Originally published on Forbes.com on July 26th, 2012
Scott Pilutik and I have been having an exchange on whether the 1993 closing agreement between the IRS and Scientology was reasonable. An interesting problem with the agreement is that it is difficult for anyone not involved in it to challenge it. The legal issue is one of standing. Scott is suggesting here that it is possible that Independent Scientologists might have standing to challenge the agreement.
Most discussions about the Church of Scientology’s exempt status end in futility because, as it turns out, there’s very little anyone can do to correct the mistake. Not only because the secret IRS/Scientology Agreement has been made secret by the parties, but because of the Supreme Court’s increasingly restrictive views on Article III “standing,” which doctrine mandates that only parties whose injuries have been caused by the law in question and which injuries can be redressed by a court may bring a case. An exception to this rule can be found in Flast v. Cohen, 392 U.S. 83 (1968), where a taxpayer was permitted to sue over a congressional allocation which violated the establishment clause. This slim precedent was restricted further in the Hein v. Freedom from Religion Foundation, 127 S. Ct. 2553 (2007) case, where Justice Alito rejected a taxpayer standing challenge to an executive order claimed to violate the establishment clause (on the arbitrary basis that an executive order is not a congressional allocation).
This leaves only the IRS and the Church of Scientology with standing to challenge the Agreement and, clearly, neither is interested in revisiting the contentious past. Indeed, in the recent case(s) brought by Michael and Maria Sklar, already mentioned here by myself and Peter Reilly, where a Jewish couple unsuccessfully argued for a section 170 deduction based on Scientology’s receiving a perk that they were not, the IRS vigorously defended the Agreement’s continued secrecy, going so far as to refer only to its hypothetical existence.
Hopeless? Perhaps. But recall Obi-Wan lamenting the sudden dearth of willing and available Jedis until Yoda reminded him, “There is another”
Despite the Church of Scientology’s increased visibility of late, comparatively few people are aware of the numerous self-identifying Scientologists practicing outside the Church-proper’s strict auspices who refer to themselves as Independent Scientologists or, in some cases, Freezoners. These disaffected, off-brand Scientologists are perceived by Church leader David Miscavige (as by his predecessor L. Ron Hubbard) as grave threats to the institutional Church. This view is somewhat validated because Scientologists practicing outside the Church do not pay money “uplines,” in Scientology parlance, which directly and adversely affects the Church of Scientology’s bottom line. It won’t surprise anyone familiar with the Church that these critical Independent Scientologists endure endless harassment.
This harassment of Independent Scientologists, together with the guarded inaccessibility of the materials necessary to the practice of Scientology, raise serious first amendment concerns, both with respect to the free exercise interests belonging to Independent Scientologists, and also establishment clause violations arising from the government’s having effectively chosen a side in a religious dispute.
But wait, you say, isn’t this just a religious dispute between two churches in which the state can’t even intervene without also violating the Constitution? That’s undoubtedly the version Scientology would attempt to sell in court. It’s been found in numerous cases that religious disputes must be decided by the religions themselves so as not to offend the establishment clause. However, the widely accepted “neutral principles” doctrine allows the courts to distinguish between nonjusticiable religious disputes and disputes which can be decided by looking to non-religious evidence, such as deeds and contracts.
It seems impossible, though, to apply precedents from any of the church governance line of cases , which are typically triggered by a congregational or hierarchical split or disagreement, as compared to the untenable situation that exists between the Church of Scientology and Independent Scientologists.
First, the manner by which the Church of Scientology controls the licensing to all of the religion’s core content renders the materials effectively inaccessible except through its stringent pay-as-you-go membership structure. This unique scenario leaves the Independents on the outside looking in and unable to build a competing church. Imagine if in the recent Episcopalian schism only one side was permitted, by way of an IRS ruling, to control the publication, distribution, and sale of biblical scripture.
Church governance case law is additionally inapplicable because unlike typical schisms that organically grow out of religious disputes, the power imbalance between organized and independent Scientology was created by the government through the IRS Agreement. By establishing and endorsing a corporate structure which bestowed an intellectual property monopoly upon a single entity, which it was no secret would (and does) aggressively wield it to suppress others’ free exercise rights, it is now on the state to rectify its constitutional error.
