Leah and I had the great pleasure of speaking to Taylor Holley this week.
Taylor is a law student at Texas Tech University who published a legal analysis of scientology’s tax exempt status in the Law Review.
Taylor has never been involved in scientology, but grew up in Tampa which sparked her interest in scientology. Her paper is a wonderful summation and careful analysis of the law and makes a compelling argument that the IRS should revisit the exempt status of scientology. I wrote about this earlier.
I am including her full paper below, as well as a link to it for downloading. I recommend you pay extra attention to her analysis of “public policy” — one of the elements necessary for the IRS to grant tax exempt status. It is a poorly defined subject and has been very narrowly interpreted by courts in the past. Scientology is clearly in violation of public policy, it cannot be true that it is acceptable for a tax exempt organization to spend taxpayer subsidized money on hiring PI’s to harass or trampling on people’s First Amendment rights to free speech.
We talk in this episode about what people can do and what the government should do. Yesterday, I published some example letters to Congress. If you want to do something, these letters might be helpful to you. And I would also recommend sending this analysis.
Click here for a downloadable PDF: AUDITING SCIENTOLOGY – REEXAMINING THE TAX EXEMPT STATUS OF SCIENTOLOGY
Found Fair Game the podcast and just listened to this episode. Sent the link to this page and a request to both the senators and my rep in DC. Hoping with the new hires at the IRS, they will reconsider changing the tax-exempt status of the business of Scientology.
Many thanks to Mike & Leah for their advocacy!
Mike,
On the subject of public policy, have the lawyers overlooked something? I think it would be easy to show that criminal behavior is against public policy. After all, the criminal code is already established law.
Not only individuals, but also organizations can be convicted of crimes. A formal example was the accounting firm Arthur Andersen. Informal examples include organized-crime groups prosecuted for racketeering.
Pete
It’s clear as can be to me anyone who has two eyes.
It requires the IRS to see. And then be willing to act.
I listened to your interview with Ms. Holly with great interest and excitement, being a practicing tax attorney for the past thirteen years (though in the corporate space, as opposed to exempt organizations). I applaud Ms. Holly’s zeal in tackling this complex issue, which has underpinnings and consequences that far exceed the isolated matter of Scientology’s tax exemption and directly touch upon important constitutional issues.
The dispositive question, in my mind, that arose in this interview was by what authority does the Service overrule a Supreme Court decision (i.e., that decision being the Court’s decision in Hernandez that payments for auditing services are quid pro quo payments, as opposed to donations, and are thus not deductible for US federal income tax purposes)? The response to this question touches the very foundation of our constitutional system and has been the subject of much debate and scholarly discourse among the bar; that response is also wholly unsatisfying.
Broadly, Title 26 of the US Code is the so-called “tax code.” If one were to physically examine the code itself, it occupies two volumes on my bookshelf; the other EIGHT VOLUMES comprise the Treasury Regulations. Congress grants Treasury broad authority within the Tax Code to promulgate regulations explaining and interpreting the statutes passed by Congress. The Service takes this a step further (or perhaps sideways?) by issuing supplementary guidance in the form of Revenue Rulings, Notices and Private Letter Rulings (“PLRs”) which further explains and interprets the Code as applied to specific fact patters.
As I mentioned, there has been much debate as to the scope of Treasury’s authority in this area. Examining the Treasury Regulations, one could argue that there are many instances in which Treasury (i.e., the Executive Branch) has overstepped its Constitutional authority and engaged in what could be argued to be the creation of law. One instance of this may be the Obama-era regulations promulgated under IRC Section 385 (i.e., the section of the Code that deals with the characterization of certain financial instruments as debt or equity for tax purposes. It actually says very little and grants incredibly broad authority to Treasury to promulgate regulations, a factor the Obama Administration used to reach beyond scope of the statute to attack so-called corporate inversions). Another are the so-called “check-the-box” regulations under 301.7701; I would urge a reading of the following article from the University of Minnesota Law School discussing the constitutional implications of those regulations (https://poseidon01.ssrn.com/delivery.php?ID=351084105114078088066006115127118074005024090008032052023104011113104127032098034106055022055064077012031023085028048000007059008126027026067026005103082112038081017082122072029095008086119073080108085081007122027065099099107090023097091024006&EXT=pdf&INDEX=TRUE).
