Preface

• Author: Bruce R. Hopkins
• Profession: Leading authority on the law of tax-exempt organizations
• Pages: 7-8

PREFACE

Anyone familiar with the Wiley series of publications on law, accounting, management, and

fundraising for nonprot organiz ations knows that your author has a passion for writ ing about

the federal and state laws applicabl e to charitable and other type s of nonprot organizations.

One of the reasons for this c ompulsion is the challe nge of capturing—and then ke eping up

with—this vast body of complex and intricateru les, particularly in the federal tax area. Thanks

to Congress and the state legislatures, the Internal Revenue Service, and other government

agencies, there is always a wide range and deep ow of topicsto write about.

There is another challenge underlying the zeal for this type of writing. It is what I call the

“interpretive” function. That is, it is not enough to simplywr itesummaries of the law and keep

those summaries current—the challenge is to write in a way that the nontechnical reader (as

well as many lawyers and accountantswho do not often dwell on the subjects) can understand.

This observation is not meant to be denigrating to someone who is not a tax lawyer or an

accountant; it is simply recognition of the fact that the law is so convoluted and mangled, and

so lled with cross-references and unintelligible phraseology,that the average person needs an

interpreter to wade through it. To state the matter less delicately, some of these laws are not

readily understandable at rst reading.

Some quotations from the Internal Revenue Code illustrate the point. Here is the language

Congress selected when it amended the income expenditure requirementsfor private operating

foundations:

Notwithstanding the provisions of subparagraph (A), if the qualifying distributions (within

the meaning of paragraph (1) or (2) ofsubsec tion(g)) of an organization for the taxable year

exceed the minimum investment return for the taxable year, clause (ii) of subparagraph (A)

shall not apply unless substantially all of such qualifying distributions are made directly for the

active conduct of the activitiesconstituting the purpose or function for which itis organized

and operated.

This is the last sentence of IRC §4942(j)(3).

Next is Congress’ description of the criteria that a privatefoundation must meet to pay a 1

percent excise tax (rather than the general 2 percent) based on investment income:

A private foundationmeets t he requirementsof this paragraph for any taxable year if (A) the

amount of the qualify ing distributions mad e by the private foundation dur ing such taxable

year equals or exceeds the sum of (i) an amount equal to the assets of such foundation for

such taxable year multiplied by the averagep ercentagepayout for the base period, plus (ii) 1

percent of the net investment income of such foundation for such taxable year, and (B) such

private foundation was not liable for tax under section 4942 with respect to any year in the

base period.