It’s elementary my dear Watson…
It’s pretty simple. American tax codes are wrongly benefiting and empowering the unethical, potentially illegal, and most assuredly uncharitable activities of an organization using “religion” as a cloak.
Because churches and other nonprofits enjoy certain tax benefits,
the IRS has the right to audit any organization it
believes no longer qualifies for an exemption
or has failed to pay applicable taxes.
A periodic reminder for the Internal Revenue Service…
The Church of Scientology is one of the most discussed religions of the modern era, and its beliefs and practices have been shrouded in controversy since its emergence in the 1950’s. Shortly thereafter, the Internal Revenue Service recognized Scientology as a valid religious organization, thus granting certain governmental protections and benefits afforded to religious organizations in this country, including tax exemption. After a decades-long battle between the Church and the IRS, the IRS eventually granted a blanket tax exemption to all Scientology organizations under Section 501(c)(3) of the Internal Revenue Code.
However, the Church’s current practices and activities raise significant concerns that warrant a reexamination of its tax exemption eligibility. The Church engages in activities that are substantially commercial by requiring payment from Scientologists to practice the religion and improve their spiritual standing. Additionally, the Church violates the fundamental national public policy that freedom of speech should not be suppressed simply because two parties disagree, a foundation of our nation that is trounced by Scientology’s Fair Game policy. Further, the Church facilitates private inurement of top executives and influential celebrity members by expending excessive funds for their personal benefit.
For these reasons, the IRS should reevaluate the tax exemption status of each individual Scientology organization, or risk undermining judicial decisions and creating the dangerous precedent that persistent attacks on governmental agencies will in turn lead to leniency and submission. Should the IRS investigate and determine that all Scientology organizations comply with the requirements of Section 501(c)(3), then retention of their tax exemption status would be completely warranted; however, to permit such activities to continue without question would undoubtedly defeat the principles behind tax exemption and raise legitimate concerns regarding the fairness of IRS decisions.
Eight years ago, Tony Ortega provided some solid advice on how to put Scientology’s tax exempt status back on the IRS radar. He discusses there here (names, addresses and full instructions are provided):
So if people are interested in motivating the IRS to revisit its 1993 decision to grant Scientology tax exempt status, what can they do?
If you’re serious about getting the attention of the IRS, forget the White House petition and get real. The IRS already has a well-defined set of rules for complaining about an organization’s tax exempt status.
Jeffrey Augustine has been investigating this, and sent us a primer on how to complain about Scientology’s activities to the IRS.
Jeff found, for example, this happy language from the government about how it really, really wants to hear from you! “Go ahead and complain. The Internal Revenue Service is all ears — particularly about complaints alleging any abuse of the tax-exempt status granted to a non-profit organization,” says an agency information sheet.
He recommends that you grab a copy of the official form the IRS wants you to use to submit a referral (which is IRS lingo for a complaint).
“The IRS Form 13909 is a one-page form that allows anyone — you don’t have to be an American citizen — to report the Church of Scientology and its related tax exempt entities for abuses of tax exemption.
Scientology even has its own online website for members to file “Knowledge Reports. ” Who knew? One can only wonder how they would react to a form submitted questioning their tax-exempt status … but hey, take a shot.
In its nearly one-mile-long entry, “Tax status of Scientology in the United States,” Wikipedia concludes…
Since the Church of Scientology gained tax exemption in 1993, there have been a number of high-profile calls for the IRS to review and potentially revoke the exemption. The calls have generally focused on the question of whether the church is operating for legitimate tax-exempt purposes.
As this investigative piece in the New York Times reported in 1997, there are elements of Scientology’s tax exemption that are relative even to this day…
On Oct. 8, 1993, 10,000 cheering Scientologists thronged the Los Angeles Sports Arena to celebrate the most important milestone in the church’s recent history: victory in its all-out war against the Internal Revenue Service.
For 25 years, I.R.S. agents had branded Scientology a commercial enterprise and refused to give it the tax exemption granted to churches. The refusals had been upheld in every court. But that night the crowd learned of an astonishing turnaround. The I.R.S. had granted tax exemptions to every Scientology entity in the United States.
The full story of the turnabout by the I.R.S. has remained hidden behind taxpayer privacy laws for nearly four years. But an examination by The New York Times found that the exemption followed a series of unusual internal I.R.S. actions that came after an extraordinary campaign orchestrated by Scientology against the agency and people who work there.
THERE ARE RULES.
It’s easy for a nonprofit organization to maintain its tax exempt status—and can be just as easy to lose it.
Each year, the IRS revokes the tax-exempt status of more than 100 501(c)(3) organizations. Organizations recognized as exempt from federal income tax under this section of the Internal Revenue Code include private foundations as well as churches, educational institutions, hospitals, and many other types of public charities.
