Tax Exemption Should be Rescinded
1, 1993, the U.S. Internal Revenue Service formally announced
that the Church of Scientology and its myriad corporate entities
had been granted tax exemption. This was a stunning announcement
considering that the IRS had been in almost constant battle
with Scientology since 1966, had several court (and even a
Supreme Court) rulings in its favor, and had compelling evidence
of Scientology fraud, misrepresentation, and even harassment
against IRS officials. The ruling, however, stopped thousands
of lawsuits against the IRS and individual IRS auditors filed
by or on behalf of Scientology.
WAR IS OVER!" trumpeted International Scientology
News magazine, showing the huge rally Scientology held
to celebrate their "victory" over the IRS which
had created "false reports disseminated overseas."
of all the many agencies that barked at Scientology's
heels in the ensuing years, the most persistent - and
the most dangerous - was the IRS
It's ultimate stated
purpose: to destroy the Church of Scientology."
win a moral victory over the IRS that was illegally attacking
a religion, or did the properly acting IRS cave in to the
attacks of Scientology in the "war" Scientology
had waged against the IRS?
article will review the history of the IRS regarding Scientology,
the October 1, 1993 tax-exemption for Scientology, and the
reasons why this ruling should be rescinded.
Congress passed a law granting religious tax exemption to
L. Ron Hubbard, founder of Dianetics and Scientology, wrote
his co-worker Helen O'Brien a letter stating "I await
your reaction on the religion angle" regarding their
for-profit Dianetics centers. In June of 1953 Hubbard wrote
of Scientology that "this is the science of knowing how
to know. It is a science
the Church of Scientology was granted exemption as a religious
organization. In 1967 the IRS revoked the exemption. From
the time the audit of that revocation began in 1965, Scientology
was at war with the IRS.
Hubbard wrote in 1965 (the year the IRS audit began) that
"Taxes exist only to destroy business. Be impudent. Get
rich and to hell with them. Governments are just a reactive
bank we have to live with for a while."
1970 IRS agent Woodrow Wilson began an audit of Scientology's
records for the years 1968-69.
summer of 1970, Martin Greenberg, Scientology's accountant,
stated that he deliberately disorganized and confused the
documentation provided to the IRS for the audit.
1973, Henning Heldt, vice president of Church of Scientology
of California, was ordered to bring documents for an IRS audit.
Heldt came to the meeting empty handed on February 20, and
lied, saying he had resigned and therefore had no control
over the asked for documents.
20 of that year, L. Ron Hubbard created the "Snow White"
program, which was designed to rid governmental agencies of
any "false data" regarding Scientology and Hubbard.
summer of 1974 Scientology's Guardian's Office began looking
for a suitable candidate to infiltrate the IRS. By October
21, 1974, Jane Kember - 2nd in command of the GO - wrote Guardian's
Order 1361, which included:
10. Immediately get an agent into DC IRS to obtain files
on LRH, Scientology, etc. in the Chief Council's [sic]
office, the Special Services staff, the intelligence
division, Audit Division, and any other areas.
Collect data on the Justice Dept.Tax Division for the
org board, the current terminals, and the people handling
When the correct areas are isolated, infiltrate and
get the files.
1, Scientologist Mitchell Hermann planted a bugging device
in the conference room of the IRS' chief counsel. Scientologists
in a car outside recorded the transmission of an IRS meeting
18, Gerald Wolfe, a Scientology operative, got a job as a
clerk typist in the IRS.
4, Scientologists Hermann and Michael Meisner illegally entered
the IRS exempt organizations office using fake passes and
stole a 10" thick document on Scientology.
14, 1975, the Church of Scientology of California (CSC) and
Department of Justice had a conference to work out issues.
They agreed to:
temporarily suspend litigation,
examine the Hawaii Scientology organization from 1965
1974 to determine its tax exempt qualifications,
the Hawaii results would apply to all Scientology organizations,
CSC and any other non-standard churches would be reviewed.
January and July of that year, Gerald Wolfe stole the equivalent
of documents stacked 10 feet high from the IRS offices. In
May, Greg Willardson devised Project Thorn which was designed
to "provide a cover for PR [Public Relations] and legal
for the way they obtained IRS docs." The plan also called
for stealing documents about other organizations in order
to hide their specific interest in Scientology. Gerald Wolfe
accomplished this mission.
27, 1975 Mary Sue Hubbard (L. Ron Hubbard's wife and head
of the GO) wrote Jane Kember that:
overall strategy with the IRS shall be as follows:
To use any method at our disposal to win the battle
and gain our non-profit status.
To buy all the time we can in terms of years ... So
we work to win, but also to delay as time works on our
side, not theirs...
Scientology filed a Freedom of Information Act suit against
the IRS. The goal was to get Scientology documents placed
in a location easier to infiltrate.
31, the IRS granted the Church of Scientology of Minnesota
(Minneapolis) tax exemption.
Scientology planned to use United Churches of Florida and
Southern Land Development Corporation to hide money from the
5, L. Ron Hubbard ordered that dozens of Scientology operatives
be placed in governmental offices to watch for any activity
against Hubbard himself. A new Guardian Order:
a separate agent into the IRS Office of International
Organizations (OIO) (as this office has a case preparation
or investigative action going on LRH personally for income
tax evasion or something similar)."
11, 1976, Michael Meisner and Gerald Wolfe were questioned
by the FBI after a security guard became suspicious of their
forged IRS badges. Meisner talked his way out and escaped.
19, U.S. News and World Report reported that contributions
to Scientology would now be tax exempt.
of 1977 CSC and the IRS held a conference to discuss audits
so far. In June Gerald Wolfe was sentenced to probation and
community service for forged federal credentials.
8 the FBI raided
the offices of Scientology in Washington DC and Los Angeles,
based on information from Michael Meisner who had turned himself
in to the FBI. Sometime in July a typewriter case was found
in a parking lot with Scientology documents that were turned
over to the FBI because they appeared to show illegal activity.
20, the IRS met with CSC to give a final offer of settlement.
28, the IRS issued notice of deficiency to CSC.
