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all admitted by Les Branding the agent assigned to the audit of Synanon, during deposition under oath on May 5, 1983:

(1) In November, 1979, Agent Brandin submitted
a Request for Technical Advice to the National
Office of the I.R.S. Ais conclusions were based
on an 8-month audit of Synanon. He concluded
that none of the net earnings of Synanon were
inured to the benefit of any private individual
and that Synanon was organized for exempt
purposes.
(2) In January, 1980, the Request for Technical
Advice was withdrawn by Agent Brandin's District
Office. Brandin was told by Mr. Beck, Chief of
Technical Review of the San Francisco District
Office of the I.R.S., that the reason for
withdrawal was that people in the National
Office would have to ruie in favor of Synanon.
(3) On January 10, 1980, the 1.R.S. District
Office issued a memorandum requesting further
examination of eight issues concerning Synanon.
Agent Brandin had already examined seven of the
eight issues and had sufficient information
regarding these issues. The remaining eighth
issue was irrelevant to the audit since it
concerned events outside the time period of his
examination.

(4) Agent Brandin and his Group Manager, Les
Stepner, met with Synanon representatives and
obtained additional information concerning all
of the items and issues in the January 10,
1980 memorandum. As always, Synanon provided
all information and documents requested by the
I.R.S. agents.
(5) Both Agents Brandin and Stepner determined
that the issues in the January 10, 1980
memorandum had no adverse impact on Synanon's
tax-exempt status.
(6)

At the end of his audit in March, 1980,
after many, many trips to Synanon's facilities
and a review of Synanon's records, Agent
Brandin prepared his Revenue Agent Report. His
report stated his conclusion that Synanon was
tax-exempt under I.A. Se section 501(c)(3) and
that Synanon should retain its tax-exempt
status.

(7) Brandin's Revenue Agent Report stated that
there was no private inurement in Syna non, that
Synanon's research, scientific and literary
activities were within the scope of Irele
section 501(c)(3), that Synanon did not
participate in legislative activities or
political campaign activities, and that the
presence of a community of diverse people
contributed to the charitable purposes of
Sy nanon. Agent Brandin submitted e_`ng_sbange"
recommendation in Synanon's tax-exempt status.
(8) Agent Brandin was immediately replaced as
the I.R.S. agent for Synanon's audit because he
had reached a result favor able to Synanon in
his Revenue Agent Report.

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On June 25, 1980, Bob Chui replaced Les Brandin as the
agent in charge of Synanon's audit. Representatives of
synanon were informed that Agent Chui would be redeveloping
Synanon's case, and that Mr. Brandin had been reassigned due
to other priorities. Agent Chui visited Synanon's religious
communities only a few times between July 22 and November 10,
1980.

On November 1, 1980, the Internal Revenue Service made a
second request for Technical Advice to the National Office.
In June, 1981, Synanon's representatives went to the National
Office in Washington, D.c. to clarify our position with
respect to the second Technical Advice memorandum. In full
cooperation with the Internal Revenue Service, Synanon
provided more information in August and September of 1981.

On May 19, 1982, over three years after the fourth audit
of Synanon had begun, the Internal Revenue Service mailed its
final adverse ruling letter and revoked Synanon's
tax-exemption.

Synanon Pursues. Its Legal Remedies

Syna non filed a lawsuit for declaratory action, pursuant to section 7428 of Federal Rules of ciyil Procedure, against the Internal Revenue Service on August 16, 1982 to preserve our constitutional rights of freedom of religion.

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This lawsuit was filed because the Internal Revenue Service refused to treat Synanon as a religion and a church, and because of our belief that the Internal Revenue Service has selectively enfor ced the law to discriminate against Synanon and thus has endangered the continuation of Synanon's important religious and charitable works.

Synanon has been denied the opportunity to fairly litigate this lawsuit on its merits. Prom the date of filing our complaint to the present, Synanon has been denied discovery of facts essential to meet the burden of proving these charges against the Internal Revenue Service. For example, Synanon has not been permitted to take the depositions of any employees of the Internal Revenue Service, with the exception of one day's de position of Agent Brandin. Furthermore, the Department of Justice has subpoena ed and secreted away documents which Synanon has not been permitted to review. The Department of Justice has commingled civil and criminal investigations of Synanon -- an impermissible tactic -- in order to gain an unfair advantage over Synanon and to prevent Synanon from litigating its action against the I.R. S.

In March, 1983, the Government filed its first Motion to
Di smiss the action and a Motion for Summary Judgment. Synanon
responded with its own Cross-Motion for Summary Judgment,
requesting that the issues be decided in Synanon's favor.
Included in Synanon's papers were over 350 affidavits from
current and former residents of Synanon, experts on religion
and others acqua inted with Synanon's charitable and religious
works. These affidav its answered each of the allegations
made by the Government against Synanon. The Court never ruled
on the Government's motions or Synanon's Cross-Motion for
Summary Judgment.

At the end of 1983, the Government filed its second Motion for Summary Judgment and Motion to Di smiss the action. The Government alleged that Synanon had engaged in a corporate policy of violence seven years ago and had systematically destroyed documents. Synanon denied the truth of these allegations and has never had the opportunity to litigate

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fully these issues before the federal court. On February 9, 1984, Judge Richey granted the Government's Motion to Di sm188; thus, Synanon's complaint against the Internal Revenue Service was di smissed. Synanon has appeal ed this decision.

