GA Letter to IRS (March 8, 1997)


Department of the Treasury
Internal Revenue Service
5045 E. Butler Ave
Fresno, CA 93888

Re:     Gerald D. Armstrong
SS# 265-81-2049
Tax Year 1994

Dear Sir/Madam:

I apologize for not writing you by your, I believe it was, January 8, 1997 deadline, and for not writing you before today, a good two months late. My reasons are stated in this letter, which will also serve as my response, at least for now, to your question about my 1994 tax return.

I explained in my earlier communications that I did not have possession of nor access to all my records from 1994, and, as further explained below, I still do not. Moreover, because of events which have transpired since I last wrote you, I now do not even have possession of your demands and other correspondence. Nevertheless, I understand what you asked for, and I will provide that information herein.

My history since approximately 1984 is quite well known to certain people in the IRS, and I would request that my records and history with the Service be retrieved and examined in order to put my 1994 taxes, as well as my present situation, in a context, beyond what I am able to provide in this letter, which will make them understandable. I would direct your attention particularly to my submission in April, 1990 concerning my 1987 tax return. I have had what in human terms is understandably called an odd life.

I have been a target of Scientology ever since 1981 when I left the organization, which has its own very well known and even longer history with the IRS. My history with Scientology became part of the Scientology vs. IRS war as a result of the first lawsuit in which the organization sued me in 1982, LA Superior Court No. C 420153. That case went to trial in 1984 and resulted in the famous and globally cited “Breckenridge decision.”2

By 1993 Scientology had sued me four times and carried out a world wide “black propaganda” campaign against me. “Black propaganda” or “black PR” is Scientology’s term, used by its former leader L. Ron Hubbard in organization directives – or as Scientology insists they be called, “scriptures” – for its policy and practice of character assassination, the destruction of a target’s reputation and credibility by lies and covert operations.

Scientology’s attacks on me, and its other targets, are pursuant to its basic, and infamous, policy Hubbard termed fair game,” its doctrine of opportunistic hatred, which has been judicially condemned since the 1970’s. See, e.g., appellate opinions in Scientology v. Allard, Wollersheim v. Scientology, Scientology v. Armstrong (1991), Scientology v. Yanny (2 cases), US v. Hubbard, US v. Heldt, US v. Zolin. The purpose underlying all of the organization’s legal actions against me was and is to silence me and destroy me financially, emotionally and in any other way possible, since I am “fair game.”

Along life’s path, but certainly by 1993, it had become clear to me that I had been given a role by God, both in persevering through the years of unholy persecution by Scientology, and participating in His Resolution of this “church’s” global war on its innocent victims and equally innocent critics, and on religion itself. This is what my calling, my life and my job became. All my activities, every day, were devoted to that job, or doing what was essential to the support of that job. Although I am professionally, inter alia, a writer, artist and philosopher, and have other commercially intended projects, I have curtailed or shelved all of these activities, except as they are needed for my Scientology job, until the conflict and threat have been reduced or eliminated.

From 1991 through 1995, the activity which consumed much of my time, and in relationship to which I received, as you know, some remuneration, was in assisting sole practitioner, attorney Ford Greene. It is clear that God led me to Mr. Greene, who was through those years one of perhaps only a half dozen attorneys around the world involved in seeking redress through the legal system for people victimized by Scientology.

Mr. Greene is himself a target of fair game, one of the central mechanisms of which is a heavily financed and aggressive litigation machine, complete with bad private investigators and corrupt attorneys. Working in a justice system already compromised by and beholden to the kind of money Scientology has to spend, this litigation machine has been extremely effective in L. Ron Hubbard’s stated policy of “us[ing] the law to harass,” and in the resulting denial of due process and justice to its victims.

I did whatever I could to help Mr. Greene survive and keep helping cult victims, and he defended me in the three lawsuits Scientology brought against me while working with him. One of these lawsuits’ goals, which I believe is illegal, was to prevent my continuing to work with him. I also did whatever else I could to defend other targets of fair game, at some risk. Because of an order Scientology was able to obtain from a Marin County judge, whose rulings I believe are illegal and indicate malfeasance, it became impossible in 1995 for me to continue to work with Mr. Greene.


Although I had become a renunciant in August 1990, and sometime thereafter understood that whatever I received in truth came from God, I continued to believe that the company I had created, The Gerald Armstrong Corporation (“TGAC” – pronounced “Teegeeack) was a great idea, with seriously commercial potential. But Scientology sued TGAC as well three times through 1993, attacked it with its black PR nastiness, and intimidated other people associated with it. My associates who had become TGAC’s major shareholders as a result of my renunciation returned their shares to me, my two other directors resigned, and I had no choice but to allow the corporation to be suspended. I continued to do my job as guided by God in the form of an independent contractor.

In the fall of 1993 I, and the rest of the world, received the unexpected and alarming news that the IRS had surrendered in its many year war with Scientology, granting tax exemption to the organization’s various components. With this capitulation, the IRS – and, by extension, the US Government – effectively abandoned the people being attacked and victimized by Scientology.

These people were left by the US to defend themselves against the very organization which had brought the nation, by whatever legal or illegal means, to its knees. That’s really when it became impossible for me to step away from what God had called me for, which only with Him would be possible. If the world’s remaining superpower had surrendered in the war against evil, Who else was there to prevent evil’s ultimate triumph; and who but those He guided would He use for the job?

My 1994 tax return reflects what funds I received for that work, and the expenses incurred in performing that work. I may have filled out the form then thinking that I could still make TGAC work, I’m not sure. My expenses include the sort of thing anyone else doing this work would have, such as rent, utilities, telephone, gas, oil, paper, photocopies, travel expenses, and so forth; as well as expenses for maintaining my shelved projects, which only I can do. I have receipts for all these expenses, but, as I’ve said, I am not able to get to these records. I will make at least one change in the return when I’m able to get to my records, expensing my car use by mileage rather than by gas and oil receipts.