IRS Rev. Rul. 78-189,1978-1 C.B. 68 was published, stating
that Scientologists cannot deduct auditing expenses from their
9 Scientologists were indicted and 2 others sought for extradition
in the theft of government documents in the "Snow White"
1979, five Scientology leaders - Mary Sue Hubbard, Greg Willardson,
Henning Heldt, Duke Snider and Richard Weigand - were convicted
of conspiracy to steal government documents and sentenced
to between two and six years.
30, 1980, Scientology attorneys attempted to force Judge Richey
to recuse himself in the Snow White case.
3 in a lawsuit by Scientology to gain tax exemption, the U.S.
argued that Scientology should be denied tax exemption because
conspiracy to obstruct the IRS,
abuse of religious confidence,
infliction of psychic harm,
blackmail and "fair game",
false statements to immigration officials,
removal of large amounts of money from US,
false registration of yachts,
drastic punishment of staff and members.
9, CSC's president signed a false affidavit claiming the UK
church is not a part of CSC, even though it is.
19, Jane Kember and Morris Budlong were sentenced to 2 to
6 years for burglarizing the IRS.
1982, David Miscavige, new head of Scientology, and his staff
called a Mission Holder's Conference in San Francisco. At
that conference Lymon Spurlock stated "prior to the end
of 1981, a few of us from the CMO got together and
took a look at the corporate structure of the Church with
the view in mind of making it more defensible and more regular
and particularly not understandable by the traditional
enemies of the Church such as the IRS, and to make an
overall improvement." The phrases in italics were omitted
in the transcript, but exist in the tape of the Conference.
1983, Mary Sue Hubbard was ordered to turn herself in in 3
weeks to begin her sentence in the Snow White case.
1984, the Criminal Investigation Division of the IRS (Los
Angeles District) began investigating L. Ron Hubbard's tax
returns for the tax years 1979 through 1983.
the IRS served an administrative summons on the Clerk of the
Los Angeles County Superior Court for access to the "Zolin
tapes." The two tapes purportedly were a recording of
a meeting with Scientology attorneys to defraud the IRS. A
portion of a transcript was made public in court:
is no need at all for them to be the Board of Directors
in order for them to run the Church, but the authority
of the Church has to lie somewhere, and on some basis.
And since the Church has always chosen a corporate entity,
eventually the authority is going to have vest with
the Board of Directors. The only reason it's worked
so long without that occurring is because everyone has
effectively been bound by the authority of LRH and have
ignored corporate lines....
Parcelle] We could say that the RRF, [Religious
Research Foundation], and CSC are part of the same church,
even though they are corporately different. I mean if
anything was a sham corporation, it's RRF.
Wertheimer attorney for L. Ron Hubbard answers.]
As I understand it RRF receives monies that would otherwise
be due to the California Church for services rendered
by the California Church to people outside of the country
who decide to pay the Church from outside the country.
So that's basically right?
That's right. Foreign non-US Scientologists pay RRF,
they go to Flag [the flag Ship Org, FSO] and take the
services. RRF was originally supposed to hold the money
until the service was rendered and then pay it to CSC.
But in fact it has not really done that and so CSC has
rendered much service to many foreign Scientologists
and RRF has got the money. Fortunately for us RRF wasn't
incorporated until 1973 and we're litigating 1972. So
I haven't really tried to sort this one out but it obviously
is the classic case (loud laugh) of inurement, if not
fraud (several laughs).
Sullivan] Well put.
unidentified] It's all privileged.
Sullivan] The tape recorder is going here Charles....
Now when you talk around a table like this and there
is no internal revenue agent present, (whispered: I
hope so), bugged or otherwise, one can work out solutions.
But when you are a few weeks away from a trial and everything
you say is going to be rammed down your throat, then
you have to start looking at what actually happened.
And it's very difficult to assign significances to things
other than what was actually being done at the time.
24, 1984, the US Tax Court ruled against Scientology's tax
exemption in a lengthy and scathing decision:
we consider all the facts spread across the voluminous
record in this case, we are left with the inescapable
conclusion that one of petitioner's [Scientology] overriding
purposes was to make money. We also conclude that criminal
manipulation of the IRS to maintain its tax exemption
(and the exemption of affiliated churches) was a crucial
and purposeful element of petitioner's financial planning.
We need not repeat in detail our findings regarding
petitioner's efforts to block the IRS from investigating,
determining and collecting taxes from petitioner and
affiliated churches. The highlights of the conspiracy
show its nature and scope.
conspiracy spanned 8 years beginning in 1969 and continuing
at least until July 7, 1977 when the FBI, pursuant to
a warrant, searched petitioner's premises for evidence
of the conspiracy and related crimes. The scheme involved
manufacturing and falsifying records to present to the
IRS, burglarizing IRS offices and stealing Government
documents, and subverting Government processes for unlawful
purposes. For example, Freedom of Information Act requests
were planned for the purpose of having the IRS amass
records in one central place where they would be easier
to steal. At first, petitioner's FBO network masterminded
the conspiracy, developing plans to conceal that OTC
was a sham by falsifying and manufacturing records.
Later petitioner's Guardian Office, whose top officials
served on petitioner's board of directors during the
docketed years, directed the conspiracy. The Guardian
Office developed plans to infiltrate the IRS and steal
documents. Later it monitored the implementation of
to the loss in court, Scientology president Heber Jentzsch
stated that "This decision has only strengthened our
iron determination to work with other churches, human rights
organizations and concerned American taxpayers to bring about
the reform of America's Gestapo (IRS) and, if necessary, to
bring about its dismantling." Jentzsch told the Wall
Street Journal that Scientology would sue the IRS for $750
million in damages for violation of their First Amendment
rights. On October 10, Scientology's Freedom magazine placed
an ad in the Los Angeles Times seeking IRS employees who would
tell critical stories about the IRS.
