Scientologists Lose Court Ruling on Tax Deductions for Donations

In another legal setback for the Church of Scientology, a federal appeals court in California ruled Friday that church members cannot claim income tax deductions for donations they make to the church in exchange for spiritual training.

The ruling, which could affect a major source of revenue for the church, concludes that the thousands of dollars church members pay for “auditing” and “training” sessions with church leaders are not charitable contributions deductible under federal tax law.

Different Findings

The opinion from a three-judge panel of the U.S. 9th Circuit Court of Appeals conflicts with a ruling earlier this month in a nearly identical case by a federal appeals court in St. Louis, which held that such payments are deductible, but it concurs with a previous decision in Boston.

The three cases are among nine Scientology tax appeals brought before circuit courts throughout the nation. The issue is expected to be decided ultimately by the U.S. Supreme Court.

In the 9th Circuit case, three church members challenged the Internal Revenue Service’s disallowance of fees they paid to the church for general training in the principles of Scientology and for “auditing” services, a process by which church members believe they are able to gain spiritual competence.

Doctrine of Exchange

The church says it charges fees for such services because it is a fundamental tenet of Scientology that any time a person receives something, he must pay it back, a concept known as the doctrine of exchange.

The fixed “donations” required for such services constitute the majority of the Church of Scientology’s funds and are used to pay for church operations, according to the court record.

Scientologists appealing the IRS ruling argued that their donations were no different from other churches’ requirements for tithing or dues in exchange for various church benefits.