Other Developments

Date01 November 2020
Published date01 November 2020
November 2020 7
Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc
the utterances about this case do not disclose any spe-
cific individual’s tax return information or this individual’s
tax return in particular. Various “series of factual infer-
ences and conclusions” were found “too attenuated”
to constitute an improper disclosure. One statement by
the IRS commissioner (see the January 2020 issue) was
portrayed as “full of policy enforcement bravado.” Some
of the government’s statements were said to pertain to
the client’s tax returns, not the appraisers’ returns.
The “briefing and counterclaim verbiage currently
before the Court” was held “insufficient to provide the
foundation for the claims asserted.” Nonetheless, the
appraiser was granted leave to file an amended counter-
claim, directly addressing how the statements made by
the government disclose his tax return information or
how his identity and investigation of him personally are
linked to his tax return.
The US Court of Appeals for the District of Columbia
Circuit, by decision dated August 21, upheld invalida-
tion of a Federal Election Commission rule concerning
disclosure of contributions for independent expenditures
on the grounds that the scope of the rule is too narrow
in relation to the authorizing statute (Citizens for Re-
sponsibility and Ethics in Washington v. Federal Election
This case involves two provisions of the Federal Elec-
tion Campaign Act, which require makers of independent
expenditures to disclose information about contributions
(52 USC § 30104(c)(1), (c)(2)(C)). (Independent expendi-
tures are outlays urging the election or defeat of identified
candidates without coordination with the candidates.)
These statutes require disclosure of contributors who
give more than $200. The FEC rule, however, requires
disclosure of these contributions only if they are ear-
marked to support a particular independent expenditure.
The appellate court applied the Chevron principles,
concluding that FECA’s terms on the point are unambig-
uous. It utilized a “plain meaning” approach, reflected
in an earlier court opinion on the point, which concluded
that the rule “shrinks the statutory duty to disclose
contributors,” thereby “squeez[ing] [FECA’s] explicit dis-
closure obligation beyond what the plain statutory text
can bear.” It rejected the argument that the scope of the
rule is necessary to avoid free speech issues. The court of
appeals thus held that the FECA “establishes a broader
disclosure mandate than the rule ostensibly implement-
ing it,” causing the rule to be “invalid.”
A nonprofit corporation was formed to create events
for the benefit of a group of independently owned
and operated bridal salons. Its primary activity is the
provision of advertising for these stores. It organizes
an annual event enabling the salons to offer sub-
stantial sales and discounts on wedding attire. The
IRS declined to recognize this entity as a tax-exempt
business league, on the grounds it is performing par-
ticular services for its members rather than improving
conditions within a line of business (Priv. Ltr. Rul.
202034010). [14.2(c)(i), (ii)]
A nonprofit membership corporation has as its pur-
pose the promotion of American businesses operated
by individuals of a particular nationality. It is essen-
tially a networking organization. It conducts various
fundraising events for charitable purposes. The IRS
denied recognition of exemption as a charitable
organization in this case, concluding that the primary
purpose of this entity is the provision of business
opportunities for its members, which serves private
interests (Priv. Ltr. Rul. 202036008). Although this
organization engages in some charitable and edu-
cational activities, these efforts were insufficient to
offset the nonexempt purposes and functions, caus-
ing violation of the operational test. [4.5(a), 20.13(a)]
A promissory note presently held in a decedent’s
estate is destined to be transferred to a charitable
lead trust. To avoid self-dealing, which would occur if
the note was distributed to the trust, the note is to be
contributed to a limited liability company, with non-
voting interests in the LLC contributed to the charita-
ble lead trust. The IRS concluded that the charitable
lead trust will not control the LLC, so that the trust’s
continuing ownership of the nonvoting interests will
not entail self-dealing (Priv. Ltr. Rul. 202037009). The
transferor of these interests is a trust; although other
beneficiaries of this trust may become disqualified
persons with respect to the charitable lead trust, they
will own voting interests in the LLC in their individual
capacities and not as managers of the charitable lead
trust. The holding of these interests by the lead trust
will not be excess business holdings, because more
than 95 percent of the LLC’s gross income will derive
from passive sources. [12.4(a), (c)]
The Department of the Treasury and the IRS, on
September 2, issued their fourth-quarter update to the
2019–2020 Priority Guidance Plan.
The IRS, on September 1, posted a draft of the Form
990-T. The principal proposed change involves the

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