Scientology Anyone?

[jkeeb]

Today's tax court cases (11/19/07, Memo decision) has Mr. Creed Pearson who would rather pay the insane failure to file penalty than file a return.

His reason? The IRS will not audit a certain "organization".
If you google Mr. Pearson, the "organization" in question does not seem to be in doubt.

[Cpt Banjo]

Which raises the interesting question: has the IRS ever audited that particular organization to see if its activities have been consistent with its tax exemption (which was on shaky grounds to begin with, IMHO)?

[Quixote]

Which raises the interesting question: has the IRS ever audited that particular organization to see if its activities have been consistent with its tax exemption (which was on shaky grounds to begin with, IMHO)?

Apparently yes and no.

Before trial, the Commissioner stipulated that the branch churches of Scientology are religious organizations entitled to receive tax-deductible charitable contributions under the relevant sections of the Code. This stipulation isolated as the sole statutory issue whether payments for auditing or training sessions constitute "contribution[s] or gift[s]" under § 170.[sup]4[/sup]

Hernandez v. Comm'r, 490 U.S. 680 (1989)

Footnote 4:

The stipulation allowed the Tax Court to avoid having to decide whether the particular branches to which payments were made in these cases qualified under § 170(c)(2) and § 501(c)(3) of the Code as tax-exempt organizations entitled to receive charitable contributions. In a separate case decided during the pendency of this litigation, the Tax Court held that the mother Church in California did not qualify as a tax-exempt organization under § 501(c)(3) for the years 1970 through 1972 because it had diverted profits to its founder and others, had conspired to impede collection of its taxes, and had conducted almost all activities for a commercial purpose. Church of Scientology of California v. Commissioner, 83 T. C. 381 (1984). The Court of Appeals for the Ninth Circuit affirmed, basing its decision solely on the ground that the Church had diverted profits for the use of private individuals. It did not address the other bases of the Tax Court's decision. Church of Scientology of California v. Commissioner, 823 F. 2d 1310 (1987), cert. denied, 486 U.S. 1015 (1988).

[Quixote]

Today's tax court cases (11/19/07, Memo decision) has Mr. Creed Pearson who would rather pay the insane failure to file penalty than file a return.

His reason? The IRS will not audit a certain "organization".
If you google Mr. Pearson, the "organization" in question does not seem to be in doubt.

Mr. Pearson is willing to audit the organization on spec, if the IRS will credit his account with [presumably a percentage of] any taxes owed by the organization.

[Kimokeo]

The Sklar case of 2001 on USTAXCOURT.gov still is unavailable. The older case is there, but not the last one which closed quite a long time ago.

It was the Sklar case that brought forth more about the agreement that public wasn't supposed to know. I guess, SCOTUS wasn't supposed to know about it either since it was contrary to their decision.

I'm just waiting for someone to raise the Constitutionality of the 'one religion over others'. This church is granted deductions that no other church could obtain if they had the exact same processes- - SCOTUS said no already.

Sued into agreeing.

[RyanMcC]

The Sklar case of 2001 on USTAXCOURT.gov still is unavailable. The older case is there, but not the last one which closed quite a long time ago.

It was the Sklar case that brought forth more about the agreement that public wasn't supposed to know. I guess, SCOTUS wasn't supposed to know about it either since it was contrary to their decision.

I'm just waiting for someone to raise the Constitutionality of the 'one religion over others'. This church is granted deductions that no other church could obtain if they had the exact same processes- - SCOTUS said no already.

Sued into agreeing.

Scientology/IRS Closing Agreement:
http://xenu.net/archive/IRS/

[Tax Guest]

If memory serves, part of the closing agreement with IRS was that every Scn organization in the US would be audited for 3 years. Sorry, I don't have the citation. If you read the closing agreement, the church is held to an extremely high standard for it's financial documents to be submitted by the compliance committee. This is nearly an annual IRS audit. Anyone with any background in non-profit compliance or 990 prep can see that.

The argument that the church's donation deductions are any different than other church is very uninformed as to the nature of the elements concerned and will likely fail.

[Burzmali]

Because classes designed to teach you to dominate people with your mind (or at least knock their hats off) should be tax deductible

[Dezcad]

Because classes designed to teach you to dominate people with your mind (or at least knock their hats off) should be tax deductible

How else do you think they got the closing agreement with the IRS?

[Quixote]

The argument that the church's donation deductions are any different than other church is very uninformed as to the nature of the elements concerned and will likely fail.

I'm not aware that anyone has ever made such an argument. On the other hand, the argument that auditing fees are not donations was made to the Supreme Court and they agreed.

Accordingly, we conclude that petitioners' payments to the Church for auditing and training sessions are not "contribution[s] or gift[s]" within the meaning of that statutory expression.

