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Report: Scientology Settles With IRS

December 30, 1997 GMT

NEW YORK (AP) _ The Church of Scientology paid the Internal Revenue Service $12.5 million as part of a settlement of a long-standing dispute with the tax agency, The Wall Street Journal reported today.

Details of the 1993 settlement, which helped secure the tax-exempt status of the main Scientology church, previously had not been released.

The details included the church’s agreement to drop thousands of lawsuits against the IRS and to stop assisting others in other lawsuits against the agency based on claims before the Oct. 1, 1993, settlement date, the Journal said.

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The IRS canceled payroll taxes and penalties it had assessed against certain church entities and seven officials, and dropped audits of 13 Scientology organizations.

The 1993 agreement ended a struggle that began in 1967, when the IRS argued that the main Scientology church should lose its tax-exempt status because it was a for-profit business that enriched church officials.

The church fought back with lawsuits against the IRS and a publicity campaign.

The Journal, which did not say where it obtained the settlement details, said the $12.5 million was intended to cover payroll, income and estate tax bills, but that it was unclear how much the IRS originally sought.

IRS officials told the newspaper they could not comment because of confidentiality rules. At the time of the settlement, IRS spokesman Frank Keith said the agency concluded the church ``is operated exclusively for religious and charitable purposes.″

Monique Yingling, a lawyer for the church, would not comment on details of the agreement but said Scientology ``does comply with the tax laws.″

The church was founded in 1954 by science fiction writer L. Ron Hubbard, whose best-selling ``Dianetics: The Modern Science of Mental Health,″ advocated the use of an ``electropsychometer″ _ a lie detector-like device to purge negative images from people’s minds.

Members pay church-trained ``auditors″ to perform the purge of negative images. The settlement allows them to deduct those fees on their individual income tax returns, the Journal said.