Using the same judge who ordered that I could not assist Mr. Greene in his Scientology litigation practice, the organization obtained a liquidated damages “award” and drove me into bankruptcy in early 1995. It then brought a bogus lawsuit in the Bankruptcy Court in an effort to seize my art, writings, and any other assets. Although defending myself in that litigation, and really over my head procedurally, and emotionally, I was finally successful at trial in 1996 in preventing Scientology’s hoped for wholesale seizure.

The organization was also able to get the Marin County judge to issue an order which prevents me from saying one word about Scientology or my 28 years of experiences in relation to it to anyone except my immediate family, prevents me from


responding to any attack on me by Scientology, either in court filings or in its black PR publications, and prevents me from assisting its victims. If I do communicate about Scientology, even to respond to its attacks, or in any way assist anyone it designates an “enemy,” in addition to being subject to a $50 thousand liquidated damages penalty per utterance, I can be jailed. Although this sounds unbelievable, it is completely and tragically true. Scientology has attempted at least a dozen times through the years to have me prosecuted and jailed on its false or manufactured charges.

I believe that this judge’s orders are illegal, against public policy, obstructive of justice, and in violation of the constitutional rights to due process, free speech, freedom of religion, freedom of association, and freedom from slavery. The basis for these orders is not that I ever libeled or slandered Scientology, or said one untrue word in or out of court about it or my experiences. The basis for the orders is a December 1986 “settlement agreement” which was part of the “settlement” of my first case with Scientology.3

The organization obtained my signature on this “settlement agreement,” which is itself and on its face illegal, obstructive of justice and in violation of basic “inalienable” rights, by fraud, duress and the vitiation of my attorney Michael Flynn. Scientology’s outrageous fair gaming of Mr. Flynn from 1980 through 1986 is widely known, and includes suing him or his law firm more than a dozen times, stealing documents from his office, threatening his family, making bogus bar complaints, framing him with the forgery of a $2 million check, paying known felons to attack him, and black PRing him around the world.

The fraud was Scientology’s promise that with the signing of this “agreement” it would end all fair game activities against me and everyone else. The threat was that if I didn’t sign, everyone, myself included, would continue to be fair gamed. The vitiation manifested in November/December, 1986 when Mr. Flynn, by then so desperate to have the personal attacks on him end, went along with whatever the organization wanted, and essentially acted in the “settlement,” not as my attorney, but as Scientology’s agent. Although expressing to me, when pressuring me to sign the unconscionable “agreement,” how the cult had ruined his marriage and his life, thus making me responsible for ending the attacks and threat to him, he also stated, also to get me to sign, that the various prohibitions, the threat of judicial enforcement, the liquidated damages provision, the obstruction of justice, the conceivably total exposure, were “not worth the paper they’re printed on.” He stated to me, “You can’t sign away your constitutional rights.” “It (the “agreement”) is unenforceable.”

Mr. Flynn’s representations about the unenforceability of the “agreement” sounded completely reasonable because it was inconceivable to me that such a “contract,” so completely one-sided in favor of a dangerous cult with a known criminal history, and violating so many basic rights, could, in the US and pursuant to its Constitution, possibly be legally enforceable. It was also inconceivable that Mr. Flynn


would sign a similar “contract” with Scientology which would prevent him from assisting, me if the organization attacked me in the future. But he did, and the cult did.


In, I believe it was, the last week of 1996 or the first week of 1997, I obtained an internet account and began to read the newsgroup alt.religion.scientology and check out various Scientology related web sites. One of my first discoveries was a person’s web page containing a large portion of Scientology’s IRS Form 1023 submission from 1992. Included in that portion is a section concerning me and the Breckenridge decision. The statements about me were factually, and in substance and conclusion, false. They are a repetition of the black PR Scientology had spread about me around the world since the “settlement”.

The 1023 response also contained black PR on other individuals; e.g., my attorneys Michael Flynn and Toby Plevin, my friends Lawrence Wollersheim and Laurel Sullivan, and other Scientology “enemies” Gene Allard and attorney Charlie O’Reilly.

I was shocked, hurt and frightened by what I read. It suddenly made understandable why Scientology had attacked me so violently for so many years, and it made it clear that the organization was going to continue the attack, and that I was in more danger than I had already imagined. The organization used its fair game attack on me to obtain its tax exemption, and to retain its tax exemption, with perhaps untaxed billions at stake, must continue the attack and destroy me.

Being a net novice I didn’t know to bookmark the site at that time, and wasn’t able to find it again until a few days ago. I think that, along with the way all of this saga has unfolded, is proof of God’s Sense of Timing.

In the next few days after the 1023 shock, however, I made some additional discoveries, which, among other things caused me to not write you earlier. I learned that Tax Analysts had brought an action against the IRS alleging improprieties in the procedures the Service had followed in dealing with Scientology’s tax exemption. I learned that the IRS itself had distributed a promotional statement about Scientology on behalf of the organization, I believe to governments in other countries. I also learned that the US State Department had publicly defended Scientology’s practices against critics in Germany, and had criticized the German government for its efforts to restrain Scientology’s abuses.