As I said, the response here is wholly-unsatisfactory. Treasury potentially overstepped its constitutional authority in promulgating regulations, as you can see it has done in the past, to circumvent the Court’s ruling in this instance. If the Court rules on an interpretation of a statute, it is Congress’ role to amend the statute if it believes the Court to be in error or if they believe public policy would be better served; it is not the executive branch’s role to act in Congress’ stead.
Unfortunately, as you can see the Hernandez decision is not the only instance of this practice occurring. In fact, much of the practice of tax law is built upon the reliance on these regulations and published guidance in guiding our advice for clients.
Thanks for your thoughtful comment.
One of the ironies here is that when a Jewish couple (the Sklars) sought to be treated the same as scientology with they payments for religious education they were denied. The court said that because they were NOT scientologists, they were not entitled to exemptions, and used the Hernandez case against them! Such a mess.
Thanks, Mike.
Sklar was actually decided correctly. It was the Service’s disregard for Hernandez and complete misapplication of IRC Section 170 in contravention of their constitutional authority that is the true miscarriage of justice in this instance.
Hi Mike…Today’s podcast was so good and got me off my a$$ to sent to congressman and to IRS. I have my IRS letter saved because I wasn’t sure exactly what the IRS email was. I was attaching Taylor’s paper which is brilliant. As you say, I have ” no dog in this fight ” but have read/watched/listened since Leah’s Troublemaker was published. I live in Sarasota so close enough to Clearwater which is a sad place if you are downtown. Eerie.
In my post below I have listed the people and snail mail addresses of the top IRS officials to involve. Sending an email through the whistleblower link on IRS.gov goes to a grade 3-5 clerk. Where as paper mail directed to these people will land on their desks and in their hands. Audits and reevaluations are selected by both random computer generated lists based on specific criteria and programs decided based on information that is provided by outside sources. Both are set by Washington DC. Those are the people you need to convince. Because believe me when I say there are many people at the field and service center levels that are ready to tackle the problem.
Hi Mike
Do you have any knowledge on how private investigators get paid meaning did they receive cash or check by Scientology for their service ? Are their any pi willing to come forth on how they worked and got paid by Scientology?
They’re paiD through lawyers by check or direct deposit I assume.
Paul Marrick and his partner talked at great length to the Tampa Bay Times an$ filed a lawsuit that detailed a lot of this…
What I find so fascinating about this issue and so many of the other cult issues, is the fact that no one is willing to use the courts to address these concerns.
For example, none of the three most recent lawsuits (Garcia, Bixler, and Haney) asked the courts to determine if the cult is a church as a matter of law. The Garcia’s judge actually noted that the Garcia’s did not challenge the church “fact”.
Just because the IRS decides to treat an entity as a church, does not mean it IS a church as a matter of law. That is a question that can be litigated and obviously if a court finds the cult is NOT a church as a matter of law, the IRS would be under intense pressure to review the tax exemption.
A person that sues the cult, has the right to challenge the claim that it is a church. No one has done that. Instead, people keep waiting for the IRS to intervene.
THAT is not going to happen.
The same thing is true about the status of Shelley Miscavige. ANY U.S. citizen can petition a court to determine whether she is safe and to have her mentally evaluated in order to determine if she is really living her life according to her own wishes.
I have been saying for months that there are legal remedies to deal with the cult. It seems to me that no one is interested in pursuing those remedies, unless it will personally enrich them. That is too bad.
Interesting comment. I think there are plenty of lawyers who would argue with you about whether a court can in fact make a determination about whether scientology is a religion. That is a very thorny constitutional question.
As for Shelly, I don’t think you’re correct as I think your case would fail on the issue of standing.
But I could be wrong in both instances.
You seem to have some certainty about this, might I ask why you haven’t brought the cases yourself if you believe they will prevail?
No lawyer would argue about whether a court can decide whether a given entity is really what it claims to be. It is a question of law. In the case of the cult, that issue has not been settled until a court settles it. All you have to do is look at the court’s opinion in Garcia. The judge specifically mentioned that the Garcia’s did not question the cult’s claim that it is a religion. Courts decide thorny constitutional questions all the time.
If a person has reason to believe another person is the victim of foul play and they have probable cause to support their concern, they have standing to petition a court to appoint a guardian to investigate the situation.
I believe there are solid legal grounds to pursue these remedies and others. I am a never in and have never known anyone that had any contact with this cult.
With no involvement perhaps you would be a perfect plaintiff?
Why not try out your theories? Maybe you can break down the walls?
A lot of people would support you.
