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Saturday, 22 December 2012
Scientology's Puzzling Journey From Tax Rebel to Tax Exempt PDF Print E-mail

The Unusual Peace
After a Meeting, A 180-Degree Turn

Scientology made the initial gesture toward a cease-fire when Mr. Miscavige, the church leader, paid an unscheduled visit to the I.R.S. Commissioner, Mr. Goldberg.

The first full account of that meeting and the events that followed inside the I.R.S. was assembled from interviews, Scientology's own internal account, I.R.S. documents and records in a pending suit brought by Tax Analysts, a nonprofit trade publisher, seeking the release of I.R.S. agreements with Scientology and other tax-exempt groups.

Mr. Feffer, a church lawyer since 1984, said he approached officials at the Justice Department and the I.R.S. in 1991 with an offer to negotiate an end to the dispute.

The church's version of what followed is quite remarkable. Mr. Miscavige and Marty Rathbun, another church official, were walking past the I.R.S. building in Washington with a few hours to spare one afternoon in late October 1991 when they decided to talk to Mr. Goldberg.

After signing the visitor's log, the two men asked to see the Commissioner. They told the security guard that they did not have an appointment but were certain Mr. Goldberg would want to see them. And, according to the church account, he did.

Mr. Goldberg said he could not discuss the meeting, although a former senior official confirmed that it had occurred. An I.R.S. spokesman said it would be unusual for someone to meet with the Commissioner without an appointment.

Mr. Miscavige does not grant interviews, church officials said, but Mr. Rathbun said the Goldberg meeting had been an opportunity for the church to offer to end its long dispute with the agency, including the dozens of suits brought against the I.R.S., in exchange for the exemptions that Scientology believed it deserved.

''Let's resolve everything,'' Mr. Rathbun recalled saying. ''This is insane. It's reached insane levels.''

Mr. Goldberg's response was also out of the ordinary. He created a special five-member working group to resolve the dispute, bypassing the agency's exempt organizations division, which normally handles those matters. Howard M. Schoenfeld, the I.R.S. official picked as the committee's chairman in 1991, said later in a deposition in the Tax Analysts case that he recalled only one similar committee in 30 years at the agency.

The I.R.S. negotiators and Scientology's tax lawyers held numerous meetings over nearly two years. An I.R.S. official who participated, and who spoke about the meetings on the condition that his name not be used, described the sessions as occasionally rancorous, but he said the general tone had been far friendlier than over the preceding years.

There are indications that the early momentum was toward resolution. In a letter to Ms. Yingling on Jan. 19, 1992, John E. Burke, the assistant commissioner for exempt organizations, brushed aside what could have been a stumbling block. Ms. Yingling had apparently objected to the potential public disclosure of information that the church was providing to the I.R.S.

Mr. Burke said he did not want the dispute to delay the talks, and he committed the I.R.S. to allowing only a portion of the information to become public. He said the only hitch would come ''in the event that our discussions break down, an eventuality that I have no reason to believe will occur.''

An I.R.S. official involved in the talks said it was not unusual for the agency to negotiate with a taxpayer over what is made public in an agreement. By agreeing at the outset that information could be withheld, however, the I.R.S. seemed to relinquish a big bargaining chip.

Paul Streckfus, a former official in the I.R.S. exempt organization division, first disclosed the existence of the negotiating committee in a trade journal after the agreement was announced. He said in an interview that creating the group had meant a settlement had almost been preordained.

''Once the I.R.S. decided to set up this rather extraordinary group, the wheels were in motion for a deal,'' Mr. Streckfus said.

Not even a stinging court decision in favor of the I.R.S. could derail the talks. Midway through the negotiations, in June 1992, the United States Claims Court handed down its decision upholding the I.R.S. denial of a tax exemption for Scientology's Church of Spiritual Technology.

Ms. Yingling, the church's tax lawyer, said the Claims Court ruling ignored the facts and was filled with gratuitous comments. She said the I.R.S. negotiators were fairer in considering the evidence.

A portion of the correspondence between the agency and church from the two years of negotiations was released when the exemptions were granted three and a half years ago. It fills part of a large bookcase in the I.R.S. reading room in Washington.

The central issues are discussed in a series of lengthy answers by Scientology's lawyers to questions from the I.R.S. The church provided extensive information on its finances and operational structure.

The senior I.R.S. official involved in the negotiations, who asked not to be identified, said the church had satisfied the agency in three critical areas. He said the committee was persuaded that those involved in the Snow White crimes had been purged, that church money was devoted to tax-exempt purposes and that, with Mr. Hubbard's death, no one was getting rich from Scientology.

Ms. Yingling argued that nothing substantive had changed. She said the church had been qualified for tax exemption for years, but biased elements within the I.R.S. had stood in its way. ''There were no changes in the operations or activities of the church,'' she said. ''What came about was finally that they looked at all the information and saw that the church qualified for exemption, and they were satisfied.''

In August 1993, the two sides reached an agreement. The church would receive its coveted exemptions for every Scientology entity in the country and end its legal assault on the I.R.S. and its personnel.

There was just one more step. Scientology entities were required to submit new applications for exemption, which were to be evaluated by the agency's exempt organizations division. But something unusual occurred there, too.

Mr. Schoenfeld, the negotiations chairman, ordered the two tax analysts assigned to the review not to consider any substantive matters, according to I.R.S. memorandums and records in the Tax Analysts case. Those issues, Mr. Schoenfeld informed them, had been resolved.

Both analysts, Donna Moore and Terrell M. Berkovsky, wrote memorandums specifying that they had been instructed not to address issues like whether the church was engaged in too much commercial activity or whether its activities provided undue private benefit to its leaders.

Mr. Schoenfeld, who has since left the I.R.S., said he could not discuss the case. However, the senior I.R.S. official involved in the talks said there had been nothing sinister about the instructions because those matters had been decided by the negotiating committee. He acknowledged, however, that this was not the typical procedure.

The agreement was announced on Oct. 13, 1993. The I.R.S. refused to make public any of its terms, including whether the church paid any back taxes. The I.R.S. also refused to discuss the legal reasoning behind one of the biggest turnarounds in tax history.

Tax lawyers said the I.R.S. could have required the church to disclose terms of the agreement, as it has done in the past. In 1991, the I.R.S. required the Jimmy Swaggart Ministries to disclose that the group had paid $171,000 in back taxes for violations. In 1993, just a few months before the Scientology agreement, the I.R.S. required the Old Time Gospel Hour, a group affiliated with the Rev. Jerry Falwell, to publicize its payment of $50,000 in back taxes.

''The I.R.S. actually specified which media outlets we were to notify and approved the release,'' said Mark DeMoss, a spokesman for Mr. Falwell. ''When nobody picked it up, they put out their own press release.''

William J. Lehrfeld, who represents Tax Analysts in its suit to make the Scientology agreement public, said, ''You and I, as taxpayers, are subsidizing these people, and we should see this information.''

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