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Subject: CoS / IRS Closing Agreement here!

Date: Tue, 30 Dec 1997 15:40:01 GMT

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Courtesy of Ron Newman...thanks Ron

Form 906

Rev. January 1987

Department of the Treasury -- Internal Revenue Service

Closing Agreement On Final Determination Covering Specific Matters

Under section 7121 of the Internal Revenue Code, the parties named

herein and the Commissioner of Internal Revenue make the following

closing agreement:

WHEREAS, the Church of Scientology and its constituent entities

(the

"Church") and the Internal Revenue Service (the "Service") have a

long

history of controversy spanning over 30 years;

WHEREAS, the Church has pending with the Service applications on

Form

1023 requesting that the Service recognize certain constituent

entities within the Church as exempt from income taxation pursuant

to

section 501(a) of the Internal Revenue Service Code, as exclusively

charitable organizations described in section 501 (c) (3) of the

Code;

WHEREAS, the controversy between the parties includes litigation

(hereinafter "the section 170 litigation") in which the

deductibility

under Code section 170 of parishioners' payments to the Church in

connection with their participation in religious services of the

Scientology faith is at issue;

WHEREAS, the Church signatories and individual Scientologists have

initiated, supported and/or otherwise participated in litigation

under

the Freedom of Information Act (FOIA) to compel the Service to

disclose information withheld by the Service in response to FOIA

requests about its treatment of Scientologists and Churches of

Scientology (hereinafter "FOIA litigation");

WHEREAS, in October of 1991, the key officials of the Church, David

Miscavige and Mark Rathbun, approached the Service seeking to

negotiate the resolution of the above-described matters, and met

with

the then Commissioner;

WHEREAS, at this meeting, the Commissioner indicated his desire to

resolve all outstanding issues between the Church and the Service

and

appointed the Assistant Commissioner to negotiate and conclude a

settlement with the Church on behalf of the Service;

WHEREAS, the Church and the Service intend this closing agreement

to

be final and conclusive with respect to all matters but, while also

final and conclusive, that its provisions relating to the

continuing

duties and obligations of both parties during the transition period

shall generally be effective until December 31, 1999;

NOW IT IS HEREBY DETERMINED AND AGREED, for purposes the Internal

Revenue laws of the United States, and in consideration of the

provisions contained herein that:

TABLE OF CONTENTS

I. Introduction

II. Resolution of Outstanding Issues

A. In General

B. Payment in Consideration of Resolution of Outstanding Issues

C. Effect of Agreement on Prior Tax Years and Waiver of Rights of

Action

D. Effect of Outstanding Administrative Matters

1. Church tax inquiries under Code section 7611

2. Other examinations of Scientology-related entities

3. Outstanding tax assessments

4. Trust fund recovery penalties

5. Time period in which to effectuate paragraph D

E. Effect on Outstanding Litigation Matters

1. In general

2. Zolin

3. Stipulations

4. Certain pending cases requiring coordination

F. After-Discovered Cases of Examinations in Existence as of the

Date

of this Agreement

G. Finality

III. Service Determinations Regarding Scientology-Related Entities

A. Issuance of Determination Letters

B. Individual Determination Letters

C. Group Determination Letters

IV. Obligations and Undertakings During the Transaction Period

A. Establishment of Church and Tax Compliance Committee

1. Purpose of Church Tax Compliance Committee

2. Membership of Church Tax Compliance Committee

a. Corporate CTCC members

b. At-large members of CTCC

c. Individual CTCC members

3. Responsibilities of CTCC

a. Annual report

b. Communications

c. Meetings

d. Guaranty

e. Liability for penalties

4. Actions of CTCC

B. Financial Reporting Requirements

1. Special accounting procedures

a. In general

b. Special Accounting Procedures --Operational aspects

c. CPA's reports -- In general

d. CTCC responsibilities

e. Selection of a qualified CPA

f. Definition of qualified CPA

g. CTCC's approval of selection

h. Notification of selection

i. First Qualified CPA

j. Special Purpose Report agreement

k. Special Purpose Report scope limitation

l. Access to Special Purpose Report - related to documents

m. Required disclosures to CPA

n. Submission of Special Purpose Reports

o. Submission of plan of corrective action

2. Internal financial reports

3. Report on central reserves transactions and balances

4. Tax returns

5. Term

C. Fiduciary Reporting Requirements

1. Compensation information

2. Modifications of organizational documents

3. Reporting of any dividend payment with respect to any entity

4. Reporting of any ownership change with respect to any entity

5. Reporting on creation of new entities

6. Reporting of any ecclesiastical modification or the

restructuring

of any entity

7. Reporting of certain asset transfers and expenditures

8. Reporting of certain asset transfers that diminish the assets of

the corporate members of the CTCC

9. Reporting of any amendment of any directive concerning the

treatment of funds

10. Activity or inaction in contravention of this Agreement

11. Update on operational modifications

12. Education and training issues under Code section 170

F. Term of fiduciary reporting under section IV C

D. Certifications

1. In general

2. Section 501 (c) (3)

3. Continuing certifications

E. Operational modifications

F. Treatment of Information Exchanges

V. Treatment of the Code Section 6104 Public Inspection

File and Certain Other Materials

A. Code section 6104 Public Inspection File

B. Disclosure of Information by the Service

C. Disclosure of Information by the CTCC

D. Proceeding Under Agreement

E. Disclosure Following Inquiries

F. Correction of Misstatements

G. Term of Undertaking

VI. Penalty Provisions During Transition Period and Other

Procedural

Matters

A. Introduction: Purpose and Scope of Sanctions

B. Self-Dealing Transactions

1. First-tier penalties

a. On Individual CTCC member who is

a self-dealer or who is related to

a self-dealer

b. On Individual CTCC member with

knowledge of transaction

2 . Second-tier penalties

a. On Individual CTCC member who is a

a self-dealer or who is related to

a self-dealer

b. On Individual CTCC member refusing

to correct

3. Self-dealing

a. In general

b. Special rules

c. Exceptions

d. Amount involved

C. Noncharitable Expenditures

First-tier penalties

a. On Corporate CTCC members

b. On Individual CTCC members

2. Second-tier penalties

a. On Corporate CTCC members

b. On Individual CTCC members

3. Noncharitable expenditure

a. Noncharitable expenditure

b. Expenditure responsibility

c. Governing principles

4. Special noncharitable expenditure

5. Amount involved

D. Reporting Obligations

1. Penalty on Corporate CTCC members

2. Penalty on Individual CTCC members

a. Failure to comply with demand

b. Application of penalties for failure

to provide information

3. Exception for reasonable cause

4. Exception for inability to certify

specific information

E. Joint and Several Liability and Certain

Penalty Limitations for Individual

CTCC members

F. Additional Penalty

G. Third-Tier Penalty

H. Procedures for Penalty Determinations

1. a. First-tier penalty

b. Second-tier penalties

c. Other penalties

2. Interest

3. Non-assertion of penalties

VII. Treatment of Parishioner's Contributions

VIII. Definitions

A. Code

B. Entity

C. Scientology-related entity

D. Scientology-related individual

E. Qualified Written Material

F. Service

G. Taxable Year

H. Transition Period

I. Agreement

J. CTCC

K. Church Signatories

L. Settlement Agreement

M. Annual Report

N. Disqualified Person

O. Willful

P. Sanction Period

Q. First-Tier Penalty

R. Second-tier Penalty

S. Correction

T. Correction Period

U. Church

V. Commissioner

W. Assistant Commissioner

X. Knowing

Y. Reasonable cause

IX. Other Matters A. Representations

B. Notices

C. Rules of Construction

D. Entire Agreement

E. Survival of Agreement

F. Cost of Compliance with Agreement

G. Counterparts

H. Finality

I. Date of Agreement

Signatures

List of Exhibits

I. Introduction.

The parties have entered into this Agreement in order to put the

past

controversy behind them, to extinguish all potential claims and

liabilities arising as a result of action or inaction prior to the

date of this Agreement and to structure their relationship into the

future. While complex, there are certain basic principles

underlying

the Agreement that will aid in its comprehension.

