Other Recent IRS Private Letter Rulings

Date01 January 2021
Published date01 January 2021
January 2021 7
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)).
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.)
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)]
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.

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