Exempted, Not Vindicated

Source: St. Petersburg Times
Date: November 21, 1993

David Miscavige, chairman of the board for Scientology's "Religious Technology Center," said recently that the IRS decision to grant his corporate empire a tax exemption was "a major victory for us." He added: "We were under siege. ... Now we've been vindicated."

His smugness aside, the business of Scientology, which is to sell vulnerable people counseling services at rates up to $800 an hour, was not vindicated by the U.S. Internal Revenue Service. It was merely exempted from taxation.

This is a business that was set up, according to the son of Scientology founder and science fiction writer L. Ron Hubbard, to avoid taxes. Its counseling process can cost a participant as much as $400,000, and it now claims offices in 78 countries. It reported $74.3-million in revenue last year from its Clearwater facility alone and says it will spend $185-million during the next five years to acquire more properties worldwide. It is a business that, according to records filed with the IRS: owns a 440-foot, $15.2-million cruise ship; spent $8.5-million on lawyers in one year; invested $6-million in an ad campaign in USA Today; is spending $114-million to build an underground vault to house Hubbard's writings; and rewards its salespeople so handsomely that one Scientology fund-raiser earned $407,052 through commissions in 1991.

By way of defense, Scientology offered the IRS this evidence of its charity: Three church affiliates were studied and "they found that they minister an average of 27 to 33 percent of their religious services without charge."

Can the U.S. Congress credibly defend this kind of tax break? Should U.S. taxpayers be forced to stomach this indirect tax subsidy? Perhaps U.S. Rep. Michael Bilirakis, who represents the district that includes Scientology's "spiritual headquarters," can provide some answers. Does he truly think Scientology deserves tax-exempt status?

The broader question of charitable tax exemption is one that Congress repeatedly has attempted to duck, but the evidence of abuse extends far beyond Scientology. The law already requires that charitable organizations pay taxes on the commercial or "unrelated business" portion of their income, but the language is so vague the IRS can't enforce it. Interestingly, the last time Congress even discussed the issue, during the mid-1980s, the IRS found that unrelated-business income taxes from non-profit organizations suddenly quadrupled.

So how much longer will Congress wait?

Just nine years ago, the U.S. Tax Court wrote that Scientology "has diverted millions of dollars through a bogus trust fund and a sham corporation" and "has made a business out of selling religion." But now the IRS has surrendered, and Miscavige is boasting of his new legitimacy. Instead of tough tax law enforcement, taxpayers are seeing a Scientology sellout. They can hold Congress responsible.