MEMORANDUM DECISION RE: OBJECTIONS OF DEBTOR TO ORDER TO SHOW CAUSE

On January 28,1988, the Court made and entered its order enforcing an Internal Revenue Administrative summons. Subsequently, an order to show cause was issued on May 5, 1988. The basis for the issuance of the order to show cause was that petitioners alleged that the Universal Life Church, and its officers, had not complied with the Court’s order of August 31, 1987.

After an evidentiary hearing, on June 9, 1988, the Court entered the following order:

At the request of the government, a further order to show cause was issued, to be returned on June 5, 1989. The hearing on this matter was dropped at the request of counsel, inasmuch as the moving papers filed by the respondent indicated that compliance with the administrative summons was imminent. It should be noted that after the issuance of the order to' show cause, petitioners filed a motion for “Entry of a Money Judgment.”

On February 26, 1990, petitioners again requested that the Court issue an order to show cause. The declaration of counsel for the government states in pertinent part that:

The Court’s research indicates that this issue has never been previously addressed by a trial or appellate court, i.e., whether the automatic stay which issues automatically under a Chapter 11 Bankruptcy filing affects the right of the Internal Revenue Service to conduct its examination pursuant to 26 U.S.C. § 7611 . Accordingly, the Court issued a pre-hearing order, requiring counsel to brief the issue of the effect of 11 U.S.C. § 362 upon the continuing investiga tion of the internal affairs of the respondent by the Internal Revenue Service. Counsel has complied.

The respondent church contends that the government’s application for an order to show cause regarding contempt violates the stay order, requiring the Court to invoke the penalties provided for in 11 U.S.C. § 362 . The Court reviews the procedure which the government must follow in its investigation. This IRS investigation arises from the fact that the respondent claims to be exempt from tax action by the United States by virtue of its status as a church. The Internal Revenue Service, as the taxing agency of the government, seeks to review certain records to determine if some or all of the respondent’s activities would defeat the tax exempt status previously claimed by the respondent.

The Government relies upon 26 U.S.C. § 7611 (a)(1986) as authority for its activities. That section provides that:

Title 26 of the United States Code, section 7611(b) states the restrictions upon such an examination.

There is no dispute that the respondent church filed a petition in the bankruptcy court on November 29, 1989, pursuant to Chapter 11 of the Bankruptcy Act. Title 11 of the United States Code, section 362, of course, entitles the respondent to the benefit of its provisions. The purpose of title 11 U.S.C. section 362 was explained in Morgan Guaranty Trust Company of New York v. American Savings and Loan Association, 804 F.2d 1487, 1491 (9th Cir.1986):

In this case, the government does not approach the respondent church as a creditor demanding payment, but rather to inquire as to whether the tax status previously granted is still appropriate. Should that question be answered in the negative, the church is still possessed of all the rights of any other taxpayer to attack the government’s determination.

The Court finds that this is a close question. In these circumstances, the position taken by the respondent church is not unreasonable, nor does it demonstrate the requisite disregard of the Court’s order to warrant a finding of contempt. The Court notes that shortly after a change of counsel on June 1, 1989, the respondent started with compliance. This continued until excused by petitioners’ counsel to allow the respondent church to proceed with litigation in another forum. Then the bankruptcy intervened.

Respondent is directed to resume compliance with the Court’s prior orders within ten (10) days of this Memorandum Decision.