Grant Ruled Qualifying Distribution; Transfers by Grantee Ruled Indirect Self‐Dealing

DOIhttp://doi.org/10.1002/npc.30339
Date01 July 2017
Published date01 July 2017
Bruce R. Hopkins’ NONPROFIT COUNSEL
July 20172THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY
Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc
by any party against the United States, its departments,
agencies, or entities, its officers, employees, or agents,
or any other person.” [23.2–23.4]
Commentary: The Internal Revenue Code precludes
tax exemption under IRC § 501(a) as an entity described
in IRC § 501(c)(3) in the case of an organization that
participates in, or intervenes in (including the publishing
or distributing of statements), any political campaign on
behalf of (or in opposition to) any candidate for politi-
cal office. This unequivocal declaration is the so-called
“Johnson Amendment,” which the president has prom-
ised to “destroy” (referenced in the April 2017 issue).
The New York Times, on May 5, stated that the
“centerpiece of the order is a pledge to allow clergy and
houses of worship to endorse political candidates from the
pulpit.” If that “pledge” is in the order, we can’t find it.
This executive order in four instances frames its
reach as being (as it must) within the law and in addi-
tion states that it is designed to “further compliance”
with applicable statutory law. The Johnson Amendment
is law. Therefore, from the standpoint of tax-exempt
churches and other religious entities and political cam-
paign speech, it is hard to see what this executive order
accomplishes for them. That would be the case if the
order stopped there. But it does not.
The order provides that the Department of the
Treasury shall not take any adverse action against an
individual or religious organization engaging in speech
about moral or political issues from a religious perspec-
tive, where speech of “similar character” has “not ordi-
narily been treated” as being in violation of the Johnson
Amendment by Treasury, which, of course, includes
the IRS. That language effectively enshrines guidance
issued by the IRS as to what constitutes violations of the
Johnson Amendment, including the wide-ranging Rev.
Rul. 2007-41 (summarized in the August 2007 issue). It
appears from here that, instead of a directive to Treasury
and the IRS to ease up on enforcement of the Johnson
Amendment in the religious setting, as the order was
originally advertised to be, it makes the granting of reg-
ulatory leeway to churches even tougher. That not ordi-
narily been treated standard is a high threshold indeed.
Thus, a minister of a church can engage in political
campaign speech from the pulpit as long as it does not
fall within the types of speech found by the IRS to be
political in character. Those interstices are going to be,
shall we say, rather creative, to craft.
GRANT RULED QUALIFYING
DISTRIBUTION; TRANSFERS
BY GRANTEE RULED INDIRECT
SELF-DEALING
The IRS ruled that a private foundation grant will be
a pass-through (out-of-corpus) qualifying distribution,
then ruled (incorrectly) that subsequent transfers by the
grantee will constitute indirect acts of self-dealing on the
grounds that they will (ostensibly) be made to a disquali-
fied person (Priv. Ltr. Rul. 201719004).
BRUCE R HOPKINS' NONPROFIT COUNSEL
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Editor: Bruce R. Hopkins. Production Editor: Mary Jean Jones
Address for Editorial Correspondence: Bruce R. Hopkins. email: brucerhopkins@brucerhopkinslaw.com
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