Bruce R. Hopkins - The Law of Tax-Exempt Organizations, 2021 Cumulative Supplement

The Treasury Department was directed to work collaboratively with the public and private sectors to protect taxpayers from identity theft refund fraud. 84.5 Treasury is to ensure that the Electronic Tax Administration Advisory Committee studies and makes recommendations to the department regarding methods to prevent identity theft and refund fraud. 84.6 Treasury is authorized to participate in an information‐sharing and ‐analysis center to centralize, standardize, and enhance data compilation and analysis to facilitate sharing actionable data and information with respect to identity theft tax refund fraud. 84.7

Congress, in 2019, established within the IRS an Internal Revenue Service Independent Office of Appeals. This office will be under the supervision of a Chief of Appeals, who will report directly to the Commissioner of Internal Revenue. This Chief of Appeals must have experience and expertise in administration of and compliance with the federal tax laws, a broad range of compliance cases, and management of large service organizations. The function of this office will be to resolve federal tax controversies without litigation on a basis that is fair and impartial to the government and the taxpayer, promotes a consistent application and interpretation and voluntary compliance with the federal tax laws, and enhances public confidence in and efficiency of the IRS. 84.8

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1 21IRS 2019 Data Book (issued on June 29, 2020). This reference to tax‐exempt organizations is to entities that are exempt from federal income tax pursuant to IRC § 501(a) by reason of description in IRC § 501(c) (see Parts Three and Four). The concept of recognition of tax exemption is the subject of § 3.2.

2 22These data are from Giving USA 2020, published by the Giving USA Foundation, and researched and written by the Center on Philanthropy at Indiana University.

3 66.1See Part Three.

4 66.2The data in this paragraph are derived from Congressional Research Service, “Tax Issues Relating to Charitable Contributions and Organizations” 3, 13–14 (R45922 (Sept. 19, 2019)).

5 66.3See § 28.2(a)(i).

6 84.1Taxpayer First Act, 133 Stat. 981 (Pub. L. No. 116‐25, 116th Cong., 1st Sess. (2019)) (for purposes of infra notes 84.2–84.8, Act).

7 84.2Act § 1302.

8 84.3Id. § 1101.

9 84.4Id. § 2101.

10 84.5Id. § 2001.

11 84.6Id. § 2002.

12 84.7Id. § 2003.

13 84.8Id. § 1001. The Department of the Treasury and the IRS, as part of the 2019–2020 Priority Guidance Plan (Oct. 8, 2019), announced that regulations were to be developed in connection with the Independent Office of Appeals.

§ 3.2 Recognition of Tax Exemption

§ 3.3 Recognition of Public Charity, Private Foundation Status

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§ 4.1 Forms of Tax‐Exempt Organizations(a) General Rules

§ 4.7 Commensurate Test

§ 4.9 Commerciality Doctrine(e) Other Applications of Doctrine (f) Elements of Commerciality (g) IRS Ruling Policy (h) Contemporary Perspective on Doctrine

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Lloyd v. Comm'r, T.C. Memo. 2020‐92 (2020);.

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An example, however, of a nonentity qualifying as a tax‐exempt organization (a custodial individual retirement account) is in Lakeview Devel. Corp. v. UBS Financial Servs., Inc., 614 B.R. 603 (Bank. Ct. for D. Col. 2020)).

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Shortly thereafter, the IRS recognized tax exemption for an organization that carried “on no operations other than to receive contributions and incidental investment income and to make distributions of income to such exempt organizations [charitable entities] at periodic intervals.” Rev. Rul. 67‐149, 1967‐1 C.B. 133.

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An organization that was ruled to be charitable because it produced plays in a theater had its exemption revoked because it ceased educating the public in the theater arts and began hosting tribute band concerts, which the IRS not surprisingly found to be a commercial undertaking. 330.1

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336.1

Charitable organizations generally derive about 73 percent of their revenue from fee‐for‐service activities, while charitable contributions constitute approximately 13 percent of total revenue (e.g., § 2.1, text accompanied by note 66.2).

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340.1

The IRS attempted to retroactively revoke the tax‐exempt status of a charitable organization affiliated with a for‐profit company with more than 2,000 bakery‐café locations in the United States, principally on the ground that it provided food and drink to the public in affluent areas (Priv. Ltr. Rul. 201911010). This case was filed in the U.S. Tax Court on March 15, 2019 (Panera Bread Found., Inc. v. Comm'r, Docket No. 5198‐19X). The organization operated Panera Cares Cafes in five of these locations, providing food and drink to the poor and distressed, job training to high‐risk individuals and those with developmental disabilities, and information to the public regarding food insecurity. The cafes ceased operations, leading the court to, on March 24, 2020, issue a stipulated opinion enabling the organization to retain its exempt status.

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an organization that provides consulting and research services on a fee basis regarding climate change and green economies, connecting member entrepreneurs and companies with investment opportunities; 359.1 an organization operating a farmers' market; 359.2 an organization that leases modified property to disabled individuals, for the purpose of advertising for businesses; 359.3 and an organization managing funds for fees, seeking highest possible returns for its clients. 359.4