May 10, 2008

In 1992, the Church of Scientology was finally granted501(c)(3) tax exempt status, the result of a long war waged by the church against the IRS. Years later, an array of reasons to revoke Scientology’s exemption remain: Scientology is self-interested and does not serve the general community interest; practices based on its belief system (such as fair game and disconnection) contradict public policy; and some of its also-exempt subsidiaries, like CCHR, operate as lobbying groups instead of charitable arms.

One basis (amongst others) by which religious entities often have their tax exempt status revoked is inurement, which arises where private individuals are personally benefited by church funds absent any charitable, educational, religious, or other exempt purpose. The penalty for inurement is revocation of its 501(c)(3) status. Inurement-triggered revocations typically arise, for example, where the pastor of a small church is paying his mortgage (or a yacht, perhaps) with church funds.

Inurement is rarely a basis for revocation amongst larger, more successful churches because as a religious entity expands, it becomes easier to justify the purchase of luxury items as being part of the organization’s religious mission, which is why (televangelists) Creflo Dollar and Benny Hinn can write off multimillion dollar jets as part of their religious ministry.

With regard to Scientology, inurement is a difficult argument to make out because it is not easy to determine whether its leader, David Miscavige, personally benefits. It’s unclear whether he even has a personal life distinguishable from Scientology, and this ambiguity is compounded by the fact that so much of Scientology is shrouded in paranoid secrecy.

Despite all this, a potentially lethal inurement argument against Scientology’s exemption in fact exists, albeit an atypical one. In short, Scientology treats one particular person to private, non-religious benefits as a matter of course, and these benefits derive from church funds. This person’s name is Tom Cruise.

As early as 1955, L Ron Hubbard directly targeted celebrities for recruitment,  astutely aware of their ability to affect popular opinion. Although “Project Celebrity” was a failure (all those targeted, including Walt Disney, Ernest Hemmingway, Jackie Gleason, and Liberace, failed to join), Scientology eventually landed quite a few celebrities, including John Travolta, Kirstie Alley, Isaac Hayes, and—of course—Tom Cruise.

By numerous accounts, celebrities in Scientology are treated differently than non-celebrities, and no celebrity is treated as well as Tom Cruise. In his biography on Tom Cruise, author Andrew Morton details the preferential treatment Cruise receives.

The IRS makes clear its policy against inurement in a host of places, but explains the policy best in its publication, Tax Guide For Churches and Religious Organizations.  The IRS first distinguishes between inurement and “private benefit,” and the distinction is meaningful. Inurement occurs where church funds benefit “insiders,” which could include “the minister, church board members, officers, and in certain circumstances, employees.” Inurement is absolutely prohibited: “[A]ny amount of inurement is, potentially, grounds for loss of tax-exempt status.” Comparatively, a private benefit “may occur even if the persons benefited are not insiders,” but the prohibition is not absolute: The private benefit “must be substantial in order to jeopardize tax-exempt status.”

Whether the Church of Scientology is jeopardizing its tax exempt status by bestowing private benefits on Tom Cruise, then, hinges on answers to the following questions:

• If the IRS were to inquire as to inurement by the Church of Scientology to Tom Cruise, would Tom Cruise be considered an “insider”?
• Assuming that Tom Cruise is not, as the Church of Scientology would contend, an insider, are the private benefits he receives and has received “substantial”?

