"Russia

"The Moscow procurator general and approximately 70 members of the FSB, Federal Tax Police, and local police raided two locations of the Church of Scientology in Moscow on February 25. According to church officials, the authorities confiscated documents, including tax records and priest-penitent privileged counseling records. The raids continued over 3 days. The tax police say that they are investigating possible tax evasion and other financial irregularities. Although there were earlier press reports that two church members were beaten, Western diplomats received no confirmation of this incident. On October 6, a Moscow district court revoked the operating license of a social center affiliated with the Church of Scientology because mistakes were made allegedly in the center's license application materials in 1993. Officials for the center acknowledge the mistake, but insist that it was corrected a few years ago; they intend to appeal the decision. The ruling was made under the law on social organizations (not the 1997 religion law) and does not appear to affect directly the functioning of the Church of Scientology. However, church officials believe that the ruling is part of a broader attack on the Church and its activities. The Church of Scientology is seeking to reregister both its social organization and its religious organization.

"Belgium

"... However, in September 110 national police officers raided Church of Scientology facilities and the homes and businesses of about 20 members of the Church. One member's home in France was raided simultaneously by the French authorities. At year's end, an investigation continued, and no arrests had been made.

"Greece

"A 1995 police search of Scientology headquarters revealed a file of press clippings (emphasis added) on Greek opposition to Scientology. The file was confiscated and 15 KEFE board members subsequently were charged with ‘unprovoked factual insult.' In May an Athens court acquitted (emphasis added) the 15 Scientology board members of the charges.

"France

"In July 1997, a Court of Appeals in Lyon recognized Scientology as a religion in its opinion in the conviction of Jean-Jacques Mazier, a former leader of the Scientologists, for contributing to the 1988 suicide of a church member. In response the Minister of the Interior stated that the court had exceeded its authority and that the Government does not recognize Scientology as a religion. The Government appealed the Court of Appeals decision, but on June 30, the Court of Cassation rejected the Government's appeal, but the Court stated that it lacked the authority to decide if Scientology was a religion.

"There have been a number of court cases against the Church of Scientology, which generally involved former members who sue the Church for fraud, and sometimes for the practice of medicine without a license. A September case in the Marseilles Correctional Court received wide media attention after judicial officials admitted that 31/2 tons of documents pertaining to the case had been destroyed by mistake. In November the court found a former local leader of the Church of Scientology and four other Church employees guilty of fraud for swindling money from former members. The court sentenced the local leader to 2 years in prison, of which 18 months were suspended and the remaining 6 months served prior to sentencing, and a fine of approximately $16,700 (100,000 francs). The other four members received suspended sentences; charges against two other persons were dropped.

"Germany

"The Church of Scientology remained under scrutiny by both federal and state officials who contend that it is not a religion but an economic enterprise. According to representatives of the Church of Scientology, while the public debate over the Church's status and operations has diminished somewhat in intensity compared to previous years, instances of governmental bias and discrimination remain. ... In December the Stuttgart administrative court ruled that Baden-Wuerttemberg could not deregister the Church of Scientology as an ideological nonprofit organization, stating that Scientology's activities could not be classified as commercial if such activities were used to accomplish the organization's ideological purposes. In August the city of Munich revoked the nonprofit status of the local Scientology organization. In June the Munich administrative court rejected an appeal by the Church of Scientology and upheld the November 1995 decision by the city of Munich to deprive the Scientology-affiliated Celebrity Center Munich of its status as a nonprofit organization. The city had argued that the center allegedly was brainwashing and financially exploiting its members. However, the court ruled that the only relevant point was whether the purpose of the center was to make money. During a March visit to the country by a lawyer for the Church of Scientology, officials in the Foreign Ministry refused to engage in a dialog with the Church and decided not to meet with the attorney. According to officials from the Ministry of Foreign Affairs, the Charge of the German Embassy in a western country met with a Scientology representative in 1996, but no tangible progress resulted from the meeting. Therefore government officials concluded that it was not worthwhile to meet with Scientology representatives again, since they do not believe that the Church has changed those practices that the Government finds unacceptable. Moreover, federal government officials believe that this issue is primarily one for the states to handle.

"Some government officials allege that Scientology's goals and methods are antidemocratic and call for further restrictions on Scientology-affiliated organizations and individuals. For example, during a March meeting with a lawyer representing the Church of Scientology and members of the working group on Scientology in the Hamburg interior ministry, Hamburg state officials expressed their belief that the Church is a criminal organization with a totalitarian ideology. ...

