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• Author: Bruce R. Hopkins
• Profession: Leading authority on the law of tax-exempt organizations
• Pages: 148-185

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factor

Fundamentally,a “factor” is one of a group of elements that contributesto the achievement of a

particular result. In the context of the federal tax law of charitabl e giving, a factor is one of the

elements used to calculate a remainder interest in a charitable gift of money and/or property.

Thefactorisaseven-digitnumberthat,whencombinedwithotherelementsofinformation

(such as the donor’sage, the value oftheproperty,andthenatureoftheincome interest)yields

the remainder interest amount. [CG §11.2].

facts-and-circumstances test

The “facts-and-circumstances test” is a way by which a charitable organization can qualify as

a donative type publicly supp orted organization wit hout satisfying al l of the general require -

ments. To meet this test, the organization must demonstrate the existence of three elements:

(1) the total amount of governmental and public support normally received by the organi-

zation is at least 10 perce nt of its total support norma lly received, (2) the organ ization has a

continuousand bona de program for the solicitation of funds from the general public, govern-

mental units, or public charities, and (3) all other pertinent facts and circumstances, including

the percentage of its support from governmental and other publicsources, the composition of

the organization’s governing board, the extent to which its facilities or programs are publicly

available, its membership dues rates, and whether its activities are likely to appeal to persons

having some broad common interest or purpose. [PF §§ 15.4(c), 15.6(b); EO §12.3(b)(ii); HC

§§ 5.2(b), 7.4(b), 27.5; CG §3.3(a); AR §8.1(d)(6); PG p. 91; SM p. 86].

failure by hospital organization, tax on

If a hospital organization,towhichtheadditional hospital exemption requirements apply,

fails to meet the requirement concerningc ommunityh ealth needs assessments for a tax year,

an excise tax in the amount of $50,000 is imposed on the organization (IRC §4959). [HC

§26.10(a)(ii); EO §7.6(b)(ii)].

fair

A “fair” is a gathering of exhibitors of items such as livestock, products, and/or equipment,

usually accompanied by booths and other places of entertainment and social activities. 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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FARMERS’ COOPERATIVE 149

conduct of entertainment activities at fairsby qualify ingtax-exempt organizations is exempt

from taxation as an unrelated trade or business (IRC §§ 513(d)(1), (2)). [UB §4.4; EO

§25.2(e)] (also Expositions;Publicentertainment activities).

fair competition

In the context of nonprot law, the concept of “faircompetition” is part of the commerciality

doctrine. The concept concerns the matterof competition between tax-exempt organizations

and for-prot organizations, where both categories of organizations are engaged in identical

or similar activities (such as health care, publishing,product sales, or research). The term “fair”

arises with respec t to the tax exemptionof t he nonprot organization competitor, which is per-

ceived by the for-protcommunity as an unfair economic advantage.The for-prot community

is of the view that this type of competition would be fairer if the tax-exempt competitors were

taxed on the net income derived from the enterprise or, in some instances, if the tax exemp-

tion were removed. [EO §4.10(a)(i); UB §7.1(a); HC §3.3(a); CG §1.6; SM pp. 288–289] (also

Halo eec t;Level playing eld).

fair market value

The “fair market value” of an item of property (or the right touseproperty)isthepriceat

which the property would change hands between a willing buyer and a willing seller, neither

being under any compulsion to buy, s ell, or otherwise transfer the property, and both having

reasonable knowledge of the relevant facts. [CG §§ 2.14, 4.2, 9.7(e), 10.1; EO §§ 20.4(b), 20.5;

PF §6.3; FR §5.14(h)] (also Arm’sleng th transaction;Val u e ).

family member

The term “familymember” generically means an individual’ssp ouse( taking intoaccount same-

sex marriage law), ancestors, brothers and sisters (whether whole or half blood), children

(whether natural or adopted), grandchildren, great-grandchildren, and the spouses of broth-

ers, sisters, children, grandchildren, and great grandchildren. Two denitions of the phrase

member of the family are utilized in the l aw of tax-exempt organizations in denitions of

the term disqualied person; the term is also use d in the denition of an exempt oper ating

foundation (IRC §4940(d)(3)(D)). [EO §§ 12.2(d), 21.3; PF §4.4; AS §3.8(c); SM pp. 59, 82].

farm

Traditionally, a “farm” has been thought of as a parcel of real estate devoted to agriculture.A

farm can also be a parcel of real estate devoted to the growing of animals (rather than just crops)

or a body of water where something is grown. Certain charitable contributions of remainder

interests in farms are deductible under the federal tax law when not donated by means of

split-interest trusts.[CG§15.2(b)].

farmers’ cooperative

A “farmers’ cooperative” is a t ype of tax-exemptorganization under the fede ral tax law (IRC

§521). These cooperatives are farmers’, fruit growers’, or like associations organized and

operated on a cooperative b asis for the purpos e of (1) marketing the produc ts of members

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150 FARMING

or other producers and returning to them the proceeds of sales, less the necessary marketing

expenses, on the basis of either the quantity or the value of the products furnishedby them, or

(2) purchasing supplies and equipment for the use of members or other persons and turning

over the supplies and equipment to them atac tual cost plus necessary expenses. With respect

to a farmers’ cooperative that issues stock, for the co operative to be tax-exempt, substantially

all of the capital stock must be owned by producers who market their products or purchase

their supplies and equipment through the cooperative.[EO §19.12; AS §1.6(q); SM p. 45].

farming

See Agriculture.

fast-track case settlement program

The IRS devised a program, known as the “fast-track case settlement program,” that enables

tax-exempt organizations with issues under examination by the TE/GE Division to partici-

pate in this program to expedite resolution of their cases. [EO §27.7].

favorable

The IRS issues determinati on letters and rulings. When these pronouncements provide the

person requesting them with the response they sought, the pronouncements are said to be

“favora ble.” ( cf. Adverse).

federal

The word “federal” pertains to a union ofst atesunder a central government. The word is used

in a law setting to mean the same as national. Thus, for these purposes, the word “federal”

means the governmental jurisdiction of the United States.

Federal Election C ampaign Act

The law embodied by the “FederalE lection CampaignAct” is the law governing participations,

including contributions and expenditures,infed eral elections. [CL Chap. 5; EO §23.2(b)(ii);

FR §5.25; AS §11.5; CU Q 9.29; SM pp. 197, 203] (also Federal ElectionC ommission).

Federal Election C ommission

The “Federal Election Commission” (“FEC”) is the agency of the federal government that is

charged with the responsi bility of enforcing the law created by enactment of the Federal El ec-

tion Campaign Act and its amendments. One of the functions of the FEC is to issue advisory

opinions.[AS§11.5(a), CL §5.2; SM pp. 30, 125, 197, 202, 203].

federal election laws

See Election laws, federal.

federal estate tax

The “federalestate tax” is the tax law of the United St ates that imposes t axes on taxable estates

(IRC §2001). [CG §8.1] (also Death tax).