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Friday, December 12, 2008
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Ninth Circuit Court Rejects Arguments That Children’s Religious School Tuition Should Be Tax Deductible

WASHINGTON - The U.S. Court of Appeals for the Ninth Circuit today rejected taxpayers Michael and Marla Sklars’ argument that they were entitled to claim deductions for tuition and fees paid to their children’s Orthodox Jewish day schools, the Justice Department announced.

The Sklars sought charitable deductions under section 170 of the Internal Revenue Code for portions of their tuition payments made to the religious day schools their children attended, asserting that those portions of the tuition payments were for "intangible religious benefits." The Sklars made three arguments in support of their position, each of which was rejected by the Ninth Circuit.

First, the Sklars argued that their tuition and fee payments to exclusively religious schools were deductible under a "dual payment analysis" to the extent the payments exceeded the value of the secular education their children received. The Ninth Circuit rejected this argument, finding that the Sklars had not shown that the payment exceeded the fair market value of the benefit received for their payments (i.e., an education for their children), and they had not shown that any excess payment was made with the intent of making a gift.

Second, the Sklars argued that sections 170(f)(8) and 6115 of the Internal Revenue Code, as enacted in 1993, authorized the deduction of tuition payments for religious education made to exclusively religious schools. In dismissing this argument, the Ninth Circuit explained that the amendments to these tax sections referring to "intangible religious benefits" did not expand the types of payments for which charitable deductions were available, but rather merely created exceptions to the substantiation requirements added in those sections.

Third, the Sklars argued that denial of their claimed deductions violated the Establishment Clause of the United States Constitution, as well as principles of administrative consistency, because allegedly similar deductions were allowed for members of the Church of Scientology under a closing agreement with the Internal Revenue Service (IRS). The Ninth Circuit rejected these arguments as well, because "[t]o conclude otherwise would be tantamount to rewriting the Tax Code, disregarding Supreme Court precedent, only to reach a conclusion directly at odds with the Establishment Clause—all in the name of the Establishment Clause."

"We are pleased that the IRS’s denial of the Sklars’ claimed deductions was upheld by the Tax Court and the Ninth Circuit," said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. "While taxpayers may choose to enroll their children in religious schools, the Tax Code should not subsidize this choice."

Assistant Attorney General Hochman thanked Tax Division attorneys Ellen DelSole and Kenneth Greene, who handled the case on appeal, as well as IRS Chief Counsel attorneys Henry Scheiderman and Keith Aqui who assisted them. He also thanked IRS Chief Counsel attorneys Louis Jack, Sherri Wilder and Julie Vandersluis, who handled the case in the U.S. Tax Court. More information about the Justice Department’s Tax Division is available at