Evangelism, Personal Expenses, and Charitable Contribution Deductions

• Published date: 01 August 2019
• DOI: http://doi.org/10.1002/npc.30626
• Date: 01 August 2019

Bruce R. Hopkins’ NONPROFIT COUNSEL

4 August 2019 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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

It is not educational because there is no provision of

instruction or training; there are no counseling sessions.

The organization is not charitable because the assistance

it provides to homeowners is not limited to low-income

individuals. Moreover, this type of assistance was held

to amount to “direct and substantial private benefit” to

the homeowners.

Then the IRS discovered the organization is providing

referrals to a for-profit company that is owned by two of

the organization’s officers. This was found to be both a

substantial nonexempt purpose and private inurement.

Worse, the organization told the IRS that its officers

did not have any relationship with one another. The IRS

found out about the company, its ownership, and the

referral arrangement by internet research.

The organization “provided contradicting informa-

tion throughout the [application] process.” It stated

it had employees, then later maintained they are vol-

unteers. The criteria for the homeowners it will assist

has been “inconsistent.” It failed to provide necessary

information about its finances. The inconsistencies in the

information provided to the IRS “did not enhance [the

agency’s] understanding of your activities, and were not

sufficient to determine that you are operated exclusively

for exempt purposes.” Needless to say, this application

for recognition of exemption was denied (Priv. Ltr. Rul.

201921019). [6.3(a), 7.4, 8.4, 20.6(j), 26.1(b)(i)] ◆

OTHER RECENT IRS PRIVATE

LETTER RULINGS

◆An organization had its tax exemption as a chari-

table and religious entity revoked for violation of the

private inurement doctrine; the IRS also determined the

organization does not qualify as a church (Priv. Ltr. Rul.

201921014). This organization’s “congregation” is con-

fined to the family members of a self-proclaimed minis-

ter. The inurement arose by means of a “circular flow of

funds” by which money contributed to the entity was

returned to its members for their personal use (infor-

mation heavily redacted). The services are held in the

minister’s home. The IRS relied on the associational test

and its 14 points in concluding that this entity is not a

church. It is stated in the examination report that the Tax

Exempt and Government Entities Division commissioner

“personally approved” commencement of the church

tax inquiry. [10.3, 20, 27.6(c)]

◆An organization recognized as an exempt religious

and charitable entity administered several programs, at

least some of which were in furtherance of a “church

planting movement.” It provides a “valuable opportu-

nity for people involved in ministry who would like to

be involved in doing independent ministry or working

for an approved charitable project.” The agent’s report

states that this organization acted as a sponsoring orga-

nization for a number of donor-advised funds. Elsewhere

in the report, however, it is said that these funds do not

qualify as donor-advised funds. The report states that

donor-advised funds “have specific rules and regulations

that must be met” but never references or discusses

these rules; there are no “regulations” in this context.

The organization had its exemption revoked basically

because it was “unable to provide sufficient documenta-

tion to show that at the time of disbursements it had

sufficient discretion and control over funds expended”

(Priv. Ltr. Rul. 201922038). [11.8, 26.1(b)(i)]

◆An unincorporated organization was formed to host

a fundraising event for the benefit of five children of

a family, following the loss of both parents as a result

of “tragic circumstances within a year of each other.”

The IRS denied recognition of exemption as a charitable

entity in this case even though the children are not

related to any of the organization’s board members, are

orphans, and are needy (Priv. Ltr. Rul. 201923026). Pri-

vate inurement was found because the children are from

one family and were preselected to receive funding from

this organization. [20.1]

◆A tax-exempt charitable organization provides injured

special operations combat veterans with outdoor rec-

reational programs to, in part, encourage and foster

rehabilitation, recovery, and transition. Having learned

of these programs, an organization allowed this entity

use of its property in furtherance of these veterans’

assistance programs. Now this entity is dissolving and

wants to distribute its remaining assets to this veterans’

organization. Ruling that this asset transfer would be an

unusual grant, the IRS held that the prior relationship

between the entities concerning use of the land was

“incidental,” and although there is some board overlap,

the veterans’ group had sufficient independent members

(Priv. Ltr. Rul. 201923027). In so ruling, the IRS said the

transfer was in the nature of a bequest. [12.3(b)(i)] ◆

EVANGELISM, PERSONAL

EXPENSES, AND CHARITABLE

CONTRIBUTION DEDUCTIONS

An individual, the US Tax Court found, has “dedicated

his life to being an evangelist.” He “seeks to spread

the teachings of the Catholic Church through random

interactions with members of the general public.” He

“considers all of his contact with members of the public

to be opportunities for evangelism.” He “evangelizes

people he happens to see when he engages in otherwise

personal activities, such as when he eats in restaurants,

travels, and pilots private planes.”

This individual cofounded the Brothers and Sisters of

the Divine Mercy. The record in this case does not reflect

any recognition by the Catholic Church of BSDM nor