retaliation against the IRS began. In January 1985, Scientology
and former congressman George V. Hansen (R- Idaho) formed
an organization to uncover corruption in the IRS. On January
30 a large anti-IRS ad was placed in the Los Angeles Times
by the Church of Scientology International. Further such ads
appeared in the Los Angeles Times on February 13 and May1,
and in the Oregonian on April 26. Scientology held an anti-IRS
forum in Clearwater Florida on November 4. In late 1985 Scientology
shredded thousands of documents requested in an IRS investigation.
several Appeals Court cases against the IRS were filed by
Scientologists trying to deduct their courses on their tax
returns. In the US 8th Circuit Court in St. Louis, auditing
fees were ruled deductible, while in the 1st Circuit Court
in Boston, they were ruled nondeductible. On July 18th the
9th Circuit Court in San Francisco ruled that auditing fees
were not deductible. These contrary rulings of course pushed
the issue inevitably to the US Supreme Court.
the 9th Circuit Court of Appeals upheld the revocation of
Scientology's tax-exempt status. President Heber Jentzsch,
vowing to fight on, declared "We're the only group in
America with the guts to stand up against the IRS." In
another blow, the Supreme Court ruled in November that the
IRS did not have to release some documents Scientology was
demanding the IRS release.
of 1988 the Supreme Court refused to review Scientology's
loss of tax-exemption, but put on its calendar the issue of
whether auditing fees could be deducted. In July the IRS ruled
the Church of Spiritual Technology (a Scientology corporation)
was not tax-exempt.
1989 issue of Scientology's Freedom magazine spent several
pages criticizing the IRS and requesting IRS whistleblowers
to send them information. In June the U.S. Supreme Court ruled
in the Hernandez case that Scientology auditing fees were
not tax deductible. On June 21 the US Supreme Court ruled
that the "Zolin tapes" could be used by the IRS
to determine a probability of fraud on Scientology's part.
That summer, Scientology hired private investigators to look
into the private lives of IRS officials involved in the investigation
of Scientology's tax status. The July/August Freedom issue
devoted 9 pages ridiculing the IRS. The December/January issue
devoted 11 pages.
1990 the IRS sent a summons to Scientology to review records
of the Church of Scientology Flag Service Organization in
Clearwater Florida on suspicion that activities of this group
were commercial in nature. In February the IRS went to federal
court in Tampa to obtain this information. In April David
Miscavige, de facto head of Scientology, wrote an editorial
in USA Today calling for the abolition of the IRS. Also in
April, the U.S. District Court in Tampa Florida ruled that
Scientology should turn over most documents requested by the
IRS. On June 20 the U.S. Court of Appeals, Ninth Circuit,
ruled that the "Zolin tapes" could be used by the
IRS to show illegal intent, specifically stating that
must therefore examine the transcripts and determine whether
they, along with the independent evidence already reviewed,
demonstrate sufficient evidence of intended illegality
to establish that the tapes are within the crime-fraud
exception. We hold that they do. The partial transcripts
demonstrate that the purpose of the MCCS project was to
cover up past criminal wrong-doing. The MCCS project involved
the discussion and planning of future frauds against the
IRS, in violation of 18 U.S.C. s 371.
it was reported that Scientologists had been successfully
pressuring their congressional representatives to inquire
as to the IRS "harassment" of Scientology. Scientologists
even protested in front of IRS offices and offered $10,000
rewards for any IRS agent's whistleblowing.
1991 Scientology won against the IRS in Boston federal court,
preventing the IRS from viewing some Scientology documents.
Scientology won another case in which it claimed the IRS had
denied Scientology was a religion. In August Scientology sued
17 IRS officials charging them with harassment and illegal
activities. Scientology placed more anti-IRS full page ads
in USA Today and the Wall Street Journal. In October Scientology
leader David Miscavige and cohort Marty Rathbun reportedly
had an impromptu meeting with IRS commissioner Fred T. Goldberg
Jr. in which Miscavige allegedly offered to drop thousands
of lawsuits against the IRS in exchange for exemption. Goldberg
set up a commission to handle the Scientology case, bypassing
normal IRS channels.
of 1992, the US Claims Court rejected Church of Spiritual
Technology's attempt to gain tax-exemption. The court stated
that Scientology's corporate structure is "something
of a deceptus vitus. Real control is exercised less formally,
but more tangibly, through an unincorporated association,
the Sea Organization..." In August, however, the church
won against the IRS in federal court in Los Angeles, winning
a $16,881 judgment against the IRS for its refusal to allow
Scientology to view certain documents.
won again in March of 1993 when the district court in Boston
ordered the IRS to pay Scientology $80,787 in legal costs
over unjustified positions the IRS held against Scientology.
In March the Church of Spiritual Technology was again denied
tax exemption, but then in August the IRS inexplicably granted
tax exemption to every Scientology entity in the U.S., including
Church of Spiritual Technology, whereupon Scientology filed
new applications as instructed. On October 1 the ruling was
formally placed into effect (but its contents kept secret),
and on October 8 Scientology held a rally of over 10,000 members
to celebrate the victory. In his 2 hour speech there, David
Miscavige announced that Scientology had defeated a plot by
psychiatry to destroy Scientology by using the IRS as a tool.
IRS Commissioner Donald Alexander voiced concerns about the
"I hope that the IRS did not give
in to intimidation
I have great reservations, based
on public record and published stories, about this organization's
activities and whether this was, is, or remains a money-making
the IRS issued Rev. Rul. 93-79, 1993-34 I.R.B. 7, which declared
Rev. Rul. 78-189 obsolete (see 1978) and now allowed auditing
to be deductible (despite contradicting the Supreme Court's
Hernandez ruling). No reason was ever given. On November 10,
the consumer affairs group Tax Analysts submitted a Freedom
of Information request to obtain the exemption agreement.
In February 1994, the IRS refused the FOI request, and Tax
Analysts filed suit.
1996, Tax Analysts successfully sued the IRS for the right
to see their field service advice memorandums (FSAs) concerning
the Scientology agreement of October 1993.
