Higher Education Corner

• Date: 01 May 2020
• Published date: 01 May 2020
• DOI: http://doi.org/10.1002/npc.30724

Bruce R. Hopkins’ NONPROFIT COUNSEL

May 2020 7

THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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

RECENT IRS PRIVATE LETTER

RULINGS

• Again, the IRS has denied recognition of exemption

as a business league to a networking entity (Priv.

Ltr. Rul. 202008009). This organization, open to

“business professionals” in its community, has as its

primary purpose the provision of “quality business

opportunities” (read: networking opportunities) to

these individuals. The members of this entity “either

own their own company or work for a company in

a different trade or business as well as represent a

different profession or trade.” Members meet weekly

and exchange referrals. The IRS declined to recognize

exemption in this case, because the organization is

“not formed to promote the common business inter-

ests of a particular industry or trade, but rather [is]

formed to benefit [its] members’ business interests.”

Two similar rulings were subsequently issued (Priv. Ltr.

Ruls. 202009027 and 202010004), as was a ruling

denying this type of referral group social welfare

status (Priv. Ltr. Rul. 202909025). [14.2(a)]

• The IRS approved a private foundation’s request for

a set-aside (Priv. Ltr. Rul. 202009030). The funds will

be used to rehabilitate a building, currently uninhab-

itable, that a public university will use. This project

will include interior, exterior, structural, plumbing,

and electrical work consistent with historic preserva-

tion standards. The goal is to convert the building to

a “habitable structure that can be used and enjoyed

by students and faculty of [the university] and the

community while maintaining and preserving its his-

toric significance.” [12.4(b)]

• A nonprofit organization unsuccessfully sought rec-

ognition of tax exemption as a social club. Its pur-

pose is to promote conservation of waterways in the

region and promote “good sportsmanlike conduct.”

It organizes fishing tournaments that are open to its

membership and the public. Its clubhouse is rented

to members and nonmembers. Nonmember income

has been over three times the amount received as

member income. The IRS concluded that this entity

is not organized and operated primarily for pleasure

and recreation of its members, and substantially

exceeds the allowable level of nonmember revenue

(Priv. Ltr. Rul. 202011007). [15.1(b), 15.2]

• The IRS approved an individual grant program to

be funded by a private foundation that will provide

professional development and educational seminars

through a yearlong program that will equip partic-

ipants with the skills to become effective members

of boards of directors of nonprofit organizations in

a metropolitan area and enable them to address

issues confronting the region involved (Priv. Ltr. Rul.

202011013). The program will include seminars at

a university and an educational weekend retreat

at a hotel or convention center. Topics covered will

include governance, fiduciary duties, meeting facili-

tation, fundraising, and leadership. [12.4(e)] ◆

HIGHER EDUCATION CORNER

• Colleges and universities are, The New York Times

reported on February 26, investing in development of

the cities and towns in which they are located, “turn-

ing Main St. into an off-campus amenity.” These

institutions are, in working to attract “increasingly

discerning students,” trying to “leverage off-cam-

pus assets” by “taking a role in revitalizing flagging

downtowns.” Examples are provided of Colgate

University, which owns a historic inn (with a tavern),

a bookstore, and a movie theater in Hamilton, New

York, and Colby College, which is “seeking to lift the

fortunes” of Waterville, Maine, by building a hotel,

restaurant, and performing arts center (all subject to

property tax, by the way).

• The Department of Education announced, on Febru-

ary 27, an agreement with the University of South-

ern California requiring the institution to change

its processes for responding to sexual assaults, in

the aftermath of a finding by the department of

“systemic failures” in its response to allegations in a

case involving a former gynecologist who has been

charged criminally with 29 counts of sexual battery

(New York Times, February 27). The agreement

causes the university to review the actions of individ-

uals involved to determine whether they should be

disciplined, offer remedies to patients who may have

been harmed, and improve its procedures for dealing

with complaints filed under Title IX. The assistant

secretary of education for civil rights is reported as

saying that this investigation is one of the largest the

department has conducted.

• Notes taken by the individual The New York Times

portrays as the “mastermind of the college admis-

sions scandal,” who organized the scheme, have

surfaced. Lawyers for some of the parents involved

are arguing that these notes show that federal

investigators, as reported on February 28, “pushed

him to lie to incriminate his clients.” The pivotal

issue is whether this individual, William Singer, led

the parents to believe that their payments were

contributions to athletic programs rather than bribes

of coaches and other athletic officials. Lawyers for

parents in court filings wrote that this evidence was

“devastating to the Government’s case and demon-

strates that the Government has been improperly

withholding core exculpatory information.” One of

these lawyers is quoted as saying: “The fact that

somebody made a donation to U.S.C. with the goal