefdom. It was under the control of a husband and wife, where the husband controlled everything but the money, which was under the control of the wife. For most people, absolute control is not anything different from ownership.
Just like a country can be passed on from father to child, as is the case in many countries around the world, so can a farm, a house, or, it would seem, a Mosque.
In that case, another Imam and board created new bylaws, which were followed to remove the widow from her position. A trial court and appellate court agreed that the wife did not get the Masjid.
The Fiefdom Masjid Model
Masajid with consolidated control is not uncommon in the Muslim community in the United States. It works for a while. Suppose someone has the support of other Muslims in the community or the resources themselves. In that case, they can start a Masjid, raise money, draw a salary, and not worry about “accountability” or people asking “questions” about how he runs the organization, his decision-making process.
This model is also relatively standard in the United States for other faith traditions.
Muslim organizations do not have political protection and are subject to tax laws that are perhaps not as enforced in some communities but could have some harsh results if they were. The fiefdom model can be a horrible idea.
The Private Inurement and Private Benefit Doctrines
A religious organization must operate exclusively for religious and charitable purposes. Any private benefit can jeopardize the organization’s tax status. Control by a person or family would be a massive red flag. Occasionally, masjid property may be owned directly by the person controlling the Masjid, but donations would flow to a nonprofit organization.
This issue concerns private inurement and private benefit, which are related but somewhat distinct concepts. Private inurement is an absolute bar that prohibits people from taking undue advantage of a nonprofit in a way that is not identical to ordinary business practices. So, for example, if giving the Masjid property to the person who runs the Masjid is just a deal for the guy who runs the Masjid, it would be pretty suspect. There are taxes on what are known as “excess benefit transactions” in IRC 4958.
The Private Benefit Doctrine differs slightly, but courts have blended it with private inurement. The concept can go beyond monetary gain, and suspect benefits can go to more people than insiders but benefit a limited number of people.
Both private benefit and inurement can also harm the organization and the person who runs it.
Muslims Have Been Fortunate
There is a strong tendency by mostly smaller Muslim organizations to be run as private for-profit businesses. That we are dealing with a “business” has implications for expected Islamic inheritance. Family members may naturally expect to inherit from a nonprofit organization, which is technically supposed to be for charitable purposes and has no owners. So, family members may end up disappointed because while they may naturally expect it because of the specific nonprofit culture, that is not how nonprofits work. Beyond this, though, there is the potential for more significant losses if the IRS becomes interested in what is happening. So far, they have not been.
As we transition to a new federal administration, it may be time to look at whether Muslim organizations and the people running them are vulnerable to enforcement of tax laws.
For a consultation with Ahmed Shaikh regarding your Islamic Estate Planning, you can schedule a 15-minute meeting on zoom by clicking here.