I can’t be a plaintiff because the cult never did anything to me. I have no reason to sue them.
I could petition the court over the Shelley situation, but I think the petition would seem more genuine coming from someone that knew her. It would be even better if the petition were signed by as many former scientologists as possible.
I would be happy to assist anyone that is interested in seeking these types of remedies. You don’t have to hire a lawyer to do any of it.
Besides your local Congress person you can also send you concerns about the abuses of Scientology to the following people:
Charles P. Rettig- the current commissioner of the IRS. The work address is
1111 Constitution Ave NW Washington DC 20224-0002
The deputy commissioners of the Tax Exempt/Government Entities offices are:
Sunita Lough
Edward Killen
IR
1111 Constitution Ave NW
Washington DC 20224-0002
The National Treasury Employees Union
National union President is
Tony Reardon
800 K St Suite 1000
Washington DC 20001
These are other people who can be contacted to trying and get them to step up the enforcement process to have the 501C(3) status.
Thanks — I added this to the post. Very helpful and appreciated.
Again, the IRS doesn’t determine tax status of religion/churches—they are presumed tax exempt under the First Amendment. Remember Marshall said “the power to tax involves the power to destroy.” I know you want that, but it doesn’t make it Constitutional nor to define what constitutes a religion.
Now if they’re committing fraud etc. then that’s something you can get them on, I would think. No one is immune from that crime.
Well, that is an interesting assertion and technically true. But the IRS has a specific list of requirements in order to be recognized as a tax exempt religious organization. Otherwise drug dealers could simply claim they were a “religious organization.” They had denied scientology tax exemption for being in violation of the IRS Code that prohibits inurement and commercial activity. That is not a determination of whether they are or are not a religion, but it IS a determination whether they fall within the criteria of being granted tax exempt status as a religion. It’s splitting hairs.
Mike, another commenter made a very valid point on your post regarding contacting your congress(wo)men. If too many of us send the same script/letter, the staffers may disregard them.
Please, everyone, use the script provided as a roadmap and modify the letter in your own words, in your own voice. Stick to the facts. Attach Taylor’s law brief. Be impassioned, not dramatic.
“Oh Danny Boy…..the Courts the Courts….. are calling…….”
Orange is the new black……..will David M BE THERE to “testify to Danny Masterson’s good character????
Time for JUSTICE for the ladies victimize………….
Very lovely, Balletlady. I never knew you had such a great singing voice.
Hello friend Skyler’
I truly hope & pray that for ONCE & for ALL that severe Justice is metered down & set at the feet of Danny Masterson.
One can Forgive a sexual assault if one CHOOSES to do so….
FORGET….that NEVER happens…..
Will the Lord & Master come to stand by the side of his “Fallen Angel”….I thinks not…he’d be crapping his pants thinking he’d be handcuffed & HAULED OFF as well…
I am counting the seconds, minutes, hours, days til Danny Boy “gets his”……
I read the paper and enjoyed it! AFAIK the agreement with the IRS also states that the COS has to pay back any prepaid money (for auditing) if a member asks for it. I don’t think the COS does that. So if I’m right, that would mean there’s an additional reason for the IRS to re-evaluate the tax exempt status. (Not a lawyer and not a US citizen here (I’m Dutch.).)
Another excellent episode.
If the IRS would remove this exemption from them in the US, a similar reflection could also happen here in Italy which has always been a major source of income for Flag and scn in general.
Thank you Taylor for what you have done, I wish you the very best and a brilliant future.
A very well written piece of a near complete overview on Sceintoliegy (the only major thing that appeared to be missing about the organisation are its volunteer groups and “humanitarian” organisations, Narconon, Criminon etc etc) from what appears to be a exceptional student.
A courageous effort considering that the author is so well knowledged on the organisation that she would be very well aware that this kind of piece may have negative consequences for her.
Read Taylor’s brief and a few others on the subject. Here’s a link to an exceptional one; https://www.irs.gov/pub/irs-tege/eotopicl94.pdf
It includes illegal activity as another cause to vacate the organization’s exempt status. It even mentions the cult.
Many of us ex-members have seen (and even participated in) illegal acts that were directed by Scientology.
I think it is time for the US government to execute another raid and gather evidence to support the rescission of the cult’s exempt status.
I made a proposal on my blog to amend The Constitution:
All religions which deny the validity of the Constitution shall not claim protection under it. The Congress shall have power to enforce this article by appropriate legislation.
