Other Recent IRS Private Letter Rulings

Published date01 August 2015
Date01 August 2015
Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc
this information to “better understand the Administra-
tion’s efforts to upend decades-old rules governing the
political activity of tax-exempt organizations.”
The chairmen noted that Treasury has already col-
lected this material as part of an unrelated Freedom of
Information Act request, “entirely eliminating the bur-
den of collecting responsive documents.” Furthermore,
the documents “sought relate to a proposed rulemaking
that has since been put aside, although we understand
the Administration is working on a new version to be
released this year.”
According to the June letter, Treasury has refused to
send the documents, offering to share only those docu-
ments it has already provided the FOIA litigants. The
chairmen expressed their understanding that many of
these documents are completely redacted. They wrote:
“The offer to treat Congress’s oversight inquiries like
FOIA requests inappropriately conflates the role of the
FOIA statute—which gives citizens the opportunity to
monitor governmental functions and obtain informa-
tion, with some restrictions—with Congress’s absolute
right to understand the basis upon which the Adminis-
tration executes the law.” FOIA does not, they added,
“limit congressional oversight.”
The Treasury also refuses to provide documents
relating to the pending rulemaking for the reason
that the request “implicate[s] well-established Executive
Branch confidentiality interests.” The lawmakers noted
that their request does not seek documents concerning
the pending regulation project.
They again requested the documents, in “complete
and unredacted form.” Should the Treasury Depart-
ment continue to refuse to provide them, they stated
that the committees “will consider initiating compulsory
process.” [23]
Note: The chairmen’s letter cited a 1979 DC Circuit
opinion, which states that FOIA “is not authority to with-
hold information from Congress.” The appellate court
added: “Congress, whether as a body, through commit-
tees, or otherwise, must have the widest possible access
to executive branch information if it is to perform its
manifold responsibilities effectively” (Murphy v. Depart-
ment of the Army).
An organization is a regional, consumer-owned,
rural electric power cooperative corporation formed to
generate and deliver electric power and other energy
at wholesale to its member systems, many of which
are rural electric cooperatives. It is taxable for federal
income tax purposes. It has several classes of members.
Two entities operating transmission facilities operate as
an integrated basis. Their transmission arrangement is
being changed to a “regional transmission organiza-
tion,” which is a tax-exempt business league (an IRC
501(c)(6) entity). The cooperative is to become a mem-
ber of this exempt organization. The IRS ruled that the
organization will retain sufficient control and risk of loss
with respect to its facilities pursuant to its membership
agreement with the RTO to enable the agreement to
be considered a management contract for federal tax
purposes, rather than a lease or some other arrange-
ment (Priv. Ltr. Rul. 201525007). The organization
represented to the IRS that it will maintain full physical
possession, financial responsibility for, and operational
control over its facilities, subject only to the administra-
tive oversight and operational authority granted to the
RTO by the membership agreement. [14.1]
A nonprofit corporation was formed with purposes
to provide business consulting services to business own-
ers, fiscal agent services to “non-established” nonprofit
organizations, grant-writing services, and training and
administrative services. This is all to be done on a fee-
for-service basis. The fees are based on those charged
by local consultants. The IRS declined to recognize this
entity as a tax-exempt charitable organization, con-
cluding that it is a “consulting agency” (Priv. Ltr. Rul.
201525011). The IRS also stated that the entity has an
“underlying commercial motive.” [4.10]
Proposed regulations have been issued providing
guidance regarding programs under the Achieving a
Better Life Experience Act. (This is one of the quickest
instances of an item first appearing on the Priority Guid-
ance Program list (see last month’s issue) and then com-
ing into existence.) The underlying statute (IRC § 529A)
provides rules pursuant to which states or state agencies
or instrumentalities may establish and maintain a new
type of tax-exempt savings program by means of which
contributions may be made to the account of an eligible
disabled individual to meet qualified disability expenses.
These accounts also receive favorable treatment for pur-
poses of certain means-tested federal programs.
Summary of Statute
The ABLE Act was enacted as part of the Tax Increase
Prevention Act of 2014, the most recent of the extend-
ers laws (see the February 2014 issue). As the preamble
to these proposed regulations states, Congress “recog-
nized the special financial burdens borne by families rais-

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