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Leah Remini calls for federal action: Here’s the frustrating reason the IRS may not a

Discussion in 'Legal and Government Actions Involving Scientology' started by J. Swift, Aug 14, 2017.

  1. J. Swift

    J. Swift Patron with Honors

    Note: This is my companion piece to the question and answer session Tony Ortega and I had at the Underground Bunker.


    What would it take to get the American IRS to commence an investigation into the revocation of the Church of Scientology’s 1993 tax exemption?

    At the minimum, it would take an IRS Regional Commissioner to call for a revocation hearing. Unfortunately, the position of Regional Commissioner was eliminated by Congress in the IRS Restructuring and Reform Act of 1998 (enacted July 22, 1998), an act implemented between 1999 and 2000. During this implementation period, the existing Regional Commissioners retired or were transferred to other positions.

    Because the IRS has no Regional Commissioners, the IRS is effectively barred from undertaking any civil audits of churches.

    Why is this?

    It is the result of a disastrous loophole unintentionally created by the US Congress. IRS Code (IRC) Section 7611 mandates that the IRS cannot initiate a civil audit of a church — or an organization claiming to be a church — without the express approval in writing of a Regional Commissioner. However, when Congress passed the IRS Restructuring and Reform Act of 1998, it made no provision for a substitute church audit process under section 7611. This created a loophole big enough for any church to drive through.


    How was such a mistake allowed to occur?

    The IRS and its sprawling bureaucracy is a part of the US Department of the Treasury. The US Congress held hearings on the IRS in 1996 and 1997. As a result of these hearings, it was determined that Congress needed to restructure the IRS and update the ways in which the IRS operates. Hence, the IRS Restructuring and Reform Act of 1998. For whatever reasons, the issue of church audits was either overlooked or was just not on the radar of the Congress or the US Department of the Treasury. Indeed, the IRS itself did not discover the problem until 2009.

    Bottom Line: Because the issue is one of statutory language, it cannot be remedied by Treasury regulations or other non-statutory guidance. What is needed is for Congress to amend the IRS Restructuring and Reform Act of 1998 to address this loophole.

    A few IRS audits of churches were started but were quickly closed when the IRS’ lack of authority to conduct such audits was challenged in court. A landmark example of such a challenge is the case United States of America vs. Living Word Christian Center (Civil No. 08-mc-37 ADM/JJK) This case was tried in the US District Court of Minnesota. In its ruling the Court specifically bound the IRS to the loophole in the IRS Restructuring and Reform Act of 1998. This is important and well worth reading to educate yourself:

    Given the loophole, the IRS is virtually powerless to do anything about the Church of Scientology or any other church. The one caveat is that the only church audits not governed by Section 7611 are civil fraud and criminal cases. Thus, if evidence of civil fraud or criminal activity is discovered and exposed by a whistleblower, a Scientology Sea Org member, or a Scientology parishioner, the IRS can address these matters. So can the IRS Criminal Investigation Division, the FBI, the Department of Justice and other agencies.

    Three government officials who can call for an investigation into Scientology’s tax exemption are:

    • The Commissioner Tax Exempt and Government Entities Ms. Sunita Lough
    • IRS Commissioner Mr. John Koskinen
    • US Secretary of the Treasury Mr. Steven Munchin

    Raising public awareness is necessary. The public should definitely contact these officials and demand that they open an investigation into the Church of Scientology’s 1993 tax exemption. And keep filing Form 13909 complaints against the Church of Scientology as a record against the day when the IRS opens, or is ordered to open, an investigation against Scientology. Easy and quick instructions on how to file a Form 13909.

    Finally, one question lingers for the IRS. In its 1993 Closing Agreement with the Church of Scientology, the Final Draft of which was leaked by the Wall Street Journal in 1997, the IRS included this stipulation:


    There are legitimate questions of fraud and misrepresentation of material fact by the Church in its 1991 1023 application for 501(c)3 tax exemption. Most notably, the Church represented that there was a system of corporate checks and balances in the Scientology when, as so many have alleged and shown, David Miscavige has collapsed these checks and balances and become the sole managing agent of Scientology and therefore pierced the corporate veils.

    Supporting PDF’ on the court case cited:

    United States of America vs. Living Word Christian Center (Civil No. 08-mc-37 ADM/JJK) — Memorandum Opinion and Order: https://scientologymoneyproject.fil...stian-center-memorandum-opinion-and-order.pdf

    United States of America vs. Living Word Christian Center (Civil No. 08-mc-37 ADM/JJK) — Report and Recommendation: https://scientologymoneyproject.fil...rd-christian-center-report-recommendation.pdf

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