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IRS.Scientology.Closing.Agrement CLOSING AGREEMENT ON FINAL DETERMINATION COVERING SPECIFIC MATTERS . Under section 7121 of the Internal Revenue Code, the parties named herein and the Commissioner of Internal Revenue make the following closing agreement: WHEREAS, the Church of Scientology and its constituent entities (the "Church") and the Internal Revenue Service (the "Service") have a long history of controversy spanning over 30 years; WHEREAS, the Church has pending with the Service applications on Form 1023 requesting that the Service recognize certain constituent entities within the Church as exempt from income taxation pursuant to section 501(a) of the Internal Revenue Service Code, as exclusively charitable organizations described in section 501 (c) (3) of the Code; WHEREAS, the controversy between the parties includes litigation (hereinafter "the section 170 litigation") in which the deductibility under Code section 170 of parishioners' payments to the Church in connection with their participation in religious services of the Scientology faith is at issue; WHEREAS, the Church signatories and individual Scientologists have initiated, supported and/or otherwise participated in litigation under the Freedom of Information Act (FOIA) to compel the Service to disclose information withheld by the Service in response to FOIA requests about its treatment of Scientologists and Churches of Scientology (hereinafter "FOIA litigation"); WHEREAS, in October of 1991, the key officials of the Church, David Miscavige and Mark Rathbun, approached the Service seeking to negotiate the resolution of the above-described matters, and met with the then Commissioner; WHEREAS, at this meeting, the Commissioner indicated his desire to resolve all outstanding issues between the Church and the Service and appointed the Assistant Commissioner to negotiate and conclude a settlement with the Church on behalf of the Service; WHEREAS, the Church and the Service intend this closing agreement to be final and conclusive with respect to all matters but, while also final and conclusive, that its provisions relating to the continuing duties and obligations of both parties during the transition period IRS closing agreement, IRS v Scientology Page 1 of 65 shall generally be effective until December 31, 1999; NOW IT IS HEREBY DETERMINED AND AGREED, for purposes the Internal Revenue laws of the United States, and in consideration of the provisions contained herein that: Table of Contents I. Introduction. ....................................................................................................................... 7 II. Resolution of Outstanding Issues....................................................................................... 8 A. In General. .................................................................................................................... 8 B. Payment in Consideration of Resolution of Outstanding Issues...................................... 9 C. Effect of Agreement on Prior Tax Years and Waiver of Rights of Action. ..................... 9 D. Effect on Outstanding Administrative Matters............................................................. 11 1. Church tax inquiries under Code section 7611.......................................................... 11 2. Other examinations of Scientology-related entities. .................................................. 11 3. Outstanding tax assessments..................................................................................... 12 4. Trust fund recovery penalties. .................................................................................. 12 5. Time period in which to effectuate paragraph D. ...................................................... 12 E. Effect on Outstanding Litigation Matters. .................................................................... 12 1. In general. ................................................................................................................ 12 2. Zolin. ....................................................................................................................... 13 3. Stipulations. ............................................................................................................. 13 4. Certain pending cases requiring coordination. .......................................................... 13 F. After-Discovered Cases or Examinations in Existence as of the Date of this Agreement. ........................................................................................................................................ 13 G. Finality........................................................................................................................ 14 III. Service Determinations Regarding Scientology-Related Entities. ................................... 14 A. Issuance of Determination Letters. .............................................................................. 14 B. Individual Determination Letters. ................................................................................ 14 C. Group Determination Letters. ...................................................................................... 16 IV. Obligations and Undertakings During the Transition Period........................................... 17 A. Establishment of Church Tax Compliance Committee................................................. 17 1. Purpose of Church Tax Compliance Committee. ...................................................... 17 2. Membership of Church Tax Compliance Committee. ............................................... 17 a. Corporate CTCC members.................................................................................... 17 IRS closing agreement, IRS v Scientology Page 2 of 65 b. At-large members of CTCC.................................................................................. 17 c. Individual CTCC members. .................................................................................. 17 3. Responsibilities of CTCC......................................................................................... 18 a. Annual Report. ..................................................................................................... 18 b. Communications................................................................................................... 18 c. Meetings............................................................................................................... 19 d. Guaranty............................................................................................................... 19 e. Liability for penalties............................................................................................ 22 4. Actions of CTCC...................................................................................................... 22 B. Financial Reporting Requirements............................................................................... 22 1. Special Accounting Procedures. ............................................................................... 22 a. In general.............................................................................................................. 22 b. Special accounting procedures -- operational aspects............................................ 22 c. CPA's reports--In general...................................................................................... 23 d. CTCC responsibilities........................................................................................... 23 e. Selection of a qualified CPA................................................................................. 23 f. Definition of a qualified CPA................................................................................ 23 g. CTCC's approval of selection. .............................................................................. 24 h. Notification of selection. ...................................................................................... 24 i. First qualified CPA................................................................................................ 25 j. Special Purpose Report agreement......................................................................... 25 k. Special Purpose Report scope limitation. .............................................................. 25 l. Access to Special Purpose Report-related documents. ........................................... 25 m. Required disclosures to CPA. .............................................................................. 26 n. Submission of Special Purpose Reports. ............................................................... 26 o. Submission of plan of corrective action. ............................................................... 26 2. Internal financial reports........................................................................................... 26 3. Report on central reserves transactions and balances. ............................................... 27 4. Tax returns............................................................................................................... 28 5. Term. ....................................................................................................................... 28 C. Fiduciary Reporting Requirements. ............................................................................. 28 1. Compensation information. ...................................................................................... 28 2. Modifications of organizational documents. ............................................................
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