Schedule B Update

• Published date: 01 May 2018
• DOI: http://doi.org/10.1002/npc.30465
• Date: 01 May 2018

Bruce R. Hopkins’ NONPROFIT COUNSEL

7

May 2018

THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc

tax. The announcement states that the Don’t Tax Higher

Education Act is supported by the American Council

on Education, the Council for the Advancement and

Support of Education, the National Association of Col-

lege and University Business Officers, and the National

Association of Independent Colleges and Universities. ◆

PARTICULAR SERVICES RULE

DOOMS EXEMPTION

A nonprofit organization was recognized by the IRS

as a tax-exempt business league. It is a group of owners

of small businesses who meet regularly to encourage

and share ideas as to how to increase the size of their

businesses. At meetings, each member has 30 seconds

to give a “commercial” about the type of business that

is being sought. Membership is limited to one repre-

sentative from each line of business in the community.

Members are fined for not participating in meetings or

for failing to meet a quota of recommendations of their

customers to other businesses. As may be expected, the

IRS revoked this exemption because the members repre-

sent multiple lines of business rather than the requisite

line of business (Priv. Ltr. Rul. 201809007). The organiza-

tion was portrayed by the IRS as promoting the “private

business interests” of its members.

A nonprofit organization was formed to promote

the general welfare of the sports in which its members

officiate, secure uniformity in the interpretation and

dispensation of the rules, educate officials in the promo-

tion of a high standard of officiating, and foster friend-

ship and mutual helpfulness among fellow umpires. Its

members provide umpire services for high school softball

and baseball games, and occasional recreational games.

It represents its members before a state governing body

and is the bargaining and billing agent for its members

with various high schools. The IRS denied recognition of

tax exemption to this organization as a business league

because its primary activities constitute the provision of

particular services to its members by arranging employ-

ment opportunities, which amounts to impermissible pri-

vate benefit (Priv. Ltr. Rul. 201810011). The agency added

that the provision of these services provides its members

with a convenience they would not otherwise have.

A nonprofit organization was formed as a trade

association of small businesses located along a scenic

state highway. These businesses are mostly sellers of

regionally and locally created arts and crafts, providers

of lodging, restaurants, and real estate brokers. Its stated

purposes are to develop and promote ideas, activities,

and programs that increase commerce and promote

economic development, tourism, and preservation of the

historic and natural resources of the highway corridor in

a number of counties. Not buying that, the IRS viewed

the organization as primarily a facilitator of group

advertising for these businesses. Again, the IRS denied

recognition of exemption as a business league because

the entity is providing particular services for its members

(Priv. Ltr. Rul. 201811016). This organization was found

to not improve the conditions of one or more lines of

business but rather promote the private interests of its

members. [14.2(c)] ◆

OTHER RECENT IRS PRIVATE

LETTER RULINGS

◆A nonprofit organization has as its purpose the pro-

motion and facilitation of trade, commerce, tourism, and

friendship among various countries. It was recognized as

a tax-exempt charitable organization. An IRS examina-

tion of this organization for a year revealed that its sole

activity was a networking opportunity for professionals

and investors from various industries to promote coop-

eration. This organization advised the IRS that this event

enabled “elites from different industries” to gather to

“share their experience, learn from each other, and

broaden their minds.” The IRS revoked this exemption

on the grounds that the organization is serving private

interests (Priv. Ltr. Rul. 201809011). [20.12(a)]

◆A nonprofit corporation was formed to operate a

condominium association pursuant to a master deed.

This organization, in addition to managing the affairs

of the association, levies and collects assessments, such

as for insurance; contracts for maintenance; and owns,

maintains, improves, buys, sells, and mortgages real or

personal property for the benefit of its members, of

which there are fewer than 20. Not surprisingly, the IRS

denied this organization recognition of exemption as a

social welfare entity because its activities do not primarily

promote civic betterment or social welfare but rather are

solely for the private benefit of its members (Priv. Ltr. Rul.

201810010). [13.1(b), 13.2(a)] ◆

SCHEDULE B UPDATE

Those, including judges, who persist in taking the

position that donors to charities should not be con-

cerned about public disclosure of their giving informa-

tion at the state level (see, e.g., the article on p. 3 of last

month’s issue) should take note of the recent develop-

ment concerning the Goldman Sachs Philanthropy Fund,

a sponsoring organization maintaining donor-advised

funds. The IRS inadvertently disclosed donor information

to Guidestar that was obtained by Bloomberg before

the schedule was removed from the Guidestar website.

This snafu enabled Bloomberg BNA to report, in

its March 15 Daily Tax Report, the identity and giving