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Proposed Revisions To Section 501(c)(4) Regulations

September 23, 2014

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Background

Currently, Treasury Regulation Section 1.501(c)(4)-1 provides for exemption under Section 501(c)(4) for an organization that is “operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community.”1  The promotion of social welfare does not include “direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”  Currently, the determination regarding whether a given activity constitutes such participation (as well as the determination of what is primary) is made by a facts and circumstances analysis.  In connection with the 2012 presidential election, there were many calls to revise the rules governing Sections 501(c)(4) and 501(c)(3) organizations with respect to political activity.

Churches in Politics

May 1, 2013

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Churches in Politics

May 1, 2013

Authored by: Nathan Boyce

Legal Background

Organizations that are exempt under Section 501(c)(3) of the Internal Revenue Code may not participate or intervene in “any political campaign on behalf of (or in opposition to) any candidate for public office.” IRC 501(c)(3).[1]  This rule applies to all 501(c)(3) organizations—including 501(c)(3) churches.  Yet, just about every election there are accusations that this or that church has violated the rule by its minister preaching support for a candidate from the pulpit.

Update on Group Exemptions

January 28, 2013

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Update on Group Exemptions

January 28, 2013

Authored by: Nathan Boyce

Background

The group exemption process allows a “central organization” that is itself exempt under Code Sec. 501(c) to obtain a group exemption for its “subordinates”.1   The subordinates must satisfy certain requirements, including that: (i) they must be subject to the “general supervision or control” of the central organization; (ii) they must all be exempt under the same subsection of Code Sec. 501(c) (which can be different than the central organization’s); and (iii) they may not be private foundations.  Once a group ruling is obtained, the central organization has the authority to add or remove subordinates (and must provide annual notice to the IRS of such changes) and the central organization may file a group Form 990 return to cover subordinates (in addition to the central organization’s own Form 990).  According to the Advisory Committee on Tax Exempt and Government Entities (“ACT”), there are over 4,300 group exemptions covering approximately 500,000

Politics in Church

September 21, 2012

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Politics in Church

September 21, 2012

Authored by: Nathan Boyce

Congress and the IRS have made it clear that 501(c)(3) organizations may not participate or intervene in “any political campaign on behalf of (or in opposition to) any candidate for public office.” IRC 501(c)(3). (Note that the rule does not prohibit all support or opposition to legislation; that is permitted as long as it is insubstantial. This rules prohibits all support or opposition to a candidate.)  This prohibition includes churches exempt under Section 501(c)(3). Yet, just about every election there are accusations that this or that church has violated the rule by preaching support for a candidate from the pulpit.

A recent news story reports that several churches, rather than covertly violating this rule, are planning to openly do so.  According to the story, the position of the churches is that the IRS rule violates their First Amendment right to free speech. Their plan is to record and send

Top 10 Reasons to Attend Church On-Line

September 10, 2012

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Top 10 Reasons to Attend Church On-Line

September 10, 2012

Authored by: Nathan Boyce

In a prior post, I discussed the case of an organization that was denied church status because, among other things, there was no opportunity for congregants to “interact and associate with each other in worship” where the sermon was broadcast over the radio and internet.  In a recent ruling, PLR 201232034, the IRS again denied church status to a similar organization, stating that: “A website on the Internet does not qualify as a place of worship, nor do individuals accessing that website constitute a congregation assembled to worship.” The IRS is sticking to its guns on this point, it seems.  Nonetheless below are my top 10 reasons to replace your live church with an on-line church:

  • No need to get dressed or brush your teeth
  • No one notices if you are late
  • Possible Revisions To Section 501(C)(4)

    August 13, 2012

    Categories

    Background

    Section 501(c)(4) of the Internal Revenue Code provides, in relevant part, an exemption for “[c]ivic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.”  With respect to the meaning of “exclusively”, the regulations provide that “An organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community.”[1]   In order to be recognized as exempt under Section 501(c)(4), an organization must file a Form 1024 with the IRS. 

    Charitable Marijuana

    Charitable Marijuana

    July 31, 2012

    Authored by: Nathan Boyce

    In PLR 201224036, the organization at issue was dedicated to providing education about using “cannabis as medical therapy” and to providing “safe, legal access to cannabis.” The law of the state apparently allowed such use when prescribed by a doctor. The organization also provided:  

    • information about how to ingest cannabis
    • recipes that include cannabis
    • instructions to grow your own cannabis
    • grading services for homegrown cannabis

    In order to pay for the cannabis, members pay a “suggested donation price” in cash or in exchange for

    When 4% is greater than 100%

    When 4% is greater than 100%

    June 4, 2012

    Authored by: Nathan Boyce

    Section 502 of the Code provides that an organization with the “primary purpose of carrying on a trade or business for profit” is not exempt under Section 501 “on the grounds that profits are payable” to exempt organizations.  This section was enacted in 1950 and revoked the destination-of-income test that previously had permitted commercial organizations to be exempt on the grounds that they donated their profits to other charities.  Of course, a trade or business may otherwise constitute an exempt activity (such as the educational activities of an exempt school or the health care activities of an exempt hospital).  But Section 502 makes it clear that if the activity is not by itself exempt

    Call Me Ishmael

    Call Me Ishmael

    March 12, 2012

    Authored by: Nathan Boyce

    I have heard it said by boat owners that the second best day in your life is the day you buy your boat.  The best day is the day you sell your boat.  Having never owned a boat, my boat experience consists of falling when trying to ski, falling when trying to wakeboard and reading Moby Dick. I asked my wife what she thought about boats and I (literally) got these responses:

    (1) Sailor hats look dorky. (2) Why can’t they just say “right” and “left”?

    Donor Advised Funds Scrutinized by the Treasury Department

    February 21, 2012

    Categories

    At the request of Congress, the Department of Treasury recently issued a report on donor advised funds. Among other things, Congress had asked the Department of Treasury whether donations to a donor advised fund should be tax-deductible, whether such donations should be treated as donations to a public charity, and whether donor-advised funds should have a minimum distribution requirement. The Department of Treasury answered “yes” to the first two questions and “no” to the third, maintaining the status quo.

    The full report can be read here: http://www.treasury.gov/resource-center/tax-policy/documents/supporting-organizations-and-donor-advised-funds-12-5-11.pdf.

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