1997 the New York Times ran an extensive coverage of Scientology's
road to tax exemption. On March 19 Scientology responded with
a large ad touting the IRS ruling. That same day, Scientology
denied its own previous accounts that David Miscavige had
an impromptu meeting with the IRS commissioner. On December
30, the Wall Street Journal published the secret IRS/Scientology
agreement on its web page. In their print article on the settlement,
the Journal delineated aspects of the agreement:
Scientology to pay $12.5 million in settlement
Scientology to set up a compliance committee to monitor
the church's adherence to the agreement
Scientology would drop "thousands of lawsuits filed
against the IRS in courts around the country and to
stop assisting people or groups suing the agency
The IRS cancels payroll taxes and penalties against
Scientology entities and officials, and drops the liens
and levies based on these charges
The IRS drops auditing 13 Scientology organizations
The IRS drops litigation seeking documents from Scientology
IRS normally settles on tax issues alone,' said Robert Fink,
a New York tax lawyer who reviewed the agreement. 'What the
IRS wanted was to buy peace from the Scientologists. You never
see the IRS wanting to buy peace.'"
SECRET I.R.S. AGREEMENT WITH SCIENTOLOGY
it not for some anonymous whistleblower, the secret IRS/Scientology
Agreement would still be unknown. There are many strange and
disturbing aspects of the secret agreement reached on October
1, 1993. The most obvious perhaps is the weak position Scientology
was in to ask for such an agreement. As the history related
above shows, the IRS was more successful than not in court
despite the many suits brought against it by Scientology.
The US Supreme Court sided with the IRS in the Hernandez case,
as the Circuit court did just months before the Agreement
in Church of Spiritual Technology's suit to gain exemption.
granted tax-exemption to Bridge Publications, which in fact
was actually a for-profit corporation.
suddenly chose to ignore court rulings in its favor and even
common sense. There was ample and well-documented evidence
of Scientology's abuse of the law, the courts, and the IRS.
Yet all this was set aside in one sudden submission to Scientology's
the IRS decide to abandon its position of strength? Could
it have been to purge itself from the thousands of lawsuits
Scientology had then against the IRS and individual auditors,
the anti-IRS articles and actions, and the flood of FOIA requests
by Scientology? The answer is unknown at this time, but as
one magazine pointed out:
Church of Scientology settlement represents a new precedent
that may come back to haunt the IRS. While most taxpayers
will not lose sleep worrying about our national tax collector's
problems, it could mean that, if a taxpayer is wealthy
enough and aggressive enough to file a legion of lawsuits
over the course of many years, the IRS may cut its losses
and throw in the towel to avoid the time and expense of
defending a huge number of cases."
was required by the Agreement to pay the IRS $12.5 million,
an apparent arbitrary settlement amount not related to any
actual judgment or previous IRS ruling. Tax Analyst's attorney
William J. Lehrfeld stated that "the Service apparently
thinks it has authority just by the mere power to execute
a closing agreement to assert a dollar sum as the equivalent
of a fine or cost without regard to whether it is a tax, a
penalty, or an interest payment
The implications are
enormous." Where did this figure come from? How did it
compare to what Scientology would have owed in back taxes
had it's exemption been denied?
also clear from the history that Scientology was indeed treating
its disputes with the IRS as war. They attacked the IRS consistently
on many fronts; suing and investigating individual IRS agents,
deliberately obscuring their records, constantly suing the
IRS directly, taking out anti-IRS advertisements, funding
anti-IRS groups, lying, infiltrating, stealing, bugging, offering
rewards for IRS whistleblowers, pressuring congressmen to
investigate the IRS, filing countless Freedom of Information
Act requests, creating a corporate maze, publishing anti-IRS
articles in their own magazines, and other methods. The attacks
acquiesced to an unusual desire of Scientology in the Agreement.
As reported in a Scientology magazine, the IRS itself sent
Scientology promotional literature out to other countries:
IRS has agreed to send out leaflets to the governments
of every nation. These letters will state that they
have done a thorough review of all Scientology activities
from top to bottom and having found nothing wrong -
fully recognize us as a bona-fide and qualified tax
exempt organization to the full extent of the law.
they will be attaching to each of these letters a printed
fact sheet on Scientology that explains what Scientology
really is. Who LRH is, and what all of our organizations
are. It is very complete and very accurate. How do I
the IRS will be sending it out to every government in
did indeed send out this literature along with a cover letter,
thus using taxpayer funds to promote a specific religion.
also does not allow public access to most of Scientology's
1023 forms. These are the documents an organization provides
the IRS in order to obtain tax exemption. According to IRS
rules, most documents supplied by the organization seeking
exemption and most IRS related documents "shall be open
to public inspection at the national office of the Internal
Revenue Service." The 3 exceptions to this open documents
"information from which the compensation
of any individual may be ascertained,"
disclosure of a trade secret, patent, or other intellectual
property that would be harmful to the organization if
names of contributors.
of 1995 this writer went to the Exempt Organizations Reading
Room of the IRS in Washington DC to view the Scientology documents
relating to their application for tax exemption. These forms,
called 1023 forms, should be public, as the rules just listed
explain. However, there was approximately 10 linear feet of
material made available for viewing.
writer asked to see a contract mentioned in the documents
but not in the available material. This writer was told that
there were two roomfuls of other material, but that it would
take a Freedom of Information Act request to see them. Therefore,
in Scientology's case, MOST of the 1023 forms are unavailable
for public inspection, contrary to the IRS' own rules.
issue is raised in the Agreement in a long section where an
apparent agreement was reached between Scientology and the
IRS over which documents would be considered disclosable and
which would not. It seems strange that the IRS did not simply
apply their own rules concerning such documents, but instead
apparently held detailed negotiations over what would or would
not be publicly accessible.
required that Scientology close their corporate entity World
Institute of Scientology Enterprises (WISE). The Agreement
members of the CTCC shall, no later than December 31,
1995, effectuate the dissolution of WISE, Inc. and the
transfer of all of its assets, including but not limited
to its rights to the Scientology religious marks, to the
Inspector General Network."
June 30, 2001, the California Secretary of State still lists
WISE as an active corporation. WISE still has an active web
page. WISE is still active in the United States and abroad.
David Miscavige in his October 8, 1993 victory speech stated
that "Over the last several years we have been expanding
our efforts to get LRH's admin tech into full use. WISE Int.
has now set up a new college to train people in this tech.
