Other Recent IRS Private Letter Rulings

• Published date: 01 October 2019
• DOI: http://doi.org/10.1002/npc.30652
• Date: 01 October 2019

Bruce R. Hopkins’ NONPROFIT COUNSEL

8 October 2019 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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

agent attending a board meeting. (How often does that

happen?)

Information garnered by the IRS at this meeting

included the facts that no amateur athlete is involved,

the organization is the rule-making body only in con-

nection with one of the races, and the organization does

not have any affiliations with youth groups or schools.

This organization does not conduct any workshops,

seminars, or clinics teaching youth about the sport. The

IRS ruled that this entity does not qualify as a charitable

or educational organization (Priv. Ltr. Rul. 201933016).

As to the matter of national or international amateur

sports, the IRS ferreted out these facts: (1) the organiza-

tion does not support an event that is represented in the

Olympic or Pan-American Games, (2) the organization’s

races do not lead to or qualify the competitors for a

national or international championship, (3) the organi-

zation does not have any affiliation with a national or

international association, (4) the athletes participating in

the races do not have to demonstrate a certain level of

talent and achievement in order to receive support from

the organization, (5) the organization does not provide

any intensive daily training, and (6) the organization is

not devoted to improving the performance of a small

group of outstanding athletes. Thus, the IRS ruled that

this entity does not constitute a national or international

amateur sports organization.

For good measure, the IRS ruled that the private ben-

efit doctrine was violated because most of the organiza-

tion’s funds were paid out to its members as prizes. The

IRS noted that the organization’s president won or came

in second in the races. Private inurement or reasonable

distributions? [11.2] ◆

OTHER RECENT IRS PRIVATE

LETTER RULINGS

◆A trust was held by the IRS to be a qualified settle-

ment fund (Reg. § 1.468B-1(c)). The trust uses its assets

and income to mitigate harm suffered by its beneficiaries

and their citizens. All of the beneficiaries are a state or

a government of a possession of the United States. The

IRS also ruled that this trust is performing an essential

governmental function, and thus that its income is

excludible from gross income (IRC § 115) (Priv. Ltr. Rul.

201930004). [19.22(b)]

◆It is common for the IRS to issue a ruling declining

to recognize a nonprofit organization as a tax-exempt

entity because it did not provide sufficient support-

ing documentation in and with its application. This

deficiency can give rise to colorful observations by the

agency. Here is an example: “The description you have

provided of your activities is persistently incoherent, full

of gaps and omissions, and lacking in necessary explana-

tory matter, frustrating all attempts to attain an under-

standing of them sufficient to support a determination

that you are operated exclusively for exempt purposes”

(Priv. Ltr. Rul. 201931011). [26.1(b)(i)]

◆A nonprofit membership corporation was formed

to “activate a diverse and collaborative group of

nonprofit leaders, and to develop them into effec-

tive changemakers to connect and advance the

local community.” This entity advised the IRS that X

percent of its time will be devoted to its members’

professional development, Y percent on “networking

and social events,” and Z percent on advocacy. (The

actual percentages were redacted, probably improperly.)

In a classic example of an analysis of eligibility for tax

exemption on the basis of quantification of activities,

the IRS found that the social activities are “substantial”

and thus declined to recognize exemption (Priv. Ltr. Rul.

201931012). [4.5(c)]

Quote of the Month: “The statutory system govern-

ing unrelated business income and the related tax seem

complex and contain multiple exceptions to the rule

and exceptions to the exceptions” (this from the court

opinion in the Mayo Clinic case (see the first article)). To

which may be added: Not to mention the exceptions to

the exceptions to the exceptions.

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). This is done to provide ready access

to additional and background information concerning these articles. For example, underlying information concerning the first

article in this issue is available in Chapters 4 § 4, 8 § 3(a), and 12 § 3(a) of the book; thus, the citation is referenced as [4.4, 8.3(a),

12.3(a)]. 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, 2019 cumulative supplement). For example, underly-

ing information concerning the fifth article in this issue is available in Chapter 16 of the book; thus, the citation is referenced as [16].

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

ter 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 develop-

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

able in the Bruce R. Hopkins Nonprofit Law Library, an e-book published by Wiley. Follow BRHopkins_NPLaw on Twitter.

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