The case for Inurement

Discussion in 'Leaks & Legal' started by tikk, Feb 14, 2011.

  1. tikk Member

    Reading Lawrence Wright’s New Yorker article on Scientology I quickly lost count of how many times Scientology was forced to deny the various allegations cited by Wright, and most of the denials were denials Scientology has gotten used to issuing. And the allegation that Sea Org member John Brousseau had customized Harley-Davidson motorcycles belonging to Tom Cruise and David Miscavige and an S.U.V. belonging to Cruise (see Tony Ortega's piece in the Village Voice for details) seemed minor when compared to, say, the allegations of physical beatings and imprisonment. But it was this claim, together with allegation that Miscavige is living like a televangelist, that triggered the most strenuous objection from Scientology, who “vigorously object[ed] to the suggestion that Church funds inure to the private benefit of Mr. Miscavige.”

    There’s a good reason this particular allegation triggered the most vehement reaction from Scientology: of all the transgressions documented by Wright, those implicating inurement are the most immediately detrimental to their tax exempt status. Religious entities considered exempt under Internal Revenue Code § 501(c)(3), as is Scientology, may not operate for the benefit of private individuals or interests. The IRS web site explicitly states that “no part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual.” [emphasis added]

    Few organizations know this better than Scientology, having been denied tax exempt status on the basis of inurement before. In the decades prior to finally being awarded exempt status in the early 1990s, Scientology waged a war against the IRS, and one of the more significant battles in that war was the Founding Church of Scientology v. United States case [188 Ct. Cl. 490 (Ct. Cl. 1969)] in which the Court of Claims found that Scientology’s finances were merely a personal compensation to benefit L Ron Hubbard (nearly 10% of its gross income, in fact). There is no shortage of additional precedent: See, e.g., Basic Bible Church v. Commissioner, 74 T.C. 846 (1980) (Court found inurement where nearly $33,000 received in contributions, more than $31,700 impermissibly benefited pastor for travel, home expenses); Southern Church of Universal Brotherhood Assembled v. Commissioner, 74 T.C. No. 89 (1980) (Court found a substantial amount of church income paid ministers' and family's rent and living expenses).

    As we know, the Scientology offensive didn’t cease until the IRS finally relented in 1993 and granted them their long sought-after tax exemption. As we also know, both parties have since been notoriously tight-lipped as to the terms and context for the ostensibly “secret” deal. The IRS’s reversal of its stance on Scientology’s tax exempt status was not only delivered in secret, it came sans any explanation as to what legal basis supported the reversal. Additionally, the IRS has subsequently defended the secrecy of their undisclosed agreement with Scientology (most notably in the two Sklar v. Commissioner cases).

    The IRS has never offered an affirmative reason why they abruptly deemed Scientology as worthy of exempt status, after spending so many years arguing the converse. The most reasonable and benign excuse is that the IRS, from a resource standpoint, was worn down by the Scientology litigation machine, which had spawned hundreds of lawsuits, all which were withdrawn pursuant to the 1993 secret agreement. But even if one accepts this as an explanation, it cannot also be the objective basis by which Scientology earned its tax exempt status. The “secret” agreement, which was leaked to the Wall Street Journal in 1997, simply presumes as fact that Scientology is now, suddenly, an exempt organization, with no further explanation to reconcile why they were not only a year prior.

    Even if the IRS is remaining mum as to why Scientology suddenly became worthy of exempt status, we do know the bases by which a 501(c)(3) organization can jeopardize its status: (a) if its net earnings inure to an individual; (b) if it provides a substantial benefit to a private interest; (c) if it devotes a substantial part of its activities attempting to influence legislation; (d) if it participates or intervenes in any political campaign on behalf or in opposition to a candidate for public office; or (e) if its purposes and activities are illegal or "violate fundamental public policy."

    Decent arguments can be made that Scientology jeopardizes their exempt status by participating in nearly all of the aforementioned prohibited activities (save intervening in political campaigns). But proving that Scientology is so engaged is difficult for a number of reasons, the most obvious being that the type of behavior which ordinarily jeopardizes an organization’s exempt status requires documentation—documentation the corporately opaque Scientology will not surrender absent a court order. More importantly, Scientology’s natural adversary, the IRS, has essentially rejected its role as a check against Scientology’s abuse of its exempt status. Scientology doesn’t have to worry about disclosing documentation if the IRS is going to intervene on their behalf time and again. Individuals have no standing to raise the issue on their own, an issue I’ve written about before.

    Of all the bases undermining Scientology’s claim for exempt status, inurement would, at first glance, seem the most difficult to prove without extensive discovery into Scientology’s internal finances. But Brousseau’s story and pictures are nevertheless prima facie evidence of inurement because the nature of the prohibited transactions alleged by Brousseau requires little more documentation than what Brousseau has provided—he served as both the quid and the quo in the transactions which bestowed private benefits upon Miscavige and Cruise. The organization pays Brousseau approximately $50 per week (which is legally squared under the “ministerial exception” to labor law, in order that Brousseau and others like him can perform “religious duties”) and Brousseau in turn performs professional, secular services (which would otherwise cost Miscavige and Cruise thousands) to private individuals, such as Scientology’s Chairman of the Board, and the Chairman’s best buddy, Tom Cruise. Simply put, that’s inurement, and the IRS should investigate it, along with the dozens of similar stories.

