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• Author: Bruce R. Hopkins
• Profession: Leading authority on the law of tax-exempt organizations
• Pages: 127-147

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See Notice.

early termination, of remainder trust

It is po ssible for a charitable remainder tr ust to be the subject of an “early termination,”wh en

there is an agreement between the income beneciaries,thetrust,andtheremainder inter-

est beneciary. An early termination occurs when this type of trust is terminated before the

income interest(s) would normally expire. This type of termination can occur under circum-

stances where the method of allocation of income and assets of the trust i s reasonable and not

detrimental to the charity involved (to avoid self-dealing). The IRS,however,hasano-rule

position as to this type of transaction. [CG §12.7; PF §5.13].

earmarking

An amount of money or transfer of property is “earmarked” for a purpose where there is an

agreement,oralorwritten,bywhichthetransferorofthemoneyorpropertymaycausethe

transferee to expend amounts to accomplish a particular purpose or where the transferor has

directed the transferee to add the money or property transferred toafund to accomplish a pur-

pose. Earmarking occurs, for example, where a contributionis made to a publi c charity under

the terms of an agreement that the amount involved will be transferred by the public charity

to a private foundation,inanattempttoenablethecontributor to claim a larger charitable

contribution deductionby re ason of a (ostensibly) more generous percentage limitation.

As another example, amounts can be transfers that become classied as direct lobbying

expenditures or grass-roots lobbying expenditures. A transfer that is earmarked for direct

lobbying purposes, or for direct lobbying and grass-roots lobbying purposes, is regarded as a

grass-roots lobbying expenditure in full, unless the transferor can demonstrate that all or part

of the amounts transferredwere expended for direct lobbying purposes, in which case that part

of the amounts transferred is a direct lobbying expenditureby the transferor. [EO §§ 12.1(A),

22.3(d)(i), 22.3(d)(iv), 28.17(a); CG §18.3; PF §§ 3.2, 14.4(a)] (also Conduit).

easement

An “easement” is a right withrespect to real proper ty (or an interest in the property) created

by the owner ofthe property by which another person(or persons) has a benecial use of the

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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128ECCLESIASTICAL LAW

property. Easements includeconservation,fac¸ade, and scenic ones. It is said that an easement

burdens the underlying property. An owner of real estate maycreate an easement in the prop-

erty and thereafter contribute that right to a charitable organizationan d receive a charitable

contribution deduction for the gift. Nonetheless, the federal tax law imposes strict require-

mentsinorderforthisdeductiontobeavailable(e.g.,IRC §170(h)). [CG §9.7].

ecclesiastical law

“Ecclesiastical law” is a body of law pertaining to matters of religion, usually interpreted by

achurch. This type of law was developed as part of the common law in England and was

administered by separate ecclesiastical courts.

economic development corporation

See Local economi c benet corporation.

Economic Recovery Tax A ct of 1981

Enactment of the “Economic Recovery Tax Act of 1981” brought another revision of the pri-

vate foundation mandatory distribution rules, causing the requirement to solely utilize the

minimum investment return rate of 5 percent (curr ent law)(IRC §4942(e)(1)). [PF §6.8].

economic sham

The term “economic sham” generally describ es a transaction that occurred but that exploits a

feature of the Internal Reve nue Code without any attendant economic risk. (Cf. Sham).

economic substance

A transaction lack s “economic substance” if it has no reasonable prospect of earning a prot

andwasundertakenfornobusiness purpose other than to obtain one or more tax benets.

education, advancement of

An organization can be tax-exemptunder fe deral law as a charitable entity if it is organized

and operated principal ly to advance education. The advancement of education includes the

establishment or maintenance of tax-exempt educational institutions,granting of scholar-

ships and other forms of student assistance, establishment or maintenance of institutions such

as public libraries and museums,advancementofknowledgethroughresearch, and dissemi-

nation of knowledge by publ ications, seminars, lectures, and t he like. [EO §7.8; CU Q 1.38, Q

2.2, Q 3.6–Q 3.8, Q 11.39; CG §3.2(b); SM p. 34].

educational

The term “educational” as used for federal tax law purp oses in the tax-exempt organizations

context, isdened as, in addition to formal schooling, relating to the instructionor training of

the individual for the purpose of improvingor developing his or her capabilities or the instruc-

tion of the public on subjects useful to the indiv idual andb enecial to the community. Educa-

tion involves at least a rationalde velopment of a point of view.[CU Q 2.2–Q 2.9; EO §8.1; SM

pp. 35–36; LI Q 9.1, Q 9.2, Q 9.4] (also Full and fair exposition test;Meth odology test).