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• Author: Bruce R. Hopkins
• Profession: Leading authority on the law of tax-exempt organizations
• Pages: 101-126

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damages

“Damages” is a form of compensation or restitution paid to a person,usuallyastheconse-

quence of litigation, for an injur y or other loss (suered personal ly in the case of an individual

or by an organization, or occasioned by harm to an item of property or v iolation of some

right)causedbycommission of an unlawf ul act or some unlawf ul omission.Damagescan

arise as a result of an act or a fai lure to act by a nonprot organization; sometimes ocers

and/or directors of the organization can be found personally liable and responsible for dam-

ages. (also Liquidateddamages).

daycare center

See Child-care organization.

de minimis

Theterm“deminimis”isLatinfor“insignicant.”Whenusedinalaw context, it refers to

an act that is of such insigni cance that the law will i gnore (except) it, even though the act

itself constitutes conduct that is in violation of that (or a) law. A de minimis standard under-

lies most civil and criminal rules of law. For example, even thoug h it is the position of the

IRS that, inasmuch as the statutes do not provide any insubstantiality threshold, any private

inurement or (in the case of charitable organizations)anypolitical c ampaign activity will

lead to loss or denial of tax-exempt status,courts usually interpretthese rules as being subject

to a de minimis threshold. Also, the substantiation requirements that appl y in the contex t

of deductible charitable giving, the rules concerning the dissemination of low cost articles.

and the rules conce rning quid pro quo contributi ons have de minimis t hresholds ($250, $5,

and $75, respectively (adjusted for ination)). Still anotherexample of a de minimis exception

applies in the setting of the lobbying disallowancerule, where that rule does not apply to cer-

tain in-house expendituresfor lobby ing where the person’s total amount of these expenditures

for a tax year does not exceed $2,000 (computed without taking into accountgeneral overhead

costs otherwise allocable to lobbying) (IRC §162(e)(5)(B)(i)). [EO §§ 20.7, 23.2(a), 25.2(j);

CG §§ 22.1, 22.2; HC §18.4; PF §5.7(c)].

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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102 DE MINIMIS RULE FOR LABOR HOURS

de minimis rule for labor hours

Thephrase“dcminimisruleforlaborhours”isusedindeningthetermlobbying labor hours.

This de minimis rule provides that an organization maytreat time spent by personnel on lob-

bying activities as zero if less than 5 percent of the person’s time is spent on lobbying activities.

Reasonable methods must be used to determine if less than 5 percent of a person’stime is spent

on lobbying activities.[EO §22.6(a)].

deadwood

The word “deadwood”is used to describe provisions of a code of laws that have expired or have

otherwise become extraneous. From time to time, a legislature will review this code and repeal

(“cleanout”) these extraneous provisions; sometimes, however,a provision of law will continue

to apply to one or a few persons, in which case the legislature will retain that law in another

manner. The U.S. C ongresshas pass ed acts removing deadwood provisions from the Intern al

Revenue Code.

dealer

A “dealer” is a person wh o repeatedly and consistently engages in the buying and s elling of

items of a type of property.Thus,adealerisengagedinabusi ness and regularly carries on

that business.A tax-exempt organization will be taxed on the income derived from a business

activity where it acts as a dealer, unless the business activity isrel ated to the exempt purposes

of the organization. For example, if an exempt organization occasionally sells a parcel of real

property, it will not be taxed on the resulting proceeds (unless it is a transaction involving

applicatio n of the privatefoundation net investment income tax); however,if the organization

is a dealer in real property, the activity is quite li kely to be considered an unrelated trade or

business. [UB §§ 2.2(e), 22.2(g); EO §24.2(h)].

dealer UBTI rule

The “dealer UBTI rule” states that gains and losses from the sale,exchange,orotherdispo-

sition of property held primarily for sale t o customers in the ordinary course of a trad e or

business are not excluded from unrelated business taxable income (UBTI) by reason of the

general exclusion for capital gains and capital losses (IRC §512(b)(5)). [UB §3.10; EO §

25.1(j)] (also Disposal property).

death tax

See Estate tax.

debt collection policy

Tax-exempthospital organizations are expecte d to havea w ritten debt collection policy; the

policy is expected to contain provisions on the collection practices to be followed forp atients

whoareknowntoqualifyforcharity care or nancial assistance. [GV §6.3(o); SM p. 277].

debt management plan services

Forpurposesofthefe deral tax law authorizing tax-exempt status as charitable organiza-

tions or exempt social welfare organizations for qualifying credit counseling organizations,