Scientology Tax-Exempt Status

Warning –This post may be biased because of my personal beliefs that Scientology does not deserve its tax-exempt status–

The church, founded in 1954, gained tax-exempt status in 1957, but lost it in 1967. Hubbard refused to pay these taxes, and years of lawsuits against the IRS and litigation followed. Along with these lawsuits, Hubbard enacted a plan supposedly called “Operation Snow White”. The mission was to “use Freedom of Information requests to remove information from government files that Hubbard thought discredited him and his organization” according to this article. What happened next is very interesting:

“Scientology agents broke into the IRS and bugged a conference room. The moles got jobs in government agencies, including the IRS, and stole documents. The FBI discovered Operation Snow White in 1977. Two years later, 11 Scientology officials, including Hubbard’s own wife, Mary Sue, were convicted of burglary, obstruction of justice and theft of government property. They got jail time. Hubbard was named an unindicted co-conspirator.”

Even after all of this, on October 8, 1993 The Church of Scientology officially gained tax-exempt status in the United States from the IRS after 25 years of the IRS considering the church a commercial enterprise. This was a very controversial decision. A 25-year billion dollar tax bill settled for $12.5 million. About 2,500 lawsuits against the IRS were dropped. Scientology’s attempts to discredit the government agency stopped.

Many people wondered why the IRS suddenly granted the church tax-exempt status as just a year earlier they denied them of it. According to this Los Angeles Times article in 1992 “the U.S. Claims Court cited ‘the commercial character of much of Scientology,’ its ‘virtually incomprehensible financial procedures’ and ‘scripturally based hostility to taxation’ as reasons for denying an exemption”. On a similar note, according to this Daily Beast article “A 1984 U.S. Tax Court ruling, for instance, found that the Church ‘made a business out of selling religion’ and that Hubbard and his family had diverted millions of dollars to their personal accounts”. There are many instances which show that US courts have found Hubbard and the church in negative light. The reason for the sudden change is unknown. However, the church’s efforts to discredit the IRS were intense. They hired “private investigators to dig into the private lives of I.R.S. officials and to conduct surveillance operations to uncover potential vulnerabilities”.

To attain tax-exempt status, the IRS determined that the church qualifies for the following, according to this Scientology website:

1. The Churches of Scientology and their related charitable and educational institutions are operated exclusively for recognized religious and charitable purposes.

2. The Churches of Scientology and their related charitable and educational institutions operate for the benefit of the public interest rather than the interests of private individuals.

3. No part of the net earnings of these Churches of Scientology and their related charitable and educational institutions inures to the benefit of any individual or noncharitable entity.

4. No part of the activities of the Churches of Scientology involve participation in any campaign for public office.

5. The purposes of these organizations do not violate fundamental public policy.

Other countries that fully recognize Scientology as a religion include Italy, South Africa, Australia, Sweden, New Zealand, Portugal, and Spain. Austria gives Scientology tax-exempt status as a charitable organization but doesn’t recognize it as a religion.

Further Reading:

Here is a blog post by Mike Rinder addressing his opinion on Scientology’s tax-exemption.

Here is a New York Times article from the day Scientology gained its tax-exempt status in 1993.

Here is an in depth New York Times article that explains the history of the church and its tax-exempt status.

Here is the church’s website explaining the history and tax-exempt status.