First, under section II of the Agreement the Church will make a

single

payment that is intended to extinguish any potential tax liability

that may be due and unpaid by any Scientology-related entity for

all

tax years up to and including the tax year ending in 1992. Thus, as

of

December 31, 1992, the Church will be current with respect to all

income, employment and estate tax liability.

Second, under section II of the Agreement, the Church and the

Service

will withdraw from virtually all existing controversy, including

ongoing examinations of Church entities, ongoing litigation by the

Service to enforce summonses for Church records, and all litigation

by

the Church against the Service and its current or former personnel.

In

addition, because the parties intend that the relationship between

them begin anew, and in light of the other provisions contained in

this Agreement, including the payment with respect to potential

past

tax liability, the Service and the Church agree under this section

II

of the Agreement that the Service will not examine the Church for

any

year ending prior to January 1, 1993. Similarly, no

Scientology-related entity may initiate or support any legal action

against the Service or any Service employee for any claim arising

prior to the date of this Agreement.

Third, it is the view of the Service that certain Church entities

are

entitled to recognition of tax-exempt status as entities described

in

section 501(c) (3) of the Internal Revenue Code. Thus, section III

of

the Agreement contains a list of entities that will be recognized

as

tax exempt entities, including certain entities that will receive

group exemption letters covering their subordinate organizations.

Notwithstanding the above, in light of, inter alia, the size and

complexity of the Church and the Service, certain concerns of the

Service and the Church remain. In addition, there is a need for

improved communication between the parties. Thus, under section IV,

a

Church Tax Compliance Committee (CTCC) has been created to

undertake

certain obligations during a seven-year transition period. The CTCC

is

to be comprised of the largest United States Church entities, as

well

as those individuals who are the highest ecclesiastical or

corporate

authorities within the Church. The Service, through the Assistant

Commissioner, has agreed to meet with the CTCC upon their request

during the transition period to address any questions arising from

the

ongoing performance of the parties' obligations under this

Agreement.

The CTCC is in a position to monitor and effect the operations of

the

group entities that are defined as "Scientology-related entities"

under this Agreement.

Under section IV, the CTCC is responsible for certain reports

produced

and provided annually to the Service. These reports will include a

report on the application of certain agreed-upon procedures by an

independent certified public accounting firms, as well as certain

other information collected and reported by the CTCC. These

reports,

and the information the CTCC collects

from Scientology-related entities in order to prepare them, are

intended solely for the purposes of administration of the tax laws

and

not for any other purpose.

In light of the CTCC and its relationship to the whole of

Scientology,

the CTCC has agreed under section IV to guarantee the collection of

taxes (including interest and penalties) from any

Scientology-related

entity for tax liability arising during the first three years of

the

seven-year transition period. The parties have agreed under section

V

to keep confidential both this Agreement and all underlying

information that is not part of the public record under Code

section

6104 except to the extent that disclosure is necessary to interpret

or

apply this agreement or is permitted under the authority of law. In

addition, the CTCC has agreed under section VI to certain

consensual

penalties intended to provide the Service intermediate sanctions

for

activities or conduct not in accordance with the Code or with this

Agreement.

Finally, under section VII, the Service and the Church have come to

an

agreement with respect to the treatment of contribution by Church

parishioners and the extent to which those contributions are

deductible under section 170 of the Internal Revenue Code, as well

as

the Service's acknowledgment of its obligation to interpret and

apply

the "gift or contribution" requirement of Code section 170 (c)

equally

and consistently to the fundraising practices of all religious

organizations that receive fixed donations from parishioners in

connection with participation in worship and similar religious

rituals

or services.

II. Resolution of Outstanding Issues.

A. In General. In general, the parties to the Agreement intend that

the below-described issues be finally and conclusively resolved

under

this Agreement.

B. Payment in Consideration of Resolution of Outstanding Issues.

1. At the same time this Agreement is executed, Church of

Scientology

International is paying by banker's draft the sum of Twelve and

One-Half Million United States Dollars (US$12,500,000.00), receipt

of

which the Service hereby acknowledges, as consideration for the

settlement of outstanding issues with the Service as set forth in

this

Agreement.

2.The amount paid under this Agreement includes recognition that

the

Church will not collect the attorneys' fees awarded to the Church

in

the Church of Scientology of Boston, Inc. litigation referred to in

Exhibit II-2, thus extinguishing the Service's liability under that

decision.

3. The amount paid under this Agreement is not considered part of,

or

attributable to, the federal tax liability of any

Scientology-related

individual or Scientology parishioner, and is not deductible,

refundable or creditable to any such individual for any purpose,

nor

may the amount be the subject of any other offset of liability

under

this Agreement.

4. If, after application of the provisions of paragraph IX.H., the

Service assesses a tax liability for a taxable year ending before

January 1, 1993 against any Scientology-related entity, the amount

paid under this Agreement shall be treated as a payment of the

taxes

so assessed against such entity as of the date of this Agreement in

the manner designated by the CTCC. Otherwise, such amount shall not

be

considered part of, or attributable to, the federal tax liabilities

of

any Scientology-related entity and is not deductible, refundable or

creditable to any such entity for any purpose, nor may the amount

be

the subject of any other offset of liability under this Agreement.

5. The amount paid under this Agreement may be designated as the

Service provides (including penalties or liquidated damages) so as

to

avoid characterization as a refundable or creditable amount.

6. The amount paid under this Agreement shall not be deductible in

computing the taxable income of any Scientology-related entity or

Scientology parishioner and shall not be treated as compensation of

either income to any Scientology-related entity or Scientology

parishioner.

7. The performance of the various obligations under this Agreement

by

the CTCC or by any Scientology-related entity, including (but not

limited to) the payment under paragraph II.B.1. hereof, shall not

in

and of itself be considered by the Service to constitute the

conferring of substantial private benefits by any

Scientology-related

entity, the private inurement of the net earnings of any

Scientology-related entity, nor shall such performance adversely

affect in any other way the tax exempt status under Code section

501

(c) (3) of any Scientology-related entity.

8. No inference shall be drawn from the fact that the payment

provided

in paragraph II.B.1 has been made with respect to whether any

Scientology-related entity agrees that any tax liability was

actually

due or owing for any pre-1993 period.

C. Effect of Agreement on Prior Tax Years and Waiver of Rights of

Action.

1. The Service agrees not to commence an examination or assess any

tax

liability under subtitles A, B, or C of the Code or under Chapter

42

of subtitle D of the Code for any taxable period ending on or

before

December 31, 1992, with respect to any Scientology-related entity.

Similarly, no Scientology-related entity shall have any right to

refund or offset with respect to any payment made for any taxable

period ending prior to the date this Agreement is executed.

