2017–2018 Priority Guidance Plan Released

• DOI: http://doi.org/10.1002/npc.30401
• Published date: 01 December 2017
• Date: 01 December 2017

Bruce R. Hopkins’ NONPROFIT COUNSEL

3

December 2017

THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc

This decision was a foregone conclusion inasmuch as

the same judge essentially held the same way in 2013

(opinion summarized in the January 2014 issue). That

decision was vacated on the grounds that the plaintiffs

lacked standing (opinion summarized in the January

2015 issue). The conclusion in this case is also foretold

in the opinion’s opening sentence: “The question in this

case is whether Congress may give a subset of religious

employees an income tax exemption for which no one

else qualifies.”

The court stated that the “plain language of the

statute, its legislative history and its operation in practice

all demonstrate a preference for ministers over secular

employees.” The government unsuccessfully contended

that the statute is merely Congress’s effort to treat min-

isters fairly and avoid religious entanglement. The court

wrote that a “desire to alleviate financial hardship on

taxpayers is a legitimate purpose, but it is not a secular

purpose when Congress eliminates the burden for a

group made up solely of religious employees but main-

tains it for nearly everyone else.”

The court viewed the statute from the standpoint

of a “modified version” of the test established by the

Supreme Court (in Lemon v. Kurtzman (1971)), which

is “whether the government’s purpose is to endorse

religion and whether the statute actually conveys a

message of endorsement, viewed from the perspective

of a reasonable observer.” Also heavily relied on was

a Supreme Court opinion supporting the general view

that the government “may not provide a benefit that

only a group of religious persons may receive” (Texas

Monthly, Inc. v. Bullock (1989)). The Court dictated that

courts explore a statute’s legislative history in search of

its true purpose; the court in this case did that, finding

that the purpose of the allowance is to “assist a group

of religious persons, which is not a secular purpose.”

The court considered the constitutionality of the

allowance in relation to the convenience-of-the-employer

doctrine (e.g., IRC § 119), observing that the “relevant

question for this case is whether it was permissible for

Congress to expand the . . . doctrine for ministers in a

manner that eliminated any requirement to show that

their choice of housing actually is for the convenience

of the employer.” That is, the allowance “applies to all

ministers who receive a housing allowance, regardless

whether the minister’s home is ever used for church

purposes or whether the minister’s choice of home is

restricted by the church in any way.” The court con-

cluded that the “important point is that many equally

deserving secular employees (as well as other kinds of

religious employees) could benefit from the exemption

as well, but they must satisfy much more demanding

requirements despite the lack of justification for the dif-

ference in treatment.”

The court declined to, at this time, make a deter-

mination of the appropriate remedy, asking the parties

to file “supplemental materials” on the point and as to

whether relief should be stayed pending the anticipated

appeal. [10.1(a)(ii)] ◆

2017–2018 PRIORITY

GUIDANCE PLAN RELEASED

The Treasury-IRS 2017–2018 Priority Guidance Plan,

dated October 20, was released. This plan includes 14

projects in the tax-exempt organizations/charitable giv-

ing context.

Tax-Exempt Organizations

• Guidance regarding methods of allocating expenses

relating to dual-use facilities operated by tax-exempt

organizations (IRC § 512).

• Guidance, from the standpoint of the self-dealing

rules, regarding a private foundation’s investment in

a partnership in which disqualified persons are also

partners (IRC § 4941).

• Final regulations designating an appropriate high-

level Treasury official for purposes of the church audit

rules (IRC § 7611) (proposed regulations were issued

in 2009).

• Guidance regarding the excise taxes on donor-

advised funds and fund management (IRC §§ 4966,

4967).

• Final regulations regarding supporting organizations

(IRC § 509(a)(3)).

• Updating of rules concerning changes in form,

including redomestications (Rev. Rul. 67-390).

• Final regulations concerning IRS disclosure of tax

exemption information to state officials (IRC §

6104(c)) (proposed regulations were published in

2011).

• Final regulations explaining the computation of

unrelated business income of voluntary employees’

beneficiary associations (IRC § 512).

• Updating of revenue procedures on grantor and

contributor reliance, including update to Rev. Proc.

2011-33 for EO Select Check (IRC §§ 170, 509).

• Final regulations accompanying the fractions rule

(IRC § 514(c)(9)(E)).

• Final regulations on qualified ABLE programs (IRC

§ 529A).

• Guidance on the recontribution within 60 days of

refunded qualified higher education expenses (IRC §

529(c)(3)(D)).

Charitable Giving

• Guidance regarding charitable contributions of

inventory (IRC § 170(e)(3)).

• Final regulations regarding charitable contributions (IRC

§ 170) (proposed regulations were issued in 2008). ◆