''Hernandez v. Commissioner'', 490 U.S. 680 (1989), is a decision of the

United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...

. relating to the Internal Revenue Code § 170 charitable contribution deduction.

Facts

The Church of Scientology, founded by

L. Ron Hubbard Lafayette Ronald Hubbard (March 13, 1911 – January 24, 1986) was an American author, primarily of science fiction and fantasy stories, who is best known for having founded the Church of Scientology. In 1950, Hubbard authored '' Dianeti ...

, teaches that an immortal spiritual being exists inside everyone. The Church uses the " auditing" practice to help interested people become aware of this spiritual being. The Church uses the "training" courses to help participants to become auditors. The Church charges for those services due to the belief that, any time a person receives something, that person must pay something back in return.''Hernandez'', 490 U.S. at 685. The income generated by those services constitutes the Church's primary source of income. The taxpayers made payments to branch churches in exchange for auditing or training services. The taxpayers tried to deduct these payments on their Federal Income Tax returns under the charitable contribution deduction.

Issue

Whether taxpayers may deduct payments to the Church of Scientology for auditing and training as a charitable contribution under IRC §170?

Holding

The payments for auditing or training sessions do not satisfy the "contribution or gift inquiry necessary for deductibility under IRC §170 because it amounted to a '' quid pro quo'' for the taxpayer. In other words, the taxpayer received a benefit in consideration for his contribution.

Reasoning

Justice

Thurgood Marshall Thurgood Marshall (July 2, 1908 – January 24, 1993) was an American civil rights lawyer and jurist who served as an associate justice of the Supreme Court of the United States from 1967 until 1991. He was the Supreme Court's first African-A ...

began the majority opinion with a discussion of the

legislative history Legislative history includes any of various materials generated in the course of creating legislation, such as committee reports, analysis by legislative counsel, committee hearings, floor debates, and histories of actions taken. Legislative his ...

of the "contribution or gift" limitation as described in IRC §170(c). When the tax bill was enacted in 1954,

Congress A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...

distinguished between unrequited payments and payments made in return for goods and services. Specifically, the gift characterization was deemed to only apply "if there were no expectation of any ''quid pro quo''..." In later decisions, the ''quid pro quo'' analysis was expanded to also apply to charitable contributions.. Hernandez and other taxpayers argued that the ''quid pro quo'' determination did not apply to this situation because the benefit they were receiving through the auditing and training was purely religious. The Court emphasized that IRC §170(c) clearly states that donations to religious organizations are only deductible if they are contributions or gifts, regardless of the expectations underlying the payments. The Court hesitated to broaden the scope of the deduction to any payments designed to achieve a religious benefit, since that could open the door to deductions such as those for parochial school tuition or payments to church-affiliated hospitals. The Court noted that refraining from characterizing the services provided by religious institutions prevented the government - the IRS and court system - from effectively monitoring the practices of a church.

Dissent

Justice O'Connor and

Justice Scalia Antonin Gregory Scalia (; March 11, 1936 – February 13, 2016) was an American jurist who served as an associate justice of the Supreme Court of the United States from 1986 until his death in 2016. He was described as the intellectua ...

disagreed with the majority opinion. The opinion noted that there have been no instances where the IRS has previously denied deductibility on a ''quid pro quo'' basis even though the benefit was entirely spiritual or religious. Because of the difficulty in putting a dollar value on intangible religious benefits, the Government had, up until this case, chosen to ignore the ''quid pro quo'' argument and allow these deductions.

References

External links

* * {{DEFAULTSORT:Hernandez V. Commissioner Scientology litigation United States Supreme Court cases United States Supreme Court cases of the Rehnquist Court United States taxation and revenue case law 1989 in United States case law