Notwithstanding the previous sentence, any amounts held in accounts

under the joint signatory authority of any Scientology-related

entity

and a representative of the Service, and any other amounts

otherwise

in the nature of bond, to defer collection action by the Service

with

respect to any liability assessed against a Scientology-related

entity

for the a pre- taxable period (including, but not limited to, joint

signature accounts at Sumitomo Bank to serve as collateral for FICA

assessments against CSI, RTC, CSWUS, and CST) shall be released or

otherwise returned to the Scientology-related entity. The Service

and

the CTCC shall jointly draft notice to the bank (s) to effectuate

release of such funds.

2. To the extent any payments have been made and/or claims for

refund

filed

for any taxable period prior to the date of this Agreement by a

Scientology- related entity, the Church and Service agree that such

payments are not subject to refund and will not be refunded. The

CTCC

certifies that no Scientology-related entity will continue to

pursue

such claim for refund or file any new claim for refund for any

pre-1993 period.

3. The Service and the Church agree that no inference is to be

drawn

from any provision of the Agreement as to the tax treatment of any

activity or item relating to any liability under the Code for any

post-1992 periods unless expressly provided herein. For example,

the

fact that the Service has not assessed any unrelated business

income

tax for past years may not be construed to mean that activities

that

occurred in those years did not give rise to such liability and

that

if such activities continue into post-1992 taxable years, that they

will not give rise to such income. For further example, the fact

that

the Church has made the payment provided in paragraph B.1. shall

not

be construed as an admission, or otherwise used in any way as

evidence, that any Scientology-related entity was not exempt from

federal tax for any taxable period before 1993.

4. In reliance upon the covenant of good faith and fair dealing

that

underlies this Agreement, the Church signatories, as well as the

Individual At-large members of the CTCC agree to relinquish all

claims

arising out of any action or inaction of the Service of current or

former Service employees that occurred prior to the date of this

Agreement, including, but not limited to, any claims of continued

conspiracy having a genesis prior to the date of this Agreement. In

addition, the Church signatories, and the Individual and At-large

members of the CTCC certify that no Scientology-related entity or

Scientology-related individual shall assist (directly or

indirectly)

any party in any suit against the United States, the Service or

current or former Service employees based upon any claim arising

out

of any action or inaction of the Service or former or current

employees that occurred prior to the date of this Agreement

including,

but not limited to, any claims of continued conspiracy having its

genesis prior to the date of this Agreement. If any

Scientology-related entity or Scientology-related individual

commences

any such action or provides any such assistance, then section VI

shall

apply.

5. The CTCC shall indemnify and hold the United States, the Service

or

any Service employee (former or present) harmless with respect to

any

litigation filed or pursued in contravention of the Agreement, that

is, any litigation filed or pursued by or with the assistance of

any

Scientology-related entity or Scientology-related individual. For

purposes of this paragraph C.5, direct or indirect assistance

includes, but is not limited to, financial aid, litigation support,

or

the use in connection with litigation of documents obtained from

the

Service by any Scientology-related entity or Scientology-related

individual prior to the date of this Agreement or under the

Inspection

provisions of the Settlement Agreement entered into by the parties

on

even date herewith.

6. Subject to the requirements of section VII, paragraph G.,

nothing

in the preceding two paragraphs shall be construed to prevent any

Scientology-related entity from conducting, supporting, or

participating in, directly or indirectly, any judicial proceeding

to

construe or enforce the obligation under this Agreement, nor to

impose

any sanction or require indemnification to the Service as a result

of

such proceeding.

D. Effect on Outstanding Administrative Matters.

1. Church tax inquiries under Code section 7611. The Service shall

close the following church tax inquiries on a no-change basis:

Church of Scientology International

Church of Scientology Flag Service Organization, Inc. (two

outstanding

inquiries)

Church of Scientology Western United States

2. Other examinations of Scientology-related entities The Service

shall close the following income or employment tax examinations on

a

no-change basis:

Church of Scientology Expansion Trust

Church of Scientology Religious Trust

Scientology Endowment Trust

Bridge Publications, Inc.

Applied Scholastics International

Author's Family Trust B

International Association of Scientologists

Religious Technology Center

Church of Scientology International

Church of Spiritual Technology

Church of Scientology Flag Service Organization, Inc.

Church of Scientology Western United States

Church of Scientology of California (employment)

3. Outstanding tax assessments. The Service shall abate in their

entirety the following unpaid tax assessments:

Church of Scientology of California, FICA and FUTA for all quarters

of

the years 1976 through 1986.

Religious Technology Center, FICA for all quarters of the years

1986

and 1987.

Church of Scientology International, FICA for all quarters of the

years 1986 and 1987.

Church of Spiritual Technology, FICA for all quarters of the years

1986 and 1987.

Church of Scientology Western United States, FICA for all quarters

of

the years 1986 and 1987.

Religious Technology Center, Form 1120 Corporate Income Taxes,

interest and penalties for the years 1982 to 1988.

Church of Scientology International, Form 1120 Corporate Income

Taxes,

interest and penalties for the years 1981 to 1988.

With respect to the foregoing tax assessments, the Service agrees

to

withdraw any notices of levy and to release any notices of tax lien

filed or made prior to the date of this Agreement.

4. Trust fund recovery penalties. The Service shall abate in their

entirety assessments made under Code section 6672 with respect to

certain FICA assessments against Church of Scientology of

California

(1985-1986), Church of Scientology International (1988), Church of

Spiritual Technology (1988), Religious Technology Center (1988),

and

Church of Scientology Western United States (1988), against the

following individuals: David Miscavige, Norman F. Starkey, Marc

Yager,

Mark Ingber, Lyman Spurlock, Patrick Broeker, and Ann Marie Tidman

(Broeker). In addition, with respect to the foregoing penalty

assessments, the service shall (1) refund upon proper claim any

amounts collected, along with interest as permitted by law, (2)

withdraw any notices of levy, and (3) release any notices of tax

lien

filed.

5. Time period in which to effectuate paragraph D. The Service

shall

take the actions required under this paragraph D. by April 1, 1994.

E. Effect on Outstanding Litigation Matters.

1. In general. The Service and the CTCC agree that all litigation

set

forth in Exhibits II-1 and II-2 shall be dismissed with prejudice

by

stipulation of the parties (or, where appropriate, the pending

appeal

shall be withdrawn) with all litigation costs (e.g., attorney fees)

to

be borne by the respective parties. The parties agree that no

damages,

costs, attorney fees, or any other amounts of relief shall be

sought

by any Scientology-related entity or Scientology-related

individual,

the United States, the Service or any individual plaintiff in any

suit

contained in Exhibits II-1 or II-2.

2. Zolin. The Service further agrees that following dismissal of

the

litigation listed on Exhibit II-2 as Zolin, it shall use its best

efforts to return to the CTCC all materials and all copies thereof

produced to the Service in response to the summons at issue in that

litigation by no later than April 1, 1994. The CTCC hereby

certifies

that CSI shall retain all such materials during the transition

period.

No inference shall be drawn from the fact the Service is returning

these materials that they were summonsed for an improper law

enforcement purpose and the CTCC agrees not to assert such an

inference in any future litigation.

3. Stipulations. At Exhibit II-3, are copies of stipulations to

dismiss the cases discussed at paragraph E.1. executed by counsel

of

record for the non-governmental parties thereto. The parties agree

that, to the extent practicable, these stipulations shall be used

to

cause the dismissal of these cases and will provide a complete

resolution of all issues arising out of the same subject matter.

