Other Recent IRS Private Letter Rulings

Date01 August 2020
Published date01 August 2020
August 2020 7
Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc
not offer any comparison to alleged comparables,
and fails to explain whether other sales “involved
a willing buyer and a willing seller or were simply
a way to resolve litigated disputes.” The Tax Court,
of course, disallowed the deduction for lack of ade-
quate substantiation (Brannan Sand & Gravel Co.,
LLC v. Commissioner (June 4)). [21.4, 21.5]
On June 8, the Tax Court issued a decision valuing a
conservation easement (Johnson v. Commissioner).
The donor claimed a charitable deduction in the
amount of $610,000; the court set the value at
$372,919. The parties agreed that the fair market
value of this easement should be determined by
calculating the difference between the underlying
property’s value before and after grant of the ease-
ment. The court favored the donor’s expert’s deter-
mination of the property’s pre-gift value and split the
difference between the sides’ experts’ analysis of the
after value. [10.1]
Commissioner of Internal Revenue Charles Rettig, in
letters to the Senate Finance Committee leadership on
April 17, announced that the IRS needs additional time
to complete the comprehensive customer service strat-
egy, organizational redesign, and comprehensive training
strategy reports required by the Taxpayer First Act. This
legislation, summarized in the September 2019 issue,
requires submission of some of these reports by the end
of September. The commissioner, citing “unprecedented
workforce and operational challenges brought on by the
COVID-19 emergency,” said he anticipates submission of
these reports in December.
Commissioner Rettig summarized the “extensive
outreach” conducted to date to ensure that the agen-
cy’s approach “fully integrates taxpayers’ needs and
perspectives.” The IRS’s TFA Office has been working to
develop new strategies, including regular meetings with
congressional staff. Prior to the pandemic, he wrote,
the IRS was “on track to timely deliver a consolidated
report detailing our comprehensive taxpayer experience
strategy, organizational redesign, and comprehensive
training strategy.”]
A nonprofit organization was formed to operate a
“community tavern” in an attempt to “create a cul-
ture of philanthropy in a distinctive venue.” Its plan is
to sell locally brewed beer and wine to its supporters,
with the sales proceeds distributed to nonprofit organ-
izations. The IRS did not buy this brew, rejecting the
notion that this organization is eligible for tax exemp-
tion as a charitable entity (Priv. Ltr. Rul. 202016019).
Playing down the fundraising component and the
educational activities, the IRS ruled that the organi-
zation’s “main focus” is operation of a tavern. This,
said the IRS, is a business that is “ordinarily carried on
by commercial ventures organized for profit.” [4.9(a)]
A nonprofit organization has a membership of com-
mercial fishers. It seeks to maintain the health of a
highly migratory species, in part by helping to solve
an overfishing problem. Its primary activity is sending
representatives to regional and international fishery
governing agencies’ meetings that have an impact
on the entity’s membership. The IRS denied recog-
nition of tax exemption as a charitable entity to this
organization, although it has some characteristics of
an environmental protection entity, on the grounds
that it has the substantial nonexempt purpose of
promoting the common business interests of its
members (Priv. Ltr. Rul. 202017031). [20.13(a)]
A nonprofit organization was formed to advance
a form of cryptocurrency. Its software is free to
download and edit. Blockchain technology provides
anyone who wants access to observe and analyze
the chain data. The IRS rejected the notion that
this entity is educational in nature, writing that the
organization “merely provide[s] open source web
applications that can be used or modified by anyone
and used for whatever purpose that individual sees
fit” (Priv. Ltr. Rul. 202019028). The IRS added that
these activities are not charitable, in part because the
members of the public who may use the programs
are not a recognized charitable class. [4.5(a), 8.1]
In a heavily redacted and lengthy ruling, the IRS
concluded that a nonprofit tax-exempt organization
has been operating in a “competitive commercial
fashion” to sell tax credits for the purpose of raising
funds for the benefit of, and providing services to,
for-profit partnerships. The agent wrote that this
entity provides “so much private benefit” to the
partnerships that exemption as a charitable organi-
zation is not warranted (Priv. Ltr. Rul. 202019029).
The agent also found that the organization materially
misrepresented its operations on its application for
recognition of exemption and thus that the revoca-
tion of exemption should be retroactive to the date
of its inception (in 2008). [4.9(a), 20.13(a), 27.3]
The IRS ruled a distribution by a charitable lead
annuity trust, following all annuity payments to
two charities, of the remaining trust assets to the
remainder beneficiaries (all disqualified persons with
respect to the trust) will not constitute an act of
self-dealing (Priv. Ltr. Rul. 202021001). The IRS
also ruled that reimbursement by the trust of legal,

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