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Scientology Leader Claims Victory In Court Ruling

July 29, 1987 GMT

SAN FRANCISCO (AP) _ A leader of the Church of Scientology International calls a federal appeals court ruling ″a tremendous victory,″ even though it upheld revocation of the church’s tax-exempt status.

The Rev. Heber Jentzsch, president of the church, said he was happy about Tuesday’s ruling by the 9th U.S. Circuit Court of Appeals that his organization is ″organized for a bona fide religious purpose.″

But the court said that was not enough to maintain the Los Angeles-based group’s tax-exempt status, revoked by the Internal Revenue Service and the U.S. Tax Court on the grounds that a portion of its earnings ″inured to the benefit of a private individual.″

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Scientology founder L. Ron Hubbard and his family received money funneled from a sham corporation and other church operations, the court said.

The court also upheld more than $1.4 million in federal taxes and penalties against the church for the years 1970 through 1972.

″Unlike the typical Saturday or Sunday when parishioners donate their money to the church, here the (Scientology) church transferred millions of dollars to bank accounts controlled by private individuals who had no official responsibility for managing church assets,″ said Judge Thomas Tang, writing for a unanimous three-member panel.

Jentzsch said the court failed to recognize that ″Mr. Hubbard turned his money over to the church″ after he died in January 1986.

Hubbard, a science fiction writer, resigned as executive head of Scientology churches in 1966 but continued to hold significant control over the operations, the court said.

The court said salaries paid to Hubbard and his wife, Mary Sue, totaling $185,000 during 1970-72, were not excessive and did not disqualify the church from tax-exempt status. But other types of payments ″cross the line between reasonable and excessive,″ the court said.

Among payments the court found excessive were more than $1 million withdrawn from a church trust fund and put in the Hubbards’ custody, and church income paid to Hubbard as a ″debt repayment″ for his work in founding Scientology.