Scientology and Tax Exemption

[Munch]

@CurtC

How is a church really different from a country club?

The answer is, again, ownership. And entry fees. And dues (though there are a small number of churches that still have dues).

[BobLibDem]

I think Scientology is a fraud, a cult, and a racketeering enterprise. That being said, they call themselves a religion. And in the US, that’s all that matters as far as being tax exempt. When the government starts defining which religions are legitimate, then freedom of religion no longer exists. As disgusting as Scientology is, better to have one cult take advantage of the tax exemption than penalize legitimate religions.

[puddleglum]

The biggest difference between Scientology and most other religions is that donations to other religions do not buy services. You can go to a church and receive all the benefits and never give a dime. However Scientology has price lists for hours of auditing and courses up the bridge. If you don’t pay you don’t get the services. That means it is a purchase and not a donation. Money given for auditing and courses should not be tax deductible.

[mikecurtis]

@BobLibDem

I think Scientology is a fraud, a cult, and a racketeering enterprise. That being said, they call themselves a religion. And in the US, that’s all that matters as far as being tax exempt. When the government starts defining which religions are legitimate, then freedom of religion no longer exists. As disgusting as Scientology is, better to have one cult take advantage of the tax exemption than penalize legitimate religions.

Not quite right. The IRS doesn’t care if you call yourself a religion or not as long as you qualify and apply for exempt status; as has been pointed out already in this thread and is detailed here

With the exception being that if an org qualifies as a church:

The term church is found, but not specifically defined, in the Internal Revenue Code. With the exception of the special rules for church audits, the use of the term church also includes conventions and associations of churches as well as integrated auxiliaries of a church.

Certain characteristics are generally attributed to churches. These attributes of a church have been developed by the IRS and by court decisions. They include:

Distinct legal existence
Recognized creed and form of worship
Definite and distinct ecclesiastical government
Formal code of doctrine and discipline
Distinct religious history
Membership not associated with any other church or denomination
Organization of ordained ministers
Ordained ministers selected after completing prescribed courses of study
Literature of its own
Established places of worship
Regular congregations
Regular religious services
Sunday schools for the religious instruction of the young
Schools for the preparation of its members

The IRS generally uses a combination of these characteristics, together with other facts and circumstances, to determine whether an organization is considered a church for federal tax purposes.

So, if you qualify as a church (and it’s a very subjective qualification) you have different auditing rules.
and back to Munch’s inquiry about the revenue from non church related items ie: scifi copyrights. This income doesn’t diqualify an org as tax exempt, but such income is outside of the exemption.
Unrelated Business Income Tax

Even though an organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. For most organizations, unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption.

[Czarcasm]

Membership not associated with any other church or denomination

I’m pretty sure they fail this standard, because I distinctly remember being told at the Hollywood Celebrity Center that I could be a Christian, Jew or even Buddhist and still be a Scientologist.

[Ruken]

@Czarcasm

I’m pretty sure they fail this standard, because I distinctly remember being told at the Hollywood Celebrity Center that I could be a Christian, Jew or even Buddhist and still be a Scientologist.

I honestly am not entirely sure what the sentence means.

[UDS]

@Ruken

I honestly am not entirely sure what the sentence means.

I think Czarcasm is associating the IRS criterion “Membership not associated with any other church or denomination” to mean “for this body to be a church, the members of this body must not be associated with any other church or denomination”. I.e., he’s interpreting "membership’ to mean “the members”.

Therefore, because a Scientologist can also be a Christian, a Jew or a Buddhist, Scientology does not meet this criterion.

I’m not sure that Czarcasm’s interpretation is correct, though. The language is admittedly terse, but I think what the IRS criterion may mean is “being a member of this body does not involve/is not associated with membership of another church or denomination” - i.e. “membership” means “the relationship between the individual and the body”. So, for example, membership of the Jesuit order necessarily involves being a Catholic, and the Catholic church is a church; therefore, the Jesuit order is not itself a church.

[Munch]

@mikecurtis

and back to Munch’s inquiry about the revenue from non church related items ie: scifi copyrights. This income doesn’t diqualify an org as tax exempt, but such income is outside of the exemption.
Unrelated Business Income Tax

Even though an organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. For most organizations, unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption.

I’m not sure that’s an absolute. An organization can hold investments in an endowment, which earns income. That income is absolutely tax exempt. I’m not sure if the rights to a copyright could be held within that endowment or not - but I would imagine they could be. The large university endowments hold very diverse holdings, and it would not surprise me if something to that effect was going on. I think “unrelated business” doesn’t cover it.

[kaylasdad99]

nm