Couple Sues to Deduct Religious School Costs

A nonjury trial began last week in Los Angeles that could set precedent for how religious school expense deductions are allowed by the Internal Revenue Service.

The crux of the case surrounds a secret agreement between the IRS and the Church of Scientology, which allows Scientologists to deduct the cost of their spiritual counseling, the Associated Press reported, adding that the agreement was leaked to the Wall Street Journal.

Michael and Maria Sklar, an Orthodox Jewish couple, are seeking to deduct the cost of Jewish school for four of their children, claiming that if the Scientologists can deduct these expenses, they should be able to as well, the AP reported.

The Sklars brought the suit after the IRS deemed their deductions invalid. Their attorney Jeffrey Zuckerman, argued that the First Amendment prohibits the IRS from discriminating on the basis of religion, the AP reported.

However, Louis B. Jack, an attorney for the IRS, told the AP that a ruling in the Sklars' favor would lead “millions of Americans to start deducting religious school tuition.”

“Existing case law is clear, deduction for religious school tuition is illegal, period,” Jack said Nov. 8 in the trial in U.S. Tax Court before Judge John O. Colvin.

In 1993, Michael Sklar, an accountant, amended his 1991 tax return to claim part of his children's tuition as a charitable contribution. “The same benefit is given to a particular sect, Scientologists, and there's no reason it shouldn't be applied to someone else,” he testified.

The deduction was allowed for a number of years because it wasn't clear to the IRS that Sklar wasn't a Scientologist. He was audited in 1994 and the IRS disallowed the deduction. The couple sued and lost in 1997, appealed to the 9th Circuit Court of Appeals where a three-judge panel upheld the tax court ruling in 2002 in Sklar v. Commissioner of Internal Revenue, the AP reported.

The new suit, filed in 2001, involves the couple's 1995 return, on which the couple claimed about $15,000 in deductions for their four children.

“Every practitioner of every religion has the right to deduct religious instruction, if the Church of Scientology is allowed to do that,” Zuckerman said.

A key point of the trial will be whether or not Colvin allows the secret agreement between the IRS and the Church of Scientology to be introduced in court.

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