I recalled some letters I had recently seen from one or another Scientology OSA operative to the IRS’s James McGovern. The Office of Special Affairs, is the organization arm which took over the Guardian’s Office (“GO”) functions in 1982. It continues the GO legal, PR and intelligence bureaus, the organization’s fair game channels. 11 GO personnel, including Mary Sue Hubbard, I’m sure you recall, received federal jail sentences for offenses stemming from the GO’s burglarizing of IRS offices in


Washington, D.C., not to mention the penetration of more than a hundred other state or federal offices, in the 1970’s. The sentencing memorandum in the plea-bargained US v. Scientology case also is a good primer on fair game.

The operative letters to Mr.McGovern were principally an attack on the Cult Awareness Network, an organization with the mission of educating the public about dangerous groups like Scientology, a cult which was ultimately able, with its litigation machine and unknown other factors, to drive CAN into bankruptcy. The operative also took the opportunity in his letters to attack me for my economic theories, in an effort it is clear to cause me even more problems with the IRS than the ones the organization had already caused me. It was revealing when I first read these letters, and more so now, that the OSA writer, with the approval of the approvers, used the friendly salutation, “Dear Jim.”

My economic theories are no threat to the IRS, nor to the United States, but are intended and designed to save the US, and the rest of the world for that matter, from economic and social disaster which flow from avoidable stupidity. These ideas have been perverted and attacked by David Miscavige and his agents in various black PR libels. It is situations like and including this organization’s use of its great monetary wealth for unarguably evil purposes, and this great country’s sale of Lady Justice to any high roller, which make my economic ideas timely and utterly workable.

There were other facts I couldn’t ignore; like recent unjustifiable rulings in Scientology’s favor in key state and federal cases; and glimpses of a something different from mutually wary relationship between organization people and Justice Department people. There has been much voicing since 1993 of the bet that some organization someone had something on someone in some government connected position of power and authority.

There has also been some speculation for some time of perhaps in a working relationship, perhaps in a framework of not unacceptable mutual wariness, between Scientology’s intelligence apparatus and a piece of the US intelligence “community.” There was a recent mention of OSA documents suggesting some such relationship being found by Greek government personnel in a raid on the organization in perhaps Athens. Scientology had even hired a “former” military intelligence colonel as an “expert witness” in its litigation against me.

I have known ever since I was posted as the Intelligence Officer on board the organization’s flagship with the Hubbards in 1974 and 1975 that Scientology’s quintessence, what time is devoted to in the places where “wog world” decisions are made, is the activity of intelligence. Hubbard as idol, the “technology,” legal or PR are all preempted by the intelligence game. There are things a cult might possess that a government more than likely would not; e.g., a litigation machine which was taking litigation where it had never gone before, and for sure where no JD litigator dared to tread; its own private court reporter firm; a lot of people’s innermost personal secrets; yet


another computer system and data base; instant mobilization in any country; plenty of foreigners to cross any border; well hatted money launderers; fanatics. It is not inconceivable that a cultic intelligence partner might pay its own way, or even pay to deliver its product for free. Conjecture, which has been around for a long time, as you can imagine, goes far beyond that.

It is not conjecture, however, but certain fact that the IRS had not contacted me to verify Scientology’s statements about me in its 1023 response. It was also certain that the IRS had ample knowledge of Scientology’s history of lying and obstruction of justice to justify, after decades of legal battles, probably millions in legal costs, and, I believe, an unbroken string of important legal victories in the Service’s favor, a telephone call. My guess, given the other known facts, is that none of the other people the organization black PRed in the 1023 response were called as well.

Scientology’s 1023 black PR should also be viewed along with the fact that the organization held at least three of its targets therein gagged with its “contracts.” On the threat of $50 thousand in liquidated damages and legal prosecution, we – Mike Flynn, Laurel Sullivan and I – were prohibited from telling the IRS the truth even if we were contacted. These “contracts” require that we “not assist or advise anyone, including [ ] governmental agencies contemplating any claim or engaged in litigation or involved in or contemplating any activity adverse to the interests of [Scientology, its personnel, agents or lawyers].” (E.g., Armstrong “settlement agreement” at para. 10, p. 1.3) The “settlement agreements” also require that we say not one word to anyone, “other than members of [our] immediate family.” (Id. para. 7H, pp. 10, 11).3

I have been “successful” in my litigations at least in getting “governmental organ[s] or entit[ies]” specifically excluded from the Marin Superior Court order enjoining me from “assisting” anyone (else) against Scientology. I cannot, of course, assist the government against Scientology or its personnel, agents or lawyers without communicating about them; although the organization insists that I must. I am risking criminal prosecution and jail by sending you this communication. Mr. Flynn and Ms. Sullivan are still “prohibited” from assisting the government at all.

There was the fact of David Miscavige’s public admission, or boast, that he had walked unannounced into former IRS Commissioner Goldberg’s office in Washington and arranged the “settlement” which resulted in Scientology’s tax exemption. And there were the facts that this “settlement” is secret, and that the IRS is opposing efforts to bring the secret settlement to light.


As I mentioned above, what Scientology, under David Miscavige’s direction, had written about me in its 1023 response was frightening; and I knew that although I had to communicate something like this letter to someone I couldn’t do so until I was a lot safer than I then was.


While in the process of getting safer before communicating, as God’s Timetable would have it I was served with a subpoena for the production of documents by defendant Grady Ward in the case of Scientology v. Ward, USDC Nor. Cal. No. C-96-20207 RMW. Organization attorney Andrew Wilson immediately wrote me threatening prosecution if I responded to Mr. Ward’s subpoena. Since such prosecution would be at the gavel of the Marin County judge who had given Scientology the illegal orders enjoining me, and who had studiously ignored all my evidence in opposition, the threat of conviction, incarceration or worse was very real.

I did, however, respond to Mr. Ward’s subpoena by sending the original of the declaration which accompanies this letter, along with my production of documents, to the presiding judge in that  case. I have not included those exhibits here, but they are available. In this declaration I refer to the IRS’s 1993 ruling and provide a number of details which I have not provided in this letter.

