 | This articleneeds additional citations forverification. Please helpimprove this article byadding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Hernandez v. Commissioner" – news ·newspapers ·books ·scholar ·JSTOR(November 2008) (Learn how and when to remove this message) |
| Hernandez v. Commissioner | |
|---|---|
 | |
| Argued November 28, 1988 Decided June 5, 1989 | |
| Full case name | Robert L. Hernandez v. Commissioner of Internal Revenue |
| Citations | 490U.S.680 (more) 109 S.Ct. 2136; 104L. Ed. 2d 766; 1989U.S. LEXIS 2773 |
| Case history | |
| Prior | |
| Holding | |
| 1) The payments for auditing or training sessions are not deductible "contribution[s] or gift[s]" underInternal Revenue Code §170 because the Court found no supporting Congressional intent for the petitioners argument. 2) Denying the deduction does not violate the Establishment Clause because §170 isnon-discriminatory and meets all threeLemon criteria. 3) Denying the deduction does not violate the Free Exercise Clause because the government interest in a "maintaining a sound tax system" overcomes the burden of having less money to access auditing and training sessions (which does not stem from a doctrinal obligation). | |
| Court membership | |
| |
| Case opinions | |
| Majority | Marshall, joined by Rehnquist, White, Blackmun, Stevens |
| Dissent | O'Connor, joined by Scalia |
| Brennan, Kennedy took no part in the consideration or decision of the case. | |
| Laws applied | |
| Statutory argument26 U.S.C. § 170; Constitutional claims based on theEstablishment Clause andFree Exercise Clause of theFirst Amendment | |
Hernandez v. Commissioner, 490 U.S. 680 (1989), is a decision of theUnited States Supreme Court[1] relating to theInternal Revenue Code § 170[2] charitable contribution deduction.[3]
TheChurch of Scientology, founded byL. Ron Hubbard, 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.[4] The income generated by those services constitutes the Church's primary source of income.[4]
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 thecharitable contribution deduction.
Whether taxpayers may deduct payments to the Church of Scientology for auditing and training as a charitable contribution under IRC §170?
The payments for auditing or training sessions do not satisfy the "contribution[s] or gift[s]" inquiry necessary for deductibility under IRC §170 because it amounted to aquid pro quo for the taxpayer. In other words, the taxpayer received a benefit in consideration for his contribution.
JusticeThurgood Marshall began the majority opinion with a discussion of thelegislative history of the "contribution or gift" limitation as described in IRC §170(c). When the tax bill was enacted in 1954,Congress 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 anyquid pro quo..."[5] In later decisions, thequid pro quo analysis was expanded to also apply to charitable contributions.[6]
Hernandez and other taxpayers argued that thequid pro quo determination did not apply to this situation because the benefit they were receiving through the auditing and training was purely religious.[1] 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.
Justice O'Connor andJustice Scalia disagreed with the majority opinion. The opinion noted that there have been no instances where the IRS has previously denied deductibility on aquid pro quo basis even though the benefit was entirely spiritual or religious. They give lots of examples of when the IRS let prior things not violate the quid quo pro test. Because of the difficulty in putting a dollar value on intangible religious benefits, the Government had, up until this case, chosen to ignore thequid pro quo argument and allow these deductions.
This article incorporatespublic domain material from this U.S government document.
Works related toHernandez v. Commissioner of Internal Revenue at Wikisource