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• Author: Bruce R. Hopkins
• Profession: Leading authority on the law of tax-exempt organizations
• Pages: 418-440

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tacking

The word “tacking” is used to describe a characteristic of some consequence in law,onceheld

by a person, then subsequently transferred to or attributed to another person. For example,

if a tax-exempt charitable organization,organized as a trust,haspublic support and the

entity subsequently becomes a corporation,eventhoughitmustleanotherapplication for

recognition of exemption,thefederal tax law will allow the incorporated entity to “tack”

onto its public support experience the public support of the predecessororganization.

tangible

The word “tangible” refers to something that can be understood by human senses, and physi-

cally possessed and moved. It is something that is corporeal and has inherent value,asopposed

to being representative of value. For example, the items constituting the inventory of a busi-

ness corporation are tangible, while the sto ck constituting ownership of the corp oration is not.

(cf. Intangible).

tangible property

“Tangible property” is property (real property or cert ain personal property)thatistangible.

[CG §§ 2.12(c), 6.11] (cf. Intangible property).

Tariff Act of 1894

The “Tari Act of 1894” was the rst general federal tax law statute. It contained a provision

for tax exemption, which stated t hat “nothing he rein contain ed shall apply t o . . . corpora-

tions,companies,orassociations organized and conducted solely for charitable,religious,

or educationalpurposes.” This law was declared unconstitutional in 1895. [CL §1.1(b); EO §

2.4] (also Sixteenth Amendment;Tari Act of 1913).

Tariff Act of 1913

Following raticationof the Sixteenth Amendment, the “Tari Act of 1913” was enacted. This

statute init iated the gener al federal income t ax law.Exemptedfrom this tax was“any corpora-

tion or association organized and operated exclusively for religious,charitable,scientic,or

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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TAX DEDUCTION 419

educationalpurp oses, no part of the net income of which inures to the benet of any private

shareholder or individual.” [CL §1.1(b); EO §2.4].

tax

A “tax” represents a sum of money, imposed on a person, for support of a government. A tax

may be levied on income, transactions, or assets. The U.S. Supreme Court observed that “taxes

are the life-blood of government.”

tax abatement

See Abatement.

tax benet rule

The “tax benet rule” consists of two components: the inclusion ary component and the exclu-

sionary component. The exclusionary component, which is partially codied (IRC §111(a))

but which also exists outside the provisions of that section, does not become an issue unless,

and until, the inclusionary component of the rule is rst satised.

This inclusionary component provides that an amount deducted from a person’s gross

income in one tax year is included in the person’s gross income in a subsequent year if an

event occurs in the subsequent year that is fundamentally inconsistent with the premise on

which the deduction had previously been based. The exclusionary component of the tax ben-

et rule, by contrast, restrains the inclusionary component by limiting the income that must

be recognized in the subsequent year to the amount of the tax benet that resulted from the

deduction.

Thus, an amount must be included in gross income in the current year if, and to the extent

that, (1) theamount was deducted in a year priorto the current year,(2) the deduction resulted

in a tax benet, (3) an event occurs in the current year that is fundamentally inconsistent with

the premiseson which the deduction was originallybased, and (4) a nonrecognition provision

of the IRC does not prevent the inclusion in gross income.

A current event is considered fundamentally inconsistent with the premises on which the

deduction was originally based when the current event would have foreclosedt he deductionif

that event hadoccurred within the year that the deduction wastaken. [CG §12.4(i)].

tax credit

A“taxcredit”isafeatureoftax law (usually, an income tax law) that allows some or all of

the amountof an expenditure to reduce, on a dollar-for-dollar basis, the amount which would

otherwise be the tax. Examples of income tax credits include those for foreign taxes (IRC §27),

increasing research activities (IRC §41), and certain rehabilitations (IRC §47). [CG §§ 2.23,

2.24, 9.29; UB §11.4(d)(vi); PF §3.4].

tax deduction

A “tax deduction” is a feature of tax law (usually, an income tax law) that allows some or all

of the amount of an expenditure to be subtracted from adjusted gross income to arrive at the

sum of taxable income. Some of the income tax d eductions for both individuals an d business