• At Tom Cruise’s wedding to Nicole Kidman, “the event was choreographed and orchestrated by Miscavige, who arranged for two Scientology chefs and other Sea Org disciples to cater and care for the newlyweds and their guests.”
• Morton describes Miscavige’s wedding gift to Cruise and Kidman: “A team of twenty Sea Org disciples was set to work digging, hoeing, and planting wheat grass and wildflower seed near the Cruises’ bungalow” after Miscavige learned of the “couple’s fantasy of running through a meadow of wildflowers together.” [legal affidavit testifying to this from Karen Pressley]
• After Tom Cruise purchased a $9.75 million house in Pacific Palisades, “many [of those employed as house staff] were Scientologists who were carefully vetted by Scientology officials…. Candidates would be interviewed on videotape by a Scientology executive before being approved.”
• At Scientology’s Celebrity Centre—which already caters to a privileged subset of parishioners—“Tom and Nicole were special. They had their own private entrance into an underground garage, their own rooms for auditing, and, of course, dedicated waiter service.”
• “At Gold, in addition to their VIP bungalow and personal chef and butler, Tom had two motorcycles, a Mercedes convertible, and a motor home garaged in the compound, while Nicole had her own private garden. When Tom and Nicole wanted to play tennis, Sea Org laborers built them a private court.”
• “[Miscavige] had a gym built for himself and Tom at Gold, which could be used only by senior executives and only when the actor was not around.” David Miscavige’s father, Ronnie Miscavige, estimated the cost at $150,000.
• “The ecclesiastical largesse did not stop there. Not only did Miscavige send Tom regular gifts of fine wine, but on at least one occasion he dispatched his assistant Shelly Britt with a picnic hamper to Tom’s Gulfstream jet for his enjoyment.”
• On behalf of Scientology, Cruise has met with United States government officials to protest the treatment of Scientology is European states such as Germany and France; specifically, in 2003, Cruise met with Deputy Secretary of State Richard Armitage and Scooter Libby on separate occasions. The meeting with Armitage also included Scientology officials Tom Davis (head of the Hollywood Celebrity Centre and son of actress Anne Archer) and Kurt Weiland, a director for Scientology’s Office of Special Affairs (OSA). Also in 2003, he lobbied in Washington D.C. for No Child Left Behind program funds for front groups promoting Scientology’s “Study Tech.”
• Ex-member Marc Headley, in an interview with Glosslip’s Dawn Olsen, discussed an unwritten policy whereby Sea Org members—the staff that runs the Church of Scientology—were instructed to only refer to Tom Cruise as “Sir,” despite a longstanding policy that SO members would only refer to higher-ranking Sea Org members as “Sir.”
• Staff also interviewed girlfriends – it was an internal project headed by Shelly Miscavige; the project reportedly yielded several candidates—including actresses Scarlett Johansson and Jennifer Garner before finally settling on Katie Holmes.
• Scientology reportedly threw a birthday party for Tom Cruise aboard its cruise ship, the Freewinds, that cost the organization $300,000. Videos of the party can be found on Youtube (here and here).

posted by scott pilutik at 05:47 PM

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April 01, 2008

I posted the following at the Enturbulation.org forum in response to an initiative by some Texas Republicans to revoke Scientology's tax exemption in Texas. I pointed out why the initiative was flawed (in short, their basis for revocation included inapplicable administrative requirements instead of actual criteria), The entire post can be read here, posted under the nick "tikk."

[...]

That all said, there are many *valid* reasons to propose that Scientology's exemption be revoked. But Texas is in no position to revoke any Scientology church's exemption unless it does so on the federally based criteria (and even then, a federal preemption issue may arise). To this, one need refer to the instructions for IRS Form 1023, which is the IRS application for charitable 501(c)(3) exempt status.

Without getting too deeply into the hows and whys, there are a limited number of bases by which religious entities have their federal exemption revoked.

One is inurement, which is where the corporate officers of a religious entity personally profit--individuals cannot personally benefit or maintain a private interest in church funds. A related basis for revocation is where the religious entity's beliefs are deemed by the IRS to not be "truly and sincerely held." In other words, where a religious corporation is built purely to evade taxes, and its belief structure fraudulent.

A religious entity also must not engage in political activity, such as campaigning for a particular candidate, although the IRS seems to selectively enforce this prohibition, often in a partisan manner. Enforcing this prohibition is made more difficult, too, by the necessity of permitting free speech latitude, so that church officials can express their opinions on political matters. It's not always easy to tell where political speech stops and political activity begins.

Finally, a religious entity must not maintain practices derived from its beliefs that are “illegal or contrary to clearly defined public policy." Note that this prohibition focuses on practices, not beliefs--it would be unconstitutional for the IRS or a court to deny an exemption based on a religious group's beliefs. Practices are another matter. The most relevant case on this matter is Bob Jones University v. United States, 461 U.S. 574 (1983); the university had its exemption revoked due to its policy against interracial dating. Courts have also advanced the same concept in the affirmative sense; that is, religious entities must not only refrain from illegal activity, but serve a general community interest.

As for Scientology, arguments can be made both for an against, with regard to each of these criteria. Does Scientology exist solely for DM's private benefit? Even if this were true, proof would be difficult come by, as Miscavige need not maintain an existence apart from his role as head of Scientology (and how would the IRS, or anyone, be able to tell the difference, necessarily?).

Are Scientology's beliefs truly held? While a good argument can be made that Hubbard cynically created a money-making machine that was only facially religious, its present-day adherents truly and sincerely hold its beliefs, regardless of whether those beliefs were fraudulently formed. It's a point not worth arguing, in my opinion.

