Re: "Make Money" in context

In article <DALJnq.8y9@murdoch.acc.Virginia.EDU> dc7v@darwin.clas.Virginia.EDU "Damon Chetson" writes:

> WONDERFULR (wonderfulr@aol.com) dribbles onto the net and this is the result:
>
> : Scientology's leadership does not "get" the money - it is for the benefit
> : of the church. It is a non-profit organization.
>
> It's a non-profit organization only because the U.S. tax laws are
> idiotic. This doesn't mean it's a church, it means it's a very successful
> scam, having duped even the courts. And are you seriously telling me
> that old Elron wasn't raking in $1 million a week by the time of his
> death?? And that he didn't get something like $35 million for the rights
> to dianetics.
>
Repost of a submission by Elvis Cole showing court rulings that Hubbard himself received moneys from the church in violation of the church's claimed status as a non-profit organisation.

It is thought that the church's current byzantine structure is in part a successful effort to deter investigation of its profit-laundering tactics by the IRS.

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     In Church of Scientology v. Commissioner, 83 T.C. 381
(1984), aff'd, 823 F.2d 1310 (9th Cir. 1987), cert. denied,
486 U.S. 1015, 108 S.Ct. 1752, 100 L.Ed.2d 214 (1988), the Court
detailed the extent to which, and the means by which, L. Ron
Hubbard made money from the Church of Scientology.  The decision
addressed the assessment of tax deficiencies and late filing
penalties against the Church for the years 1970, 1971 and 1972.
At issue was whether the IRS properly revoked the Church's tax
exempt status.
     The Tax Court explained the issue before the court as
follows:


          "[The Internal Revenue Service] asserts, and we
     agree, that petitioner fails to qualify for tax-exempt
     status because a portion of its net earnings inured to
     the benefit of private individuals.  In order to
     qualify for tax-exempt status under section 501(c)(3),
     not only must an organization establish that it is
     organized and operated exclusively for exempt
     purposes, but it must also prove that no part of its
     net earnings inures to the benefit of any private
     shareholder or individual."


Church of Scientology, 83 T.C. at 491.
     The Tax Court identified indicia of both "overt" and
"covert" benefit to L. Ron Hubbard and his family:


          "In the instant case, there can be no question
     that L. Ron Hubbard and his family are clearly private
     shareholders or individuals within the meaning of
     section 501(c)(3).n69  During the tax years at issue,
     the obvious indicia of benefit to L. Ron Hubbard and
     his family include salaries, directors fees,
     management fees, complete support of the family, and
     royalties; while covert indicia of benefit include
     repayment of alleged debts in unspecified amounts and
     unfettered control over millions of dollars in funds
     purportedly belonging to OTC and the United States
     Churches of Scientology Trust."


Church of Scientology, 83 T.C. at 492 (footnotes omitted).
     With regard to overt inurement, the Tax Court held:


          "In sum, the total value of the overt benefits
     received by the Hubbards during the tax years at issue
     in living expenses, and from salaries and royalties
     was several hundred thousand dollars.  These payments
     are substantial.  When viewed  in light of the
     self-dealing that transpired, they prove conclusively
     that petitioner was operated for the private benefit
     of L. Ron Hubbard and his family."


Church of Scientology, 83 T.C. at 495.
     The Tax Court then discussed the indicia of covert inurement
to Hubbard.  The Tax Court stated in pertinent part:


     "However, we need not rest our conclusion on this
     evidence, alone, since the record also abounds with
     indicia of covert inurement.
          Probably the most covert form of compensation
     paid to L. Ron Hubbard was tithes (or a percentage of
     gross income) which petitioner and other Scientology 
     organizations routed to him in the guise of "Founding
     Debt Payments.


     * * *


          [The evidence] clearly establishes that payments,
     other than salary and royalties, were being made by
     petitioner to L. Ron Hubbard under the guise of debt
     repayments.  Additionally, it is obvious from this
     policy letter that the so-called debt repayments were
     not just for money advanced by L. Ron Hubbard to
     petitioner but were also compensation for L. Ron
     Hubbard's past work in developing Scientology and for
     the use of his name.  [The Church of Scientology] has
     not produced any evidence of bona fide indebtedness,
     and it is clear from the record that there was no
     recognized debt which had been negotiated between
     petitioner and L. Ron Hubbard but rather a continuing
     obligation to make payments based on petitioner's
     total receipts.  n70"


Church of Scientology, 83 T.C. at 495-498 (footnotes omitted,
brackets added).
     The Tax Court identified another mechanism by which
L. Ron Hubbard covertly obtained inurement from the Church.  The
Tax Court stated in relevant part:


          "Finally, although the apparent existence of an
     arrangement whereby all Scientology organizations
     funneled a percentage of their gross income to L. Ron
     Hubbard under the guise of debt repayment certainly
     constitutes evidence of inurement on a grand scale,
     probably the most blatant source of covert inurement
     to L. Ron Hubbard in the present case is the complete
     control that he exercised over the millions of dollars
     transferred to OTC and the United States Churches of
     Scientology Trust.


     * * *


     In view of L. Ron Hubbard's unfettered control of the
     OTC and trust funds ranging in the millions of
     dollars, petitioner's failure to come forward with
     relevant evidence bearing on these holdings
     constitutes an overwhelming failure of proof. 
     Consequently, we find petitioner was operated for the
     private benefit of L. Ron Hubbard and his family and
     that its net earnings inured to their benefit."


Church of Scientology, 83 T.C. at 499-502 (footnotes omitted).
     Some might argue that this decision is no longer relevant
because the Church has now been given tax exempt status.  Any
such argument would be without merit for at least two independent
reasons.  First, the issue presented is whether L. Ron Hubbard
made money from the Church of Scientology, and not whether the
Church is currently entitled to tax exempt status.  The factual
findings made by the Tax Court clearly establish that Hubbard did
make money from the Church.  Secondly, any current determination
by the IRS to grant the Church tax exempt status does not
undermine this Tax Court decision covering the tax years 1970,
1971 and 1972.
     The argument that Church can't be cheating (anymore) because
otherwise the IRS wouldn't give the Church tax exempt status is
equally unconvincing.  The facts upon which the IRS made said
decision have not been revealed, much less reviewed by a court. 
Further, it is very possible that, in return for tax exempt
status, the Church dropped various legal actions against the IRS. 
In other words, the Church and the IRS may have entered into a
global settlement of all the claims and disputes (to date)
between them.  Thus, the decision to grant the Church tax exempt
status may not have been made on the merits, but in a bargain
with the Church.




-- Elvis Cole






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