In 1992 1993, 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”?
No single individual may be more integral to a particular religious movement than Tom Cruise is to Scientology, a fact apparently not lost on Scientology’s current leader, David Miscavige, who, according to Morton, made recruiting Cruise a top priority, sparing little expense along the way. Morton describes Tom Cruise’s first visit Scientology’s Gold base, in Hemet, California: “In the weeks before [Cruise’s] arrival, the base was a hive of activity as the five hundred or so Sea Org disciples painted, pruned, primped, and cleaned the gardens and buildings so that it was in pristine condition for his arrival.” Cruise was housed in a “plush guest bungalow” and given his own chef and butler, Sinar Parman for the duration of his stay.”
Since recruiting Cruise, the Church of Scientology’s treatment Cruise has transcended mere VIP levels. For example:
- 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).
The aforementioned examples indicate, at the very least, that the Church of Scientology views Tom Cruise as something greater than an ordinary parishioner, despite not bestowing an official title upon him. Cruise’s relationship with the Church is multi-faceted: He frequently reaps benefits, ranging from ordinary celebrity perks to extraordinary benefits of a unique nature, while he simultaneously advances the church’s goals by acting as its agent and emissary before governmental bodies. Per se church insiders—Sea Org staff—treat him with a deference reserved only for other—higher—church officials. Staff also tend to Cruise’s personal needs and vet his own personal staff members using Scientology criteria. As Morton rightly concludes, Cruise is essentially the de facto number two official in Scientology, albeit not on paper.
Whether Tom Cruise is an insider is a determination the IRS or a judge would have to make, because any consideration of the question would necessitate an inquiry into the specific nature of Tom Cruise’s relationship with the Church of Scientology. But as I’ve already pointed out, if Tom Cruise is an insider, any benefit accruing to him would jeopardize Scientology’s exempt status. Such a factual determination would also necessitate a legal fight with the notoriously litigious Church that the U.S. Justice department is probably not willing to undertake, as the Church would almost certainly invoke various Constitutional protections against any such fact-finding excursion.
But determining whether Tom Cruise is an insider is unnecessary if the IRS or a judge instead determined that the personal benefits accruing to Cruise from the Church of Scientology were “substantial,” a term which is usually described in case law on the subject as the opposite of “incidental.” Regardless of whether one views the term “substantial” against an absolute or relative standard (the relative standard would ask whether a benefit was substantial against a particular church’s size), a $300,000 birthday party aboard a cruise ship could only be regarded as substantial.
If it could be determined that the Church of Scientology was indeed providing Tom Cruise with substantial personal benefits, it could defend itself against allegations of inurement by demonstrating that the benefits were for a charitable or religious purpose. But that would likely prove difficult—personal chefs, gyms, wine, and birthday parties are rarely described as charitable or religious. The Church could also argue that it didn’t provide any benefits—rather, either Miscavige or Cruise paid for them personally, and reimbursed the cost of services actually provided by Church staff members. Even if it had the paperwork to back that argument up, it would also have to demonstrate that its reimbursement accounted for the fair market value of the services of Sea Org members, who work around the clock and are paid less than $75 a week. This could also prove difficult.
My legal exercise here is probably a moot point, of course—Scientology hasn’t had to answer to the IRS since 1993, when the two parties signed a secret deal (since leaked to and published by the Wall Street Journal) granting it 501(c)(3) status in return for dropping all ongoing litigation (which at the time was substantial) against it. But there are cracks in the armor nevertheless: a case brought in federal court by Michael Sklar sought to deduct religious school tuition payments on the basis that Scientology was receiving preferential treatment from the IRS by its allowing Scientologists to deduct auditing payments. In support of his larger argument, Sklar argued that Scientology’s secret agreement with the IRS should be made public (even though it’s leaked and its veracity never denied, it’s still “secret” and therefore unable to enter into Sklar’s case). Sklar’s deduction was denied, but the case is on appeal before the 9th Circuit. If the agreement were made public, Scientology might become vulnerable to other legal challenges, although the taxpayer standing prohibition looms as a large obstacle (an obstacle I’ll attempt to address in a future post).