By Ellen P. Aprill
Several commentators have called attention to the statement of the IRS in Revenue Procedure 2018-5, just reiterated in Rev. Proc. 2019-1, that it will not issue a determination letter recognizing exemption from income tax for “an organization whose purpose is directed to the improvement of business conditions of one or more lines of business relating to an activity involving controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law regardless of its legality under the law of the state in which such activity is conducted.”
These commentators suggest that this position could constitute impermissible viewpoint discrimination in violation of the First Amendment. I do not view the IRS announcement in this way. Instead, I see it as an application of the long-standing principle denying exemption to entities with an illegal purpose or engage primarily in illegal activities.
The illegality doctrine has long prevented exemption under section 501(c)(3), the category that encompasses what we generally call charities. In the words of Section 101(c) of the ALI Draft Restatement of the Law of Charitable Nonprofit Organizations, “[a] purpose is not charitable if it is not lawful, its performance requires the commission of criminal or tortious activity, or it is otherwise contrary to fundamental public policy.” Continue reading “The IRS Did Not Violate the First Amendment in Declining to Exempt Organizations to Help Marijuana Dealers” →
By: Philip Hackney
In the new tax act of 2017, Congress imposed an unrelated business income tax on transportation, parking, and athletic facility fringe benefits that a nonprofit provides to its employees. I write because I suspect there are universities or hospitals or other large nonprofits out there (pension funds maybe) that offer these types of fringe benefits that are unaware that they must pay UBIT on the total value of these benefits at the end of the year. The law went into effect for taxable years starting January 1, 2018.
In Section 13703 of the bill, Congress promulgated the following new rule: UBIT “shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section 132(f)), any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)), or any on-premises
athletic facility (as defined in section 132(j)(4)(B)).” Continue reading “GOP 2017 Tax Act Forces Nonprofits to Pay UBIT on Some Fringe Benefits” →
By Sam Brunson
Last week, the Free Beacon ran an exposé of the Southern Poverty Law Center, making four principal claims. First, the Free Beacon said, the SPLC was keeping literally tons of money in offshore tax haven investment funds and bank accounts. Second, it spends too much on fundraising. Third, it overpays its executives. Fourth, it underspends on its mission.
The problem with the exposé? At best it misunderstands what’s going on, and at worst, it is flagrantly wrong.
I’m usually not interested in doing fact-check-style responses, but I’m going to nonetheless. The accusations Schoffstall levels sound plausible, so it’s worth explaining why and how they’re wrong.[fn1] Continue reading “Responding to the SPLC “Exposé”” →