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IRS: Scientology is tax-exempt religion

Title: IRS: Scientology is tax-exempt religion
Date: Wednesday, 13 October 1993
Publisher: St. Petersburg Times (Florida)
Author: Wayne Garcia
Main source: link (245 KiB)
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The agreement ends a fight that lasted decades. And the deal may help Scientologists avoid paying millions of tax dollars in Clearwater.

The Internal Revenue Service says the Church of Scientology and its myriad entities don't have to pay federal income taxes, ending a 40-year battle with the controversial church over its purpose and methods of dealing with opponents, which included burglary and intimidation.

In the past week, the Internal Revenue Service issued 30 "determination letters" that exempted 153 Scientology churches, missions and corporations from paying federal corporate income taxes, said Frank Keith, an IRS spokesman.

The decision saves Scientology millions of dollars in taxes annually and enables Scientologists to declare their donations as charitable contributions.

It also could tip the balance in the organization's efforts to avoid paying property taxes on its Clearwater holdings, a tab that is nearing $7-million after more than a decade of withholding the payments. Scientology has its spiritual headquarters in Clearwater.

"We're thrilled," said Marty Rathbun, president of Scientology's Religious Technology Center, the Los Angeles-based corporation that is believed to be at the top of the hierarchy that surrounds the secretive self-help religion founded on the works of science fiction writer L. Ron Hubbard.

"It was a 40-year war," Rathbun said Tuesday. "Essentially, any time you have peace at the end of such a conflict, you are extremely happy."

The IRS may have given Scientology something more valuable than money: legitimacy.

"Recognition of tax-exemption is a very important recognition," Rathbun. said.

"We're very happy. We think it's a good sign," said Richard Haworth, a spokesman for Scientology's Clearwater organization. "Now we can get down to our real business, that of delivering counseling."

The news of the IRS decision was announced last weekend by Scientology's top official, David Miscavige, in a speech broadcast worldwide to Scientology centers, including 3,000 people at the former Fort Harrison Hotel in Clearwater.

"We have brought to an end 40 years of suppression of Scientology and Scientologists," Miscavige said, according to Scientology documents. "Our road to infinite expansion is now wide open."

The news was greeted with much less enthusiasm in Clearwater City Hall, where officials have openly fought Scientology since the organization began secretly buying downtown land in 1975.

"I have invested a whole number of years in this and l can say I'm disappointed if this is the final ruling," Mayor Rita Garvey said. "It's a profit-making organization preying on the needs of people looking for help."

"I think it's a license to steal," said Gabe Cazares, a former Clearwater mayor who was a target of church harassment.

Likewise, national critics of Scientology downplayed the IRS decision and continued in their assessment that the church is merely a money-making scheme.

"At its core, it is antithetical to religion," said Gerald Armstrong, a former church member who worked closely with Hubbard to research the founder's biography before breaking with Scientology in 1981. He has been sued by the church several times since then and remains at odds with Scientology's leaders.

"I've always thought that it's meaningless one way or the other" whether the IRS grants tax-exempt status, Armstrong said from his California office Tuesday night. "What is meaningful is the nature of the Church of Scientology."

Scientology calls itself an applied religious philosophy. It was founded upon principles of the mind and soul first delineated by Hubbard in his 1950 best-seller Dianetics: The Modern Science of Mental Health. The church espouses a strong code of ethics and behavior that includes no drug or alcohol use.

Scientologists can pay up to thousands of dollars for counseling in a process called auditing. It is aimed at ridding their mind of negative thoughts and enabling them to live the fullest life possible.

Hubbard died in 1986 after spending the last years of his life in seclusion.

Hubbard instilled Scientology with a strong sense of survival and said its members should not hesitate to fight vigorously against critics, including government officials and the media. Some Scientologists in the late 1970s bugged an IRS office in Washington and stole files from several government agencies as part of a plan to cleanse their records. Eleven top Scientologists, including Hubbard's wife, were imprisoned in that case. Scientology officials called the 11 renegades and they were expelled from the church.

The current IRS decision was part of a broader "closing agreement" with the Church of Scientology, Keith said.

Technically, the church and its affiliates were given tax-exempt status under 501(c)3 of the federal tax code, a provision that means it won't have to file annual financial disclosure forms that other charities, but not churches, have to file.

"The service has granted tax-exempt status to a wide variety of entities within the hierarchy of the Church of Scientology," Keith said. "The majority of them are being recognized as churches."

That list includes the Clearwater-based Scientology Flag Services Organization, the umbrella organizations Church of Scientology International and Scientology Missions International and the Church of Spiritual Technology.

To determine Scientology's legitimacy, the IRS collected financial and operating records that stack up to 12 linear feet. Those records were made public in Washington on Tuesday.

Before the IRS ruling last week, only a handful of individual Scientology churches — in Boston, Detroit and Washington D.C., for example — were given tax-exempt status. Scientology parishioners who tried to write their donations off their personal income taxes had been barred from doing that by a U.S. Supreme Court decision.

The IRS decision was greeted with disbelief among Clearwater and Pinellas County officials Tuesday night.

"The fact remains: They are a for-profit organization," said Jim Smith, the county property appraiser who is fighting an 11-year-old property tax battle with the Church of Scientology.

Smith said he didn't know how the IRS ruling would affect his case and would review the situation with county attorneys today. Scientology owns more than 14 parcels around Clearwater worth more than $21-million. It also plans to build a $40-million counseling center and auditorium as the next phase of expansion in Clearwater.

— information from staff writers Ned Seaton and David Dahl, librarian Barbara Hijek, researcher Debbie Wolfe and the Los Angeles Times was used in this story.

About Scientology

Members: Scientology claims 8-million members worldwide, nearly 5-million in the United States.

Founder: The Church of Scientology was begun by L. Ron Hubbard, the late science fiction writer, who in 1950 wrote Dianetics: The Modern Science of Mental Health. The first church was founded in 1954 in Los Angeles.

Countries: It has branches in 78 countries. Dianetics, which is used as a scripture by Scientologists, has been translated into 25 languages.

Clearwater: In 1975, Scientology slipped into Clearwater, setting off a firestorm of controversy about its methods and intentions. The group used a front company to secretly buy the historic Fort Harrison Hotel, a landmark in downtown Clearwater. Things have changed in the last 18 years. At least 600 uniformed Scientologists work in downtown Clearwater now, and another 3,000 who don't work for the church live in Pinellas County. Scientology facilities attract 12,000 out-of-town visitors a year.

Tax-exempt status: The IRS recognized the Church of Scientology of California as a tax-exempt religious organization in 1957, but revoked that exemption in 1967. This month it has been restored.

Famous Scientologists. Actors Tom Cruise, Kirstie Alley, John Travolta and Priscilla Presley; musicians Chick Corea and Al Jarreau; Sonny Bono.