HERNANDEZ v. COMMISSIONER OF INTERNAL REVENUE

Legal Principle at Issue

Whether payments made to the Church of Scientology for religious "auditing" and "training" services qualify as tax-deductible charitable contributions under federal law, and whether denying those deductions violates the Free Exercise or Establishment Clauses of the First Amendment.

Action

Affirmed (includes modified). Petitioning party did not receive a favorable disposition.

Facts/Syllabus

The Church of Scientology provides "auditing" sessions designed to increase members' spiritual awareness and training courses at which participants study the tenets of the faith and seek to attain the qualifications necessary to conduct auditing sessions. Pursuant to a central tenet known as the "doctrine of exchange," the Church has set forth schedules of mandatory fixed prices for auditing and training sessions which vary according to a session's length and level of sophistication, and which are paid to branch churches. Under the Internal Revenue Code of 1954, petitioners each sought to deduct such payments on their federal income tax returns as a "charitable contribution," which is defined as a "contribution or gift" to eligible donees. 

After respondent Commissioner of Internal Revenue disallowed these deductions on the ground that the payments were not "charitable contributions," petitioners sought review in the Tax Court. That court upheld the Commissioner's decisions and rejected petitioners' constitutional challenges based on the Establishment and Free Exercise Clauses of the First Amendment. The U.S. Courts of Appeals for the First Circuit affirmed on petitioners' separate appeals.