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• Author: Bruce R. Hopkins
• Profession: Leading authority on the law of tax-exempt organizations
• Pages: 374-417

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S corporation

An “S corporation” is a corporation that has certain characteristics that make it nontaxable

under the federal ta x law; in this sense, this type of corporation is treated, for tax purposes,

in the same way as a partnership (IRC §1372(a)(1)). (As corporation with this feature is so

named because th e tax rules with respect to it are found i n the IRC, Subtitle A, SubchapterS .)

ThisbodyoflawallowstheshareholdersofaqualifyingCcorp oration to elect apass-through

system under which corporate income taxes,deductions,andcredits arepassedthroughand

directly attributed to the shareholders (IRC §§ 1361–1379). A tax-exempt charitable orga-

nization may be a shareholder in an S corporati on (IRC §1361(c)(6)), although that interest

is treated as an interest in an unrelated trade or business,sothatallitemsofincome,loss,

or deduction, and any gain or lo ss on the disposition of the stock in an S corp oration, must be

takenintoaccountasunrelated business taxable income (IRC §512(e)). [CG §§ 2.8, 3.2, 6.13,

6.15, 7.18(a), 9.8, 24.3, 24.7(a); EO §§ 19.23, 25.2(m), 32.8(c); UB §§ 6.3(c), 8.2; PF §11.3(c)].

safe harbor

The concept of a “safe harbor” is derived f rom the thought of a safe place near land for a boat

in a storm. In the law, a “safe harbor” is a set of rules that, when met, provide assurance to

the person involved that a general rule has been complied with. For example, with respect to

the limitations on lobbyingby a public ch arity, compliance with the expenditure test is a safe

harbor in relation to t hat limitation. [EO §§ 22.2(b), 22.3(d); HC §§ 9.2(a), 24.16, 24.17, 27.4,

30.3(c); SM pp. 189–191].

salary

The word “salary” means xed compensation perio dically paid to an individual for services

rendered.Thewordusuallyisusedinconnectionwithworkthatisotherthanmanualormenial

labor. [HC §§ 25.5(a), 28.5(a)] (also Wage s ).

sale

A “sale” is a transaction wherethere is a transfer of property or the rendition of a se rvice from

one personto anot her in exchange for consideration.Thus, a transaction that constitutesa sale

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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SAME GEOGRAPHIC LOCALE 375

cannot qualify as a contribution, although a transa ction may be partial ly a sale and partial ly

acontribution.[CG§§ 3.1(c), 9.19; PF §5.4; FR §3.2(d); CU Q 18.28–Q 18.30] (also Sale or

exchange).

sale and leaseback

A “sale and leaseback” is a transac tion whereby an owner of a property sells it to another per-

son,whoimmediatelyleases thepropertybacktothepriorowneroftheproperty.Itwasa

variety of sale and leaseback transactions involving tax-exempt organizations that caused

enactment of the tax-exempt entity leasing rules.[EO§28.16; SM pp. 219–220].

sale or exchange

The phrase “sale or exchange,” common in the federa l tax law, is used to refer to a disposition

of property for a full and adequ ate consideration,incontrasttoacontribution of property.

Asaleorexchangeofpropertymaycausearealization of gain as a result of the transaction.

The word “exchange” usually is somewhat superuous, in that the word “sale” often suces to

describe the transaction. The word “exchange” is added to b e certain that all types of disposi-

tions, other than gifts, are captured by the phrase.

sales solicitation for charitable purposes

Under the charitable solicitation acts of some states, the phrase “sales solicitation for chari-

table purposes” is used to describe what other states term a charitable sales promotion or a

commercial co-venture.[FR§3.8].

sales tax

A“salestax”isatax,leviedbystateandlocalgovernments,onthesaleofcertainitemsofprop-

erty at retail. Usually, this tax consists of one rate. In some states, certain types of nonprot

organizations (most frequently, charitable on es) are exempt from payment of the sales tax

(although not necessarily exempt from the collection of it). [CG §9.13(f); FR §8.8(f)] (cf. Us e

tax).

salvage value

The“salvagevalue”ofanitemofproperty is the estimated value of the proper ty as of the time

the owner of the property has nished use of it. It is the value of a propertyat the completion

of its useful life.

same geographic locale

One of the requirements fortax exemption as a voluntary empl oyees’ beneciary association

is that the members must have anemployment-related bond. The bond may be demonstrated

where employees of one or more employers areengagedinthesameline of business in the

“sam e geogr aphic l oc al e.” [EO §18.3].

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376 SAME SPECIFIC SUBJECT

same specic subject

Thephrase“samespecicsubject,”asemployedinthesame specic subject allocation rule,

meansanactivityorspecicissue,discussedinanon-lobbying context, that would be directly

aected by the specic leg islation thatis the subject of the lobbying message in the same com-

munication. Also, a discussion of the background or consequences of the specic legislation,

or discussion of the ba ckground or consequenc es of an activity or speci c issue aected by

the specic legislation, is on the same specic subject as the lobbying communication. [EO §

22.3(d)(ii)].

same specic subject allocation rule

One of the two rules under the expenditure test concerning allocation of expenses between

lobbying and non-lobbyingpurposes per tains to nonmembershiplobbying communications.

Where this type of communication also has a bona de nonlobbying purpose, the organiza-

tion must include as lobbying expenditures all costs attributableto those parts of the commu-

nicationthatareonthesame specic subject as the lobbying message. [EO §22.3(d)(ii)].

same state rule

Generally,gross income fromthe sale of items that result from the performance of tax-exempt

functions does not constitute gro ss income from the conduc t of an unrelated business if t he

item is sold in substantially the “same state”(using the word state to mean corporeal form, n ot

governmental jurisdiction) it is in on completion of the exemptf unctions. [UB §2.7(c); EO §

24.4(c); HC §24.4(b)].

sanction

The word “sanction” has several meanings in the law. A sanction can apply in either the civil

or criminal law context. It includes a ne, one or more taxes,aninjunction, and/or impris-

onment. As to the law of tax-exempt organizations, sanctions are preval ent in the federa l

tax law and the states’ charitable solicitation acts. For example, as to the former, the various

excise taxes underlying the private found ation rules are sanctions. Indee d, the tax penalti es

that underlie the excess benet transactions rules are termed interme diate sanctions .[EO

§§ 12.4, 21.10; PF §§ 1.10, 5.1, 5.2; FR §3.21; SM pp. 59, 90–91] (also Excise taxes).

sanctioned whaling activities

The phrase “sanctioned whaling activities” means subsistence bowhead whale hunting activi-

ties conducted pursuant to the management plan of the Alaska Eskimo Whaling Commission

(IRC §170(n)(3)).

sanctions, intermediate

See Intermediate sanct ions.

Sarbanes-Oxley Act

The “Sarbanes-Oxley Act” is federal accounting reform and for-prot corporate responsibil-

ity legislation that was signed into law in 2002. This measure is focused on publicly traded