It would have been silly to write to you about my 1994 tax year, for which, I trust you’re now certain, I do not owe any taxes or penalties, and  pretend that my real and actual situation with the IRS didn’t exist. Nor could I communicate this situation to the very people in the US Government who appeared to be assisting Scientology in its persecution of me and other innocent targets, unless, as I said, I first made myself somewhat safer. I thus packed a bag of clothes, left my home in San Anselmo and am in Canada.

I have since learned that Scientology did in fact obtain an order to show cause re contempt from the Marin judge for my response to Mr. Ward’s subpoena. I have also received some warnings to not let myself be jailed by Scientology because of what the organization might have happen to me while in custody. And thus, being in Canada but still in danger, I am communicating to you in this manner; and I hope that you, or someone to whom your seniors in the IRS direct this communication, will communicate back to me.

In 1984 Los Angeles CID agents Al Ristuccia and Al Lipkin made a real offer of the federal witness protection program to Scientology’s targets who claimed to be in danger. Today it is altogether possible that there are people in the Fed from whom the organization’s designated targets now need protection. I hope that you and your seniors take this possibility very seriously.

It is clear that a deal was cut between Scientology and the IRS. Whatever the deal was probably involved, and involves, other parts of the US Government. Whatever the deal was, both sides are now implicated in an evil deal. The IRS and the other federal participants in the deal knew the policies, practices, history and character of the organization with whom they were dealing. The black PR on me in the 1023 response alone is sufficient proof that the policies, practices, history and character remain unchanged.


If there has been assistance to Scientology, someone in the US having declared it a “religion,” there is a violation of the separation of church and state. Where there is collusion, there is a state church. As fantastic as that might sound, it is not impossible, nor untrue. When secret deals are made with a known destructive and power hungry cult, there is more than an appearance of impropriety. There are many people who pray that Scientology has not been embraced by power hungry government players.

There are obvious secular things involved here – huge sums of money, laws, levels of lawyers, statements and decisions made and not made, and so forth. But there are also non-secular things – like God, faith and truth, the terrible nothingness of evil and its wake, forgiveness and grace. Evil deals, like Scientology’s evil “settlement agreement” with me, are made to be broken. That is God’s message to His Children through His Son: the contracts with evil are broken; stand up, be free and speak your peace.

Because God has moved me to break my deal with evil, I am viewed as a threat by Scientology leader Miscavige. Because of what I now know I am indeed a threat to his organization’s untaxed wealth, its power and stature. I will also be viewed as a threat by IRS people or other US agency people who have made their own unholy deal, and want that deal and the relationship it makes protected.

Back in 1984, at a time of great stress and under terrible attack and manipulation by Scientology I helped the IRS against the organization. It wasn’t because I was being operated by the IRS, as Scientology asserts in its black PR packs, nor even that the IRS asked that I do anything, other than offer protection to people who had the courage to come forward to talk to them. I did whatever I did because of my faith in God, and my knowledge that Scientology, under the same management as today, is dangerous and hurts people. I thought that the IRS, as indeed it can, could act to restrain, through its legal powers, the danger and hurt.

I may not have done the best job, although that conclusion cannot honestly be reached, because my job, for reasons contained in this letter, is not finished yet. I may also have quit prematurely in December, 1986, leaving the IRS in the lurch, but that was for the very reason I had helped the Service: to save both Scientology’s victims and the victimizers from the effects of fair game. And in any case God is merciful about all that.

I’m sure the IRS at one time wished I didn’t have such a foul mouth, and there certainly have been times I’ve wished the same. I thank God, however, not only because I’ve also been saved from that, but because He used all my raunch for His purposes. Nevertheless, my profanities have nothing to do with Scientology’s black PR, other than being its fodder. Nor do they have anything to do with the IRS’s decision, or anyone else’s decision to give the organization its tax exempt status, and, by extension, its religious status. The IRS and the US must not avoid being courageous now because of embarrassment for having been chicken in the past.


The IRS, and US Government leaders are now protecting the bad guys just because the bad guys are the bad guys. The people who con, threaten and hurt are given, not only tax exemption to enable yet more conning, threatening and hurting, but support. This can be corrected, the deal can be broken.

I would like to receive back a communication from the IRS that honest people have read and understood this letter. I would ask that the recipient pass it on to the people as high in the IRS and in other parts of the US Government as it should honestly go. I would hope that my concern for my safety be respected, and I would also hope that the concerned people would signal their concern. I would rather, because all of us for peace and safety depend on the US Government, that we be on the same side. Obviously this whole matter will become public in one way or another, and I would hope that when that happens we will be on the same side.

I do not have an address or phone number at which I am safe, and to which anyone can communicate. If anyone in the IRS wants to communicate to me before I have a safe place, have a message posted to alt.religion.scientology, which I will try to monitor. Make the subject line “Re Midian.” Say whatever you want. No one else will know to watch for the message.

Thank you for this opportunity. May we all make wise decisions.

Yours sincerely,

Gerald Armstrong


IRS: Final Adverse Ruling (July 8, 1988)

[CT 6240]

Internal Revenue Service
Church of Spiritual Technology
419 North Larchmont, Suite 162
Los Angeles, Ca 90004
Department of the Treasury
Washington, DC 20224
Person to Contact:
Mr. M. Friedlander
Telephone Number:
(202) 566-6701
Refer Reply to:
Date: [stamp] JUL 8 1988

Employer Identification Number: 95-3781769
Tax Years: All Years

Dear Applicant:1

This is a final adverse ruling as to your exempt status under section 501 (c) (3) of the Internal Revenue Code.