The $55. Million Tax Bill

The legislative intent of section 7428 of the Federal
Rules of Civil Procedure was to enable a charitable and/or
religious organization to bring a denial or revocation of

I.R. S. recognition of tax-exempt status to the courts prior to · being forced to pay its taxes. Synanon's action for

declaratory relief against the I.R, S. has not been decided on the merits. Therefore, all appeals should be exhausted before the injunctive-like authority of section 7428 is dissolved.

On Monday, February 13, 1984, four days after Judge Richey's decision and even before Synanon had an opportunity to prepare and file the Notice of Appeal, the Internal Revenue Service delivered to The Synanon Church a series of tax bills totalling $55 million for years 1977-1983. In March, 1983 Judge Richey had issued an opinion that his Court lacked jurisdiction to grant declaratory relief under 26 USC section 7428 for years after fiscal 1978 because there was no final adver se determination for those years. The I.R. s. had revoked Synanon's exemption for years 1977 and 1978 only. There was no determination for years 1979-1983. Despite this, the $55 million tax bill was for years 1979-1983.

To meet this demand, The Synanon Church would have had to turn over its entire gross revenues for the next twelve years without incurring a single expense. Synanon's revenues in the year ending August 31, 1981 were approximately $4.9 million. For the year 1982, the total was $4.6 million, and, in 1983, it was $4 million. These figures total $13.5 million for the past three years and are the gross revenues of Synanon. They do not include any expenses of any kind or payments for any obligations.

The haste with which the Internal Revenue Service prepared these tax bills became immediately evident when accountants reviewed the bills and found a $10 million computational error in the assessment of interest. Ten million dollars may not be much to the Internal Revenue Service, but it is a tremendous amount to the people of Synanon!

In June, 1984, the I.R.S. presented Synanon with a revised tax bill totalling $3.9 million. This bill is $51.1 million less than the original bill "Computational errors" of such overwhelming magnitude demonstrate the malice of the I.R. S. toward Synanon.

On February 13, 1984, upon serving the tax bill, the I. R. S. impounded Synanon's bank accounts, seizing Synanon's available ca sh. In addition, the I.R.S. placed liens on Synanon's properties in California. These actions were widely publicized, had a negative effect on Synanon's ability to do business and created tremendous fear and insecurity among Synanon's residents.

within one week, representatives of Synanon met with I.R.S. agents at Syna non's community in Badger, California to discuss the effects of the seizure of Sy nanon's funds, the liens on our property and the $55 million tax bill. The I.R.S. agents subsequently agreed to return the cash to Syna non and to not collect taxes until Synanon's appe als had been exhausted.

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Two weeks later, the I.R.S. presented Synanon with a bill for

approximately $750,000 for social security taxes. Furthermore, the I.R. S. demanded explanations for all current and future expenditures of Synanon, thus assuming power to control Synanon's budget. The I.R. s. has agreed to stay collection of any PICA taxes until there has been a resolution of the lawsuit filed by Synanon on the FICA taxes.

The unpredictability of the I.R.S.'s actions proves their earlier assurances meaningless and reveals the true. intent of the I. R. S., which is not to collect taxes but to render Synanon incapable of future operation. On March 16, 1984, The Synanon Church sent a letter, pur suant to I.R.C. section 7429, to the Secretary of the Treasury, Donald T. Regan, requesting administrative review of the jeopardy assessment made against The Synanon Church. The eighteen-page letter sets for th evidence of the unreasonable and unjustifiable jeopardy assessment which discriminates against and injures The Synanon Church. The letter further specifies how the law requires immediate abatement of this assessment.

Onless the I.R.S. stays all attempts to collect taxes until the issue of Synanon's tax exemption is ultimately decided in higher courts, Synanon and the Government will be forced to expend enormous amounts of money and energy litigating separate issues such as jeopardy, amount of assessment and refunds for all years in question. Also, it would be wise to await the decisions of the higher courts on issues which would only have to be relitigated for each year after 1978. Synanon has the choice of closing its doors or allowing several auditors to again come to Synanon and conduct an audit. Paced with this alternative, Synanon has consented to an audit which we believe is improper and has agreed to pay taxes under protest while our lawsuit is pending. We have repeatedly tried to get the I. R. S. to follow procedures for an audit of a church, and they have repeatedly refused to do 80.

18 This What, was Supposed to Bappen in 1984,2

The present approach by the I.R.S. and Department of Justice could force Synanon to close its door 8. Over 550 people would be homeless. Many of these people are children, drug addicts, alcoholics, handicapped or senior citizens and those who are otherwise incapable of earning a living. Reason and rule of law will once again fall to prejudice, political expediency and ignorance.

Any beliefs, be they religious or philosophical, cannot be destroyed by a Government. They will either endure or not endure in the hearts and minds of the people who hold them. Only history bears witness to this. Unfortunately, there are hundreds of people in Synanon and many more throughout the country who are not in a position to wait for history to unfold.

We should mark 1984 not with a series of Orwellian nightmares, but move forward with compassion, courage and reason.

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This is to request that the enclosed materials be included in the
printed report of your June 26, 1984 subcommittee hearing on
religious liberty in the United States. The materials are
excerpted from the current May/June edition of LIBERTY magazine--
America's best known First Amendment journal.
A copy of your report would be very much appreciated if you could
send one to us.

Thank you very much.

Yours sincerely,

omkoss

G. M. Ross, Ph.D.
Associate Director and
Congressional Liaison

GMR/hmd

Enclosures

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