    Courts are wary of delving into the manner in which a religion organizes and conducts itself, largely because courts are prohibited by the first amendment from ruling on questions of religious orthodoxy. This wariness provides some wiggle room for religions being investigated for inurement to redefine potentially violating incidents as falling within a religious rubric. Why should a judge categorically prohibit a religious entity from refurbishing the motorcycle it bought for the head of the church? Viewed in isolation, this might be a close question. But the allegations of inurement have steadily mounted for Scientology and Miscavige and a picture is emerging that the IRS is negligent each day it ignores. One unique aspect of Brousseau’s allegation is that Tom Cruise—who is not a religious official—was a beneficiary of Brousseau’s services. Benefits inuring to Cruise do not implicate even a scintilla of grey legal space such as those benefits inuring to Miscavige, because no religious basis—not even a preposterous one—can justify the need for religious, ahem, “ministers” to customize Tom Cruise’s motorcycles and S.U.V.
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  2. Anonymous Member

    much love to the tikkster!
    • Like Like x 3
  3. Anonymous Member

    What can be done to light a fire under the IRS' buttocks to get them to do their job?
    • Like Like x 2
  4. Anonymous Member

    offer caek, hookers and blow?
    • Like Like x 3
  5. subgenius Member

    Let's not forget the big birthday party on the Fleawinds.
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  6. Anonymous Member

    or the wild flower field that was planted for him and Nicole, the private chefs and the TC apartment at Gold
    Wonder what DM gave Cruise as a wedding gift? anyone ever hear what it was? Or was it never mentioned?
    • Like Like x 2
  7. tikk Member

    Perhaps sending the IRS a polite letter including both mention and links to the articles detailing Brousseau's story and pictures, such as Tony Ortega's in the Village Voice, and perhaps a link to my legal argument above, which I tried to keep light and readable.
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  8. xenubarb Member

    Toasting in epic bread
    • Like Like x 1
  9. Anonymous Member

    and how about a copy of the statements from Maureen Boldstadt (planted wild garden) and Sinar (cooked for Cruise) the chef?
    Or will it just look like he said she said stuff?
    • Like Like x 1
  10. tikk Member

    Well, those allegations belong on the pile, definitely, but the Brousseau stuff should really be front and center because it's all a bit stronger, as evidence goes.
    • Like Like x 2
  11. CarltonBANKS Member

    This is worth repeating.

    Yet again, it seems libel law is stifling journalism :(
    A key fact about COB David Miscavige being investigated for inumerent was deleted :(

    The original Daily Mail article

    From #632

    From #635

  12. CarltonBANKS Member

    Why did the Daily Mail do this? J'accuse Carter-Ruck! If only someone in the Mail would leak the threat

  13. tikk Member

    I don't have a problem with the above because, as I suggested in the above screenshot, I'm pretty sure the original report was mistaken. Also, it hadn't been reported anywhere else and the Daily Mail article wasn't relying on its own reporting. If the FBI isn't and wasn't investigating Scientology for inurement, and there's no reason to think it is or was, retracting the mistake is not censorship.
    • Like Like x 1
  14. Boris Korczak Member

    Great analysis tikk..
    I just wonder what the FBI alleged investigation of human trafficking will achieve. I have reasons to believe that behind the millions of dollars there is human trafficking and probably much more.
    Thanks and ...

    Stay safe.
  15. amaX Member

    I just love you, tikk.
  16. Puppetmama Member

    Great thread!
  17. Triumph Member

    theres also the issue of Sea Org members pooling their money from their measly earnings each year for a costly barfday Gift *cough* for the Diminutive Dwarf.
    Marc talked about it in his Coast to Coast interview..
    • Like Like x 6
  18. subgenius Member

    The IRS has a couple of face saving reasons to revoke the special status granted to the cult of Scientology:
    -fraud in obtaining the status
    -newly discovered evidence of failure to comply the regulations for maintaining that status

    • Like Like x 5
  19. I also would like to express my fondness for Tikk.
    Hopefully this will be the death blow for Miscavige. Its pretty obvious that the guy is living like a Saudi prince with the proceeds from Sci. I just wonder how much evidence the IRS needs before they will do something.
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  20. Mark Cabian Member

    Excellent, Tikk! Can we place this OP as a blog at WWP? Recently there was an opportunity to submit an example of work to WWP, and to me, this is perfect.
    • Like Like x 1
  21. Anonymous Member

    We tried that with Charlie Sheen. Did not end well.
    • Like Like x 2
  22. Ann O'Nymous Member