This ruling is made for the following reasons:

1. You have failed to establish that you are operated exclusively for exempt purposes as required by section 501 (c (3) of the Code. You have not demonstrated that your activities and purposes conform to exempt purposes and activities as required by section 501 (c (3) of the Code.

You are one of a number of organizations which were created pursuant to a reorganization of the Church of Scientology which took place in 1981 and 1982. The reorganization was undertaken after the Service revoked the exempt status of the Church of Scientology of California, the former “Mother Church” of the denomination. The basis of the revocation was that the California church was an ordinary commercial enterprise, the Church’s income inured to L. Ron Hubbard, founder of the Scientology religion, and the Church had violated public policy by conspiring to impede the Service from assessing and collecting taxes which were lawfully due. Church of Scientology of California v. C. I.R., 83 T.C. 381 (September 1984). The revocation was sustained by the Tax Court and upheld by the Court of Appeals for the Ninth Circuit. 823 F. 2d 1310 (9th Cir. 1987).

An earlier case involving a Scientology organization had also resulted in a finding of private benefit to Mr. Hubbard and members of his family.Founding Church of Scientology v. U.S., 412 F. 2d 1197 (Ct. C1. 1969),cert. den., 39 U.S. 1009 (1970).

In the Church of California case, cited above, the Tax Court described how the Church attempted to frustrate the Service’s efforts to examine its financial affairs. The Church maintained no books or journals to record

[CT 6241]


Church of Spiritual Technology

and systematize its financial transactions. Therefore, the examination had to proceed on the basis of millions of separate checks, invoices, and disbursement vouchers. The Church’s accountant saw to it that these documents were provided in no semblance of order. He advised another church to “give the IRS agent a bunch of records in a box in no semblance of order, to place the agent in a dark, small, out-of-the-way room, [and] to refuse to give practical assistance locating records.” In the face of such tactics, the IRS spent approximately two years in an unsuccessful attempt to audit the Church’s 1958 and 1969 financial operations.

In addition to the above tactics, the Church knowingly and purposely misled the IRS concerning extensive operations it conducted in the United Kingdom. It concealed from the examiners the fact that it regularly received debit advices from foreign banks in lieu of canceled checks. It never produced canceled checks from some of its accounts which it maintained in the name of another corporation. When checks were produced, they were sometimes detached from their stubs. Boxes of records were mislabeled. The Church intentionally delayed in providing requested records and in some instances it never provided the records at all.

In order to establish whether the reorganized Church of Scientology was operated exclusively in furtherance of exempt purposes, we sought to obtain detailed information from you and from the other newly created entities which had filed applications for recognition of exemption. Although some information was initially provided, the information was incomplete or partial. Eight of the organizations eventually withdrew their applications without providing the information we had requested.

While the applications were pending, witnesses gave testimony in court cases involving churches of Scientology. See Church of Scientology of California v. Gerald Armstrong, No. C 420153 (Calif. Super. Ct., July 20, 1984);Founding Church of Scientology of Washington, D.C., Inc., et al. v. Director, Federal Bureau or Investigation, et al., 802 F. 2nd 1448 , cert. den., 56 U.S.L.W. 3231 (October 6, 1987). The testimony was to the effect that L. Ron Hubbard continued to control the Church of Scientology for his private benefit. Witness testimony in the Armstrong case alleged that the project known as Mission Corporate Category Sort-Out (MCCS) had been undertaken by the Church of Scientology of California in 1980. The alleged purpose of the MCCS project was, according to the testimony of Laurel Sullivan, to devise a new organizational structure to conceal L. Ron Hubbard’s continued control of the Church of Scientology. In the Founding Church.v. Director, F.B.I. case, to which the Service was a party, the government successfully argued that L. Ron Hubbard should be required to appear and be deposed because he was a managing agent of the Church. Mr. Hubbard did not appear and the case against the government defendants was dismissed with prejudice.

[CT 6242]


Church of Spiritual Technology

We asked the remaining applicants who had not withdrawn their applications to comment on the matters noted in the Armstrong and Founding Church v. Director F.B.I. cases. They responded that the testimony related to other organizations and time periods, attacked the credibility of the witnesses, and stated that L. Ron Hubbard did not hold any position of control in any church of Scientology even though he was still revered as the founder of the religion.
We were told that the present corporate structure had been designed after those responsible for the MCCS project had been dismissed from the church and that the work done on the MCCS project was not considered or consulted in designing the new organizational structure presently in place. At the same time, we were furnished for the first time a chart showing levels of authority and departments within the new organizational structure. One of the departments, the Commodore’s Messenger Organization (International), exists within the corporate structure of Church of Scientology International, the new “Mother Church” of the denomination. According to allegations made in the Armstrong case, L. Ron Hubbard controlled the church through the Commodore’s Messenger Organization utilizing David Miscavige, Pat Broeker and Anne Broeker to carry out his orders. David Miscavige, Anne Broeker, and Lyman Spurlock were the original trustees of Religious Technology Center. Mr. Miscavige enjoys a position of influence in the reorganized Scientology structure which we have been informed derives from”moral authority” rather than from any official position in the corporate structure. Lyman Spurlock is president of Church of Spiritual Technology and, along with Mr. Miscavige, is an employee of Author Services, Inc. Author Services, Inc., is a for-profit corporation formed to provide services to L. Ron Hubbard in connection with exploitation of patents and copyrights which Mr. Hubbard owned.

