Source: http://www.xenu.net/archive/CourtFiles/occf113.html
Timestamp: 2019-04-18 19:02:40+00:00

Document:
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
Argued and Submitted Aug. 8, 1986.
(4) late filing penalties were valid.
public purpose and confer public benefit.  26 U.S.C.A. s 501(c)(3).
to private individual.  26 U.S.C.A. s 501(c)(3).
net earnings.  26 U.S.C.A. s 501(c)(3).
control over organization's resources.  26 U.S.C.A. s 501(c)(3).
will be resolved in favor of government.
in three different tax years were not excessive.
pay author reasonable compensation in form of royalties for literary works.
control over millions of dollars in money which originated with church.
thus, church's claim to tax exempt status was defeated.
questions of motive implicate constitutional rights, review is de novo.
to any other taxable year.
return.  26 U.S.C.A. s 6651(a)(1).
Eric Lieberman, New York City, for petitioner-appellant.
Steven Frahm, Washington, D.C., for respondent-appellee.
Appeal from a Decision of the Tax Court of the United States.
Before TANG and BRUNETTI, Circuit Judges, and JAMESON, [FN*] District Judge.
District of Montana, sitting by designation.
whether the Commissioner properly revoked the Church's tax exempt status.
FN1. Codified as amended at 26 U.S.C. s 501(c)(3) (1982).
file tax returns under 26 U.S.C. s 6651(a).
Court upheld the penalties for failure to file tax returns.
payments were internal transfers of funds.
with mental images that are frequently the source of irrational behavior.
auditing.  The religion also offers courses to train auditors.
exceptions, services were not given for free.
known as "Flag" offered the highest level of training and auditing.
of auditing geared to help people in crisis.
information, often in statistical form, about the organization's operations.
to help other units or churches experiencing management difficulties.
managerial services to branch organizations around the world for a fixed fee.
trained staff members in salesmanship techniques.
Your People and Peter Gillum wrote the book How to be Successful.
which Mary Sue Hubbard had the only set of keys.
totaling nearly $175,000 to the Central Defense and Dissemination Fund.
operated, exclusively for religious or charitable purposes.  Hall v.
Commissioner, 729 F.2d 632, 634 (9th Cir.1984).
Church by Mail, 765 F.2d at 1391.  Courts have imposed a fourth element.
the operational test and lose its eligibility for tax exempt status.
Harding Hospital, Inc. v. United States, 505 F.2d 1068, 1072 (6th Cir.1974).
for a substantial commercial purpose or whether it violated public policy.
(1969), cert. denied, 397 U.S. 1009, 90 S.Ct. 1237, 25 L.Ed.2d 422 (1970).
F.2d 148, 153 (3d Cir.1984).
412 F.2d at 1200;  Spokane Motorcycle Club v. United States, 222 F.Supp.
be the public at large.  Founding Church, 412 F.2d at 1199.
constitute inurement.  Bubbling Well Church of Universal Love v.
L.Ed.2d 674 (1967);  Kenner v. Commissioner, 318 F.2d 632 (7th Cir.1963).
funneled church income to Reverends Ewing and McElrath.  765 F.2d at 1393.
benefits paid to the family members were reasonable.  670 F.2d at 106.
and Reformed Publishing Co. v. Commissioner, 743 F.2d 148 (3d Cir.1984).
finding for clear error.  Bubbling Well Church, 670 F.2d at 106.
government.  Harding Hospital, 505 F.2d at 1071.
expenses, and royalties.  The covert indicia included "debt repayments" and L.
Ron Hubbard's unfettered control over millions of dollars of Church assets.
the Church was operated for the benefit of L. Ron Hubbard and his family.
logic of the finding that several reasonable payments add up to inurement.
rely on the distribution of church literature to propagate their beliefs.
copyrighted by L. Ron Hubbard were actually written by Church employees.
tax years in question OTC funneled millions of dollars of Church assets to L.
these payments were made to the United States Church of Scientology Trust.  L.
Ron Hubbard was the sole trustee of the Trust during the years in question.
Mary Sue Hubbard were two of the three signatories on the Trust accounts.  L.
The Church disputes that control over assets compels a finding of inurement.
monies to defend Scientology against attack and to propagate the religion.
aboard the Apollo and testified that none of it was missing.
*1319 The Tax Court found that Church income inured to the benefit of L.
also called "LRH RR" or "LRH 10").
high credit rating.  The letter establishes the post of "LRH accounts officer"
to monitor collection of debt repayments.
insufficient to support revocation of tax exemption for all three years.
payments more closely resemble tithes to L. Ron Hubbard than debt repayments.
Tax Court concluded, or the total of all debt repayments made by the Church.
Well Church, 670 F.2d at 106.
L. Ron Hubbard and his family during the tax years 1970, 1971 and 1972.
repayments" strongly demonstrate inurement.  We find no clear error.
government in its dealings with religious organizations.  See Sherbert v.
the type of mixed question of law and fact which we review for clear error.
United States v. McConney, 728 F.2d 1195, 1203 (9th Cir.) (en banc), cert.
(1985);  McConney, 728 F.2d at 1203.
Black United Front, the New Left Movement and the Welfare Rights Organization.
the IRS revoked the Church's exemption based upon legitimate agency concerns.
of deficiency for the tax years 1970, 1971 and 1972.
grounds such as race, religion or the exercise of constitutional rights.
revocation);  Church of Gospel Ministry, Inc. v. United States, 640 F.Supp.
argument that the notice of deficiency was unconstitutional.
The IRS revoked the Church's tax exempt status by letter dated July 18, 1967.
States, 504 F.2d 970 (5th Cir.1974).
question of law which we review de novo.  United States v. Boyle, 469 U.S.
241, 105 S.Ct. 687, 692 n. 8, 83 L.Ed.2d 622 (1985).
to show reasonable cause for failing to file the required return.  Funk v.
return."  83 T.C. at 526.
"reasonable cause" under s 6651(a)(1).  Boyle, 105 S.Ct. at 693-94.
expressly instructed the taxpayer to file a tax return.
imposition of a penalty on the Church for failure to file the proper returns.

References: v.

 v. 
 v. 
 v.

 v. 
 v. 
 v.

 v. 
 v. 
 v. 
 v.