EO Tax Journal

EO Litigation Developments – Part 2

Last week I mentioned in email update 2011-80 that I had gone to the D.C. Bar luncheon program on “Litigation Developments for Exempt Organizations.” I’m hoping to have a transcript of this program in the near future — as opposed to “soon.”

In the meantime, I’ve been doing my own research into what is going on at the Tax Court, egged on by the Tax Court’s efforts to keep us all in the dark. I’m sending along today information that I have collected on cases that are currently active. I expect to have additonal information as my requests for documents are fulfilled. Continue…

1 – EO Litigation Developments

2 – ADF Report on Pulpit Sunday Efforts

3 – Amicus Brief Filed in Catholic Answers Case Continue…

1 – Update on Joint Ventures

Attorney outlines implication of section 501(r) for joint ventures — healthcare tax practitioners may want to take note.

2 – Tax Court Holds Deductions for Facade Easement Not Properly Substantiated under Section 170

Am I the only one who thinks we could balance the federal budget by getting the IRS to audit every taxpayer claiming a facade easement? In the case reprinted below, if it were me and I planned on deducting a total of $705,000 as a charitable contribution for a facade easement, I’d be super careful. Sounds like the taxpayer in this case was anything but, neglecting to provide on Form 8283 the necessary information to satisfy section 170(f), and paid the price in Tax Court. Appeal, anyone? Continue…

1 – How to “Elevate” When You Disagree with the IRS

Don’t forget to cc Lois and Nan.

2 – To Err Is Human, To Forgive Is Divine

Recently-released PLR 201106019 should be of interest to anyone active in the area of colleges and universities. The initial ruling, PLR 200625035, has been found to be in error and has been replaced by PLR 201106019.

3 – DAF Donors Beware

Background: Ray Styles made a $250,000 donation pursuant to a donor-advised fund agreement, only to find that his contribution had been commandeered by the DAF’s two sole directors and officers. For prior coverage, see Email Update 2010-114. Continue…

I see one of my jobs as telling readers what not to read. I’d put the Asmark Institute case, released on Monday by the Tax Court, in that category. (Because I know some of you will still want to read it, I’m reprinting it below.) It’s very factual and the result is what I think most of us would expect.

What’s less than satisfying is the sketchy rationale for the court’s decision.

First, let me once again blast the IRS Office of Chief Counsel for not releasing its Tax Court briefs. Since the judge mentions the IRS’ brief in passing, it would be of value to know exactly what the IRS said in its brief. Let me repeat — there is absolutely no reason why the IRS should not be routinely releasing its briefs filed in litigation. Unless a court were to seal all records in a case, there is no bar to the IRS releasing what are public documents.

I suppose I could track down this case in Tax Court — not always immediately available — and pay the court 50 cents a page to copy the IRS brief. Why can’t the IRS simply make an extra copy of all its briefs available to the tax services? I believe the IRS charges the tax services for its PLRs, so it could do the same for its legal briefs if cost is an issue.

Second, lest I forget, the case under consideration. The Tax Court in Asmark Institute cites as precedent B.S.W. Group, Inc., v. Commissioner:

“Under the operational test * * * the critical inquiry is whether * * * [an organization's] primary purpose for engaging in its * * * activity is an exempt purpose, or whether its primary purpose is the nonexempt one of operating a commercial business producing net profits * * *.”

That appears to be the Tax Court’s rationale in a nutshell. I will just note that section 501(c)(3) does not specifically prohibit “operating a commercial business producing net profits.” While the regulations do allow commercial activities — in recognizing the possible imposition of the unrelated business income tax — business activities may not be the organization’s primary purpose. Continue…