On January 7, 1986, we issued an initial adverse ruling on your application. You submitted a written protest to our initial adverse ruling. In your protest we learned for the first time of the existence of still other organizations which were related to the new Scientology operating structure. Following your protest conference, which was held in January, 1987, we asked you to provide more detailed information about these new “international” organizations, including International Association of Scientologists, International SOR Trust, SOR Management Services, Ltd., Scientology International Missions Trust, and International Scientology Religious Trust. In a letter dated November 24, 1937, we noted that you had previously agreed to supply that information to us. However, you did not supply the information.

In support of the protest to our initial adverse ruling, we were supplied with copies of affidavits dated December 4, 1986, from Gerald Armstrong and Laurel Sullivan. Ms. Sullivan was the person in charge of the MCCS project. The affidavits state that the new church management “seems to have returned to the basic and lawful policies and procedures as laid out by the founder of the religion, L. Ron Hubbard.” The affidavits conclude as follows:

[CT 6243]


Church of Spiritual Technology

“Because of the foregoing, I no longer have any conflict with the Church of Scientology or individual members affiliated with the Church. Accordingly, I have executed a mutual release agreement with the Church of Scientology and sign this affidavit in order to signify that I have no quarrel with the Church of Scientology or any of its members.”2

The history of Scientology’s operations detailed in the Church of California case includes a lack of adequate financial records, public policy violations, deceptive practices and the maintenance of enemies lists against whom any actions, however illegal, were justified. The California case also demonstrates inurement of net earnings and benefit to the private interest of Mr. Hubbard, operations that primarily furthered commercial purposes conducted amid continuous representations denying control by and benefit to Mr. Hubbard, and a tenacious denial of the actual state of the organization’s affairs in the face of overwhelming evidence establishing the true nature of the organization’s operations. More recently, attempts to conceal Mr. Hubbard’s ongoing control of Scientology were alleged in the Armstrong case. Utilizing testimony any witnesses from the Armstrong case, the government successfully argued that Mr. Hubbard was a managing agent of the Church of Scientology as late as 1984. See the Founding Church v. Director, F.B.I. case, cited earlier.

The events detailed in these court cases, which span almost the entire period of Scientology’s history, create an inference that Scientology, even after reorganization, is not operated exclusively for exempt purposes. The fact that Mr. Armstrong and Ms. Sullivan elected to settle their personal differences with Scientology does not detract from the relevance of the statements they previously made concerning Mr. Hubbard’s use of Scientology organizations to serve his private interest. Our experience with your organization similarly reflects a continuation of the pattern of inurement and benefit to the private interest of Mr. Hubbard, operations that primarily further commercial purposes, and denials of control by and benefit to Mr. Hubbard for periods prior to his death despite contrary judicial and Service findings. Blanket denials that Mr. Hubbard personally profited from his position of influence in Scientology and assertions that your operations exclusively further exempt purposes do not dispel this inference.

Mr. Hubbard died on January 24, 1986. But, his death did not alter the history of Scientology’s prior operations or make available complete information about your actual operations. Moreover, the same individuals who controlled Scientology operations prior to Mr. Hubbard’s death, and who participated in arrangements which resulted in inurement and private benefit, continued to control your operations and those of the other top level Scientology organizations after Mr. Hubbard’s death. Thus, the possibility of inurement and private benefit continued after Mr. Hubbard’s death and more complete information about your operations and financial affairs was required to assure that your operations had changed to eliminate any further private benefit.

[CT 6244]


Church of Spiritual Technology

For the reasons explained above, in a letter dated March 17, 1988, we proposed to review your books of account and records and those of Church of Scientology International and Religious Technology Center. As explained in our letter of :March 17, 1983, the purpose of this review was twofold. First, to determine the integrity of your financial and accounting systems so we could verify that the information you had provided was accurate. Second to verify that no part of your net earnings inures to the benefit of any private shareholder or individual and that there is no other disqualifying activity.Church of Spiritual Technology, Church of Scientology International, and Religious Technology Center agreed to participate in the financial reviews pursuant to the letters of March 17, 1988. Church of Spiritual Technology, Religious Technology Center and Church of Scientology International informed us by letter dated June 24, 1988, that they would no longer participate in the review. The refusal to continue the review, concentrating on those areas of concern, and their failure to fulfill the terms of the March 17, 1988, agreement, prevents us from concluding that Scientology’s operations have changed and that activities previously found to be disqualifying for purposes of section 5O1(c)(3) of the Code have been discontinued. Therefore, we conclude that you have not established that you are operated exclusively for exempt purposes as required by section 501(c) (3) of the Code.

2. You are operated for a substantial non-exempt commercial purpose.

In our initial adverse ruling of January 7, 1936, we concluded that you were operated for a substantial non-exempt commercial purpose because your activities assisted other organizations in maximizing sales of goods and services associated with the practice of Scientology.

In your protest and subsequent submissions you argued that your activities were engaged in for religious rather than commercial purposes. You contended that the provision of goods and services for a fee, which is characteristic of Scientology, was a permissible means of providing funds necessary for Scientology to support its operations, provide reserves for renovations and expansion, and to attract potential new members to the religion.

[CT 6245]


Church of Spiritual Technology

We have carefully considered your arguments, but fail to see that sales of goods and services for a fee by Scientology organizations under policies and directives which emphasize sales and profits does not result in a primary purpose of engaging, in activities similar in nature to those of an ordinary commercial enterprise, in which profits are the primary goal, rather than in advancing religious purposes. The fact that the fees provide a source of funds for operating expenses and future expansion and dissemination does nothing to distinguish these fee-for-service operations from similar activities of ordinary commercial enterprises. Therefore, by assisting and aiding in the marketing of Scientology, you are engaged in activities which further a substantial non-exempt commercial purpose.