460 us 680, 694

[Quixote]

Scientology/IRS Closing Agreement:
http://xenu.net/archive/IRS/

I guess I'm missing something. As I read that agreement, with regard to the deductability of auditing fees, it applies only to tax years before 2000. The IRS is and for several years has been, free to apply the law, as determined by the SC, that auditing fees are not donations.

[Kimokeo]

"If you read the closing agreement, the church is held to an extremely high standard for it's financial documents to be submitted by the compliance committee. This is nearly an annual IRS audit. Anyone with any background in non-profit compliance or 990 prep can see that. "

That would be a rather expensive process for the IRS to undertake. Such an audit would have to be funded every, single year forever. I can't see the justification for the funds spent that way - especially when the agreement allows that which the Supreme Court ruled was not deductible and therefore the audits should be throwing out the illegal deductions. And then, there is the individual returns claiming a deduction that SCOTUS ruled on?

[Kimokeo]

Rev. Rul. 78-189, 1978-1 C.B. 68: A "fixed donation" paid to the Church of Scientology for general education courses, religious education courses, and "auditing" and processing courses that does not exceed the fair market value of these courses is not a charitable contribution within the meaning of Code section 170.


I wonder what would be said now.

[Tax Guest]

That would be a rather expensive process for the IRS to undertake. Such an audit would have to be funded every, single year forever. I can't see the justification for the funds spent that way - especially when the agreement allows that which the Supreme Court ruled was not deductible and therefore the audits should be throwing out the illegal deductions. And then, there is the individual returns claiming a deduction that SCOTUS ruled on?

I don't think you read the parts of the closing agreement I was referring to. A great deal cost is borne by the church to provide a greal deal of extra documentation to demonstrate it is following the law. I said it was "nearly an annual IRS audit.". My point is that they the church agreed to tighter reporting requirements, restrictions, and greater liability exposure than any other 501(c)(3) organization I'm aware of.

Rev. Rul. 78-189, 1978-1 C.B. 68: A "fixed donation" paid to the Church of Scientology for general education courses, religious education courses, and "auditing" and processing courses that does not exceed the fair market value of these courses is not a charitable contribution within the meaning of Code section 170.


I wonder what would be said now.

That Rev. Rul. was rescinded by IRS many years ago. Try googling it. Early 1990's I think. But if it serves your purpose to quote things that are superceded, be my guest.

[jg]

Scientology/IRS Closing Agreement:
http://xenu.net/archive/IRS/

For other Scientology cases see http://www.cs.cmu.edu/~dst/Cowen/essays/irslegal.html for links.

[Quixote]

That Rev. Rul. was rescinded by IRS many years ago.

Close. It was obsoleted by Rev. Rul. 93-73, 1993-34 I.R.B. 7. I can't find a copy on the web. The synopsis on the contents page of IRB 1993-34 states "Church of Scientology. Revenue Ruling 78-189 is obsoleted." If that's all the ruling did, it appears that the last word on the subject is the SC's statement that auditing fees are not donations, and therefore not deductable.

[LPC]

The synopsis on the contents page of IRB 1993-34 states "Church of Scientology. Revenue Ruling 78-189 is obsoleted."

That's not a synopsis. That's the full text.

[Tax Guest]

Quixote, I tried to find that SC cite, but I think you put up the wrong case number. Didn't you mean: HERNANDEZ v. COMMISSIONER, 490 U.S. 680 (1989)?

All I know is I have had no difficulty with IRS auditors since about 1994, if there was any question, by quoting the 1993 Rev. Ruling.

Why would the prior SC ruling trump the later Revenue Ruling?

[Burzmali]

So an organization whose documented policy is to deceive outsiders, and who carried out the largest (known) infiltration of the US government, is being trusted to present accurate records? Sure, what could go wrong with that?

[Tax Guest]

From the closing agreement with IRS.

i. Required procedures. The CTCC shall retain a qualified CPA (defined below) to perform the agreed-upon procedures enumerated in Exhibit IV-2 of this Agreement with respect to each of the reporting entities. Following its performance of these procedures, the qualified CPA so selected shall report to the CTCC and to the Service in the form prescribed by the American Institute of Certified Public Accountants for engagements to apply Agreed-Upon Procedures (SAS No. 35, Special Reports -- Applying Agreed-upon Procedures to Specified Elements, Accounts, or Items of a Financial Statement) (hereinafter referred to as "Special Purpose Reports"). These Special Purpose Reports shall include a summary of any exceptions the qualified CPA discovers through the agreed-upon procedures.

But I suppose that doesn't matter if you're convinced they're all liars. Unfortunately in my business dealings with Scientologists I have found the opposite to be true. I live in an area where there's a Scientologist every few feet (Glendale, CA) and your assertions about "documented policies to deceive others" sounds completely bizarre and paranoid. I suppose many years ago this is possible, before my time. Maybe you're referring to something that happened 10 or 20 years ago? Anything recent? How many Scientologists have you personally dealt with?