It is called the Hubbard College of Administration and as
you can see here, it too is recognized by the IRS!" Apparently,
there was no written penalty for not complying with this portion
of the Agreement, but obviously, WISE was not dissolved.
Scientology corporation granted exemption is Bridge Publications.
This is particularly unusual since Bridge was created as a
for profit corporation. An internal Scientology document stated
at Bridge's creation that "because of the change, BRIDGE
can also expand tremendously into the commercial publishing
world, which it could not do before. BRIDGE will be able to
distribute its books to commercial book stores all over the
country, and will not be limited to Church and Mission book
stores only." Bridge was therefore created from the beginning
to be a commercial enterprise to sell Hubbard's secular writings
to secular book stores.
to the IRS in their documentation seeking tax exemption, the
story was quite different. "Bridge and NEP have always
operated exclusively for religious purposes."
and Bridge sell introductory Scriptural texts such as
Dianetics: The Modern Science of Mental Health and Scientology:
The Fundamentals of Thought and Mr. Hubbard's fictional
works through commercial retailers, but sales are limited.
objective of these limited sales through commercial
retailers is to create interest in Mr. Hubbard's works
and thereby to disseminate the religion. Since readers
tend to follow the works of authors they enjoy, crossover
readership often interests the reader in Scientology."
again, Scientology is trying to claim that a commercial enterprise
is in fact a religious activity. If this is so, then any commercial
enterprise could gain non-profit status simply by calling
itself a religion, and tax-exemption would simply be a farce.
It appears, then, that Scientology intentionally misrepresented
Bridge Publications to the IRS.
Scientology in the above reference claimed that the sales
of Hubbard's fictional books "are limited," on Bridge
Publication's web site they claim that both Battlefield Earth
and the Mission Earth dekalogy have sold over 5 million copies,
and the Mission Earth dekalogy "continues to appear on
bestseller lists in countries throughout the world."
These are hardly limited sales.
has some aspects that apply only to Scientology and no other
exempt religious organization. According to Tax Notes, the
Revenue Ruling 93-73, which allows deductibility of Scientology
auditing sessions, is unique among tax exempt religions. Catholic
religious training, for instance, is not deductible. Why would
the IRS grant an exemption to one particular religious organization?
SCIENTOLOGY'S VIEW OF THE I.R.S.
8, 1993, 10,000 Scientologists packed the Los Angeles Sports
Arena for an announcement from Scientology leader David Miscavige.
you are here to get word of what has been promoted as our
biggest breakthrough on the fourth dynamic [a Scientology
term for society] ever! Let me begin by assuring you that
is not an overstatement!" Miscavige spoke for about 2
hours, outlining a peculiar view of history that had psychiatrists
running the world and using the IRS to attempt to destroy
Scientology. The "psychs," he declared, "had
formulated a plan to infiltrate all levels of society so that
they - and they alone - were the decision makers as to what
was right and wrong." The psychs felt that Hubbard's
Dianetics had become too great a competitive practice against
the psychs turned to the modern day, 20th century inquisitors.
The creatures of the night. That's right, the vampires.
And not little vampires, but the ones who suck the blood
from the whole country, and so the villain of this plot
came on the scene - the Internal Revenue Service.
extremely important that the IRS not be allowed to deny Scientology's
tax exemption, declared Miscavige, because "a tax exempt
organization is not subject to the myriad complexities of
the Internal Revenue Code which can be used to harass and
destroy organizations the IRS does not like. But most importantly
- because all bona-fide religions and churches in the United
States do have tax exemption, and if the IRS refused to grant
such to Scientology that fact alone could be used to black
PR the Church internationally." From Miscavige's world
view, the IRS could simply not be allowed to deny Scientology
did deny Scientology's exemption, according to Miscavige,
and caused Scientology havoc throughout the world, "IRS-created
false reports were at the bottom of such infamous attacks
as the Australian inquiry, the UK and South African inquiries,
and attacks on the Flagship Apollo."
the IRS to Hitler, Miscavige stated "Don't forget - the
IRS hadn't found the Church doing anything wrong. They just
wanted to get us. So they had to resort to pure lies. Picking
up a technique from their mentor, Adolf Hitler, in his book,
"Mein Kampf", they subscribed to the theory that
"the bigger the lie - the more easily it would be believed."
1991, Miscavige was in Washington, D.C. and decided to make
an unannounced call on the IRS Commissioner,
October of 1991, while this war was raging at its apex,
Marty Rathbun and I were in Washington DC. to attend
one of these court hearings I mentioned. It was to be
the next day
we proceeded to 1111 Constitution Avenue - which if
you didn't know is the address of the national headquarters
of the IRS. We presented ourselves to security at the
front door, signed the visitors log and informed them
we were there to see Fred.
asked - Fred who?
answered, Fred Goldberg of course, the Commissioner
of the IRS.
he expecting you"" they asked.
was our response. "but if you phone him on the
intercom and tell him we are from the Church of Scientology,
I am sure he'd love to see us."
you ever wondered whether we were really impinging,
when we have spoken of the IRS at previous events? Well
- if so - shame on you.
did meet with the commissioner, and, as the saying goes
- the rest is history."
Scientology would deny this account and claim there was no
In this speech, Miscavige heaped scorn on the IRS continuously.
He called them liars, puppets of psychiatry, "vampires,"
haters, and thieves. He claimed they paid reporters to write
false stories, infiltrated Scientology, and spread false information
to other countries. It was this paranoid fantasy view of the
IRS that partially fueled the "war" by Scientology.
Also, Scientology felt the need for approval by the IRS so
badly that Miscavige and his predecessor fought a constant
battle with the IRS for years.
predecessor, L. Ron Hubbard, was the founder of Scientology.
He wrote policy letters that are considered scriptures and
that must be followed. Some of these concern how to deal with
the government, what to do about taxes, and other pertinent
quoted earlier, Hubbard had said "Taxes exist only to
destroy business. Be impudent. Get rich and to hell with them.
