News & Politics

Why Scientology Should Have its Tax Exempt Status Revoked

The tax-exempt status of the abusive extortion racket should be revoked once and for all.

In “Going Clear: Scientology and the Prison of Belief,” filmmaker Alex Gibney documents the strange journey of the Church of Scientology, from its beginnings as a fringe self-help system with a sci-fi bent, to an organized, well-funded religion, albeit one that’s mired in controversy. The film is an expose of the Church’s practices, with serious allegations of physical and psychological abuse from ex-Scientologists, and argues that the tax-exempt status of The Church of Scientology, hard-won after forty years of legal dispute, should be revoked.

The basis of Gibney’s argument has little to do with whether Scientology is a cult or a religion, and more to do with whether Scientology is really a charitable organization. Clarifying his point in a recent editorial in the Los Angeles Times, Gibney wrote:

To maintain the right to be tax-exempt, however, religions must fulfill certain requirements for charitable organizations. For example, they may not "serve the private interests of any individual" and/or "the organization's purposes and activities may not be illegal or violate fundamental public policy.”

The Church of Scientology often points to its tax-exempt status as proof that it is a recognized religious entity in the United States. And there’s no disputing that tax-exempt status has been a huge boon to the Scientology industry. With a little over 50,000 documented members, but billions in real estate holdings, the Church of Scientology has been called “the most famous small business in the world,” with its tax exempt status saving the Church an estimated $20 million a year on property taxes alone.

It doesn’t help that circumstances in which the tax exemption was granted have always surrounded in controversy. Scientology first became a religion in 1956, but was stripped of its tax-exempt status in 1967. Then began a legal battle that lasted for 26 years. The Supreme Court finally ruled for the IRS against the Church in 1991, but rather than relying on the verdict of the highest court in the land, the IRS caved two years later, granting tax-exempt status. During this period, over 2400 Freedom of Information Act Requests and 200 lawsuits were filed on behalf of Scientologists against the IRS; Gibney also notes that individual IRS agents and accountants were investigated and intimidated by private investigators. (In a note to Forbes.com, a Church of Scientology representative claims that the case was won because the Church “provided substantive proof on the merits”).

So the real question is—after all that, how likely is it that the IRS will relaunch an investigation? While Gibney’s film is hardly the first criticism of Scientology, it raked in over 1.75 million viewers in its debut, making it one of the most watched documentaries on HBO in the past decade. A petition on whitehouse.gov asking the IRS to revoke Scientology’s tax exempt status received than 30,000 signatures in one month. In a phone interview earlier this week, Gibney, like his film, pulled no punches. “The Church of Scientology is an organization which, as a matter of doctrine, practices focused cruelty” he says. “Are the practices of Scientology really in accord with what most people would consider ‘life, liberty and the pursuit of happiness?’ I don’t think so.”

In fact, revoking tax exempt status of an organization isn’t a radical move for the IRS. The Nonprofit Risk Center reports that over 100 organizations lose their tax exempt status yearly, and “private  benefit/inurement” tops the list of reasons why.  This was one of the arguments that the IRS used to strip the Church of its tax exempt status in 1967, stating that the entire church seemed to exist solely for the financial benefit of one man, Scientology founder L.Ron Hubbard. Now, Gibney argues, Church of Scientology leader David Miscavige has a similar role, and reaps a similar financial benefit. “The way it’s operated is as a business, as a fee-generating business, run by one man.”

The IRS will also have a public policy argument. In his editorial, Gibney points out the 1983 Supreme Court decision in Bob Jones v. The United States which upheld the revocation of tax exempt status where the institution in question had a policy against interracial dating. The Court recognized a “fundamental, overriding interest” in racial equality that overrode “whatever burden denial of tax benefits places on [the university's] exercise of their religious beliefs." Even if it is a religion, therefore, the Church of Scientology can still be stripped of its tax exempt status.

“The Bob Jones precedent wasn’t based on anything other than public policy,” Gibney says. And that precedent, he argues, sets the stage for a case against Scientology. “Here, you have an organized policy of harassment directed at any individual who disagrees with you, to the point of hiring armed private investigators to literally follow that person around. The purpose isn’t to find information; just to harass and intimidate. And they use your tax dollars to do this. There’s a clearly fundamental public interest here that’s being violated.”

Perhaps realizing that much of their tax exempt status hinges on meeting certain charitable organization requirements, recent Scientology advertising has highlighted Scientology’s efforts in disaster relief and charitable work. Gibney for one isn’t buying it “I think it’s bullshit, honestly. Look, they’re pushing very hard to be classified as a charitable organization. But you can’t have a doctrine of abuse and harassment and then say ‘we can do all that because we perform some charitable functions’”

Scientology’s practices may be questionable, but the IRS will have to be careful in opening an investigation into them. Section 7611 of the Internal Revenue Code limits how and why the IRS may audit churches and religious organizations, including the requirement that a high-level Treasury agent begin the investigation based on a written statement of facts. These restrictions specifically apply to organizations recognized by the IRS as churches as well as those claiming to be churches, even if not recognized by the IRS. It’s worth noting that these limitations do not apply to criminal investigations.

Gibney admits it won’t be easy, but notes that, for once, the IRS will have a lot of support. “That’s why you have to have an innovative investigation to look into this, to investigate whether or not there’s a pattern of harmful behavior. And I can tell you-- there’s countless ex-Scientologists who can and will testify to that pattern.”

Past history has shown that the Church of Scientology will not take an investigation into its tax-exempt status lightly. Will the public outcry generated by Going Clear be enough for the IRS to enter into round two against Scientology? “I know there are members of the IRS who are deeply embarrassed by what the film uncovers,” Gibney says. “But does the IRS have the balls to go after them again? That I can’t tell you.”

 

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