The

parties agree that these stipulations shall be executed by counsel

of

record for the government and returned to the CTCC. The CTCC will

file

the fully executed stipulations with the appropriate court within

30

days of its receipt of the executed stipulations. The parties

further

agree not to undertake any further actions to prosecute or defend

any

such litigation during the period of time following execution of

this

Agreement until the court has acted on the parties' dismissal

stipulations. In addition, the parties agree to file as necessary

requests to stay any action on such cases pending dismissal.

4. Certain pending cases requiring coordination. Recognizing that

carrying out the provisions of this paragraph E. shall require

coordination with persons and agencies not parties to this

Agreement,

the parties further agree as follows:

a. The Service shall use its best efforts to secure the voluntary

dismissal with prejudice of all litigation listed in Exhibits II-1

and

II-2 in which the Commissioner, the Service and /or Service

employees

are represented by the United States Department of Justice.

b. The CTCC shall use its best efforts to secure the voluntary

dismissal with prejudice of all litigation listed in Exhibits II-1

and

II-2 insofar as it involves litigants who are not

Scientology-related

entities or individual members of the CTCC. Following execution of

this agreement, the Church signatories, and the Individual and

At-large members of the CTCC certify that no Scientology-related

entity nor Scientology-related individual shall provide any further

support or assistance (directly or indirectly) in such litigation.

F. After-Discovered Cases or Examinations in Existence as of the

Date

of this Agreement. It is the intention of the parties to cease

activity and dismiss with prejudice all existing cases in

controversy

between the Service and any Scientology-related entity or

Scientology-related individual, costs to be borne by each party

(e.g.,

attorney fees), as well as all existing current examinations of

Scientology-related entities for years prior to 1993. Thus, if

there

exists other civil actions that are not contained in Exhibits II-1

and

II-2 or in the Settlement Agreement, Exhibit IV-6, or an

examination

of a Scientology-related entity is not listed in paragraphs D.1 and

D.2, and the exclusion of such suit was inadvertent (i.e., not

specifically discussed and intentionally excluded by the parties

during their negotiations), the parties agree to dismiss such suit

or

cease such examination as soon as administratively feasible.

G. Finality. The provisions of this section II. are final and

conclusive, except as provided in section IX, paragraph H.,

notwithstanding the seven-year transition period set forth in other

provisions of this agreement.

III. Service Determinations Regarding Scientology-Related Entities.

A. Issuance of Determination Letters.

Having received and reviewed the completed Forms 1023, Applications

For Recognition of Exemption and the attachments thereto for the

entities described in paragraphs B.1, B.2, B.3, B.4, B.5, B.6, B.7,

B.8, and B.9 together with requests for group exemption letters and

the attachments thereto described in paragraphs in paragraphs C.1,

C.2, C.3 and C.4, on the basis of that information, the Service is

issuing the individual determination letters and group

determination

letters described below and copies of which are attached at

Exhibits

III-1 through III-30.

B. Individual Determination Letters.

1. The Service hereby issues individual determination letters

(copies

attached as Exhibits III-1 through III-5, respectively) that the

following entities are organizations described in Code sections

501(c)

(3), 170(c) (2), 509(a) (1), and 170 (b)(1)(A)(i):

Religious Technology Center ("RTC")

Church of Scientology International ("CSI")

Scientology Missions International ("SMI")

Church of Spiritual Technology ("CST")

Church of Scientology Flag Service Organization, Inc. ("CSFSO")

2. The Service hereby issues an individual determination letter

(copies attached as Exhibit III-6) that Foundation Church of

Scientology Flag Ship Service Organization ("CSFSSO") is an

organization described in Code sections 501(c) (3), 509(a) (1), and

170(b)(1) (A) (i). CSFSSO is not described in Code section 170 (c)

(2)

because it is a foreign entity.

3. The Service hereby issues individual determination letters

(copies

attached as Exhibits III-7 through III-14, respectively) that the

following Scientology-related entities are organizations described

in

Code sections 501(c) (3), 170(c) (2), and 509(a) (3):

Inspector General Network ("IGN")

International Hubbard Ecclesiastical League of Pastors ("IHELP")

Building Management Services ("BMS")

Bridge Publications, inc. ("BPI")

Dianetics Centers International ("DCI")

Dianetics Foundation International ("DFI")

Hubbard Dianetics Foundations ("HDF")

U.S. IAS Members' Trust

4. The Service hereby issues individual determination letters

(copies

attached as Exhibits III-15 and III-16, respectively) that the

following Scientology-related entities are organizations described

in

Code sections 501 (c) (3), 170 (c) (2), 509 (a) (1) and, 170 (b)

(1)

(A) (vi):

The Way to Happiness Foundation ("TWTH")

Association for Better Living and Education ("ABLE")

5. The Service hereby issues individual determination letters

(copies

attached as Exhibits III-17 and III-19, respectively) that the

following Scientology-related entities are organizations described

in

Code sections 501 (c) (3) and 509 (a) (3):

Scientology International Reserves Trust ("SIRT")

Flag Ship Trust ("FST")

New Era Publications International ApS ("NEP")

However, these organizations are not describe in Code section 170

(c)

(2) because they are foreign entities.

6. Pursuant to a ruling request, the Service hereby modifies the

individual determination letter (copy attached as Exhibit III-20)

that

the Church of Scientology Religious Trust ("CSRT") is an

organization

described in Code sections 501(c) (3), 170 (c) (2), and 509(a) (3).

7. The Service hereby issues individual determination letters

(copies

attached as Exhibits III-21 through III-23, respectively) that the

International Association of Scientologists ("IAS") and its

operating

arms: Membership Services Administration, Ltd., and Foundation

International Membership Services Administration d/b/a IAS

Administrations, are organizations described in Code sections

501(c)

(3), and 509(a) (3). IAS and its operating arms are not described

in

Code section 170(c) (2) because they are foreign entities.

8. The Service hereby issues an individual determination letter

(copy

attached as Exhibit III-24) that the Hubbard College of

Administration

("HCA") is an organization described in Code sections 501(c) (3),

170

(c) (2), 509 (a) (1), and 170 (b) (1) (A) (ii).

9. Having previously issued a determination letter to the Church of

Scientology Western United States ("CSWUS") (under the name Church

of

Scientology of San Diego) recognizing CSWUS as an organization

described in Code sections 501(c) (3), 170 (c) (2), 509 (a) (1),

and

170 (b) (1) (A) (i), and having received and reviewed an updated

Form

1023 and attachments thereto (dated August 30, 1993), the Service

hereby issues a revised determination letter (copy attached as

Exhibit

III-25) recognizing CSWUS as an organization described in Code

sections 501(c) (3), 170 (c) (2), 509 (a) (1), and 170 (b)(1) (A)

(i).

10. The Service agrees that the organizations listed in paragraphs

B.1, B.2. and B.9. are churches described in Code section 6033 (a)

(2)

(A) (i). Pursuant to Code section 6033(a) (2), Treas. Reg.

[Section]

1.6033-2(g) (6), and Rev. Proc. 86-23, 1986-1 C.B. 564, the service

determines that the organizations described in paragraphs B.3, B.5,

B.6, B.7, and B.8. are church-affiliated organizations that need

not

file annual Forms 990. However, nothing in this Agreement relieves

any

Scientology-related entity from any requirement to file a return

(e.g., filing the Form 990-T in the event of unrelated business

taxable income).

