Recent IRS Private Letter Rulings

Published date01 May 2020
Date01 May 2020
May 2020 7
Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc
Again, the IRS has denied recognition of exemption
as a business league to a networking entity (Priv.
Ltr. Rul. 202008009). This organization, open to
“business professionals” in its community, has as its
primary purpose the provision of “quality business
opportunities” (read: networking opportunities) to
these individuals. The members of this entity “either
own their own company or work for a company in
a different trade or business as well as represent a
different profession or trade.” Members meet weekly
and exchange referrals. The IRS declined to recognize
exemption in this case, because the organization is
“not formed to promote the common business inter-
ests of a particular industry or trade, but rather [is]
formed to benefit [its] members’ business interests.”
Two similar rulings were subsequently issued (Priv. Ltr.
Ruls. 202009027 and 202010004), as was a ruling
denying this type of referral group social welfare
status (Priv. Ltr. Rul. 202909025). [14.2(a)]
The IRS approved a private foundation’s request for
a set-aside (Priv. Ltr. Rul. 202009030). The funds will
be used to rehabilitate a building, currently uninhab-
itable, that a public university will use. This project
will include interior, exterior, structural, plumbing,
and electrical work consistent with historic preserva-
tion standards. The goal is to convert the building to
a “habitable structure that can be used and enjoyed
by students and faculty of [the university] and the
community while maintaining and preserving its his-
toric significance.” [12.4(b)]
A nonprofit organization unsuccessfully sought rec-
ognition of tax exemption as a social club. Its pur-
pose is to promote conservation of waterways in the
region and promote “good sportsmanlike conduct.”
It organizes fishing tournaments that are open to its
membership and the public. Its clubhouse is rented
to members and nonmembers. Nonmember income
has been over three times the amount received as
member income. The IRS concluded that this entity
is not organized and operated primarily for pleasure
and recreation of its members, and substantially
exceeds the allowable level of nonmember revenue
(Priv. Ltr. Rul. 202011007). [15.1(b), 15.2]
The IRS approved an individual grant program to
be funded by a private foundation that will provide
professional development and educational seminars
through a yearlong program that will equip partic-
ipants with the skills to become effective members
of boards of directors of nonprofit organizations in
a metropolitan area and enable them to address
issues confronting the region involved (Priv. Ltr. Rul.
202011013). The program will include seminars at
a university and an educational weekend retreat
at a hotel or convention center. Topics covered will
include governance, fiduciary duties, meeting facili-
tation, fundraising, and leadership. [12.4(e)]
Colleges and universities are, The New York Times
reported on February 26, investing in development of
the cities and towns in which they are located, “turn-
ing Main St. into an off-campus amenity.” These
institutions are, in working to attract “increasingly
discerning students,” trying to “leverage off-cam-
pus assets” by “taking a role in revitalizing flagging
downtowns.” Examples are provided of Colgate
University, which owns a historic inn (with a tavern),
a bookstore, and a movie theater in Hamilton, New
York, and Colby College, which is “seeking to lift the
fortunes” of Waterville, Maine, by building a hotel,
restaurant, and performing arts center (all subject to
property tax, by the way).
The Department of Education announced, on Febru-
ary 27, an agreement with the University of South-
ern California requiring the institution to change
its processes for responding to sexual assaults, in
the aftermath of a finding by the department of
“systemic failures” in its response to allegations in a
case involving a former gynecologist who has been
charged criminally with 29 counts of sexual battery
(New York Times, February 27). The agreement
causes the university to review the actions of individ-
uals involved to determine whether they should be
disciplined, offer remedies to patients who may have
been harmed, and improve its procedures for dealing
with complaints filed under Title IX. The assistant
secretary of education for civil rights is reported as
saying that this investigation is one of the largest the
department has conducted.
Notes taken by the individual The New York Times
portrays as the “mastermind of the college admis-
sions scandal,” who organized the scheme, have
surfaced. Lawyers for some of the parents involved
are arguing that these notes show that federal
investigators, as reported on February 28, “pushed
him to lie to incriminate his clients.” The pivotal
issue is whether this individual, William Singer, led
the parents to believe that their payments were
contributions to athletic programs rather than bribes
of coaches and other athletic officials. Lawyers for
parents in court filings wrote that this evidence was
“devastating to the Government’s case and demon-
strates that the Government has been improperly
withholding core exculpatory information.” One of
these lawyers is quoted as saying: “The fact that
somebody made a donation to U.S.C. with the goal

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