By DOUGLAS FRANTZ

The Internal Revenue Service indicated Wednesday that it would open an investigation into the disclosure of the confidential closing agreement that granted tax-exempt status to the Church of Scientology.

Details of the agreement had been kept secret under taxpayer privacy law since it was reached between the tax agency and the church in 1993. But on Tuesday The Wall Street Journal published an article describing the agreement and posted the document on its Internet Web site. The New York Times obtained a copy of the agreement the same day.

Under the agreement, the church paid $12.5 million to the tax agency, created an internal monitoring committee to insure compliance with tax laws and agreed to drop more than 2,000 lawsuits against the tax agency and present and former officials of the agency.

In exchange, the Internal Revenue Service granted tax-exempt status to the church and provided it with a sweeping tax amnesty. The agreement canceled payroll taxes, penalties and tax liens the agency had said were owed by Scientology-related entities and dropped several audits of church organizations. It also reversed an earlier revenue policy and made payments by Scientologists to the church tax deductible.

In a statement Wednesday, the revenue agency said that closing agreements were confidential taxpayer information and that their unauthorized disclosure violated the revenue code. The agency did not formally announce an investigation, but the statement said disclosure of confidential tax information was investigated by its Office of the Chief Inspector.

Frank Keith, a spokesman for the revenue service, said the agency would not confirm that the document was genuine. Keith also declined to say whether an inquiry had been started.

But he said the agency would regard the release of confidential taxpayer information as a serious matter and would seek an investigation. The unauthorized disclosure could be a felony, he said.

A former senior official at the agency, who spoke on condition of anonymity, said that the disclosure would certainly be investigated and that the press statement was a means of signaling the inquiry.

Last updated 3 January 1998
by Chris Owen (chriso@lutefisk.demon.co.uk)