C. Group Determination Letters.

1. The Service hereby issues a group determination letter (as

described in Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas. Reg.

[Section] 601.201 (n) (8) (copy attached as Exhibit III-26)) that

the

subordinate organizations of the Church of Scientology

International

are organizations described in Code sections 501(c) (3), 170 (c)

(2),

509 (a) (1), 170 (b) (1) (A) (i), and 6033 (a) (2) (A) (i).

2. The Service hereby issues a group determination letter (as

described in Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas. Reg.

[Section] 601.201(n)(8) (copy attached as Exhibit III-27)) that the

subordinate organizations of Scientology Missions International are

organizations described in Code sections 501(a) (2) (A) (I), 170

(c)(2), 509(a)(1), 170(b) (1)(A)(i), and 6033 (a)(2)(A)(i).

3. The Service hereby issues a group determination letter (as

described in Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas. Reg.

[Section] 601.201(n)(8) (copies attached as Exhibit III-28 and

III-29,

respectively)) that the subordinate organizations of the following

Scientology-related entities, are organizations described in Code

sections 501 (c) (3), 170 (c) (2), 509 (a) (1), 170 (b) (1) (A)

(ii)

(but are not described in Code section 6033 (a) (2) (A) (I):

Applied Scholastics Inc.

Hubbard College of Administration ("HCA")

4. The Service hereby issues a group determination letter (as

described in Rev. Proc. 80-27, 1980-1 C.B. 677 and Treas. Reg.

Section

601.201(n)(8) (copy attached as Exhibit III-30)) that the

subordinate

organizations of the Citizens Commission on Human Rights ("CCHR")

are

described in Code sections 501 (c) (3), 170 (c) (2), 509 (a) (1),

170

(b) (1) (A) (vi) (but are not described in Code section 6033(a) (2)

(A) (i)).

5. Subordinate organizations initially covered by the group

exemptions

recognized under paragraphs C.1, C.2, C.3 and C.4 are set forth in

the

following respective Exhibits:

Church of Scientology International Exhibit III-31

Scientology Missions International Exhibit III-32

Applied Scholastics Inc. Exhibit III-33

Citizens Commission on Human Rights Exhibit III-34

Hubbard College of Administration Exhibit III-35

IV. Obligations and Undertakings During the Transition Period.

A. Establishment of Church Tax Compliance Committee

1. Purpose of Church Tax Compliance Committee. The Church

Signatories

and others as described below shall form a Church Tax Compliance

Committee (the "CTCC"). The purpose of the CTCC is to ensure that

Scientology-related entities, including those recognized under

section

III of this Agreement as tax-exempt continue to be organized and

operated in conformity with the requirements of Code section 501

(c)

(3) and the provisions of this Agreement. Further, the CTCC is to

ensure that no Scientology-related entity, regardless of whether

the

entity is described in Code section 501 (c) (3), engages in any

conduct that may endanger the tax-exempt status of any other

Scientology-related entity or that would otherwise be in

contravention

of this Agreement. The membership of the CTCC shall guarantee the

obligations of any Scientology-related entity as to necessary

compliance with the Code and the requirements of this Agreement. In

addition, the CTCC will facilitate communication between the

parties

to this Agreement.

2. Membership of Church Tax Compliance Committee. The CTCC shall

consist of Corporate, At-large and Individual members.

a. Corporate CTCC members. The Corporate CTCC members are RTC, CST,

CSFSO, CSWUS, BMS, and CSRT (hereinafter "Corporate CTCC members").

The Church of Scientology Religious Trust is also a Corporate

member,

to be represented by one CSRT trustee designated for this purpose.

The

Presidents of RTC, CSI, CST, CSFSO, CSWUS and BMS shall serve as

representatives of their respective entities on the CTCC. No

Corporate

CTCC member many withdraw from the CTCC.

b. At-large members of CTCC. The Watchdog Committee (as described

in

the Qualified Written Material) shall be an At-large member of the

CTCC and shall be represented on the CTCC by the Chairman of the

WDC.

In addition, the International Finance Director and the Chief

Accountant International shall serve as At-large representatives on

the CTCC. The At-large members of the CTCC may not withdraw from

the

CTCC, although the individuals representing WDC or serving as

Finance

Director or Chief Accounting International may be replaced by

reason

of the prior office holder no longer serving in that capacity. The

CTCC shall give prompt notice to the Service of any replacement of

these individuals on the CTCC.

c. Individual CTCC members. The individual members of the CTCC are

David Miscavige, Norman Starkey, Mark Rathbun and Heber Jentzsch.

No

individual member of the CTCC shall be permitted to withdraw from

service on the CTCC, except by reason of death, being adjudicated

an

incompetent, or by mutual agreement of the parties to this

Agreement.

3. Responsibilities of CTCC. In general, the CTCC is responsible

for

overall implementation of the duties and obligations imposed with

respect to the Scientology-related entities by this Agreement

during

the transition period. Specific responsibilities and duties of the

CTCC shall include the following:

a. Annual Report. The CTCC is responsible for submission of the

Annual

Report transmitting the information required under section IV.

paragraphs B., C., D.2 and D.3 of this Agreement (the Annual

Report).

The CTCC is also responsible for engaging the certified public

accounting firm that is required to perform and report on certain

agreed-upon accounting procedures under section IV. paragraph B. of

this Agreement. Information required to be reported shall be

contained

in the Annual Report relating to the taxable year at issue and due

no

later than July 15 following the end of such year. This date may be

extended by written agreement between the Service and the CTCC. No

extensions beyond November 15 shall be granted, absent

extraordinary

circumstances . The Annual Report, any supplements thereto, and any

responses to inquiries under paragraphs B. and C. shall be

submitted

under penalties of perjury in a manner similar to that set out in

the

form 990 (hence subject to prosecution under Code section 7206(1)).

This report will be signed by all members of the CTCC.

b. Communications. i. If the CTCC determines that it needs to

communicate with the Service regarding any issue related to the

Church

and the Service, the CTCC may so notify the Service in writing.

Included within the notice will be specific information regarding

the

issue the CTCC wishes to raise. Such disclosure is intended to

provide

the Service with sufficient information to determine if waivers

under

Code section 6103 may be required. If the Service determines that

it

needs to communicate with the CTCC regarding any issues related to

the

Church, the Assistant Commissioner may so notify the CTCC in

writing.

ii. The CTCC shall submit waivers in favor of CTCC members and

their

counsel as required under Code section 6103 on behalf of all

Scientology-related entities recognized as described in Code

section

501(c)(3) under section III of this Agreement as soon as

practicable

but in no event later than 120 days after execution of this

Agreement.

Every such waiver also shall be submitted to the Service not more

than

60 days after its execution by the relevant Scientology-related

entity.

iii. Not withstanding the provisions for written notice in

subparagraph i., nothing shall prohibit the parties from other,

less

formal modes of communication, such as the telephone. It is

contemplated that there will be regular and frequent informal

communications with respect to matters arising under this

Agreement.

c. Meetings. i. The CTCC and the Assistant Commissioner shall meet

no

less than once each year during the transition period, such meeting

to

be held no later than 90 days following the Service's receipt of

the

CTCC's annual report under subparagraph a.

ii. If the CTCC submits a written request for a meeting, then a

meeting with the Assistant Commissioner shall be held within 15

working days after the receipt of such written request.

iii. All meetings under this subparagraph c. shall be held at a

mutually agreeable time at the National Office of the Service or

other

mutually agreeable location.

d. Guaranty.

i. In general. The Corporate CTCC members absolutely and

unconditionally, jointly and severally, guarantee to the Service

the

full and prompt payment of all U.S. tax liabilities under the Code

(including but not limited to income tax (including tax imposed

under

Code section 511) and employment tax), together with all interest

and

penalties, accruing or arising during the first three years of the

transition period with respect to all Scientology-related entities.

