Other Recent IRS Private Letter Rulings

• Date: 01 January 2021
• DOI: http://doi.org/10.1002/npc.30815
• Published date: 01 January 2021

Bruce R. Hopkins’ NONPROFIT COUNSEL

January 2021 7

THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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

relatives of certain families” (a purpose obviously in

violation of the US law organizational test). The charity

was subsequently dissolved, with its assets and earnings

transferred from its bank account to, at the direction

of the US-based individual, another bank account. The

individual never had signature authority or control over,

or access to the funds in, this second account.

The IRS ruled that the dissolved charity’s assets were

properly transferred to this individual and that the indi-

vidual “released dominion and control” over the assets

held in the charity’s account. The result is a “completed

gift for gift tax purposes.” Moreover, the IRS held that

the transfer from one account to the other was not a

qualified disclaimer (IRC § 2518), because the individual

affirmatively directed it. Consequently, this individual is

subject to gift tax on the transfer (IRC § 2501(a)(1)). ◆

SUPREME COURT APPEARS

LIKELY TO AGAIN RESCUE

ACA

November 10 brought another round of oral argu-

ments at the US Supreme Court over the future of the

Patient Protection and Affordable Care Act (California v.

Texas). This is not a health care case or even much of a

constitutional law case; it is a severability doctrine case.

One of the issues in this case, of course, is whether the

individual health insurance mandate (or shared-responsi-

bility payment) is no longer constitutional, in that its justi-

fication cannot rest on Congress’s power to tax, now that

the penalty tax underlying the mandate is reduced to zero.

The answer to that question would seem to be yes, inas-

much as that was the Court’s basis for initially upholding

the act (see the August 2012 issue). Moreover, a federal

district court held that the act is unconstitutional because

the mandate is no longer constitutional (see the February

2019 issue), with a federal court of appeals agreeing that

“[n]ow that the shared responsibility payment amount

is set at zero, the provision’s savings construction is no

longer available” (see the March 2020 issue). (This case

began as Texas v. United States but shifted to its current

style when the Court took it on an expedited basis.)

This district court, moreover, held that the mandate

was so integral to the architectural design of the act

that the entire act has been rendered unconstitutional.

The court of appeals remanded on that point, directing

the lower court to “employ a finer-tooth comb” as to

severability of the other statutory provisions.

The matter of severability was also argued before

the Court. Conventional wisdom has it that the Court

will sever the mandate and uphold the other elements

in the Act. For example, the New York Times reported

on November 11 that, “[j]udging by the questioning on

Tuesday, in an argument that lasted for two hours, the

law’s defenders seemed poised to prevail” on at least

the severability issue. (See the Quote of the Month.) ◆

OTHER RECENT IRS PRIVATE

LETTER RULINGS

• The IRS ruled that a tax-exempt religious organiza-

tion qualifies as a religious order and that its mem-

bers constitute members of such an order, inasmuch

as the entity satisfies all the characteristics of a

religious order stipulated in Rev. Proc. 91-20 (Priv.

Ltr. Rul. 202043003). The organization is under the

control and supervision of a church. Its members vow

to live under a strict set of rules requiring moral and

spiritual self-sacrifice; they normally live together as

part of a community. Also, the members participate

regularly in activities such as public or private prayer,

religious study, teaching, and missionary work. [10.7]

• A nonprofit organization provides information about

health share ministries and their value as an alterna-

tive to traditional health insurance. It has subscribers

who pay into a pool managed for the benefit of all

subscribers. They will be reimbursed by the organi-

zation for covered medical expenses. The IRS ruled

that this entity does not qualify for tax exemption

as a charitable organization, because it is primarily

operated for the private benefit of its members, by

functioning as a “fee-based health care cooperative”

(Priv. Ltr. Rul. 202046010). The IRS observed that the

promotion of health “has long been recognized as

a charitable purpose under common law,” adding

that, however, “[u]nder the community benefit

standard, an organization must benefit the commu-

nity as a whole to be recognized as promoting health

in the charitable sense” for federal tax purposes.

[4.5(a), 7.6, 20.13(a)] ◆

FORMS, ANYONE?

• The IRS, on November 10, requested comments on

many forms used in the tax-exempt organization

context, including the Form 990 series. The “infor-

mation collections” include Forms 990 and 990-EZ

(and accompanying schedules), 990-N, 990-PF, 990-T,

1023, 1023-EZ, 1024, and 1024-A. [28.2, 28.7, 28.9]

• The IRS, by notice filed on October 18, is seeking

comments on Form 8976, the form used by tax-ex-

empt social welfare organizations to, pursuant to

IRC § 506, submit to the IRS notification of intent to

operate under IRC § 501(c)(4). [26.13]

• The IRS, on October 15, issued draft instructions

to accompany Form 8283, the form used to report

information about noncash charitable contributions.

[24.7(a)] ◆