Section of Taxation Publications
 VOL. 55
NO. 4
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Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
"No, You Still Can't Deduct that Payment to Your Child's Private Religious School:" An Analysis of the Ninth Circuit Decision in Sklar v. Commissioner
Eric Hildenbrand

In Sklar v. Commissioner, the Ninth Circuit held that, under section 170 of the Code, taxpayers may not deduct the portion of tuition payments made to private schools that represent the portion of the school day spent on religious study. The court held that the tuition payments were non-deductible because they failed to satisfy the "dual payment" requirements set forth in United States v. American Bar Endowment. Specifically, the taxpayers were unable to prove that they intended to make a gift to the schools and that the payments exceeded the market value of the education received.

In addition to discussing the "dual payment" requirements of American Bar Endowment, the court strongly suggested that the Service's position regarding payments to the Church of Scientology was unconstitutional. In the court's view, the Service was discriminating against religions other than Scientology by allowing members of that church to deduct payments for "auditing" and "training" when these payments were judged not to be qualified donations under section 170 of the Code. Nonetheless, the court declined to base its holding on this constitutional issue because the Sklars' deduction was already disallowed due to their failure to meet the "dual payment" requirements.

Part I of this note discusses the factual, statutory, and case law background of the Sklar decisions. Part II summarizes the Tax Court's decision ( Sklar I), and the Ninth Circuit's decision ( Sklar II). Part III analyzes the Ninth Circuit's formulation of the "dual payment" analysis and its comments regarding the constitutionality of the Service's treatment of the Church of Scientology. Part III also concludes that the Ninth Circuit correctly decided the case based on the Sklars' failure to meet the "dual payment" requirement even though the court may have incorrectly applied the American Bar Endowment test. Part III further argues that the Ninth Circuit has invited a potentially successful constitutional challenge to the Service's treatment of the Church of Scientology, but such a challenge is unlikely to be brought. Part IV summarizes the analyses and conclusions of this note.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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