"Between 1996 and 1998 a number of states published pamphlets warning of alleged dangers posed by so-called sects and ideological groups, including the Church of Scientology. ... The Hamburg OPC published ‘The Intelligence Service of the Scientology Organization,' which outlines its claim that Scientology tried to infiltrate governments, offices, and companies, and that the Church spies on its opponents, defames them, and ‘destroys' them. ...

"The Federal Property Office has barred the sale of some federal real estate to Scientologists, noting that the Federal Finance Ministry has urged that such sales be avoided, if possible. Scientologists assert that business firms whose owners or executives are Scientologists, as well as artists who are church members, faced boycotts and discrimination, sometimes with state and local government approval. Other church members reported employment difficulties, and, in the state of Bavaria, applicants for state civil service positions must complete questionnaires detailing any relationship they may have to Scientology. The questionnaire specifically states that the failure to complete the form will result in the employment application not being considered. Bavaria identified some state employees as Scientologists and required them to complete the questionnaire. Some of those employees refused and filed complaints with the Labor and Administrative Courts. The cases are pending. However, according to Bavarian and federal officials, no one in Bavaria lost a job, was denied employment, or suffered any infringement of rights by public officials or entities solely because of association with Scientology. Bavarian officials also contended that a Scientologist was teaching in a Munich public school and that another Scientologist was a member of the Bavarian Ministry of Culture. During the year, Hamburg city officials expressed public concern about Microsoft Windows 2000, because one of its software functions was developed by a company whose chief executive officer is a Scientologist. The Bavarian interior ministry warned against overreacting to such concerns."

On February 6th, 2001 the above-mentioned Spanish fraud trial began without defendant Heber Jentzsch. A press article stated that the U.S. Justice Department had sent a fax to the court, saying that "it was unable to serve the subpoena upon Jentzsch." [Exh. No. 158] Evidently the Justice Department followed the recommendations of the American embassy in Madrid to delay the judicial process. During the time of the trial, Jentzsch was neither seen in public nor appeared he in any current internal Scientology literature.

Two weeks later, on February 23rd, 2001 the U.S. States Department issued its current "Human Rights Report" and under the chapter "Freedom of Religion" it continued its criticism over the counter-actions of European government against the Scientology organization:

"Germany

"... The Church of Scientology, which operates 18 churches and missions, remained under scrutiny by both federal and state officials who contend that its ideology is opposed to democracy and that it is not a religion but an economic enterprise. Since 1997 Scientology has been under observation by the Federal and state OPC's, except in Schleswig-Holstein where the state constitution does not permit such observation ( ... ). Observation is not an investigation into criminal wrongdoing, and the Government has filed no criminal charges against Scientology since observation began. However, in April the Federal OPC concluded in its 250-page annual report for 1999 that the reasons for initiating observation of Scientology in 1997 still were valid. The six pages in the report covering Scientology described those aspects of the organization's beliefs that were deemed undemocratic, quoting from the writings of Scientology founder L. Ron Hubbard and Scientology-published pamphlets and books. ...

"Scientologists continued to report discrimination because of their beliefs. A number of state and local offices share information on individuals known to be Scientologists. ...

"The Federal Government uses its ‘Defense Clause' (commonly referred to as a ‘sect filter') for procurement involving some training and consulting contracts, specifically those that may provide opportunities for mental manipulation or behavior modification. The sect filter requires a bidder to declare that the firm rejects and will not employ the ‘technology of L. Ron Hubbard' within the framework of the contract, and that the firm does not require or permit employees to attend courses and seminars conducted via this ‘technology' as part of its business function. Some state and local agencies, businesses (including several major international corporations), and other organizations require job applicants and bidders on contracts to sign similar ‘sect filters.' The Federal Property Office has in several cases barred the sale of real estate to Scientologists, nothing that the Finance Ministry has urged that such sales be avoided, if possible.

"Public exhibitions by Scientologists in a number of cities to explain themselves to citizens encountered difficulties. In April the Visitor's Bureau of the Federal Press and Information Office intervened with a Berlin hotel, forcing the hotel to cancel Scientology's reservations for rooms for an exhibit titled ‘What is Scientology?' The hotel claimed that the Visitors' Bureau threatened to cancel several hundred thousand dollars worth of reservations if Scientology were allowed to exhibit in the hotel. Scientology was able to rent space elsewhere but incurred substantial extra expenses related to the last minute move of the exhibit. In Frankfurt a late February Scientology exhibit in the cafe of a well-known, city-owned museum sparked significant criticism, with city officials speaking out openly against Scientology and the exhibit. However, Scientology's recently established information office in Frankfurt has generated little or no public controversy. A Scientology exhibit at the Leipzig book fair in March provoked complaints about what some visitors considered aggressive marketing tactics, and fair authorities were reviewing whether to allow the exhibitors to return next year. In April Scientology was able to rent the public congress center in Hanover for a 2-day exhibition, after a hotel cancelled its reservation when it learned that Scientology had made the booking.

