◆The US Tax Court, on February 5, held that a nonprofit organization does not qualify for tax exemption as a scientific research organization and is operating to pursue its founder's “intellectual and commercial goals” as a form of private benefit (David Muresan Scientific Research Foundation v. Commissioner). The organization's case was thwarted by the fact that its founder is not a physician and was not forthcoming in providing information to the IRS, and its lack of scientific facilities or equipment. [9.2, 20.12(a)]◆The Department of Justice announced, on February 1, that it settled the case with Z Street, a nonprofit organization that educates the public about various issues related to Israel and the Middle East. Z Street alleged that the IRS has a policy of applying heightened scrutiny to applications for recognition of tax‐exempt status filed by organizations connected to Israel and applied that policy to Z Street's application, resulting in delay. “Tax exemption eligibility should be based on whether an organization's activities fulfill requirements of the law, not a group's policy positions or the name chosen to reflect those views,” said Principal Deputy Assistant Attorney General Richard Zuckerman. A consent order is under consideration at the US District Court for the District of Columbia (Z Street v. Kautter). [26.1(j), 26.15] (See the Quote of the Month.)◆The president and CEO of the Independent Community Bankers of America, by letter dated February 20, advised Senate Finance Committee Chairman Orrin Hatch (R‐Utah) that the credit‐union “tax subsidy is the elephant in the room.” This tax exemption, it was said, has “outlived its purpose.” “[T]oday's credit unions are virtually indistinguishable from taxpaying community and regional banks,” the letter read. Exempt credit unions are “seeking the power to raise outside, supplemental capital and further leverage their tax subsidy, subverting their cooperative status, which is among key justifications for their tax exemption.” Chairman Hatch was urged to hold a hearing to “examine the evolution of the credit union industry and the threat it poses to the American tax base.” [19.7]Quote of the Month: Paragraph 48 of the consent order in the Z Street case (see above) states: “The Court hereby declares that it is wrong to apply the United States tax laws, including any and all tax rules, regulations, policies, procedures, and standards of review, to any tax‐exempt applicant or entity based solely on any lawful positions it espouses on any issues or its associations or perceived associations with a particular political movement, position, or viewpoint.” Paragraph 49 states that the foregoing declaration “does not constitute a finding by the Court that the IRS committed any violation of law or otherwise acted in bad faith in this case.”Each article in the newsletter on a tax‐exempt organizations law topic ends with a citation to the appropriate chapter(s) or subchapter(s) in Hopkins, The Law of Tax‐Exempt Organizations, Eleventh Edition (Wiley, 2017 cumulative supplement). This is done to provide ready access to additional and background information concerning these articles. For example, underlying information concerning the second article in this issue is available in Chapter 28 § 1(b); thus, the citation is referenced as [28.1(b)]. Likewise, each article in the newsletter on a charitable giving law topic ends with a citation to the appropriate chapter(s) or subchapter(s) in Hopkins, The Tax Law of Charitable Giving, Fifth Edition (Wiley, 2017 cumulative supplement).This newsletter is a stand‐alone publication. An inventory of articles in the newsletter since its inception in 1983, and a subject matter index, as well as an index of the court opinions, IRS revenue rulings and procedures, IRS technical advice memoranda, and IRS private letter rulings discussed in the newsletter, are available at www.brucerhopkinslaw.com. For those who have the books, the newsletter also provides monthly updates. Both books are annually supplemented. Questions concerning nonprofit law developments in general may be sent to email@example.com. Also, a comprehensive summary of nonprofit law is available in the Bruce R. Hopkins Nonprofit Law Library, an e‐book published by Wiley. Follow BRHopkins_NPLaw on Twitter.The newsletter has a dedicated website. Please visit www.hopkinsnonprofitcounsel.com.
Bruce R Hopkins' Nonprofit Counsel – Wiley
Published: Jan 1, 2018
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