Private benefit: A 501(c)(3) organization’s activities should be directed exclusively toward some exempt purpose. Its activities should not serve the private interests, or private benefit, of any individual or organization (other than the 501(c)(3) organization) more than insubstantially. The intent of a 501(c) (3) organization is to ensure it serves a public interest, not a private one.
Inurement: A 501(c)(3) organization is prohibited from allowing its income or assets to benefit insiders (people with a personal or private interest in the activities of the organization). Insiders are typically board members, officers, directors, and important employees.
Lobbying: When an organization contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or when the organization advocates the adoption or rejection of legislation, it is lobbying.
Political Activity: All section 501(c)(3) organizations are prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate running for public office. The prohibition applies to all campaigns (federal, state and local level). Political campaign intervention includes any and all activities that favor or oppose one or more candidates for public office.” The prohibition extends beyond candidate endorsements.
Unrelated Business Income: Another activity that can potentially jeopardize an organization’s 501(c)(3) tax-exempt status is having too much income generated from activities that are unrelated to the exempt function of the organization. This income comes from a regularly-carried-on trade or business that is not substantially related to the organization’s exempt purpose.
Some of the most common UBI generating activities include: the sale of advertising space in weekly bulletins, magazines, journals or on the organization’s website; the sale of merchandise and publications when those items being sold do not have a substantial relationship to the exempt purpose of the organization; provision of management or other similar services to other organizations; and, even some types of fundraising activities.
Around the world.
Scientology status by country.
Argentina: No known recognition as a religion. As of 2012, it was officially recognised as a cult.
Austria: Tax-exempt status as a charitable organization. It is not recognized as a religious association in Austria.
Belgium: In 2005, Scientology’s application for the status of a recognized religion was refused.
Brazil: Not registered as a religion.
Chile: As of 2009, Scientology had been considered a cult. As of 2012, Scientology did not have legal religious recognition.
China: China recognises just five state-sanctioned religions, and Scientology is not one of them.
Denmark: In Denmark the Church of Scientology is not officially approved as a religion.
Finland: Scientology is not officially recognized as a religion in Finland.
Germany: The German government does not recognize Scientology as a religion.
Greece: The German government does not recognize Scientology as a religion.
Ireland: In Ireland, the Church of Scientology has not been successful in its attempts to obtain tax-free, charitable status.
Japan: Japan does not officially recognize Scientology as a religion.
Mexico: No known legal recognition as a religion.
Norway: Norway does not recognize the official Scientologikirken (Church of Scientology) as a religious community. It is registered as a non-profit.
Poland: Poland does not officially recognize Scientology as a religion.
Romania: According to the Law no. 489/2006 Scientology is not included among the 18 officially recognized religions by the State.
Can the IRS ever be convinced to revisit the (still formally secret)
agreement that it made with Scientology?
Final thoughts…
In the world of religious tax exemptions, does Scientology measure up?
Though Hubbard, ever the entrepreneur, founded Scientology as a for-profit entity in 1952, he quickly realized the pecuniary benefits of “the religion angle,” as he put it in a letter to one of his acolytes. After the federal government revoked the tax exemption it had awarded Scientology in 1956, Hubbard went to war. The church’s efforts culminated in Operation Snow White, a seven-year long campaign of dirty tricks that resulted in 11 senior church officials (including Hubbard’s wife) pleading guilty to obstruction of justice, burglary of government offices and theft of documents in 1978. Undeterred, the church later hired private investigators to snoop on IRS employees. Scientology even set up a front group, the National Coalition of IRS Whistle-Blowers, to discredit the agency.
The campaign worked. When Hubbard’s protégé, David Miscavige, strolled unannounced into IRS headquarters 13 years later and offered to drop the roughly 2,500 lawsuits individual Scientologists had filed against the agency in exchange for a tax exemption, the beleaguered IRS agreed.
There was no legal justification for this decision. Every single time Scientology had challenged its nonexempt status in court, it lost. Indeed, just a year before the IRS reversal, the U.S. Claims Court cited “the commercial character of much of Scientology,” its “virtually incomprehensible financial procedures” and “scripturally based hostility to taxation” as reasons for denying an exemption.
Unlike other organized religious communities that minister to individuals regardless of their ability to tithe, Scientology extracts ever-higher fees from its members on the “Bridge to Total Freedom.” As the head of France’s cult-monitoring unit stated, Scientology’s schemes lead one to “no longer act of his own free will, but become completely dependent on this organization that will exploit his weakness to the maximum, in order to attain a fortune.”
Finally, there is the church’s routine use of violence to intimidate would-be dissenters. Many former Scientologists have attested to physical abuse, forced labor and human entrapment at the hands of church leaders. No other tax-exempt religion maintains anything remotely resembling Scientology’s Office of Special Affairs.
The church’s response to this rap sheet is always the same: Ex-Scientologists are “disgruntled” dissidents motivated by greed. But when so many people tell nearly identical horror stories of exploitation, manipulation and brutality, it warrants something more than harsh media scrutiny. It warrants government action.