"There were no new attempts to deregister Scientology organizations previously registered as non-profit organizations, but the judgments in two such earlier cases were appealed during the year. The government of Baden-Wuerttemberg appealed a decision by the Stuttgart Administrative Court, which ruled that a Scientology organization could not be deregistered as a nonprofit organization because its activities were used to accomplish its ideological purposes. The case was pending at year's end. The Celebrity Center Munich, a Scientology-affiliated organization that was stripped of its status as a nonprofit organization in 1995, has appealed a 1999 upper court ruling upholding that decision. The case was pending at year's end.

"France

"The law provides for these rights, and the Government respects them in practice. There are regular demonstrations on various issues, which occur generally without incident. In October the Paris prefecture denied a request by the Church of Scientology for a permit for a demonstration involving 10,000 participants. The Church alleged discrimination; however, the prefecture justified the denial based upon the proposed size and duration of the demonstration, which would make it difficult to maintain public order. The group rented a private park outside Paris in which to hold their gathering.

"The authorities previously took similar action against the Church of Scientology. In the case of the Paris church, the Ministry of Finance refused to grant the church authorization to import funds to pay the claimed taxes although the church offered to pay the total amount of all taxes assessed, a percentage of which would have come from outside the country. Subsequently in December 1997, the Government filed legal action for the claimed amount against the former officers of the Paris church and against the Church of Scientology International (a California nonprofit organization). The hearing in this legal action was deferred pending a decision regarding a 1998 administrative claim filed with the Conseil d'Etat by the Paris church that the Minister of Finance acted improperly in refusing to allow the church to import funds to pay the assessed taxes. In January 1999, the Conseil d'Etat requested the advice of the European Court of Justice. On March 14, the Court ruled that French law was incompatible with European Union laws regulating the free flow of capital; however, the Court ruled that such regulations could be allowed if required on the grounds of a threat to public security or public policy. The Court ruled the French laws were not sufficiently detailed and, on December 8, the Conseil d'Etat found the State at fault and upheld the decision of the European Court of Justice. However, the judgment's practical effect was limited because the affected churches had dissolved themselves and been reconstituted in the intervening period under different names. ...

"Russia

"The Church of Scientology has been in conflict with authorities since a February 1999 raid on its Hubbard Center in Moscow by the tax police, FSB, and procurator. Since then the organization has faced charges that it engaged in a commercial enterprise without a license. The case is still pending. The Church has been repeatedly refused in its efforts to reregister its national center and register local religious organizations. While the Church has succeeded in registering 50 ‘Dianetics Centers' as social organizations, it has only managed to register 1 Church of Scientology in Moscow as of October. The Church reports that authorities have impeded the operation of its centers in Dmitrograd, Khabarovsk, and Izhevsk."

It must be noted that while the Church of Scientology continued its aggressive litigation tactics against private opponents and state and local government agencies during the 1990s, it completely ceased to litigate against federal entities. I have not found any court case that involved Scientology and a federal U.S. agency that was initiated after the IRS-tax exemption decision in 1993.

Appeals Court criticizes the granting Tax Exemption (2002)

Michael and Marla Sklar are a couple from North Hollywood in California, which had financially supported two Jewish day schools during the 1990s. When they had submitted applications for a partial tax refund to the IRS, the agency refused to grant it. The Sklars sued before a Federal court in Los Angeles and stated they were entitled to a tax refund, citing the IRS' tax exemption decision with regards to the Church of Scientology in 1993.

On January 29th, 2002 the Californian U. S. Appeals Court denied the Sklars' petition and questioned in the same ruling the IRS' tax exemption of Scientology and its treatment of the closing agreement, while upholding the 1989-Supreme Court Decision of Hernandez/IRS as relevant for its decision ("Michael & Marla Sklar vs. Commissioner of IRS," U. S. Court of Appeals for the Ninth Circuit, No. 1556-97).

In particular the court said:

"Additionally, the Sklars claim that the IRS engages in a ‘policy' of permitting members of the Church of Scientology to deduct as charitable contributions, payments made for ‘auditing,' ‘training,' and other qualified religious services, and that the agency's refusal to grant similar religious deductions to members of other faiths violates the Establishment Clause and is administratively inconsistent. They assert that the ‘policy' is contained in a ‘closing agreement' that the IRS signed with the Church of Scientology in 1993, shortly after the Hernandez decision and the 1993 changes to § 170 of the Internal Revenue Code.