Governments are just a reactive bank we have to live with
for a while." Hubbard's view was that government was
an enemy. "The governments are in the business of falsifying
other people's records so as to collect more tax," said
Hubbard, who at the time was under investigation by the tax
authorities in the U.S. and the U.K. Hubbard's solution to
thing to do is to assign a significance to the figures
before the government can. The whole thing is a mess only
because arithmetic figures are symbols open to ANY significance.
So I normally think of a better significance than the
government can. I always put enough errors on a return
to satisfy their bloodsucking appetite and STILL come
out zero. The game of accounting is just a game of assigning
significances to figures. The man with the most imagination
wins. BUT there must be correct figures and there must
not be gross misassignment of debts as profits or the
whole thing won't hang together.
METHODICAL TRIP TO EXEMPTION
is strong evidence that Scientology became a religion in order
to gain the exemption and protection that religions have in
the United States.
at first created Dianetics as a business. After a few years
he wrote his co-worker Helen O'Brien about whether to set
up their organization in a different manner, such as a clinic
or counseling center, or "I await your reaction on the
aspect of Scientology came on gradually. In 1960 he wrote
"Scientology 1970 is being planned on a religious organization
basis throughout the world. This will not upset in any way
the usual activities of any organization. It is entirely a
matter for accountants and solicitors."
evidences that Scientology is a religion are mandatory on
the PES [Public Executive Section]," wrote Hubbard in1969,
apparently attempting to make sure Scientology looked religious.
The appearance of religiosity was not enough for the IRS,
however, since the IRS still found problems enough to disallow
the IRS would not grant exemption, Scientology fought back.
Scientology's actions against the IRS are consistent with
policies written by L. Ron Hubbard in handling enemies of
the organization. The constant lawsuits, use of private investigators,
anti-IRS advertising, organizations, forums and articles,
all come directly from Hubbard policies:
ever tamely submit to an investigation of us. Make it
rough, rough on the attackers all the way."
attacked on some vulnerable point by anyone or anything
or any organization, always find or manufacture enough
threat against them to cause them to sue for peace
Don't ever defend. Always attack."
we do the above as our pattern, we will successfully
bring the following facts into public consciousness:
(a) People who attack Scientology are criminals.
(b) That if one attacks Scientology he gets investigated
(c) If one does not attack Scientology, despite not
being with it, one is safe."
"However, if anyone is getting industrious trying
to enturbulate Scientology or its activities, I can
make Captain Bligh look like a Sunday school teacher.
There is probably no limit on what I would do to safeguard
man's only road to freedom against persons who, disdaining
processing, seek to stop Scientology or hurt Scientologists."
we need somebody haunted we investigate
investigate we do so noisily always. And usually mere
investigation damps out the trouble even when we discover
no really pertinent facts
spook if investigated. And don't co-operate. Sit tight.
Be silent. Make the investigator talk. Gradually put
him into session if you can."
policies were followed against the IRS, as history proves.
They are still in force today and still in practice. And,
as the Agreement shows, they can be a successful method in
dealing with perceived enemies.
POLICIES INCONSISTENT WITH IRS EXEMPTION
be noted that Scientology and Dianetics were created by L.
Ron Hubbard, who was the power directly or indirectly until
approximately 1982, when David Miscavige wrestled absolute
control. Miscavige has been the leader of Scientology ever
since. Miscavige was under Hubbard's direct tutelage before
taking control of the Scientology organization.
is a continuity throughout Scientology's leadership of the
key players. Even some of the people that Scientology claimed
to have kicked out after the Snow White trial are still in
the organization. Mary Sue Hubbard is listed as a Patron of
the church in a 1994 Scientology magazine. Henning Heldt has
continued taking Scientology training and is listed as a Patron.
Duke Snider has continued taking courses. Richard Weigand
has helped spread Scientology in Columbia and the United States.
Unindicted co-conspirator Kendrick Moxon is now one of Scientology's
any other religious organization with exemption, and against
exemption rules, Scientology uses its Doctrine of Exchange
in court to try to show that courses must have fixed fees,
providing a quid pro quo for any courses or items from Scientology.
According to this doctrine, there should never be a one-way
exchange between people or groups. One should always give
something of approximate value in exchange for an item or
service. A 1992 tax case describes this doctrine:
the administrative process, the IRS questioned CST regarding
the doctrine of exchange. The doctrine of exchange requires
that in order to receive, it is also necessary to give.
A Scientologist is obligated to exchange something he
values for anything he acquires. Thus, he must exchange
cash for auditing services.
must exchange cash for Scientology books. He must exchange
any original LRH documents he possesses for the satisfaction
of advancing the Scientology cause.
doctrine was described as a fundamental belief of the
religion, yet at other times, CST insists it is a minor
part of Scientology. It has, however, consistently been
cited as the explanation for why all Scientology religious
services must be paid for by those receiving them.
explains the doctrine as being based on early writings
of LRH which discuss the importance of balancing inflow
of money or services, for example, with outflow.
argues in its requests for tax exemption that Scientology
courses must have fixed fees - a practice that otherwise goes
against the prohibition of quid pro quo transactions in exempt
organizations - because of this religious doctrine. However,
the Doctrine of Exchange actually instead shows that Scientology
by its own doctrine should not even be seeking tax exemption.
Scientology utilizes the services of the federal government
as well as state and local governments. By the Doctrine of
Exchange, Scientology must in return give something for these
services and benefits. So, on the one hand, the Doctrine of
Exchange is used by Scientology itself to try to seek tax
exemption, yet on the other hand the Doctrine actually precludes
them from not paying their fair share of taxes.
of Exchange in fact is an attempt to create a religious doctrine
out of commercialism. If it is possible for the IRS to grant
exemption to a Church of Commercialism, then any business
could designate itself a church.
the Doctrine of Exchange and fixed fees, Scientology is organized
and run as a business in most aspects. Those who proselytize
for the organization are called Field Staff Members, or FSMs.