Does Scientology engage in political activity? Not often, except on behalf of itself, usually to request the state department intervene on its behalf with regard to its treatment by France or Germany. But CCHR is also tax exempt (although there are multiple CCHR corporate entities), and it is essentially a single-issue lobbying group. It seems possible that CCHR is vulnerable to revocation for its political activity.

Scientology is most vulnerable, it would seem, on the public policy question. It does not contribute to the general community interest, as it is entirely self-interested. Even where Scientology demonstrates a charitable side, such as where Volunteer Ministers appear at disaster sites such as Katrina and 9/11, its internal correspondence reveals its true purpose as PR-related. Scientology also maintains practices such as disconnection and fair game (of both ex-members and critics), which are contrary to US public policy, and harm the general community interest.

Obviously, there are many other reasons why Scientology's practices (not beliefs) fail to serve the general community interest or run contrary to public policy. But the aforementioned language framework should be your guide when complaining to the IRS or public officials.

posted by scott pilutik at 09:30 AM

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March 23, 2008

At approximately 1:30pm yesterday afternoon an order was issued to shut down the British 'alternative news' web site ‘RINF.com’ for the publication of anti - Scientology material.

Speaking via telephone last night ‘RINF’ founder, Mr Mick Meaney said “It’s still not completely clear what has happened but one thing is perfectly clear – the closure of the site is solely motivated by Scientology.

posted by scott pilutik at 11:19 AM

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February 27, 2008

The two e-meters in the previous post were indeed sold on eBay. However, the sale of the first e-meter ended after one day--five days early. The sale of the second e-meter is curious too, as no picture was included in the listing. This may have had the effect of robbing Scientology of its only thin basis for removal, that being that the listed e-meter was a counterfeit, and the listing thus a trademark infringement. Without the picture, it is impossible to ascertain the authenticity and thus impossible to claim trademark infringement. It may also be noteworthy that the second e-meter was listed by a British user.

Onto new e-meters! Well, one new e-meter. eBay listing here, and screenshot here, in case it disappears. The listing is due to expire in 4 days and can be "bought now" for $1400. The seller is from the US, and the e-meter is relatively new (a Mark Super VII Quantum).

posted by scott pilutik at 08:20 PM

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February 21, 2008

And with a very low $50 starting bid! It's an older model, a Mark VI, and from the looks of it as well as the description, used. Here's the link to the e-meter. Here's a screenshot of the listing, in case it suffers the same fate as countless e-meters before it. With so much attention now trained on both eBay and Scientology, it will be interesting to see if this older model squeaks through. Bidding ends on February 28 at 10:12 PST, and the seller is from the United States.

Update/Correction:

There are TWO e-meters for sale on eBay. This other e-meter (a Mark Super VII) doesn't attach a picture, however. Link to sale here. Link to screenshot here. The bidding is up to $260 on this model, and the seller is from London.

posted by scott pilutik at 03:32 PM

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February 20, 2008

I never expected all this hoopla (and you can quote me on that!). The hoopla I'm speaking of is for the 45,000+ 'unique visitors' to this site yesterday, from Slashdot, Digg, Reddit, Guy Fawkes, and Emma, all to read my post on Scientology's abuse of eBay's VeRO system. You all caused me to lose sleep while I tried to reconfigure the bandwidth of the site; the site crashed but was back up within ten minutes. I also received a few emails, some with interesting points I'll try to address later.

One thing I would like address up front, however, is that the title of the Slashdot article linking here is a bit misleading. The VeRO program doesn't quite give Scientology access to eBay's database--it's an administrative tool whereby VeRO members can remove listings. It's not a slight distinction and should at least be pointed out. That said, it is true that the VeRO program allows rightsholders to police infringements themselves without interference from any human at eBay; these dynamics (including the prohibitive cost of responsive litigation by sellers) dictate a scenario where overreaching is inevitable.

Another point a few emailers made is that the DMCA safe harbor rule would come into play here, and if sellers wanted to restore listings that were removed, all they would need to do is counternotify. This is true only in the context of an alleged copyright violation, however. Trademark and patent law are not covered by the DMCA safe harbor provision, and it is trademark and patent which has served so far as the bases for removal when Scientology has complained, based on emails and conversations I've had with affected sellers. So counternotifying is generally not an option for sellers of e-meters on eBay. See the EFF's Safe Harbor FAQ for more on this.

posted by scott pilutik at 08:02 AM

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February 18, 2008

By the time Bill (not his real name) left the Church of Scientology a few years ago, he had amassed quite a collection of Scientology material—mostly books, tapes, e-meters. But ex-members of Scientology (especially staff members) find themselves in a difficult spot in this regard when they leave Scientology: their books, tapes, and e-meters are only valued by Scientologists, who, quite inconveniently, are strongly discouraged (read: disallowed) from communicating with ex-members—as any ex-Scientologist will tell you.