The obvious question that’s been raised in the past is why I don’t call for a ban on Scientology by name? A name is only a mental label for the concept. Even though it appears to be internally forbidden to change the doctrines of Scientology, the doctrines also commands the believer to deceive the victims where necessary. Thus deception, such as a name change, by a Scientologist will occur. It’s by identifying a specific toxic attribute of Scientology that we can properly exclude it from protection under the First Amendment. A fundamental attribute of the doctrine of Scientology is the denial of real laws. The real acts of legislation by real governments that protect the real rights of the people. In declaring actual laws to be invalid Hubbard opened the door to the commission of a multitude of crimes that would be carried out by Hubbard and other Scientologists for their own personal benefit. This action’s absolutely intolerable in a civil society, in reality the people are the sovereign authority and the sole source of legislation. In reality Scientology has to go. In order for us to live a properly Human life we must allow our government to take a proactive role in defending our rights.
Americans didn’t dump the British Monarchy so that Scientology could harass people.
I really hope that Scientology leaves this bright young student alone and does not attempt any kind of “fair game” directed toward her.
If the do, it would be further evidence supporting her contentions.
On July 17th. 1988 on the Freewinds in the middle of the open Ocean, Scientology and Hubbard illegally opened up my head and inserted an e-meter device complete with cans into my head. They thought that demons were congregating in the area between universes and nfluencing me with mental telepathy.
They thought that Jesus Christ was being used as a mafia type front group to brainwash the entire population of planet earth. The e-meter type device that they placed in my head had an electronic action. It basically was designed to chop memories and create the illusion that Hubbard’s facsimiles were in fact realty. But the electronic action actually was separating the seeds contained in the mental compartments of the mind into only incomplete fragments of realty. These incomplete fragments of reality were not then able to discern the actual workings of reality. Hubbard was under the delusion that Gautama Buddha in 650 BC was part of the planetary Confederation. Hubbard thought that Buddha was creating Ninja type soldiers who would invade Western Civilization. The main Cognition required on the Freewinds for OT VIII on that day was that “There is nothing”. It is actually easy to say that there is nothing but harder to operate in a manufactured world of reality. Therefore nothing has passed since July 17th, 1988. The seeds of various weights and densities and fluidity still still impinge probabilities on the universe.
The legal profession should be tearing down Scientology to the degree that they have become backwards motion.
George even though we are a bit off topic here I want to add something.
What you describe as what one achieves on OT 8 is actually a distortion of the concept of Buddhism and then Zen, the hubbard’s classic where he takes something tweaks it and says it’s his discovery.
The ‘not-being’ which in reality is the only path to understand ‘that you are’ (not ‘who you are’ as defining who you could be is a label, hence ego).
Hubbard has distorted this concept and thus becomes that ‘nothing is real’ while keeping the ego in place – and also reinforces it – which was the primary target instead in order to really ‘be’.
One is told that everything he audited wasn’t him (and he has to be told, because a cognition like that he’ll never get it alone), and this is the old mentalist trick where you put the guy’s attention in the present, suggesting that he is really here now and he “realizes” that he is there now and then automatically accepts (because he trusts) what was suggested and becomes “reality”.
Awakening and enlightenment are gifts, not something the ego can claim.
Excellent reply. You fill in the gaps. OT VIII on the Freewinds in 1988 was a totally mind blowing experience for me and I am lucky to be alive.
Figure also that “History of Man” was used as the main text book and that there was a lot of “Implant Auditing”. Hubbard was confused, as you say, on the fundamental point of “being” and “not being”. Hubbard never really wanted peace, harmony and equanimity. It took me years to wade through Hubbard’s mistakes. In the end, I think Hubbard was confused, as you say, on the concept of ego.
Thanks George. In my humble opinion, I don’t think hubbard ever crossed the threshold of spirituality. It was all just on the mental plane, and therefore ego.
From whatever spiritual belief or path or practice one comes from when entering true spirituality the ego usually becomes an annoying burden. But not in hubbard or scn, there we see it increasing. I’d say fascinating.
If just a few dozen victims of the cult worked together, they could probably get the cult investigated. But they would have to fight super hard, risking the lives they built for themselves outside the cult, and exposing all their friends and families to harassment.
You are absolutely right. The point is that this, by the way, would also require several years of back and forth.
I prefer to believe as sure that the continuous exposure on the media has turned off the tap of new people and that due to its voracious nature the cult will soon start with cannibalism and will swallow itself up.