## Facts

- Michael and Marla Sklar, Orthodox Jewish parents, paid tuition and related fees to Orthodox Jewish day schools for their children’s education.
- They claimed a charitable-contribution deduction under I.R.C. § 170 for a portion of the payments (asserting it corresponded to religious instruction and conveyed only “intangible religious benefits”).
- The IRS issued a notice of deficiency disallowing the claimed deduction as personal tuition expenses.
- The Tax Court disallowed the deduction, relying on Ninth Circuit precedent treating tuition for a child’s education as a nondeductible personal expense.
- On an earlier appeal, the Ninth Circuit rejected the statutory basis for deducting tuition but remanded for factual development on whether allegedly favorable IRS treatment of Church of Scientology “auditing/training” payments created an impermissible disparity.
- On remand, the Tax Court again disallowed the tuition deduction, found insufficient similarity to Scientology payments to support administrative-consistency or Establishment Clause relief, and declined to impose an accuracy-related penalty under I.R.C. § 6662(a).
- The Sklars again appealed, challenging the disallowance of the tuition deduction and renewing the administrative-consistency and Establishment Clause arguments.

## Issues

1. Whether payments labeled as the “religious instruction” portion of day-school tuition qualify as deductible charitable contributions under I.R.C. § 170.
2. Whether alleged IRS allowance of deductions for Church of Scientology “auditing/training” payments required comparable deductions for religious-school tuition under administrative-consistency principles.
3. Whether denying the tuition deduction, in light of alleged Scientology-related treatment, violated the Establishment Clause.

## Decision

- The Ninth Circuit affirmed the Tax Court’s decision disallowing any charitable-contribution deduction for the tuition and related fees.
- The court held that tuition payments for a taxpayer’s children are quid pro quo educational expenses and therefore nondeductible personal expenses under § 170.
- The court rejected the argument that allocating tuition to religious instruction converts the payment into a deductible contribution based on “solely intangible religious benefits.”
- The court affirmed rejection of administrative-consistency claims because the Sklars did not establish a legally controlling IRS policy or a relevant factual equivalence between their tuition payments and Scientology auditing/training payments.
- The court rejected the Establishment Clause challenge, concluding that any asserted favorable treatment of Scientology did not require extending deductions beyond the statute’s limits to factually distinct tuition payments.

## Legal Principles

- A deductible charitable contribution under I.R.C. § 170 does not include payments made in exchange for substantial benefits to the payor, including a child’s education.
- A taxpayer cannot convert a nondeductible tuition payment into a deductible contribution by allocating part of it to religious instruction or characterizing it as conferring “intangible religious benefits.”
- Claims of unequal tax administration require proof of relevant similarity and an identifiable, legally operative policy or practice that compels equivalent treatment; alleged favorable treatment of another group does not expand statutory deductions.
- The Establishment Clause does not require the government to extend an unauthorized tax deduction to one religious practice based on claimed accommodation of another, particularly where the payments are materially different.

## Conclusion

The Ninth Circuit held that Orthodox Jewish day-school tuition and related fees are nondeductible personal expenses under § 170, and it rejected efforts to obtain a deduction through “intangible religious benefits” labeling or by invoking alleged Scientology-related IRS treatment under administrative-consistency or Establishment Clause theories.


Sklar v. Comm’r, 549 F.3d 1252 (9th Cir. 2008)