Scientologist Tax Trial to Open Today

A California accountant who sends his children to Orthodox Jewish schools is to appear in federal court this morning to attempt to force the Internal Revenue Service to grant him the same tax deduction for religious instruction that it accords to members of the Church of Scientology.

The trial, which is scheduled to open today in Tax Court in Los Angeles, is the second round in Michael Sklar's long running legal battle with the IRS over his claim that part of the tuition he pays for his children at Jewish day schools should be tax deductible.

"I've been hanging on for a decade because I feel it's imperative that this case be fought," Mr. Sklar said in an interview yesterday. "This kind of basically religious favoritism is very damaging, certainly for Jewish people, but probably for all people in the United States."

The case stems from an agreement the IRS reached in 1993 with the Church of Scientology, a religion founded in the early 1950s by a science-fiction writer, L. Ron Hubbard. The settlement ended what the Scientologists described as a "war" between the federal government and their church.

Under the pact, the IRS granted tax-exempt status to a variety of Scientology entities, while the church paid $12.5 million to the government and agreed to financial controls to ensure that its leaders were not unduly enriched by payments from Scientology followers.

What troubles Mr. Sklar is a part of the settlement that allows Scientology members to deduct from their taxes amounts they pay for religious training or "auditing," a practice in which Scientologists purge themselves of troublesome thoughts by holding a device that measures the body's electrical impulses.

The IRS and the church agreed to keep the details of their deal secret, but Mr. Sklar noticed in late 1993 that the tax agency suddenly withdrew, without explanation, a written ruling that had barred Scientologists from taking deductions for religious programs. Mr. Sklar viewed the government's decision as conferring a benefit on Scientologists that is not extended to members of other religions.

"I see no reason why we should be any different. It's not like they're any more religious than we are," said the 45-year-old accountant, who lives in Los Angeles with his wife and six children.

In early 1994, Mr. Sklar filed for tax deductions for 55% of his tuition payments for the preceding three years. He said 55% represented the amount of time his children spent in Jewish religious studies at their schools.

After the IRS disallowed his deduction, Mr. Sklar filed a case in Tax Court in 1997. Appearing without a lawyer, he argued that the Constitution requires the government to treat members of all religions equally. "You just can't do it for one group and not do it for another," he said.

The Tax Court rejected Mr. Sklar's arguments, and he appealed to the 9th Circuit Court of Appeals. A Washington-based lawyer, Jeffrey Zuckerman, who is also an Orthodox Jew, agreed to take the case on a pro bono basis.

In 2002, a three-judge panel of the 9th Circuit turned down Mr. Sklar's appeal. The court sharply criticized the IRS for its secrecy and suggested that the deduction for Scientologists was probably unconstitutional. However, the judges said the accountant had not shown that the religious instruction his children receive in school was sufficiently similar to the kinds of training courses that Scientologists are allowed to deduct.

"Why is Scientology training different from all other religious training?" Judge Barry Silverman wrote in a concurring opinion that evoked the history lesson that accompanies a traditional Jewish seder. "We should decline the invitation to answer that question. The sole issue before us is whether the Sklars' claimed deduction is valid, not whether members of the Church of Scientology have become the IRS's chosen people."

The judges also suggested that some facts in the case were murky. For instance, it was not clear whether Mr. Sklar had paid more in tuition than he would have if he sent his children to secular schools.

A lawyer for the Church of Scientology, Monique Yingling, denied that the 1993 agreement entitles the religion to special treatment.

"The IRS agreed to treat the Church of Scientology like all other religions are treated. The Church of Scientology does not get a deduction for parochial school education and that's what the Sklars are trying to get," she said in an interview Friday.

Beginning today, Mr. Sklar will get another shot at proving his case, as the Tax Court considers whether to uphold a $15,000 deduction for tuition that the accountant took on his 1995 return.

The IRS declined to discuss the dispute, citing taxpayer privacy laws, but Mr. Zuckerman said the agency has argued that the religious studies and secular classes at Jewish schools are so intertwined that it is impossible to determine what portion of the tuition goes toward religious education.

Mr. Zuckerman said that at least half the classes on any given day are religious. "There is truly strict separation. There's no overlap," he said.

While donations to charitable and religious organizations are tax deductible, tuition at religious schools generally is not. If the IRS considers a payment to be a quid pro quo, then a taxpayer can only deduct that portion of a donation that exceeds the value of the goods or services provided in return. However, the tax agency has allowed taxpayers who get intangible religious benefits from their gifts to deduct them in their entirety.

"If you're Jewish and you pay a synagogue so you can have a seat for High Holidays, it's technically a quid pro quo, but the IRS allows it to be deducted," Mr. Zuckerman said. He said Mormon tithes and Catholic pew rents are also fully deductible, even though the donors get some benefit from their gifts.

Mr. Zuckerman said that if his client prevails, purely religious programs for adults would also become deductible.

"Could Madonna deduct the cost of her Kabbalah class?" he asked. "Under our argument, the answer would be yes."

Jewish groups are divided about whether taxpayers should be able to deduct tuition at religious schools.

"We are certainly in favor of the deductibility of a portion of parochial school expenses and, if the court would go that way, we'd be very pleased," the director of public policy for the Orthodox Union, Nathan Diament, said. "People who use parochial schools are paying the same property taxes as everyone else that supports the public school system."

Mr. Diament said Mr. Sklar will be "the hero of many people if he's successful." However, Mr. Diament said the accountant's chances of prevailing are "rather slim."

An attorney with the American Jewish Congress, Marc Stern, said his group opposes such a deduction because of fears that it will drain revenue from public schools and because the benefits would accrue primarily to families with higher incomes. "It's not good public policy," he said.

Mr. Stern noted that Congress has considered and rejected proposals to create tax deductions for private and parochial school tuition. "It would be, I think, out of place for the court to create a social program the Congress hasn't mustered the political will to enact," he said.

For his part, Mr. Sklar said he bears no ill will toward the Scientologists. "The only anger I feel is toward the government," he said.