On October 1, 1993 the US Internal Revenue Service signed a secret agreement with the Church of Scientology granting unique privileges to the church. This agreement was counter to court rulings, including the US Supreme Court. This agreement only came to light (despite a court ruling to make it public) on December 30 1997 when the Wall Street Journal put it on their web page.
The church had been fighting the IRS for a long time to get its tax exemption. In fact, the church claimed to have had 2500 lawsuits going at once against the IRS and individual auditors. The church was waging an all out war against the IRS, and it is my belief that the IRS caved into the pressure from the church to grant it exemption. The IRS had won every court case against Scientology up to the time of the Secret Agreement that had to do with tax exemption. There was no need for it to buckle under. And this now sets a horrible precedent for other organizations, who will see that it is possible to pummel a reluctant IRS into submission.
The IRS even lied about this agreement.
This Secret Agreement provided many sweetheart deals for Scientology:
1) the IRS states that it will no longer have any interest in an audio tape
(known as the Zolin
tape) that a court had ruled was of a meeting by Scientology officials and
attorneys to defraud the IRS.
2) grants en masse tax exemption to dozens of Scientology's corporate structures, including Church of Spiritual Technology.
3) the IRS sent a Fact Sheet to other countries concerning their new agreement, which included a pro-Scientology pamphlet written by the church! The US Government was promoting a religion!
4) changes the status of many of the 1023 forms so that they cannot be viewed by the public as required by IRS rules (1023 forms are any documents the church provides the IRS in order to obtain tax exemption. The majority of these documents are not available to the public).
5) makes fixed costs of church courses tax deductible. This goes against the US Supreme Court's ruling in Hernandez.
6) any future violations of IRS rules by Scientology will be taken out of the hands of regular auditors and now placed in the highest officials of the IRS' duties.
7) requires that both parties keep the agreement secret.
There are no doubt other sweetheart deals involved that I as a non-tax expert don't see in the 72 page Secret Agreement.
The secret Agreement of October 1, 1993
Church of Spiritual Technology denied exemption in court in 1989
Church of Spiritual Technology denied exemption in court in 1992 (CoST is a corporation of Scientology). The secret agreement granted CoST tax exemption.
The "Hernandez" US Supreme Court ruling from 1989 ruling that Scientology fixed donations are not tax deductible. The Secret Agreement granted tax deductibility to Scientology fixed donations.
IRS information dealing with 1023 forms, which should mostly be publicly available. The Secret Agreement made MOST Scientology 1023 forms non-public.
Links to legal cases
Scientologists convicted of infiltrating the US federal government
other countries deny tax exemption
Doctrine of Exchange
St. Petersburg Times 1/6/98 editorial
Scientology's own page on the IRS
go to Jeff's Scientology page