This guaranty is for the sole benefit of the Service and is for

purposes of collection of the tax. The specific Scientology-related

entity that is allegedly liable for the tax may contest the

liability

as permitted under the Code and regulations, and any final

adjudication thereof, after exhaustion of all appeals, shall be

binding and conclusive on the CTCC. If the liability is assessed

against the specific Scientology-related entity without judicial

review, the CTCC may dispute the underlying liability in any suit

by

the Service under paragraph A.3.d.ii. of this section IV. to

collect

on the guaranty. In addition, the guaranty shall not be operative

to

the extent that the Scientology-related entity satisfies the

underlying liability or is successful in disputing the fact or

amount

of such liability.

ii. Procedure for collection. At the time such liability is due and

owing (i.e., the Scientology-related entity has exhausted its

remedies), the Service may, at its sole option, present the CTCC

with

a notice substantially in the form of a Revenue Agent's Report

detailing the unpaid tax, interest and penalty. The CTCC shall have

180 days from such notice to make the payment, with interest, or to

arrange for installment payments, with interest, to be made over a

period not to exceed three years, which will provide the Service

the

present value of the liability. If no payment (and no arrangement

for

installment payments) is timely made, the Service may enforce the

guaranty provisions of this Agreement.

iii. Term of guaranty. This guaranty will apply only to tax

liabilities of Scientology-related entities for taxable years 1993

through 1995. The Service must present the CTCC with notice for

payment in accordance with subparagraph ii., no more than two years

following its receipt of the CTCC's report under paragraph A.3.a

for

the year 1997 or be forever barred from collecting on this

guaranty.

For purposes of this subparagraph d.iii, the notice under

subparagraph

d.ii may be given the CTCC prior to such time as the

Scientology-related entity has exhausted its judicial remedies.

iv. Example. A Class V church is determined by the Service to have

engaged in an activity giving rise to unrelated business taxable

income. The Class V Church disputes that the activity was a trade

or

business and the Class V Church brings suit in Tax Court. The Tax

Court upholds the Service's position and the decision becomes final

(including completion of appeal thereof or expiration of the time

for

bringing an appeal). At this time, the Service may collect the UBIT

along with any applicable interest or penalties, upon notice, from

the

CTCC.

v. Certain events not impairing guaranty. Without in any way

limiting

the generality of the absolute and unconditional guaranty in

paragraph

A.3.d, the obligations of the Corporate CTCC members under this

Agreement shall not be affected or impaired by reason of the

happening

from time to time of any of the following events with respect to

this

Agreement, even if any such events happen without the giving of

notice

to, or obtaining the consent of, the Corporate CTCC member:

a. any compromise, settlement, release, renewal, extension,

indulgence, modification or termination of any or all of the

obligations, covenants or agreements of any Church signatory,

Scientology-related entity, or any Corporate CTCC member under this

Agreement, including but not limited to any modification or

amendment

(whether material or otherwise) of any obligation, covenant, or

agreement set forth in this Agreement;

b. any waiver of the performance or observance by the Service or

any

Church signatory or Scientology-related entity, as the case may be,

of

any of the obligations, covenants, agreements, duties, terms or

conditions in this Agreement;

c. any extension of time for the filing of any tax return, payment

of

all or any part of any U.S. tax liability or the extension of the

time

for payment of any sums of money due under this Agreement or of the

time for performance of any obligation under or arising out of this

Agreement;

d. any change in the composition of the CTCC, whether by the

addition

of any Individual, At-large or Corporate member, or the

substitution,

admission, withdrawal or removal of any CTCC member;

e. any voluntary or involuntary liquidation, dissolution, merger,

sale

or other disposition of all or substantially all of the assets,

marshaling of assets and liabilities, receivership, insolvency,

bankruptcy, assignment for the benefit of creditors,

reorganization,

arrangement, composition, readjustment of debt, or other similar

proceeding affecting any Church signatory, Scientology-related

entity,

any member of the CTCC or any of their assets, any say of the

enforcement by the Service of any remedies against any Church

signatory, Scientology-related entity or any member of the CTCC, in

connection with any of the foregoing;

f. the taking of any actions referred to in the Agreement or any

failure, omission, delay, or deficiency on the part of the Service

in

enforcing, asserting or exercising any right, power, sanction or

remedy pursuant to the Code or this Agreement;

g. any release or discharge of any Church signatory,

Scientology-related entity, or CTCC member from the performance or

observance of any obligation, covenant, agreement, duty, term or

condition herein, respectively, by operation of law;

h. any merger, consolidation or sale, transfer, gift or other

disposition of assets by any Church signatory, Scientology-related

entity or CTCC member; or

i. any default or failure by any member of the CTCC fully to

perform

the obligations, agreements, covenants, or duties under this

Agreement.

vi. No set-off. No set-off, counterclaim, reduction or diminution

of

obligation, claim for refund, abatement, or any defense of any kind

or

nature which any member of the CTCC has or may have against the

Service shall be available to any member of the CTCC against the

Service with respect to the guaranty set forth in this section IV.

paragraph A.3.d.

vii. Right to proceed directly against Corporate CTCC members. The

Service, in its sole discretion, shall have the right to proceed

first

and directly against any one or all Corporate CTCC members under

this

Agreement, without proceeding against or exhausting its remedies

against any other Corporate CTCC member of any other

Scientology-related entity.

viii. Agreement by CTCC not to diminish assets during transition

period. The CTCC agrees that it shall not allow the material

diminution of the assets of the Corporate members of the CTCC

during

the transition period. Diminution of assets will be deemed to be

material to the extent that there has been in any year during the

transition period, the transfer, grant, contribution, loan, payment

for services, gift, voluntary or involuntary conversion, exchange,

sale or any other disposition of assets (including but not limited

to

trademarks, copyrights, cash, securities, mortgages, etc.) by one

or

more Corporate CTCC members within the taxable year at issue

resulting

in the reduction in aggregate value, reflecting the greater of cost

or

market, of ten-percent or more of the aggregate total value

(reflecting the greater of cost or market) of all Corporate CTCC

members as of the beginning of the taxable year at issue. At no

time

during the transition period may the aggregate value of gross

assets

of the Corporate CTCC members be reduced by over fifty percent from

the aggregate net value of their assets on December 31, 1993

through

the disposition of assets as defined in this subparagraph.

Transfers,

etc., within the Corporate membership of the CTCC shall be

disregarded

for purposes of determining whether there has been a material

diminution of assets, as will transfers between a Corporate CTCC

member and a party that is not a Scientology-related entity for

which

the Corporate CTCC member receives fair market value in exchange.

