Other Developments

• Date: 01 August 2020
• DOI: http://doi.org/10.1002/npc.30758
• Published date: 01 August 2020

Bruce R. Hopkins’ NONPROFIT COUNSEL

8 August 2020 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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

accounting, and related expenses to its trustee will

not be self-dealing. This ruling is essentially based on

Reg. § 53.4947-1(e)(2), Example 2.

• A membership nonprofit organization was denied rec-

ognition of tax exemption as a charitable entity in part

because of failure of the operational test, in that its

members commercially conduct public tours on the

land it uses. The IRS concluded that this organization

was primarily formed to ensure that the members

adhere to their obligations under a contract with the

landowner (Priv. Ltr. Rul. 202022006). This purpose

was seen by the IRS as a conferring of a substantial

private benefit on these members. [20.13(a)].

• Readers are familiar with the rule denying tax-exempt

status to social clubs where more than 35 percent of

their gross receipts is derived from nonmembers. A

recent IRS ruling illustrates an extreme application of

that requirement, where a club’s members do not

pay any dues whatsoever (Priv. Ltr. Rul. 202022008).

All revenue flowing to this club (a bass fishing group)

on a recurring basis is from sales of apparel, corpo-

rate sponsorships, and other contributions. [15.2]

• The IRS denied recognition of exemption as a social

welfare organization to an entity having as its pri-

mary purpose opposition to a candidate for the US

Senate (an incumbent) (Priv. Ltr. Rul. 202022009).

This organization initially advised the IRS that 90

percent of its revenue would be expended for public

education, yet spent a substantial portion of its rev-

enue on direct political expenditures. Expenditures

were primarily for television advertisements and

mailers expressing approval of a candidate, and allo-

cated fundraising, legal, and administrative support

services. [13.4(b), 23.6]] ◆

OTHER DEVELOPMENTS

◆President Trump, on June 5, signed into law the

Paycheck Protection Program Flexibility Act of 2020,

concerning rules to ease the criteria for loan forgiveness,

providing for more time and flexibility (Pub. L. No. 116-

142). Among the changes is expansion of the period

within which the funds must be used to have loans

forgiven from eight weeks to 24 weeks (or year’s end,

whichever is earlier).

◆The IRS has solicited comments with respect to the

IRS’s Form 8940 (Request for Miscellaneous Determina-

tions), including any burden associated with filing the

form.

◆An individual, in his capacity as trustee of a tax-exempt

religious organization, sought to quash an IRS third-party

subpoena (IRC § 7609). The federal district court involved

admonished this individual for appearing pro se to rep-

resent the organization (he did the same in an earlier

case). (Organizations must appear in most federal courts

through a lawyer.) The trustee was ordered to immedi-

ately retain legal counsel or face dismissal of the case

(Steeves v. Internal Revenue Service (S.D. Cal. (June 2)).

◆The US Court of Appeals for the Tenth Circuit, by

decision dated June 2, upheld imposition of an abusive

tax shelter promotion penalty in connection with a solar

energy scheme as a plan organized and sold by promot-

ers who knowingly made false or fraudulent statements

about material matters (IRC § 6700(a)). The promoters

falsely told buyers of the plan that they were entitled

to solar-energy tax credits and depreciation deductions.

The promoters were also found to have made gross

valuation overstatements (United States v. RaPower-3,

LLC). [28A.3(h)]

◆The Department of Education, on May 7, issued final

Title IX regulations concerning sexual misconduct, defin-

ing sexual harassment as unlawful sex discrimination,

and stating the procedures colleges, universities, and

other schools are to follow in adjudicating misconduct

incidents. The staff of the Joint Committee on Taxation,

on April 23, published a (revised) description of the tax

law provisions of the CARES Act (JCX-12R-20). ◆

Each article in the newsletter on a tax-exempt organizations law topic ends with a citation to the appropriate chapter(s) or

subchapter(s) in Hopkins, The Law of Tax-Exempt Organizations, Twelfth Edition (Wiley, 2019, 2020 supplement). This is done to

provide ready access to additional and background information concerning these articles. For example, underlying information con-

cerning the first article in this issue is available in Chapter 20 § 5 of the book; thus, the citation is referenced as [20.5]. Likewise,

each article in the newsletter on a charitable giving law topic ends with a citation to the appropriate chapter(s) or subchapter(s) in

Hopkins, The Tax Law of Charitable Giving, Fifth Edition (Wiley, 2014, 2020 cumulative supplement). For example, underlying infor-

mation concerning the third article in this issue is available in Chapter 9 § 7 of the book; thus, the citation is referenced as [9.7].

This newsletter is a stand-alone publication. An inventory of articles in the newsletter since its inception in 1983, and a subject

matter index, as well as an index of the court opinions, IRS revenue rulings and procedures, IRS technical advice memoranda, and

IRS private letter rulings discussed in the newsletter, are available at www.brucerhopkinslaw.com. For those who have the books,

the newsletter also provides monthly updates. Both books are annually supplemented. Questions concerning nonprofit law devel-

opments in general may be sent to brucerhopkins@brucerhopkinslaw.com. Also, a comprehensive summary of nonprofit law is

available in the Bruce R. Hopkins Nonprofit Law Library, an e-book published by Wiley. Other law resources are referenced at www.

brucerhopkinsbooks.com. Follow BRHopkins_NPLaw on Twitter.

The newsletter has a dedicated website. Please visit wileyonlinelibrary.com/journal/npc.

Quote of the Month: “The concerns expressed by com-

menters opposing the proposed changes [to the disclo-

sure regulations, summarized in the article beginning on

p. 4 of this issue] are misplaced” (regulation preamble).