Comments Submitted on Proposed Schedule B Regulations

Published date01 January 2020
Date01 January 2020
January 2020 7
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)]
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
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.”

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