Comments Submitted on Proposed Schedule B Regulations

• Published date: 01 January 2020
• Date: 01 January 2020
• DOI: http://doi.org/10.1002/npc.30678

Bruce R. Hopkins’ NONPROFIT COUNSEL

January 2020 7

THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc

per se in furtherance of any exempt [charitable] pur-

pose.” Moreover, the entities to which this organiza-

tion licenses the commercial version of the software

require the services of third-party service providers

whom the organization trains to download, install,

and deploy that version on their customers’ com-

puting infrastructure and provides support services.

Inasmuch as this training is provided without charge,

the IRS held that the organization is conferring a

substantial private benefit on them. (If this orga-

nization charged for these services, the IRS would

have found violation of the commerciality doctrine.)

[4.5(a), 20.13(a)]

• The IRS granted advance approval of a private foun-

dation’s educational grant program for individuals

(IRC § 4945(g)(3)) (Priv. Ltr. Rul. 201945030). The

purpose of this program is to provide financial sup-

port to allow individuals employed by charities to go

on a sabbatical. This time is to be used to “promote

activities that will provide personal and professional

growth opportunities for individuals to improve or

enhance the capacity, skill, and talent of individuals

in the charitable sector.” The foundation will also

provide expert coaching to enable participants to

create a “leadership plan and sabbatical goals.”

Each grant award is a fixed amount (information

redacted), to facilitate “time away from [the grant-

ees’] professional life to reflect and renew in a man-

ner not possible while working.” Each grant recipient

will be expected to submit a “two-page reflection on

their experiences.” [12.4(e)] ◆

COMMENTS SUBMITTED

ON PROPOSED SCHEDULE B

REGULATIONS

Following is a sample of the comments filed in connec-

tion with the proposed regulations that would reduce

the categories of tax-exempt organizations that have

to file Schedule B of their annual information return,

disclosing donor identity. These proposed regulations are

summarized in the November 2019 issue.

Those in support of the proposal offer the follow-

ing reasons: (1) the existing regulations violate the free

speech rights of the charities and other exempt entities

and their donors, (2) the existing regulations violate

donors’ rights of privacy, (3) the existing regulations

violate principles of statutory interpretation, (4) the

federal government (and state governments) do not

need the information currently being disclosed, (5) the

proposed rules would decrease the likelihood of inad-

vertent or improper disclosure of confidential informa-

tion, and (6) the proposal would reduce the amount

of IRS resources now devoted to redacting Schedule

B information before releasing the annual return for

public inspection.

Comments filed by Americans for Prosperity focus

heavily on the first point, by letter dated October 30,

summering the substance and/or status of recent appli-

cable court cases. The Citizens Union of the City of New

York v. Attorney General of the State of New York and

the Americans for Prosperity v. Grewal cases (summa-

rized in the December 2019 issue), plus the Americans

for Prosperity Foundation v. Harris case (summarized in

the July 2016 issue) and the pending petition for a writ

of certiorari filed with the US Supreme Court (summa-

rized in the November 2019 issue). As to this petition,

the comment letter informs that “eighty-nine amici

from across the political and philosophical spectrum

filed twenty-two separate briefs in support urging the

Supreme Court to review and overturn the Ninth Circuit’s

decision.”

As to the second point, the AFP submission states

its experience of its donors facing “threats, harassment,

and reprisals if their names are publicly disclosed.” Sup-

porters who have become publicly known “have faced

repercussions ranging from threats to kill or maim to

boycotts, firings, and public shaming.”

The National Federation of Independent Business, by

letter dated November 6, wrote that it supports the pro-

posal to “free organizations that are tax exempt under

section 501(c) of the Internal Revenue Code (other than

under section 501(c)(3)) from the burden to report with

their annual returns the names and addresses of contrib-

utors.” The proposed policy, the NFIB stated, “respects

the privacy of Americans who donate to tax-exempt

organizations (other than 501(c)(3) organizations), which

is especially appropriate when the IRS admits that it has

no need for the names and addresses of such donors to

carry out its responsibilities.” This policy, said the NFIB,

“also reduces the risk of accidental disclosure, whether

by the IRS or others with whom the IRS had in the past

shared donor names and addresses.”

The Institute for Free Speech, by submission dated

November 4, also supported the proposed rule, writing

that “[c]ompelled disclosure of donors to civil society

groups offends the First Amendment.” That is, “[w]hen

the government compels disclosure of a private orga-

nization’s financial supporters, it intrudes on the First

Amendment’s protection of free association.” The insti-

tute’s letter discusses NAACP v. Alabama (summarized in

the June 2019 issue), concentrating on the requirement

that government must justify its disclosure demand

under “exacting scrutiny” standards. It observed that

“[s]imply asserting a generalized law enforcement inter-

est, for instance, is not sufficient.” The organization

concluded that the proposed changes “appropriately

value Americans’ right to freedom of speech and privacy

in association and demonstrate serious consideration of

appropriate tailoring under the First Amendment.”