Scientologists' Deal With IRS: $12.5 Million

LOS ANGELES - The Church of Scientology paid the Internal Revenue Service $12.5 million in a 1993 settlement that established its tax-exempt status, a church official said yesterday.

Mark Rathbun, director of the church's Religious Technology Center, confirmed some previously undisclosed details of the 1993 settlement reported yesterday in The Wall Street Journal.

The settlement 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 replied with more than 2,000 lawsuits against the IRS.

IRS spokesman Frank Keith said the decision to grant tax-exempt status was "based upon voluminous information provided by the church to the IRS regarding its financial and other operations."

The Church of Scientology agreed to drop its lawsuits and pay $12.5 million to settle any tax assessments prior to 1993.

The IRS can levy up to $50 million in penalties on the church if it finds officials were enriching themselves with money intended for nonprofit activities. The IRS will drop any outstanding audits of Scientology organizations.