The

involuntary loss or diminution in value of assets not attributable

to

the action or conduct of any Scientology-related entity shall not

be

considered in determining whether there has been a diminution of

assets to which this subparagraph applies.

ix. Discharge of guaranty. Upon a material breach by the Service of

any of its obligations under this Agreement, the guaranty under

this

paragraph A.3.d. shall be null and void as to amounts not yet

collected, and no amounts may be collected that would otherwise

have

been due under the guaranty prior to such material breach. For

purposes of this subparagraph, only the following actions will be

considered to be a material breach by the Service:

a. the filing of suit to collect sanctions under section VI. from

any

corporate or individual CTCC member without engaging in substantive

discussion with the CTCC of the parties' respective positions as

required by paragraph H.3.a.iii of section VI;

b. the issuance of a Regulation, Revenue Ruling or other

pronouncement

of general applicability providing that fixed donations to a

religious

organization other than a church of Scientology are fully

deductible

unless the Service has issued previously or issues

contemporaneously a

similar pronouncement that provides for consistent and uniform

principles for determining the deductibility of fixed donations for

all churches including the Church of Scientology;

c. the knowing, negligent or willfull disclosure of information

described in section V. paragraph A.4 of this Agreement in

violation

of any provision of section 6103, to the extent such disclosure is

not

the result of a good faith but erroneous interpretation of section

6103; or

d. the knowing, negligent or willful failure to disseminate the

Church

Fact Sheet as required by paragraph 5 of the Settlement Agreement

attached hereto as Exhibit IV-5; or

e. examining, assessing or seeking to collect any tax liability of

any

Scientology-related entity for any taxable year ending before

January

1, 1993, unless the Service terminates such action and refunds or

credits any amounts collected within 90 days of notice from the

CTCC,

or unless section IX, paragraph H. applies.

e. Liability for penalties. The CTCC shall be liable for the

penalties

set forth in section VI. of this Agreement.

4. Actions of CTCC. David Miscavige will act as the initial

Chairman

of the CTCC. He may be removed from this office and replaced by

another individual CTCC member by majority vote of the CTCC

members.

The CTCC shall promptly notify the Service of any change in the

Chairmanship. The Chairman may act on behalf of the CTCC, and bind

the

CTCC, except where a specific provision of this Agreement requires

the

action of more than one CTCC member.

B. Financial Reporting Requirements.

1. Special Accounting Procedures.

a. In general. The special accounting procedures of this section

IV.

paragraph B. apply to each corporate member of the CTCC, CSFSSO,

NEP,

BPI, Church of Scientology Celebrity Centre International, and to

(i)

any other Scientology-related entity formed under the laws of, and

operating primarily in, a country other than the United States for

any

year in which such entity has United States source gross receipts

(including contributions) in excess of $1,000,000 in value, and to

(ii) any Scientology-related entity formed under the laws of, and

operating primarily in, the United States for any year in which it

has

either (a) gross assets, or (b) gross receipts in excess of

$10,000,000 in value. The entities with respect to which special

accounting procedures apply are collectively called the "reporting

entities."

b. Special accounting procedures -- operational aspects.

i. Required procedures. The CTCC shall retain a qualified CPA

(defined

below) to perform the agreed-upon procedures enumerated in Exhibit

IV-2 of this Agreement with respect to each of the reporting

entities.

Following its performance of these procedures, the qualified CPA so

selected shall report to the CTCC and to the Service in the form

prescribed by the American Institute of Certified Public

Accountants

for engagements to apply Agreed-Upon Procedures (SAS No. 35,

Special

Reports -- Applying Agreed-upon Procedures to Specified Elements,

Accounts, or Items of a Financial Statement) (hereinafter referred

to

as "Special Purpose Reports"). These Special Purpose Reports shall

include a summary of any exceptions the qualified CPA discovers

through the agreed-upon procedures.

ii. Foreign entities. To the extent that the particular reporting

entity is required under the laws of a foreign jurisdiction to have

certified financial statements or an accountant's review prepared

annually, those reports (converted to the English language and to

United States dollars) may, in general, be substituted for the

special

purpose reports enumerated in Exhibit IV-2. However, the special

purpose reports relating to fundraising and overseas cash flows

must

be performed for all reporting entities. In addition, this section

IV.

paragraph B.1.b.ii. shall not apply unless: (a) the financial

statements are prepared by an accountant that otherwise meets the

definition of Qualified CPA under this Agreement (or their

equivalent

under the laws of the foreign jurisdiction in which the accountant

is

admitted to practice); (b) the financial statements include a

balance

sheet, income statement accountants' report, and accountants' notes

to

the financial statements, (statements of cash flows and management

letters shall be included to the extent they are prepared); and,

(c)

the foreign entity remains a reporting entity for purposes of

special

procedures to be performed in connection with other reporting

entities.

c. CPA's reports--In general. The CTCC shall also deliver to the

Service two (2) copies of the special purpose reports and

management

letter (described below) for all reporting entities for each year

during the Reporting Period. The Special Purpose Report must state

that the Special Purpose Report was conducted in accordance with

SAS

no. 35, Special Reports--Applying Agreed-upon Procedures to

Specified

Elements, Accounts, or Items of a Financial Statement and this

Agreement.

d. CTCC responsibilities. The CTCC shall cause all reporting

entities

to fully and timely cooperate with the Qualified CPA in the

preparation and submission of the Special Purpose Reports.

e. Selection of a qualified CPA. The CTCC shall be responsible for

the

selection of a qualified CPA that meets the requirements set forth

below. When selecting a CPA, the CTCC should consider, among other

matters:

i. The qualification of CPAs available to do the work;

ii. The CPA's experience in performing audits of churches and other

nonprofit organizations; and

iii. The CPA's ability to timely complete and submit the Special

Purpose Report.

f. Definition of a qualified CPA.

i. In general. For the first two taxable years to which this

section

IV. paragraph B. applies (i.e., for calendar years 1993 and 1994),

the

CPA must be a Big Six firm or, in the alternative, another firm

agreed

to by the Service. For the last taxable year to which this

paragraph

B. applies (i.e., 1995), the CPA may be designated by the CTCC,

provided that the firm or CPA is (i) a qualified CPA and (ii) is

acceptable to the Service. The Service consents to the designation

of

Richard D. Clark for the last year, provided that, at that time, he

otherwise meets the requirements of being a qualified CPA.

ii. Requirements for qualified CPA. For purposes of this Agreement,

any CPA that meets the qualifications criteria of this section IV.

paragraph B.1.f. and enters into a Special Purpose Report agreement

with the CTCC, Corporate CTCC members and all reporting entities,

and

that complies with the provisions of this Agreement, will be

considered a qualified CPA and acceptable to the Service.

(a) Certification. The CPA must be a CPA in good standing in a

state

or the District of Columbia. The CPA does not have to be licensed

by

the state in which the Corporate CTCC members are located; however,

the CPA must abide by the rules and regulations of professional

conduct promulgated by the accountancy board of the state in which

the

Corporate CTCC members are located.

(b) Practice before the Service. The CPA (or any accountant working

for such CPA who is participating in the required reporting process

under this Agreement) may not be, or have been, under suspension

from

practice before the Service.

(c) Independence. The CPA must be independent. A CPA will be

considered independent if the CPA meets the standards for

independence

contained in the AICPA Code of Professional Conduct in effect at

the

time the CPA's independence is under review. In addition, the CPA

may

not, at the time engaged (or at any time prior to that time), be a

Scientology-related individual, a Scientology-related entity or a

WISE

sublicensee.

