scientology’s tax exemption – basic criteria for revocation

I posted the following at the Enturbulation.org forum in response to an initiative by some Texas Republicans to revoke Scientology’s tax exemption in Texas. I pointed out why the initiative was flawed (in short, their basis for revocation included inapplicable administrative requirements instead of actual criteria), The entire post can be read here, posted under the nick “tikk.”

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That all said, there are many *valid* reasons to propose that Scientology’s exemption be revoked. But Texas is in no position to revoke any Scientology church’s exemption unless it does so on the federally based criteria (and even then, a federal preemption issue may arise). To this, one need refer to the instructions for IRS Form 1023, which is the IRS application for charitable 501(c)(3) exempt status.

Without getting too deeply into the hows and whys, there are a limited number of bases by which religious entities have their federal exemption revoked.

One is inurement, which is where the corporate officers of a religious entity personally profit–individuals cannot personally benefit or maintain a private interest in church funds. A related basis for revocation is where the religious entity’s beliefs are deemed by the IRS to not be “truly and sincerely held.” In other words, where a religious corporation is built purely to evade taxes, and its belief structure fraudulent.

A religious entity also must not engage in political activity, such as campaigning for a particular candidate, although the IRS seems to selectively enforce this prohibition, often in a partisan manner. Enforcing this prohibition is made more difficult, too, by the necessity of permitting free speech latitude, so that church officials can express their opinions on political matters. It’s not always easy to tell where political speech stops and political activity begins.

Finally, a religious entity must not maintain practices derived from its beliefs that are “illegal or contrary to clearly defined public policy.” Note that this prohibition focuses on practices, not beliefs–it would be unconstitutional for the IRS or a court to deny an exemption based on a religious group’s beliefs. Practices are another matter. The most relevant case on this matter is Bob Jones University v. United States, 461 U.S. 574 (1983); the university had its exemption revoked due to its policy against interracial dating. Courts have also advanced the same concept in the affirmative sense; that is, religious entities must not only refrain from illegal activity, but serve a general community interest.

As for Scientology, arguments can be made both for an against, with regard to each of these criteria. Does Scientology exist solely for DM’s private benefit? Even if this were true, proof would be difficult come by, as Miscavige need not maintain an existence apart from his role as head of Scientology (and how would the IRS, or anyone, be able to tell the difference, necessarily?).

Are Scientology’s beliefs truly held? While a good argument can be made that Hubbard cynically created a money-making machine that was only facially religious, its present-day adherents truly and sincerely hold its beliefs, regardless of whether those beliefs were fraudulently formed. It’s a point not worth arguing, in my opinion.

Does Scientology engage in political activity? Not often, except on behalf of itself, usually to request the state department intervene on its behalf with regard to its treatment by France or Germany. But CCHR is also tax exempt (although there are multiple CCHR corporate entities), and it is essentially a single-issue lobbying group. It seems possible that CCHR is vulnerable to revocation for its political activity.

Scientology is most vulnerable, it would seem, on the public policy question. It does not contribute to the general community interest, as it is entirely self-interested. Even where Scientology demonstrates a charitable side, such as where Volunteer Ministers appear at disaster sites such as Katrina and 9/11, its internal correspondence reveals its true purpose as PR-related. Scientology also maintains practices such as disconnection and fair game (of both ex-members and critics), which are contrary to US public policy, and harm the general community interest.

Obviously, there are many other reasons why Scientology’s practices (not beliefs) fail to serve the general community interest or run contrary to public policy. But the aforementioned language framework should be your guide when complaining to the IRS or public officials.