Court Opinion

ID: 9477467
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:24:19.268384+00
Date Added: 2024-06-11T17:45:53.650306
License: Public Domain

JON O. NEWMAN, Circuit Judge,
dissenting:
The Church of Scientology offers “auditing” sessions at prices ranging from $50 to $100 an hour depending on the level of “intensity.” The Church’s price list states that quantity discounts are available; the $50 per hour price for the I2V2 hour package drops to $42.50 per hour for the 100 hour package. Payments must be made in advance. A 5% discount is available for purchases prepaid substantially in advance. Partial refunds are available for sessions purchased but unused. The Church’s advertising literature states that a participant in these auditing sessions can improve his health, memory, and communication skills. The Tax Court concluded that payments for the purchase of these auditing sessions were not charitable contributions under section 170 of the Internal Revenue Code. That conclusion has been upheld by the courts of appeals for four circuits. Lee v. Commissioner, 56 U.S.L.W. 2572 (10th Cir. Apr. 1, 1988) (No. 86-1453); Miller v. I.R.S., 829 F.2d 500 (4th Cir.1987); Graham v. Commissioner, 822 F.2d 844 (9th Cir.1987) (Kennedy, J.); Hernandez v. *98Commissioner, 819 F.2d 1212 (1st Cir.1987), cert. granted, — U.S. —, 108 S.Ct. 1467, 99 L.Ed.2d 697 (1988); contra Staples v. Commissioner, 821 F.2d 1324 (8th Cir.1987), petition for cert. filed, 56 U.S.L.W. 3592 (U.S. Feb. 19, 1988) (No. 87-1382). Because I agree with the views of the First, Fourth, Ninth and Tenth Circuits, I respectfully dissent.
The claim of deductibility raised by this appeal and similar appeals brought in each of the nation's circuits may not recur now that the Ninth Circuit has also upheld the Tax Court’s revocation of the tax exemption of the Church of Scientology. Church of Scientology of California v. Commissioner, 823 F.2d 1310 (9th Cir.1987), affirming 83 T.C. 381 (1984), petition for cert. filed, 56 U.S.L.W. 3592 (U.S. Feb. 16, 1988)-(No. 87-1377). And the issues raised by the claim have been thoroughly discussed by the courts of appeals that have already considered the matter. Nevertheless a few words are appropriate to point out the basis of my disagreement with the panel opinion of this Court.
The majority appears to set forth two basic rationales for its reversal of the Tax Court’s decision. First, the majority says that “it must be presumed that the primary purpose of the donations was a charitable expectation that the religious causes of the Church would be furthered, Murphy v. Commissioner, 54 T.C. 249 (1970), and that only incidental benefits accrued to the individual donors.” 844 F.2d at 97. On the contrary, it is the notice of tax deficiency that carries a presumption of correctness and requires the taxpayer to demonstrate otherwise. Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 9, 78 L.Ed. 212 (1933); Schaffer v. Commissioner, 779 F.2d 849, 857 (2d Cir.1985). Moreover, in this case the Tax Court found, upon a record filled with the promotional literature of the Church of Scientology, that participants in the Church’s auditing sessions received far more than incidental benefits, and those findings are not clearly erroneous. There is no basis for according the taxpayer a favorable presumption.
Second, and more fundamentally, the majority concludes that any payment made to a church for participating in religious practices of the church is entitled to be treated as a charitable deduction. That is a policy choice that perhaps could be made by Congress, subject to the limitations of the Establishment Clause, but it is a choice that Congress has thus far declined to make. Rather than make all payments for participating in religious practices automatically deductible, Congress has specified that a payment to an organization operated exclusively for religious and other eleemosynary purposes is deductible only if such a payment is a “contribution or gift.” 26 U.S.C. § 170(c) (1982). No special preference is given to payments made for participating in religious practices.
Moreover, it is far from clear that Congress would want to legislate the blanket deductibility for religious practice payments that the majority has announced in this case. It may well be in conformity with the religious teachings of a church that its members educate their children in church-run schools and a church might well deem such attendance a religious practice, but payments for parochial school tuition are nonetheless not considered charitable contributions. Winters v. Commissioner, 468 F.2d 778 (2d Cir.1972). Allowing de-ductibility of all payments made for a purpose that a church deems to be a religious practice would greatly expand the scope of the charitable contribution category beyond what Congress has provided.
In some cases it may be a close question whether a payment to a religious institution is a purchase of services primarily for the benefit of the payor and hence not deductible or a contribution to the institution with only incidental benefit to the pay- or and hence deductible. Payments for pew rentals and attendance at High Holy Day services are close to the line, and, as the Ninth Circuit has observed, not all of the Commissioner’s prior rulings in this area may be defensible. See Graham v. Commissioner, supra, 822 F.2d at 850. The inquiry in each case is whether the payment “is intended to benefit the charity without reference to a reciprocal and specific benefit to the donor, whether or not the benefit is religious.” Id. at 849. In this case, that issue is not even close. Auditing sessions are advertised, priced, and *99marketed by the seller and bought by the customer as specific benefits for the purchaser, and the Tax Court could hardly have found otherwise.
Appellants’ constitutional contentions, not reached by the majority, are not persuasive in my view, for reasons fully set forth in Graham, Miller, and Hernandez.
For these reasons, I dissent.