FSMs make a percentage (generally 10%) on any sale made to
the new recruit, be it a book, an e-meter, or a course. Ken
Pirak made $407,000 in 1991 as an FSM. The contract with Pirak
for his proselytizing activities says all taxes required by
any government "with respect to the business of Pirak
shall be made, filed, and paid by Pirak." Note that Scientology's
own contract labels FSM work as "business." Scientology
therefore uses a commercial method of salesman compensation
in order to gain converts.
exorbitant costs are contrary to that of a charitable religious
organization. Books, some written 50 years or more ago, are
priced by policy at 5 times the cost to produce plus twice
the postage cost to the farthest church.
cost up to hundreds of dollars per hour at a fixed rate, depending
on what level the Scientologist is working on. Since Scientology
staff makes only $50 per week, course work can be extremely
lucrative for the organization. Prices are reasonably consistent
in course prices at the Clearwater Florida organization. Lower
level courses, such as the Clear Certainty Rundown, cost $616
per hour, while OT VIII Eligibility, one of the highest courses,
costs $572 per hour. The justification for this price scheduling
is again the Doctrine of Exchange.
parishioner is unsatisfied with a course taken, there is a
policy where refunds for course costs will be given. This
is another aspect of Scientology much more like a business
than a religion:
PROMPTLY REFUNDED TO ANY DISSATISFIED STUDENT OR PRECLEAR
IN ACCORDANCE WITH THE POLICIES OF THE CLAIMS VERIFICATION
BOARD. IF THE PRECLEAR OR STUDENT IS DISSATISFIED AND
DEMANDS IT WITHIN THREE MONTHS AFTER THE TRAINING OR PROCESSING,
THE ONLY CONDITION BEING THAT HE MAY NOT AGAIN BE PROCESSED
is blatant about its actual goal, which the IRS seems to have
decided is religious:
J. MAKE MONEY.
K. MAKE MORE MONEY.
L. MAKE OTHER PEOPLE PRODUCE SO AS TO MAKE MONEY."
me also teach you to make tons of money for the organization."
exist only to destroy business. Be impudent. Get rich
and to hell with them. Governments are just a reactive
bank we have to live with for a while."
you move off a point of power, pay all your obligations
on the nail, empower all your friends completely and
move off with your pockets full of artillery, potential
blackmail on every erstwhile rival, unlimited funds
in your private account and the addresses of experienced
assassins and go live in Bulgravia and bribe the police."
be clear that Scientology is designed as a business, run as
a business, it's goals are business goals, and its founder
profited handsomely by skimming Scientology funds while simultaneously
seeking tax exemption.
been assumed that Scientology is in fact religious. Almost
any organization desiring tax exemption and willing to practice
some deception could create a religious trapping to their
activities. As was related in the history above, Scientology
indeed seems to have begun as a business and then gradually
took on religious cloaking. Dianetics, the precursor and still
Siamese twin of Scientology, was first made public in 1950.
Hubbard has never claimed that Dianetics is religious, yet
all the course work and books on Dianetics obtain the same
tax exemption as the religious Scientology. All Scientology
course work before a member goes "clear" is in fact
Dianetics training and processing. Dianetics training must
be completed before the religious Scientology materials can
L. Ron Hubbard constantly makes the claim that dianetics is
a "scientific fact." In fact, he makes that claim
35 times in Dianetics, the Modern Science of Mental Health.
For example, "All our facts are functional and these
facts are scientific facts, supported wholly and completely
by laboratory evidence." Hubbard shows that he regards
correct scientific experimentation to a high degree by carefully
hedging his approval of another scientific experiment done
by someone else. This test was conducted in a hospital to
see whether unattended children became sick more often than
attended children. "The test... seems to have been conducted
with proper controls," he cautiously states, not having
apparently seen the entire written report.
is only after man is sufficiently exteriorized to become a
spirit that we depart from the field of Dianetics; for here,
considering man as a spirit, we must enter the field of religion."
Here Hubbard himself divides Dianetics as the science from
Scientology the religion. "Dianetics is a science; as
such, it has not opinion about religion, for sciences are
based on natural laws, not on opinions." "The validation
of Scientology and Dianetics has engrossed the time and attention
of many auditors and myself
It is, indeed, the most
validated science of mind Earth has ever known."
Dianetics is still presented today as a "modern science
of mental health" by the Church of Scientology. And specifically,
despite the bifurcation between Dianetics and Scientology
made by Hubbard himself and Scientology in practice, all Dianetics
books and courses are granted tax exemption under Scientology's
does Scientology do with its money? According to IRS rules,
the activities of a religious tax exempt organization are
supposed to be of benefit to society. However, much of Scientology's
funds go to attack anyone who dares speak out against Scientology.
Their cadre of attorneys and pool of private investigators
continuously and aggressively pummel anyone Scientology decides
is an enemy. This writer has been followed by private investigator
Christopher E. Nelson, Florida investigator's license #A9400076,
intermittently since moving to Clearwater in May 2000. Several
private investigators seem to be assigned to staff and members
of the Lisa McPherson Trust.
follows the religious scripture of L. Ron Hubbard: "The
law can be used very easily to harass, and enough harassment
on somebody who is simply on the thin edge anyway, well knowing
that he is not authorized, will generally be sufficient to
cause his professional decease. If possible, of course, ruin
him utterly." Funds for this activity are large. Brian
Raftery, a private investigator for Scientology, stated in
court that he is paid $187,200 per year to surveil critics
of Scientology in the Clearwater Florida area.
1023 forms state that their "projected expenditures for
defense" which include legal and professional fees, was
$30 million in 1987-88. In 1990 Bowles and Moxon was paid
$2,172,515.76 and in 1991 $3,678,259.18. Kendrick Moxon was
an unindicted co-conspirator in the Snow White case. He provided
false handwriting samples to the FBI, according to the Stipulation
of Evidence in that case. In 1990 Moxon and fellow attorney
Robert Brennan were fined $27,000 for filing a frivolous case
involving a school dispensing Ritalin. Helena Kobrin, another
Scientology attorney, was fined $17,775 for filing a frivolous
civil RICO claim in 1994 against a former Scientologist.
has created a corporate maze that rivals any organization
on earth. The purpose of such a creation is left to the reader.