Your archival activities relate to the materials constituting the scriptures of Scientology. These materials consist of the written and spoken works of L. Ron Hubbard on the subject of Scientology. Prior to his death, Mr. Hubbard held the copyrights on these materials. The works you collected were being commercially exploited by Mr. Hubbard and some of the organizations licensed by him. You were supported by income paid to you by some of the organizations engaged in this exploitation, notably Religious Technology Center and Church of Scientology Flag Service Organization, Inc., a subordinate of Church of Scientology International. You were thus performing functions which benefited these organizations and furthered their objective of marketing Scientology products and services.

After Mr.. Hubbard’s death, Religious Technology Center and Church of Scientology International and its subordinates have continued to market Scientology products and services. Your collection of original Hubbard writing and tape recordings enhances their marketing efforts because the products they market are derived from these original writings and tape recordings. Therefore, you are operated for a substantial non-exempt commercial purpose.

In addition, the refusal to continue the review agreed to in the letters of March 17, 1988, to Church of Spiritual Technology, Church of Scientology International, and Religious Technology Center, concentrating on those areas of concern, and their refusal to fulfill the terms of the March 17, 1988, agreement prevents us from concluding that Scientology’s operations have changed and that activities previously found to be disqualifying for purposes of section 501(c) (3) of the Code have been discontinued. Therefore, we conclude that you have not established that you are operated exclusively for exempt purposes as required by section 501(c) (3) of the Code.

[CT 6246]


Church of Spiritual Technology

3. You are operated for the benefit of private interests and your net earnings inure to the benefit of private individuals.

In our initial adverse ruling, we concluded that your operations furthered the private interest of and resulted in inurement of net earnings to L. Ron Hubbard because he received royalties on the sales of products associated with the practice of the religion he founded. We also concluded that your activities served Mr. Hubbard’s private interest through your participation in a plan to exploit Mr. Hubbards’s trademarks, trade names, service marks, copyrights, and patents through licensing and assignment arrangements. We also concluded that your activities served the private interests of and resulted in inurement of net earning to organizations associated with Mr. Hubbard.

In your protest you called our attention to the fact of Mr. Hubbard’s death and noted that his estate is in probate. Church of Spiritual Technology is the principal beneficiary of the estate and will receive the royalty income formerly received by Mr. Hubbard if it is determined to be exempt under section 501(c) (3). Based on these facts, you contend that private benefit, if there was any, ceased upon the death of Mr. Hubbard on January 24, 1986.

Mr. Hubbard’s death does not erase the benefit and inurement to his private interest that occurred.

Further, both before and after Mr. Hubbard’s death, you made the original writings and other materials formerly owned by Mr. Hubbard available to Church of Scientology International and Religious Technology Center in exchange for so-called “contributions” from Religious Technology Center and Church of Scientology Flag Service Org, Inc., a subordinate of Church of Scientology International. Religious Technology Center and Church of Scientology International engage in marketing Scientology to the public in a manner indistinguishable from that of an ordinary commercial enterprise. Therefore, your provision of the original Hubbard Materials to Religious Technology Center and Church of Scientology International serves the private interests of Religious Technology Center and Church of Scientology International.

In addition, the refusal to continue the review agreed to in the letters of March 17, 1988, to Church of Spiritual Technology, Church of Scientology International, and Religious Technology Center, concentrating on those areas of concern, and their refusal to fulfill the terms of the March 17, 1988, agreement prevents us from concluding that Scientology’s operations have changed and

[CT 6247]


Church of Spiritual Technology

that activities previously found to be disqualifying for purposes of section 501(c) (3) of the Code have been discontinued. Therefore, we conclude that you have not established that you are operated exclusively for exempt purposes as required by section 501(c) (3) of the Code.

4. You have failed to establish that you are not operated for the benefit of private interests and that your et earnings do not inure to the benefit of private individuals.

Trusts and corporations can be used to siphon income from allegedly exempt organizations for the benefit of private individuals. This happened in the Church of California case. An allegedly religious trust and dummy Panamanian corporations were used to funnel money to L. Ron Hubbard.

Although the organizational structures employed by Scientology have changed since the California case, you have not clearly established that your relationship with the new entities furthers your exclusively exempt purposes. The past history of Scientology’s operations suggests that the purpose of these organizations may be to disguise the fact that private interests are the ultimate beneficiaries of the reorganized operating structure.

An example of an organization which may serve private interests is International Publications Trust (IPT). Prior to the formation of IPT, L. Ron Hubbard granted licenses to New Era Publications (NEP) to produce Scientology books and E-meters. NEP sublicensed Bridge Publications, Inc. (BPI). The license and sublicense agreements provided for royalty payments from BPI to NEP and from NEP to L. Ron Hubbard. Then, IPT was formed to act as the holding company parent of BPI and NEP.

You informed us that IPT has two foreign trustees, Church of Scientology Religious Education College, a corporation, and Geoffrey Clunie, an individual. Our requests for additional information about IPT and its trustees and their relationship to the reorganized Scientology structure have not been answered. So, we see in place an entity that controls Scientology publications and E-meter production controlled by persons about whom no information has been provided. In the absence of any other explanation for this arrangement, we have no alternative but to conclude that the holding company’s real purpose could be to benefit Mr. Clunie’s private interest or the private interest of the College, just as intervening trusts and corporations were used to mask benefits to the private interest of L. Ron Hubbard.

