A School Case To Watch

Oh, ye of little faith — and here we are speaking of those who doubt that some day a solution will be found to the problem of school choice — we say behold what is happening among the judges who ride the 9th circuit of the United States Court of Appeals. There, our Josh Gerstein reports from the Coast, three judges are hearing a case that could force the Internal Revenue Service to explain why it has secretly allowed members of the Church of Scientology to take a tax deduction for religious education.

The case was brought by a Jewish couple, Michael and Marla Sklar, who had taken deductions for part of the costs of the tuition for the education of their children for afterschool classes in Judaism. They are seeking to view an agreement the Internal Revenue Service reached with the Church of Scientology in 1993 as part of a settlement in a long-running dispute. The church, Mr. Gerstein reports, paid $12.5 million, while the IRS, as Mr. Gerstein characterizes it in his story on page one, "agreed to drop arguments that Scientology was not a bona fide religion." And the IRS agreed to allow Scientologists to deduct at least 80% of fees paid for "religious training and services."

A memo memorializing the agreement, which was secret, was later published by the Wall Street Journal, igniting a tumult. The Sklars, Mr. Gerstein reports, took similar deductions for religious education on their returns for the early 1990s, without challenge by the IRS, until 1994, when the IRS began rejecting their deductions. One of the questions being battled over in federal court now is whether the IRS has to disclose its secret agreement with the Scientologists and whether it sets a precedent in respect of others who wish to deduct tuition and other payments for religious education.

It's always dangerous for a newspaper to predict the outcome of a court case, but at one point, Mr. Gerstein reports, Judge Kim Wardlaw put it this way: "The view of the IRS is it can unconstitutionally violate the Constitution by establishing religion, by treating one religion more favorably than other religions in terms of what is allowed as deductions, and there can never be any judicial review of that?" A hapless lawyer for the IRS tried to argue that's not what she was saying. Snapped two judges from the bench: "That's the bottom line." Added Judge Wardlaw: "This does intrude into the Establishment Clause."

At one point, the IRS lawyer actually warned the court that the tax collector would have difficulty resolving tax disputes if the IRS were forced to disclose its secret agreement with the Scientologists. "Every person who can find out about it from any other religious group is going to come in and want the same thing and that would really tie the IRS's hands," she said. She went on to argue that the idea that the IRS can't settle and keep the settlement confidential could lead to members of racial minorities trying to claim that taxpayers of other races got better deals. This prompted the lawyer for the Sklars to ask: "If the IRS were saying white people were entitled to a certain deduction and black people were not, why would it be such a parade of horrors for the courts to come in and say the government may not act that way?"

* * *

Our own view on school vouchers and the like is that the right place to work out a solution is in the legislatures. But one of the things the courts are made for is abuses of the state power, and it certainly is starting to look like there has been an enormous one if the Internal Revenue Service is denying Jews, or Christians, or any other religion, the right to make deductions for religious education it is permitting to another group on the grounds that it is a religion. So there is at least the possibility here that the riders of the 9th United States Circuit could simply order the IRS to grant the Sklars — and others similarly situationed — deductions for certain costs of religious education similar to what the government is secretly allowing the Scientologists. Or in other words, one could make a giant leap forward in parental choice in the education of children, all in one judicial fell swoop.