Supreme Court Accepts Religious Hospitals' View of Concept of Church Plan

• DOI: http://doi.org/10.1002/npc.30349
• Date: 01 August 2017
• Published date: 01 August 2017

THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

IRS CORRECTS

ERRONEOUS TAXABLE

EXPENDITURE LAW

RULING

The IRS issued a private letter ruling (201724001) correcting an earlier

ruling (201652004 (summarized in the March 2017 issue)), concerning a private

foundation taxable expenditure issue. In the previous ruling, the IRS held that a

standard private foundation grant to a private operating foundation would not be

a taxable expenditure, reasoning that the prospective grantee, being an operating

foundation, thus automatically qualified as an exempt operating foundation. That

conclusion was incorrect.

The new ruling strips the old of its law summary on this issue, replacing it with

a correct one. It also adds facts stating that the prospective grantor will exercise

expenditure responsibility with respect to the grant. This change in the facts causes

the prospective grant to, when made, not be a taxable expenditure. [12.4(e)]

Commentary: This fixing of the first of these two rulings is, obviously, a good

development. There are a few more outstanding that could use some patching. If

memory serves, the last time this happened in the private foundation setting was

over 10 years ago, when the IRS ruled that a state district court judge was not a

government official because a state statute forbade the individual from making

law (Priv. Ltr. Rul. 200542037 (summarized in the February 2006 issue)). That one

had a shorter life span than the one above (revoked by Priv. Rul. 200604034 (sum-

marized in the March 2006 issue)). Now, about those governance rulings . . . ◆

SUPREME COURT ACCEPTS RELIGIOUS

HOSPITALS’ VIEW OF CONCEPT

OF CHURCH PLAN

The US Supreme Court, on June 5, unanimously held (8–0) that an employee

benefit plan maintained by a church-affiliated entity, dubbed by the Court a prin-© 2017 Wiley Periodicals, Inc.

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DOI:10.1002/npc

Analysis of current developments in tax

and related law for nonprofit organiza-

tions and their professional advisors.

Volume 34 Number 8

August 2017

Also in This issue...

Transfer of Disqualified Person’s

Note via Noncontrolled Trust

to Foundation Ruled Not Self-

Dealing 3

Private Foundation’s Matching

Gift Program Ruled to Not Entail

Self-Dealing 4

Easement Gift Ruled

Nondeductible Because

of Late Recording by Donee 4

Taxable Nonprofit Organization

Ruled to Be Nontaxable on Loan

Proceeds Obtained as Funding

Vehicle for Development

of Sports Stadium 5

Watch Out for Website Content 5

Operator of Building Ruled

Not Fraternal Beneficiary

Organization 6

Network of Business-

Seeking Professionals Denied

Recognition of Exemption 6

Court Rules IRS Can’t Charge

PTIN User Fees 7

Other Recent IRS Private

Letter Rulings 7

Health Care Law Revision Bill

Emerges, Fizzles in Senate 7

Other Developments 8