"Because the IRS erroneously asserted that it is prohibited from disclosing all or any part of the closing agreement, we assume, for purposes of resolving this case, the truthfulness of the Sklars' allegations regarding the terms of that agreement. However, rather than concluding that the IRS's pro-Scientology policy would require it to adopt similar provisions for all other religions, we would likely conclude, were we to reach the issue, that the policy must be invalidated on the ground that it violates either the Internal Revenue Code or the Establishment Clause. ...

"We are required, for purposes of our analysis, to assume the contents of the IRS's policy towards the Church of Scientology, because of the IRS's refusal to reveal to the Sklars, to this court, or even to the Department of Justice, the contents of its closing agreement, although that agreement has apparently been reprinted in the Wall Street Journal. ...

"The IRS insists that the closing agreement in this case cannot be disclosed as it contains return information which the IRS is required to keep confidential under I.R.C. § 6103. Under § 6103, the IRS is prohibited from disclosing ‘returns' and ‘return information,' but § 6103 does not discuss closing agreements, nor does it explicitly prohibit their disclosure. The regulatory provision governing closing agreements also does not explicitly prohibit their disclosure. Treas. Reg. § 301.7121-1.

"We agree with the D.C. Circuit. Disclosure of closing agreements is not categorically prohibited by § 6103; in appropriate circumstances, disclosure may be required under § 6104 or otherwise. Similarly, we reject the notion that § 6103 prohibits the disclosure of the entire closing agreement whenever part of the agreement contains return information.

"We also conclude that there are several reasons why the closing agreement in the case before us likely is subject to disclosure, at least in substantial part. First, just as in the Tax Analysts case the settling of the Church of Scientology's tax liability through the closing agreement was required in order for the organization to regain the tax-exempt status it had previously lost. Therefore the closing agreement would appear to constitute documentation in support of the exemption application which must be publicly disclosed pursuant to § 6104(a)(1)(A).

"The Supreme Court has developed a framework for determining whether a statute grants an unconstitutional denominational preference. Under that test, articulated in Larson v. Valente, 456 U.S. 228, 246-47 (1982), the first inquiry is whether or not the law facially discriminates amongst religions. The second inquiry, should it be found that the law does so discriminate, is whether or not, applying strict scrutiny, that discrimination is justified by a compelling governmental interest. Id. Applying this test to the policy of the IRS towards the Church of Scientology, the initial inquiry must be whether the policy facially discriminates amongst religions. Clearly it does, as this tax deduction is available only to members of the Church of Scientology.

"The second Larson inquiry is whether or not the facially discriminatory policy is justified by a compelling governmental interest. 456 U.S. at 246-47. Although the IRS does not concede that it is engaging in a denominational preference, it asserts in its brief that the terms of the settlement agreement cannot be used as a basis to find an Establishment Clause violation because ‘in order to settle a case, both parties are required to make compromises with respect to points on which they believe they are legally correct.' This is the only interest that the IRS proffers for the alleged policy. Although it appears to be true that the IRS has engaged in this particular preference in the interest of settling a long and litigious tax dispute with the Church of Scientology, and as compelling as this interest might otherwise be, it does not rise to the level that would pass strict scrutiny. The benefits of settling a controversy with one religious organization can hardly outweigh the costs of engaging in a religious preference. Even aside from the constitutional considerations, a contrary rule would create a procedure by which any denomination seeking a denominational preference could bypass Congressional lawmaking and IRS rulemaking by engaging in voluminous tax litigation. Such a procedure would likely encourage the proliferation of such litigation, not reduce it. Larson, 456 U.S. at 248 (holding that even assuming arguendo that the government has a compelling governmental interest for a denominational preference, it must show that the rule is ‘closely fitted to further the interest that it assertedly serves'). Because the facial preference for the Church of Scientology embodied in the IRS's policy regarding its members cannot be justified by a compelling governmental interest, we would, if required to decide the case on the ground urged by the Sklars, first determine that the IRS policy constitutes an unconstitutional denominational preference under Larson. 456 U.S. at 230."

In a concurring opinion Judge Silverman stated:

"Accordingly, under both the tax code and Supreme Court precedent, the Sklars are not entitled to the charitable deduction they claimed. The Church of Scientology's closing agreement is irrelevant, not because the Sklars are not ‘similarly situated' to Scientologists, but because the closing agreement does not enter into the equation by which the deductibility of the Sklars' payments is determined. An IRS closing agreement cannot overrule Congress and the Supreme Court.

"If the IRS does, in fact, give preferential treatment to members of the Church of Scientology - allowing them a special right to claim deductions that are contrary to law and rightly disallowed to everybody else - then the proper course of action is a lawsuit to put a stop to that policy. The remedy is not to require the IRS to let others claim the improper deduction, too."