[CT 6248]


Church of Spiritual Technology

It is also clear that NEP and BPI share in the commercial exploitation of these properties to benefit their own private interests. Mr. Hubbard’s death did not effect the rights that NEP had already received from Mr. Hubbard prior to his death. Therefore, NEP and BPI are continuing to benefit from their part in the commercial exploitation of these properties even though Mr. Hubbard is no longer sharing in the benefits of the commercial exploitation. Even if Church of Spiritual Technology does eventually become the owner of the patents and copyrights formerly owned by Mr. Hubbard the licenses granted to NEP will still be in effect. Thus the private benefit to NEP and BPI is ongoing even though Mr. Hubbard is dead and even though a number of new Scientology organizations have been created. Further, it has not been established that other new and old organizations about which our requests for detailed information remain unanswered are not sharing in private benefit. The potential beneficiaries include Author Services, Inc., SOR Management Servies, Ltd, International Scientology Film Trust, and International Scientology Religious Trust.

The same persons who were in charge of Scientology prior to Mr. Hubbard’s death hold positions of control or influence in some of these new organizations. For example, persons who hold positions of influence in the reorganized Scientology structure also hold positions in Author Services, Inc., a for-profit corporation formed to benefit L. Ron Hubbard, Lyman Spurlock, David Miscavige, Greg Wilhere, Terri Gamboa, Marion Meisler, Maria Starkey, and Becky Hay, persons who hold influence in the reorganized Scientology structure, also hold positions in Author Services, Inc. Author Services, Inc., is now performing the same function of “collecting royalties” for the beneficiary of L. Ron Hubbard’s estate. Thus, as happened in the Church of California case, the income of an allegedly exempt organization (Church of Spiritual Technology should it obtain recognition of exemption) will be passed through a for-profit corporation which is controlled by persons who also hold positions of influence in the Scientology structure.

A similar problem exists with regard to the “central reserves” of Church of Scientology International and its subordinate churches. A nonexempt foreign entity, SOR Management Services, is being paid under a contract to “manage” these reserves. Again, the income of allegedly exempt organizations is being passed through a nonexempt organization controlled by persons who hold positions in, or act as nominees for, organizations in the topmost levels of the reorganized Scientology structure.

[CT 6249]


Church of Spiritual Technology

Moreover, a newly revealed organization, International SOR Trust, about which our inquiries remain unanswered, has an ongoing relationship with some of the organizations engaged in the exploitation of the properties formerly owned by Mr. Hubbard. For example, at one time International SOR Trust purchased the stock of Bridge Publications, Inc., from Church of Scientology of California and later disposed of the stock to International Publications Trust.

Furthermore, individuals closely associated with Cancorp Investment Properties, a for-profit British Columbia corporation allegedly formed to serve the private interests of L. Ron Hubbard, about which we inquired, have been in positions of influence in the reorganized Scientology structure. You refuse to provide detailed information about Cancorp Investment Properties or Religious Research Foundation, another organization allegedly formed to serve the private interest of L. Ron Hubbard, about which we also inquired.

The proliferation of associated entities also includes a number of other new “international” organizations, about which we have inquired but you have not responded to our inquiries. Since the Scientology operating structure is the only funding source for these organizations, they and the persons who control then are also sharing in the income generated by the activities of. Church of Spiritual Technology, Church of Scientology International, and Religious Technology Center.

In light of the past history of Scientology’s operations, this continuing sharing in the net earnings of Scientology by nonexempt entities is sufficient by itself to raise serious concerns about private benefit and inurement. Nonetheless, you have chosen to ignore these concerns or have provided incomplete or partial information which is not adequate to establish that private benefit and inurement are not flowing to nonexempt entities, some of which employ and are directed by the same people who hold positions of influence in the new Scientology operating structure. Such self-dealing does not lose its identity as private benefit and inurement merely because it is conducted through intermediary individuals and/or organizations.

Accordingly, we find that you are not exempt because you have failed to establish that you do not operate for the benefit of private interests and that your net income does not inure to private individuals contrary to the prohibition contained in section 501(c) (3) of the Internal Revenue Code. In addition, the refusal to continue the review agreed to in the letters of March 17, 1988, to Church of Spiritual Technology, Church of Scientology International, and Religious Technology

[CT 6250]


Church of Spiritual Technology

Center, concentrating on those areas of concern, and their refusal to fulfill the terms of the March 17, 1988, agreement prevents us from concluding that Scientology’s operations have changed and that activities previously found to be disqualifying for purposes of section 501(c) (3) of the Code have been discontinued. Therefore, we conclude that you have not established that you are operated exclusively for exempt purposes as required by section 501 (c) (3) of the Code.

Furthermore, the Service considers your failure to fulfill the terms of the March 17, 1988, agreement as constituting a failure to exhaust administrative remedies, as required by section 7428(b) (2) of the Code.

Contributions to your organization are not deductible under Code section 170.

You are required to file federal income tax returns on the above form. Based on the financial information you furnished, it appears that returns should be filed for the tax years shown above. You should file these returns with your key District Director for exempt organization matters within 30 days from the date of this letter, unless a request for an extension of time is granted. Returns for later tax years should be filed with the appropriate service center as indicated in the instructions for those returns.

If you decide to contest this ruling under the declaratory judgment provisions of section 7428 of the Code, you must initiate a suit in the United States Tax Court, the United States Claim Court, or the District Court of the United States for the District of Columbia before the 91st day after the date that this ruling was mailed to you. Contact the clerk of the appropriate court for rules for initiating suits for declaratory judgment. Processing of income tax returns and assessment of any taxes due will not be delayed because a declaratory judgment snit has been filed under code section 7428.

If you have questions, please contact the person whose name and telephone number are shown in the heading of this letter.

Sincerely yours,
(Signed) E. D. Coleman
E.D. Coleman
Director, Exempt Organizations
Technical Division


  1. This document in PDF format.
  2. See Declaration of Gerry Armstrong (December 6, 1986); Armstrong Declaration (12-25-1990)

Declaration of Gerry Armstrong (Re: B-1 files) (May 7, 1985)