Not surprisingly, he turned to eBay, where a Scientologist buyer can remain blissfully unaware that his seller is a declared suppressive person. But every time he attempts to sell his e-meter on eBay, the listing is removed within hours by the Church of Scientology, which claims that the listing violates their intellectual property rights. See screenshots of the auctions while they were up here [update; personal info redacted] and here, and respective "Invalid Item" eBay pages here and here. And it’s not just Bill—I’ve watched numerous e-meter listings from other sellers removed before they even receive a bid.

If you’re uninitiated to eBay, you’d probably think that for each of these removals, the Church of Scientology informs eBay of the violation of its rights, eBay considers the merits of their argument, and then only then does eBay yank the listing. But that’s not what happens at all. Instead, eBay effectively deputizes Scientology, which logs into eBay and removes the listings itself.

The mechanism that permits the Church of Scientology (and others) such broad access and discretion is called the Verified Rights Owner ("VeRO") Program. Membership in VeRO is obtained simply by submitting a form to eBay explaining that you are an Intellectual Property rights holder.

It should come as little surprise that VeRO members routinely overreach, as the cost of challenging a listing removal is almost always prohibitive. (See my paper on this subject here, and see the brave husband and wife exception to this rule here.) The VeRO Program makes a great deal of sense for some types of listings—counterfeit Rolexes and Gucci handbags appear on eBay with such frequent regularity that those companies would be hard pressed to handle these trademark violations any other way.

But Bill's e-meters (and the e-meters other ex-Scientologists have attempted to sell on eBay) are not counterfeits and do not violate the Church of Scientology's trademarks, patents, or copyrights. Some sellers have even included the serial number found at the bottom of each e-meter in their listings in order to authenticate them. There is no source confusion, as every seller whose e-meters have been removed have made it clear that they took the photo of the e-meter, and that they are not affiliated with the Church of Scientology. Patent law doesn't prevent the resale of patented items, and patent law barely covers e-meters anyway, the first having run out years ago and the 2000 patent only covering "improvements" on the "Quantum" e-meter. And copyright law barely applies here—all of the listings I've observed have been originally written, for one thing, and regardless, Scientology (from what I can gather) has only issued VeRO complaints under patent and trademark bases.

In short, the Church of Scientology is at least constructively aware that the e-meters being listed on eBay are authentic, and so have no basis under trademark—or under any other intellectual property basis, for removing these listings. What's actually going on here is that Scientology is abusing eBay's VeRO program, knowingly alleging Intellectual Property violations that clearly don't exist, so that they can limit the secondary market for e-Meters, controlling both the price and who can get them.

It shouldn’t shock anyone that Scientology is trying to limit (if not eliminate) the secondary marketplace for e-meters, since they have a strong motivation to control the price on e-meters from their own production line (they update to a newer more expensive model every few years), and a strong motivation to control to whom they're sold. The economic motivation should be clear enough—Scientology doesn't want what few members it has being exposed to a secondary market because it would undermine their monopoly on a prohibitively expensive and infrequently purchased item.

Scientology's other motivation for wanting to be the only game in town is intrinsically cultish—it has long perpetuated the idea that e-meters should never be used outside of the auspices of the Church. In other words, not only should Scientology be the sole sale source, but it should also be able to dictate every element of the post-sale environment—who can use it, how it can be used, etc. If e-meters are being sold on eBay, it doesn't know the purchaser and can't therefore control how and by whom it's used.

Indeed, the warning label at the bottom of each e-meter demonstrates the kind of control to which I’m referring. The need for a label came about after the FDA took offense at Scientology’s claim that the e-meter retained medical benefits; the court eventually agreed with the FDA and mandated a disclaimer, which has morphed from the original into the following:

By itself, this meter does nothing. It is solely for the guide of Ministers of the Church in Confessionals and pastoral counseling. The Electrometer is not medically or scientifically capable of improving the health or bodily function of anyone and is for religious use by students and Ministers of the Church of Scientology only. (emphasis added)

posted by scott pilutik at 01:48 AM

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