Robert Baty had a career with the IRS finishing up as an appeals officer. He is still boiling about the deal that the Service cut resulting in Revenue Ruling 70-549. Under its terms any Pepperdine University faculty member or administrator, including the basketball coach, who is a member of the Churches of Christ, is entitled to a tax free housing allowance as a “minister of the gospel”. I asked Bob for his thoughts on the “secret” 1993 agreement between IRS and Scientology. Here is what he has to say:
Very Disturbing: Scientology & “Basketball Ministers”!
by Robert Baty
IRS Appeals Officer, ret. 2005
July 18, 2012
Peter J. Reilly recently opined regarding the Scientology issue:
> The most surprising, some might say shocking,
> aspect of the agreement was that the IRS gave
> up on the deduction issue for “auditing” after
> having won it in the Supreme Court.
>
> It raised constitutional concerns.
>
> The IRS will often continue to litigate an issue
> after it loses in court. As a matter of fact, it makes
> announcements as to whether it will or will not
> “acquiesce” in decisions of various courts.
>
> When the Supreme Court rules against it though,
> it is game over.
>
> Here we have the Supreme Court ruling in favor
> of the IRS and the IRS not following the decision.
>
> Very disturbing.
In one of his comments responding to another reader, Peter J. Reilly wrote:
> …then there are the infamous basketball ministers.
Very disturbing!
The Scientology “auditing” issue was only one aspect of a complex problem which the IRS negotiated to a conclusion. Supposedly, the IRS got something in exchange for what it gave up, and Scientology likewise.
Scientology did give up something, didn’t it???
I forget!
I fully support the government taking another look at the results of the negotiated settlement with Scientology and reconsidering what benefits should be afforded the organization and its members.
From a legal standpoint, I figure it would be a simple matter for the IRS to conclude that there is good reason to revoke that part of the agreement that allowed a charitable deduction for Scientology’s “audits”.
Very simple!
If some Scientologist, or lots of Scientologists, didn’t like it, they could litigate the issue…again!
Very simple!
Such litigation might even result in the official Scientology agreement becoming part of the public record.
What has that got to do with “basketball ministers”?
Here’s some similarities!
Over a period of 20 years or so, certain private schools received at least two rulings from the IRS saying that “basketball ministers” at such private schools could not receive income tax free housing allowances because the private schools were not “integral agencies” of a church.
Private school officials even admitted that, if “integral agency” status were the standard and determinative factor, they didn’t qualify.
Like Scientologists, that did not end the matter.
Scientologists took the deduction for their auditing!
They took their case to Court and, after losing, talked the IRS into letting them have it anyway.
The private schoolmen also began claiming the income tax free housing benefit.
They were all set up to litigate the issue!
That’s where it gets interesting.
It seems the private schoolmen had political clout that saved them the trouble of going to Court for a ruling on the merits of the case.
Nixon came in to the White House, and he is alleged to have had this thing about using the IRS.
George Bush, Sr. and Omar Burleson came to power as Texas congressmen.
The IRS, to its credit, tried to hold the line consistent with the facts and the law and its two prior rulings that private school “basketball ministers” not employed by an “integral agency” of the church were not entitled to the income tax free housing allowance.
Bush and Burleson would have none of that!
They threatened to try legislate the relief they wanted (as if they could)!
The IRS backed down; the decision ultimately being made at the highest levels!
The Sklars were denied their deduction for their kids’ Jewish education!
Oscar Haimowitz was denied an income tax free housing allowance from his synagogue!
Yet, Scientologists deduct their “auditing” costs!
Private school “basketball ministers” get income tax free income!
It’s time to get serious about cleaning up the mess!
The Scientology deal, like the “basketball minister” deal, may be impervious to legal challenge by concerned citizens because of a lack of “standing”. If so, it remains for pressure to be brought to bear through the political process.
Related to the “basketball minister” deal is a taxpayer legal challenge to the law underlying the deal. The Freedom From Religion Foundation (FFRF) and concerned individuals have filed suit to challenge the income tax free ministerial housing law as an unconstitutional violation of the 1st Amendment. That case cites the “basketball minister” deal as an example, a case study, in what is wrong with the law and its administration. If the case is litigated, perhaps the “rest of the story” regarding the deal Bush and Burleson got out of the IRS during the Nixon years will be made public.
“Standing” has yet to be granted in the FFRF case. Hopefully, “standing” will be granted soon and the case can proceed on its merits.
The income tax free ministerial housing allowance has been around almost 100 years and it’s only just now getting as far as it has in being judicially challenged.
Perhaps some enterprising citizens will figure out a litigating strategy whereby they might gain “standing” to challenge one or more of the various aspects of the officially secret Scientology agreement.
I wish them well in such an effort.
Maybe someone will figure out how to tie-in the Scientology issue with the FFRF case and move to join the FFRF as plaintiffs and use the Scientology exploitation of the ministerial housing allowance as an addition to the FFRF Complaint. If “standing” is granted, that could form a basis for compelling the Government to give up the official version of the agreement.
You better act quickly though. The Court is awaiting answers from the parties this month regarding the “standing” issue in the FFRF case and sometime thereafter the Court will rule on whether or not to grant “standing”.
Rich Bolton is the FFRF attorney in the case. Give him a call, quick, and begin working on the logistics and prospects for making Scientology a key element to his case.
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Annoying as Revenue Ruling 70-549 might be, at least it is out in the open for any similarly situated taxpayers to take advantage of. People cannot use the Scientology agreement, because the IRS has not confirmed that it exists.
You can follow me on twitter @peterreillycpa.
Originally published on Forbes.com on July 19th, 2012