“But,” you might respond, “the religious dispute you cite didn’t exist in 1993–the IRS-Scientology agreement couldn’t have envisioned the existence of a Scientology offshoot.” You’d be wrong though. Only ten years earlier, in 1983, a high-ranking Scientologist who worked closely with Hubbard, David Mayo (who many contend actually authored some of the Scientology upper level “OT” materials attributed to Hubbard), broke away from the Church and created a competing splinter group called (among other names) the “Advanced Ability Center” (AAC).
Mayo’s initiative led to his being sued for copyright and trademark infringement and trade secret violations. In deciding whether AAC’s “substantially similar” works infringed on Scientology’s copyrights, a California federal district court found that questions of infringement were outweighed by the “potential hardship from interference with defendants’ religious freedom.” Religious Tech. Ctr. v. Scott, 660 F. Supp. 515, 522 (C.D. Cal. 1987). The Church of Scientology continued to litigate against Mayo through the mid-nineties. Mayo was ultimately awarded $2.9 million in legal fees for the well-documented hell he was put through, after which he evidently signed an agreement to not discuss or compete with Scientology in the future.
David Mayo’s experience is worth considering because at the time it was brought and litigated, Scientology was not recognized as a tax exempt religion. Whether the case comes out differently if brought today is intriguing but presently academic: despite the Independent Scientology community’s apparent growth no one within the community seems at all interested in incorporating or formalizing a competitor. Which is the point, I suppose–the Church of Scientology has been made so powerful through the IRS settlement agreement that no one is even willing to try, either because of fear or expected inevitable futility.
If an Independent Scientology entity were to emerge, on what bases might a legal challenge to the IRS-Scientology Agreement be mounted?
One area in which the Church of Scientology is particularly susceptible to challenge by Independent Scientology is the potential gentrification of its popular trademarks (think what happened to “zipper,” “aspirin,” “escalator,” et al.), such as “Scientology,” “Dianetics,” and “e-meter.” David Mayo, in the creation of his Scientology offshoot, carefully avoided infringing on Scientology’s trademarks by designing a parallel lexicon for use in his church. But he shouldn’t have had to endure this free exercise hardship at all, because the term Scientology, for instance, has ceased to be distinctive by its attaining “secondary meaning” through non-organized Scientology channels.
For a court to uphold the enforcement of Scientology’s trademarks against a hypothetical competing Independent Scientology entity, then, it would necessarily trample on that entity’s own free exercise rights, not to mention its becoming impermissibly entangled in a religious dispute. Such a suit would likely be triggered simply by advertising, say, “Scientology auditing”.
Another way an Independent Scientology challenge to the IRS-Scientology Agreement could arise would be for an Independent Scientologist to deduct their auditing payments, wait for the IRS to deny the deduction, and challenge the deduction in tax court on the basis that the courts are impermissibly favoring one religion over another. In other words, the same suit brought by the Sklars, with a key exception. The Sklars were denied partly because their children’s Jewish school tuition was fundamentally unlike Scientology auditing–Independent Scientology is functionally identical to Church of Scientology auditing. As such, a Sklars-like suit brought by an Independent Scientologist holds a greater promise for success in exposing the IRS-Scientology Agreement to the light of day.
The barely attainable Flast standing standard would be unnecessary in any hypothetical Agreement challenge brought by an Independent Scientology entity, where standing would be based not on the person/entity’s status as taxpayer but as a directly interested party suffering a constitutional injury.
And because the corporate authority exercised by the Church of Scientology derives entirely from the terms of the IRS-Scientology Agreement, and because they utilize their state-granted religious monopoly to inflict both torts and religious injuries upon Independent Scientologists, in any resulting dispute the IRS-Scientology Agreement would be fair game (pun intended).
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Scott Pilutik is an attorney who has written extensively on Scientology and is often cited by the Village Voice as a legal expert.
You can follow me on twitter @peterreillycpa.