  23. exOT8Michael Member

    I am doing the sammich you.
  24. Smurf Member

    They're doing their job. The IRS isn't just about regulating Scientology. I suspect with all the changes in the federal tax law, issues with the economy and federal budget, the IRS is not interested of spending all their time & resources in defending themselves, in a multitude of lawsuits, from corporate Scientology. When the exemption issue lands in federal court, the rules are different. Federal judges have provided Scientology alot of latitude in getting away with shit over the years because they are a "religious corporation." Just ask Marc & Claire Headley.
  25. tikk Member

    It's somewhat a whole other can of worms, but the exemption issue can't land in federal court because no individual has standing to bring such a suit. Though one Supreme Court case, Flast v. Cohen, arguably permits an individual taxpayer standing to bring a hypothetical suit, the Supreme Court has since, in Hein v. Freedom From Religion Coalition, greatly narrowed the instances by which a taxpayer lawsuit could be brought to enforce establishment clause violations. And it's pretty clear that a taxpayer suit challenging Scientology's exempt status falls outside that narrow restriction.
  26. exOT8Michael Member

    OK, tikk, so what CAN be done to bring Justice to this situation?
  27. Anonymous Member

    tikk, you talk so purty!

    Seriously, it seems that we are on the right path here. What we need is evidence and with so many exes out there someone must have what we need. I can't imagine M2 don't have something, but damned if we ever see it.
  28. Anonymous Member

    OP's 1st post is a must read for all anons.
    • Like Like x 1
  29. Anonymous Member

    Is it just me or is this completely and utterly irrelevant to this thread?
    • Like Like x 1
  30. Anonymous Member

    You'd have to get Miss Bloodybutt of the "Church Tax Compliance Committee" to visit them at their home.

    Wait, maybe she already has?
  31. Anonymous Member

    Tikk, would you consider writing such a letter to the IRS?
  32. tippytoe Member

    This thread rocks!
  33. grebe Member

    Given that the US government can't really define "religion," if I were the feds I'd treat the referent for that word as something beyond my ken - like the concept of color to a person born blind. If anyone in my courtroom were to make the "religion" sound, I would respond, "Hey whatever floats yer boat," as I turned my attention to matters of verifiable fact.

    And thus I'd avoid getting hit in the face with many distracting "its religious - no it is not!" arguments.

    If a charity is restricted from using its income to benefit its leadership, then a fancy motorcycle for the leader of said charity is not okay.

    I now bump this thread for great justice.
  34. tikk Member

    That's a good point, though the legal analysis differs slightly with regard to how religious organizations obtain exempt status (they're presumably exempt) versus how charitable organizations obtain exempt status (they must apply via Form 1023). Generally speaking, however, there's little difference to how charities and religions lose their exempt status.
  35. Orson Member

    We have to bring public awareness to this issue in order to pressure the IRS to do its job. That's the only thing that will work in my opinion.

    Some initial thoughts:

    1. Tikk's post needs to be submitted for posting on a major blog (Daily KOS, HuffPost, etc.) or given to Tony Orgtega to work with or something like this. This well-reasoned and legally sound summary needs to be read by opinion leaders in politics. How do we get this in front of them? (Tikk, if you are willing, may want to add to it.) This is not Gawker, RadarOnline or TMZ stuff (even with the Cruise connection).

    2. Who was the dude that was in Scientology, got out, became a writer/researcher on cults and blogged recently about the IRS tax status on HuffPo? He's been interviewed by WBM and others in recent vids and I think he was at the Boston Mega Raid. My memory fails me. But this guy should be contacted to see if he could get this up on HuffPo or use Tikk's summary as a starting point for him to write another piece for HuffPo. I think this has an excellent chance of working. Who is the guy and who knows him?

    3. This information should be added to the website immediately. And we should begin promoting the shit out of that site again.

    4. ?

    5. Profit
    • Like Like x 1
  36. Orson Member

    Also, tweet this thread over and over.
  37. tikk Member

    Well, it's most likely not going to come from in a court room for the reason I went into, so it's probably only going to come from a change in political will, which might be brought on by changing public sentiment, which might be brought on by increased publicity. The iron is as hot as it's been in awhile, given the authoritative weight and reach of Wright's article.
  38. AnonLover Member

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  39. Anonymous Member

    I don't want to imply that what was done for TC was in anyway "right". But hypothetically TC gets a lot of gifts from a lot of fans. Some are expensive some are not. What is there to prevent the argument of the CoB saying that this was done in the "religious minister's" free time ? Other than of course, the truth that he may never see his family again if he didn't do it, and do it well.

    Is this a human trafficking issue? or an IRS issue, or both ?

    And a hypothetical, can a 501(c)3 pay for the travel of a president or Chairman of the board to attend some function in a different state ? And while he is at that function can the 501(c)3 hold a party in his honor and use organization funds to do so? I would assume the answer is yes, but where is the line ?
  40. Anonymous Member

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