Below are most of the Scientology corporate entities:
Corporations granted exemption with Agreement
Association for Better Living and Education
Building Management Services
Church of Scientology Flag Service Org., Inc.
Church of Scientology International
Church of Scientology Western United States
Church of Spiritual Technology
Citizens Commission on Human Rights
Dianetics Centers International
Dianetics Foundation International
Flag Ship Trust Saint Hill Manor
Foundation Church of Scientology Flag Ship Service Organization
Foundation International Membership Services Administration
Hubbard College of Administration
Hubbard Dianetics Foundation
Inspector General Network
International Association of Scientologists
International Hubbard Ecclesiastical League of Pastors
Membership Services Administration (U.K.) Ltd.
New Era Publications International Aps
Religious Technology Center
Scientology International Reserves Trust
Scientology Missions International
U.S. IAS Members' Trust
The Way to Happiness Foundation
Church of Scientology Freewinds Relay Office, Inc.
Church of Scientology Religious Education College, Inc.
Church of Scientology Religious Trust
FSO Oklahoma Investments Corporation
FSS Organization, N.V. (Netherlands Antilles)
Golden Era Productions
International Publications Trust
Majestic Cruise Lines, Inc.
MCL Services, N.V. (Netherlands Antilles)
National Commission on Law Enforcement and Social Justice
Publications Int. Limited
San Donato Properties Corporation
Scientology Defense Fund Trust
Scientology Publications Limited
Sea Organization Reserves Services LTD
Transcorp Services S.A.
Trust for Scientologists
United States Parishioners Trust
Way to Happiness Foundation
considers anyone who speaks out or criticizes Scientology
to be an ememy. L. Ron Hubbard wrote that an enemy is to be
handled by being "tricked, sued or lied to or destroyed."
This policy is often administered by Scientology attorneys
and private investigators as listed earlier.
is anti-family through its "disconnection" policies.
This is a requirement for a Scientologist in good standing
to stop communication and interaction with a family member
who has become critical of Scientology:
Scientologist can become PTS [Potential Trouble Source,
a low condition in Scientology] by reason of being connected
to someone that is antagonistic to Scientology or its
order to resolve the PTS condition he either HANDLES
the other person's antagonism (as covered in the materials
on PTS handling) or, as a last resort when all attempts
to handle have failed, he disconnects from the person.
is simply exercising his right to communicate or not
to communicate with a particular person."
within Scientology, spouses have disconnected from spouses,
children from parents, and parents from children. By policy,
a Scientologist must choose Scientology over their family
has its own prison system called the RPF, for Rehabilitation
Project Force. The religious explanation is that if a parishioner
becomes disenchanted or uncertain of their allegiance to Scientology,
they can "voluntarily" be in the RPF and do manual
labor until they have a cognition on why they had doubts about
Scientology. The essential ramification is that the RPF is
a penal system designed to pummel recalcitrant or doubting
members into submission.
began in 1974 while Hubbard was commodore of a flotilla of
ships. A member on the RPF loses all rights to any activities
besides work assignments and study. He is restricted in movement
and is housed separate from the rest. His pay is reduced to
¼. He may speak only when spoken to. If married, one
night per week visits are allowed unless the spouse is also
on the RPF. Children may be visited during meal time (30 minutes
per meal), but the child must first express a desire to see
the parent. Meal time is separate from the rest. Number 17
of the rules states "And if dismissed from the Sea Org
is to sign a confession of his crimes before leaving the Base."
"The RPF has been created so redemption can occur. This
is basically its only purpose."
RPF assignment order, the reason given was that the person
"committed a suppressive act by blowing [leaving without
permission] two days ago
this resulted in the DCO E&I
MAA SHF going out to her house to recover her." This
is the type of activity that is now tax exempt.
course work is similar to a Catholic confessional in that
it is a review of the person's past to find and correct what
is causing problems in the present. However, unlike the Catholic
confessional, Scientology "auditors" write down
what the parishioner confesses and stores it in the person's
"pc folder." Thus, there is a written record of
deeply personal and private confessions kept on each member.
There have been complaints by many ex-members that the privacy
of these folders is breached if Scientology decides to turn
against a former member. Detrimental items from a church's
"enemy" are culled and used against the "enemy."
Peter Alexander wrote that during a protest of Scientology
in May of 2000, a Scientologist came up to him as he was protesting:
a few words back and forth, the OSA guy started making
comments based upon my PC folder. Now, for those of
you who don't know, I was a Scientologist for twenty
years, gave them a million dollars, and I have a lot
of PC folders! This guy picked what he thought was the
most embarrassing, or demeaning thing in my supposedly
confidential PC folders, and taunted me with it.
explained that while much of what was in my PC folder
turned out to be past life false memory syndrome, I
had expected some level of confidentiality. In fact,
the failure to keep this confidence by an acknowledged
member of the Church Security Staff (who are not entitled
to see or review any guidance counseling folder by "Church"
"policy") was the act of a morally bankrupt
raid in 1977 uncovered internal Scientology documents that
included references to utilizing pc folders as intelligence
sources against ex-members. This activity is now also tax
Agreement expired December 31, 1999. A new agreement was reached,
but this also is kept secret by the IRS. The IRS has little
to do now concerning Scientology since exempt organizations
are exempt also from much of the scrutiny non-exempt organizations
are subject to.
exemption has ripples throughout the government. Many laws
and regulations handle religious organizations differently
than non-exempt ones. For instance, minimum wage laws may
not apply to certain religious workers. Scientology pays its
Sea Org members $50 per week plus room and board.
relations have come into play as well. The U.S. government
has condemned both Germany and France for their "religious
discrimination" of Scientology. Germany considers Scientology
to be a business rather than a religion, while France considers
it a dangerous sect. The U.S., largely because of the IRS
exemption ruling, officially treats Scientology as a religion.
organization's history shows a need for monitoring, Scientology's
certainly does. The exemption hampers investigation, provides
cover for the organization, and gives it status and privilege
that it does not deserve. The exemption should be immediately
Stephen PhD Affidavit
January 6, 2000, on whether Scientology is a religion.