C

• Author: Bruce R. Hopkins
• Profession: Leading authority on the law of tax-exempt organizations
• Pages: 56-100

CC

C corporation

Acorporation, in the federal tax law, may be classied as a “C corporation” when it is orga-

nized as a for-prot corporation. This name is derived from the fact that these corporations

are referenced in Subchapter C of the Internal Revenue Co de,SubtitleA,Chapter1.ACcor-

poration is any for-prot corporation t hat is not an S corporation (IRC §1361(a)(2)). [CG §§

2.8, 3.2, 6.14, 24.2, 24.7(a); UB §8.2] (also Regular corpor ation).

call to action

The phrase “call to action” is used in the context of the rules dening grass-roots lobbying

communications.One of t he elements of that denition is th att he communication encourages

the recipient of the commun ication to take action with res pect to the legislation involved.This

is termed a “call to action”; the absenc e of this type of cal l often precludes a communi cation

from being considered a grass-roots lobbying communication. [EO §22.3(d)(i)].

campaign

Theword“campaign”isusedinthenonprot law context in two ways. One is the eort of

acharitable organization (and perhaps another type of tax-exempt organization)toattract

contributions and grants to be used to further its tax-exempt purpose; this is fundr aising.

The other is the eortof a candidate for a public oce to spend money and attract votes; this

is the political campaign.[FR§2.2(a); EO §23.2].

campaign, capital

See Capitalc ampaign.

campaign, fundraising

Tax-exempt organizations particularly those that are charitable ones, refer to their discrete

fundraising eorts as campaigns.Thesecampaignsareundertakingstoraisecontributions

of money and property over a projected pe riod of time. The most common of the se campaigns

is the capital campaign.[FR§2.2(a)].

Bruce R. Hopkins’ Nonprot Law Dictionary, First Edition. Bruce R. Hopkins.

©2015 Bruce R. Hopkins. Published 2015 by John Wiley& S ons,Inc.

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CAPITAL ACCOUNT 57

campaign, political

For federal ta x law purposes, a “political camp aign”(a campaig n for a public oce in a public

election) is a run ning for oce, or a campaign for oce, as that term is general ly used. [EO §

23.2(e)].

campaign committee

See Political campaign committee.

candidate

The federal tax law denes the term “candidate for public oce” as an individual who oers

himselforherself,orisproposedbyothers,asacontestantforanelectivepublic oce, irre-

spective of whether the oce is national, state, or local. There are no clear standards, however,

in the federal tax law for determining precisely when an individual becomes a “candidate.” An

individual is, of course, a c andidate once an announcement of his or her c andidacy is made.

Mere speculation as to a possible future candidacy by someone who is a prominent political

gure does not necessarily make that individual a candidate, although some in the IRS tend

to use that as a standard. Determinations as to whether an individual is a candidate are often

made in hindsight. [EO §23.2(d); AR §10.1(a)(2); CU Q 9.8].

candidate-related political activity

The IRS, late in 2013, issued proposed regulations addressing the matter of permissible and

impermissible political campaign activity by tax-exempt social welfare organizations.This

proposal, which attracted a record number of comments (said to be over 150,000), centered

on dening eight types of political campaign activity that would not constitute social welfare

activity; these types were denominated “candidate-related political activity.” These proposed

regulations proved to be c ontroversial and unpopular ; the IRS announced, in the spring of

2014, that the regulations will be revised and reproposed. It is notknown at this time whether

the concept of candidate-related political activity will be retained. [EO §23.5].

capital

“Capit al” is property contributed to or otherwis e acquired by an organization,whichisheld

by the organization as part of its asset base. The term is usually associated with for-prot

organizations (as being all of its money and property that is used in its operations), although

nonprot organizations often require operat ing capita l as well. In th e nonprot law set ting,

the term used may be principal or corpus. Sometimes, the fund holding capital is termed an

endowment.[CG§§ 2.16(a), 7.6(a); EO §11.9(a); CU Chap. 19].

capital account

A “capital account”is that portion of an organization’s nancial books and records reecting

capital assets and capital expenditures,aswellasanyliabilities incurred in the process of

acquiring the assets and making the expenditures.

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58 CAPITAL ASSET

capital asset

A“capitalasset”isanitemofproperty held by a person, other than properties such as inven-

tory or other stock in t rade, or property that is an inte gral part of a taxpayer’s business (IRC

§1221). It is either a property that has a long useful life or is a xed asset used in a business.

The term has been construed by courts to mean investment property that tends to appreciate

in value over time. When a capital asset is sold, any economic gain is termed capital gain;this

type of disposition can also cause a capitalloss. If a capital asset is the subjectof a charitable

contribution,thecharitablec ontribution deduction is often based on the fair market value

oftheproperty(andthepropertyisfrequentlyreferredtoascapital gain prop erty). [CG §§

2.16(a), 7.6(a)] (also Ordinary income prop erty).

capital campaign

A “capital campaign” involves solicitations by a charitable organization to obtain contribu-

tions and grants for a special purpose, which is the augmentation of the organization’s phys-

ical facilities or other capital assets. The objective of the campaign is signicant to the future

of the organization, major gifts are required, and start and end dates are followed. This t ype

of campaign is the culmination of years of eort, both in design and consensus surround-

ing the master project and in development of the fundraising team, including volunteers.

[FR §2.2(a)].

capital contribution

A “capital contribution” is a contribution of capital, in the form of money or property,toan

entity,usuallyafor-prot business, by an owner (su ch as a shareholder or partner)orperhaps

another person, causing the c ontributi on to create an e quity intere st or increa se the per son’s

equity interest in the enterprise. On occasion, however, capital contributions aremade to non-

prot organizations. For example, in c omputing the grossreceipts of a tax-exempt social club,

for purpose of determ ining its ongoing exemption, capital contributions are excluded. [EO §

15.3; CG §2.3].

capital gain

“Capital gain” is the economic return generated by the sale or other disposition of a capital

asset.Thisgainistheamountrealized on the transaction less the taxpayer’s basis in the asset

(IRC §1222). Most other forms of economic gain are termed ordinary income.Historically,

capital gain has been accorded preferential tax treatment. [CG §§ 2.14(b); 2.16(b), 2.20; PF

§§ 12.1(b), (f), 14.1(b). 14.2, 14.4(a), (c); EO §25.1(j); AR §7.2(a)(3)] (also App reci ation ;

Appreciation element;Capital gainelement;Capital gain property;L ong-termcapital gain;

Short-term capital gain).

capital gain element

When an item of capital gain property is sold or otherwi se disposed of, and where the prop-

erty has appreciated in value, theamountreceivedonthetransaction(usuallyanamountequal

to the fair market value of the property) w ill reect the am ount of the appreciation (capital