EO Tax Journal

I’m assuming most of my readers are familiar with the Milton Hershey School. I first learned of it in the fifties when I was in grade school. While most of us discussed what Catholic high school in Baltimore we wanted to go to, a friend of mine would always say he was going to Hershey, Pennsylvania, for high school. As I knew, his mother was a widow raising four kids and sending her boys away to the Milton Hershey School was probably her best option. So my impression of the school over the years has been favorable.

But is the Milton Hershey School being bilked by its directors/managers? A letter sent out this week by a group of Hershey School alumni makes this complaint. This situation reminds me of the notorious Bishop Estate case, with lots of tough questions. Should the IRS consider applying section 4958? Should Senator Grassley get involved? Or must we rely on Pennsylvania Attorney General Tom Corbett, now running for governor, to address these concerns? Continue…

In regard to the IRS’ handling of the Z Street case (see August 27 and 30 email updates), Ellen Aprill has sent along current IRS procedures regarding terrorism cases. According to the IRS Manual Transmittal (reprinted below), “A terrorism case involves a situation where an organization has been designated as supporting or engaging in terrorist activities or demonstrates an intention or likelihood to undertake this type of activity.” Not surprisingly, the IRS has elaborate procedures for such cases.

In another IRS document (reprinted below), we have a rare appearance by the IRS Office of Chief Counsel for EO matters. In fact, documents coming out of EO Counsel have become so rare that old GCMs are now selling for thousands of dollars on eBay. In the most recent document, Phil Hackney has provided advice in applying section 501(q) to organizations assisting homeowners who are at risk of foreclosure.

IRS Issues Program Manager Technical Assistance Continue…

We won’t know whether a recent Tax Court case (reprinted below) was decided correctly until Jim Hasson has his next panel on UBIT, but I find the rationale used in this case confusing.

If the subject homeowners association is serving Ocean Pines, Maryland, population 10,496, is that a “community” for purposes of section 501(c)(4)? Even the IRS seems to say yes. If that’s a community, should it matter if services (day-time parking) are limited to members of that community? I don’t think so. The issue to me is whether the night-time parking is subject to UBIT, which it clearly is.

Correct me if I’m wrong, but isn’t a church or school analogy appropriate? A church or school restricts its parking to members or students during certain times. No one argues that is not a related use or subject to UBIT. But if the church or school is able to make money off its parking lot when not needed for church or school functions, that is subject to UBIT.

In the case under consideration, the court seems to get confused in its analysis, and focuses on the fact that the two parking lots at issue are eight miles away from the community of Ocean Pines. Why should this matter? The day-time parking clearly benefits the folks from Ocean Pines, but isn’t that part of the community benefit for which Ocean Pines Association received its 501(c)(4) status? The night-time parking is run like your typical commercial parking lot, so UBIT is appropriate on the receipts from this business activity.

Any other opinions?

I don’t know whether us beleaguered males should be outraged or not at an article in today’s New York Times discussing Under Armour sports apparel. According to an analyst for a market research group, “guys buy clothes to look cool or feel cool,” whereas “women buy for fit and color.” Okay, I don’t like the bozo implications, but women do have to admit we are cool.

Another Times’ article is a follow-up to an earlier Times’ story, and sort of a follow-up to my report yesterday on a Baltimore Sun article on compensation of hospital executives.

Practices of Dodgers’ Charity Are Said to Be Under Scrutiny

by Katie Thomas and Michael S. Schmidt, New York Times, August 31, 2010

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