HBO’s ‘Going Clear’ Triggers New Scrutiny of Scientology’s Tax-Exempt Status

Church’s nonprofit classification may be in jeopardy after Alex Gibney documentary’s shocking allegations

HBO’s Sunday airing of documentary film “Going Clear” has reignited interest in the tax-exempt status afforded the Church of Scientology by its classification as a nonprofit.

In fact, actress Mia Farrow tweeted damning words about the organization and shared a petition to revoke its tax-exempt status to her more than 640,000 followers on Monday.

“#Scientology is a thuggish, dangerous, cruel cult. Sign petition to revoke their tax exempt status … #GoingClear,” she wrote.

It isn’t so far-fetched an idea, either. The Nonprofit Risk Management Center reports that more than 100 501(c)(3) organizations are stripped of their tax-exempt status each year. The reasons can vary, covering the violation of laws that govern private benefits, lobbying, political campaign activity, unrelated business income, the obligation to report annually and maintaining operation in accord with stated exempt purpose.

In “Going Clear,” director Alex Gibney provides research, footage and interviews with former Scientologists that may shed new light on the organization, its billion-dollar nest egg and a shady deal with the IRS wherein after several years of unsuccessfully applying for tax-exempt status, the Church was finally granted the designation in 1993.

According to the film, Church of Scientology Chairman David Miscavige ordered the organization’s members to file individual lawsuits against the IRS for its failure to recognize it as a church. Overwhelmed by 2,400 individual suits and the prospect of defending itself against all of them, the IRS agreed to grant Scientology tax-exempt status in exchange for the withdrawal of the cases.

A 2011 tax filing reveals that the three organizations comprising Scientology claim a combined value of $1.5 billion, a sum that has allegedly been built on the backs of members who pay thousands of dollars to rise within the organization, are paid 40 cents an hour for labor and have been tortured for dissent, combined with the organization’s vast international property portfolio.

“This issue is not about whether Scientology is a religion,” Gibney told TheWrap. “The issue is whether or not Scientology is pursuing policies that are not in the public interest.”

The government simply needs to determine whether there’s a “fundamental overriding interest” in declassifying an organization involved in the above activities as exempt from taxation.

According to the IRS website, to be tax-exempt, an “organization’s purposes and activities may not be illegal or violate fundamental public policy.”

An IRS representative told TheWrap he’s unable to comment on whether there’s currently an investigation into any organizations or individual cases.

A Church of Scientology representative pointed TheWrap to letters to HBO Counsel from their tax and corporate counsel that calls the film’s depiction of a deal between Scientology and the IRS “factually wrong.”

Read them here and here.

Update: Scientology Attorney Monique Yingling sent the following statement to TheWrap on Monday.

Alex Gibney’s claim that the Church of Scientology harassed and intimidated the IRS to obtain tax exemption to which it was not entitled is as absurd as it is false. Gibney falsely paints as sinister the perfectly legal and eminently justified actions – Freedom of Information Act lawsuits, individual Petitions to the Tax Court and refund suits– that the Church and its parishioners brought to defend their rights. The IRS recognized Scientology as a tax-exempt religious and charitable organization because it provided substantive proof on the merits, following a two-year examination, that it was entitled to that recognition. The results of the IRS examination are a matter of public record and have been available to all, including Gibney, for more than 20 years. The IRS necessarily concluded that the Church of Scientology operates in the public interest and does not violate public policy when it recognized the Church as tax-exempt. These findings were subsequently reaffirmed by the IRS and are as accurate today as they were in 1993.