(d) Peer review requirement. The CPA must belong to and participate

in

a peer review program, and must have undergone a satisfactory peer

review conducted by the AICPA's Division for CPA Firms. After the

initial peer review has been performed, the CPA must submit to a

peer

review of the accounting and audit practice every three years or at

such additional times as designated by the peer review executive

committee.

g. CTCC's approval of selection. The CTCC's approval of a CPA must

be

recorded in writing and state the following:

i. The CPA meets the Service's qualifications to perform the

Special

Purpose Report required by this Agreement; and

ii. The CTCC, the Corporate CTCC members and all reporting entities

and CPA will enter into a Special Purpose Report agreement in

accordance with the provisions of this Agreement.

h. Notification of selection. When the selection of a CPA by the

CTCC

has been made, the CTCC must notify the Service, in writing, prior

to

the execution of the Special Purpose Report agreement (as defined

below) and in no event less than 90 days prior to the end of the

taxable year for which the change of CPA is effective. The Service

will notify the CTCC, in writing, within 30 days of the date of

receipt of such notice, if the selection of a CPA is not

satisfactory.

A copy of the Special Purpose Report agreement, or any amendment to

such agreement, is to be provided to the Service as soon as

feasible

after the execution thereof. One copy of the current Special

Purpose

Report agreement must be maintained in the CPA's workpapers or

permanent file.

i. First qualified CPA. The Service has been notified that the CTCC

has selected Nanas, Stern, Biers, Neinstein and Co., 9454 Wilshire

Boulevard, Beverly Hills, California, 90212 as its first qualified

CPA. The Service approves of such selection. Notwithstanding

paragraph

h., the Special Purpose Report Agreement with Nanas, Stern, Biers,

Neinstein and Co. shall be provided to the Service no later than

with

the First Annual Report due under this Agreement.

j. Special Purpose Report agreement. The CTCC, Corporate CTCC

members

and all reporting entities shall enter into a Special Purpose

Report

agreement with the CPA that specifically complies with all of the

following:

i. The CTCC, Corporate CTCC members, all reporting entities and CPA

acknowledge that the agreed-upon procedures are being performed and

the Special Purpose Report is being issued in order to enable the

CTCC, the Corporate CTCC members and the reporting entities to

comply

with the provisions of the Code and this Agreement.

ii. The CTCC, Corporate CTCC members and all reporting entities

acknowledge that this Agreement provides that if the CTCC fails to

have a Special Purpose Report performed and documented in

compliance

with this Agreement, the CTCC and Corporate CTCC members are in

violation of the provisions of this Agreement.

iii. The CPA represents that he meets the requirements under this

Agreement satisfactory to the Service.

iv. The CPA will perform the agreed upon procedures in Exhibit IV-1

and will prepare the Special Purpose Report in accordance with the

requirements of this Agreement.

v. The CPA will document the Special Purpose Report work performed

in

accordance with the professional standards of the AICPA and the

requirements of this Agreement.

k. Special Purpose Report scope limitation. The CTCC, Corporate

CTCC

members and reporting entities shall not limit the scope of the

Special Purpose Report, nor suffer or permit the Special Purpose

Report scope to be limited, to the extent that the CPA is unable to

meet the Service's Special Purpose Report requirements.

l. Access to Special Purpose Report-related documents. Pursuant to

the

terms of the Special Purpose Report agreement, the CPA must (at no

charge to the Service):

i. retain all Special Purpose Report-related documents (including

but

not limited to CPA's reports, workpapers, and management letters)

for

a period of four years after the close of the taxable year for

which

each Special Purpose Report was prepared; and

ii. following the Service's request of, and the consent by, the

CTCC,

(a) make all Special Purpose Report-related documents available to

the

Service, and

(b) permit the Service to photocopy all Special Purpose

Report-related

documents.

m. Required disclosures to CPA. Prior to commencing the agreed upon

procedures, the CTCC shall provide to the CPA a copy of all

Scientology scripture concerning finances and accounting (e.g. the

Treasury Division volumes) and any other written material relating

to

or involving the handling of funds by Church personnel in effect at

that time. The CTCC also shall promptly provide to the CPA copies

of

any newly-issued materials on these subjects or any modification,

amendment, or rescission of any existing material on the subject.

In

addition, the CPA is to be given a copy of the Agreement and any

future amendments to the Agreement.

n. Submission of Special Purpose Reports. The Annual Report shall

include separate Special Purpose Reports for each reporting entity.

These Special Purpose Reports are for the use of only the CTCC and

the

Service.

o. Submission of plan of corrective action. The CTCC shall submit

written comments to the Service on the exceptions and

recommendations

in the Special Purpose Reports and shall also submit to the

Service:

(i) a written plan for any corrective action taken or planned; and,

(ii) comments on the status of any corrective action taken on

previously reported exceptions and recommendations.

2. Internal financial reports.

a. As part of the Annual Report, the CTCC shall deliver a copy of

the

internally generated annual financial statements (either (i) income

and expense statement, balance sheet, and all notes to financial

statements or (ii) if such records are not generated in the normal

course of church operations, then the adjusted trial balance and

all

adjusting journal entries) prepared for the internal use of the

particular entity or other Scientology-related entity for the

following entities.

Church of Scientology International

Religious Technology Center

Church of Spiritual Technology

Foundation Church of Scientology Flag Ship Service Organization

Church of Scientology Flag Service Organization, Inc.

Church of Scientology Western United States

Church of Scientology Religious Education College, Inc.

Church of Scientology Celebrity Centre International

Scientology Missions International

International Hubbard Ecclesiastical League of Pastors

Church of Scientology Religious Trust

Scientology International Reserves Trust

Flag Ship Trust

New Era Publications International ApS (including subsidiaries)

Bridge Publications, Inc.

Building Management Services

FSO Oklahoma Investments Corporation

World Institute of Scientology Enterprises

Church of Scientology Advanced Organization Saint Hill, Europe and

Africa (CS AOSH EU&AF)

Church of Scientology, Inc. (CS AOSH ANZO)

SOR Services (UK) Ltd.

SOR Services Ltd. (Cyprus)

Transcorp Services S.A.

San Donato Properties Corporation

In addition, internal annual financial statements as required above

are to be provided for any Scientology-related entity not

designated

above (or in paragraph B.1.a. above) for any year in which it has

either (a) gross assets (based on the greater of cost or fair

market

value) in excess of $15,000,000 in value, or (b) gross receipts in

excess of $15,000,000 in value.

b. As part of each Annual Report, the CTCC also shall include a

consolidation of the above internal reports in a master balance

sheet,

and income and expense statement prepared in the same manner as the

consolidated financial data submitted with the Qualified Written

Materials. These consolidations are to be done in accordance with

reasonable accounting practices and consistently year to year. The

Annual Report also shall include a separate consolidated balance

sheet

for the corporate CTCC members. Consolidating adjustments shall

include, but are not limited to, liabilities and corresponding

receivables between Corporate members of the CTCC. The nature of

consolidating adjustments will be explained in the Annual Report.

All

amounts shall be reported in United States dollars.

c. As part of each Annual Report, the CTCC also shall include

copies

of audited financial statements (in the English language and U.S.

dollars) for the International Association of Scientologists,

Foundation International Membership Services Administrations,

Membership Services Administration (U.K.), Ltd., and the U.S. IAS

Members' Trust.

3. Report on central reserves transactions and balances. As part of

the Annual Report, the CTCC shall deliver to the Service a summary

of

central reserves transactions containing information in similar

format

to the summary information that was provided as part of the

Qualified

Written Material, with the exception that the information included

in

the Annual Report need not contain a list of reserves transfers to

non-reserves accounts of the same Scientology-r