What does the IRS agreement say about refunds?

Question answered by honorarykid in Scientology

yertletheturtle asked this question on 7/31/2000:

Can anyone explain in simple english what the IRS agreement means to those seeking a refund? What rights to parishoners actually have? What steps must they take to get their money back?

I started to read this, but it's written in a way not to be understood by most people.

http://www.xenu.net/archive/IRS/index.html

honorarykid gave this response on 8/2/2000:

What kind of refund are you talking about?

If you're talking about tax refunds, the IRS agreement addresses that fairly specifically (but I agree with you that the wording is quite legalistic and hard to parse).

Payments to the CoS for "qualified religious services" for which "fixed donations" were charged, now became eligible charitable contributions. You add the deductions to your other itemized deductions on Schedule A.

For tax years prior to 1993 (when the agreement was reached between Scientology and the IRS), the IRS was apparently willing to also grant a deduction of 80% of each dollar spent on those same services.

However, as is normal in other 501(c)(3) groups, payments for books, materials and artifacts (like E-meters) would not be eligible for a deduction. And of course, like with any charitable contribution, you are obligated to have receipts proving you had indeed paid for the qualifying services. Without receipts, the deductions would be disallowed and interest and penalties applied in the event you get audited.

The new deductions are also limited by statutes of limitations. I have no idea how many years you can go back and still refile your tax return with the IRS, but I wouldn't be surprised to learn it was 7 years.

And the process of collecting an additional tax refund would be nasty from a paperwork standpoint. Each individual taxpayer seeking the additional tax deduction would need to file an amended 1040, along with the revised Schedule A to show the new, higher, charitable contribution for each year in which the additional refund was being claimed.

Generally speaking, and depending on how much you paid to Scientology, if you had very little existing tax liability, or your newly calculated itemized deductions still did not equal or exceed the standard deduction for the years in question, there still might be no monetary advantage in refiling.

Also, the IRS agreement reads very much like a class-action settlement agreement (although the class members, Scientologists, were not likely ever consulted about what they thought would make an equitable agreement). Strangely, to get the deduction, this agreement apparently obligates you (if I'm interpreting it correctly) to accept all the terms of this !SECRET! agreement. To get the deduction for Scientology services, you must also agree to the dropping all Scientology inspired lawsuits against the IRS and it's agents.

Not that Scientologists have reason now to sue IRS agents beyond what the general population would, but I think this a very unusual thing to have to agree to, in order to get a tax deduction. And if a Scientologist wanted to sue the IRS for non-contribution issues, would their hands be tied by this agreement? I'm not a lawyer or a tax preparer, so I really can't say. But all this shows that the "charity" involved in these deductions had probably less to do with a determination that the CoS was really acting as a charitable institution, and lot more to do with ending the institutional coercion and abuse that the CoS was applying to the IRS.

It's a very ironic thing that the IRS, which is noted for its own use of some of those heavy-handed tactics to collect taxes, was caved-in by the CoS' use of them against it.

And if you were talking about a refund FROM Scientology of "money on the books" or funds paid for a specific course with which you were dissatisfied, I don't think the IRS agreement says anything about that.

BUT if you had claimed a tax deduction for money "donated" to Scientology and then received a refund of those monies from Scientology, you would then be legally obligated to pay the tax on those amounts.

I hope this helps.

yertletheturtle rated this answer:

Thank You! But I must admit I was referring more specifically to refunds and re-payments from the church.

It is quite interesting, however, that at the end of the day, I was not able to take a deduction for any of my previous donation due to, as you also mentioned that the itemized deductions did not equal the standard deductions. I would hope to guess that would mean I would not be obligated to pay taxes on any refund.

Return to The Skeptic Tank's main Index page.