[EL] IRS discussion of nonpartisan analysis, study or research

Tue Apr 24 11:46:43 PDT 2012

This is an interesting discussion.  The organization could have avoided many of these issues with a c(4) status.8

There are serious problems with engaging in much of the reported activity with a c(3).  Drafting legislation and working to get it passed is not a c(3) activity.

Nonprofits get a lot for that status--no taxes and contributions are tax deductible.  There is history behind the prohibitions on lobbying related to this status because there were concerns about it being used to influence government policy making.

A c(3) could focus its efforts to write laws to financially benefit itself or it's members at taxpayer expense.  

A few years ago the NAACP's tax exempt status was challenged because of staff e-mails of a partisan nature.

ALEC is in trouble and they really did not have to be if they had gone with c(4). This is too simple a fix that would have kept them out of this problem.  Their contributors' money would not have been tax deductible, today I believe that would have been a bargain The organization is not the only entities in trouble--any tax deductions may also have problems

Lillie 

Sent from my iPhone

On Apr 24, 2012, at 12:07 PM, Ellen Aprill <ellen.aprill at lls.edu> wrote:

> Barnaby and I have already continued our discussion off-line, but, on reflection, I think it is worth quoting to the list the full paragraph in the CPE text re Revenue Ruling 70-79 from which he quoted (emphasis added):
> 
> "In Rev. Rul. 70-79, 1970-1 C.B. 127, an organization was created to assist local
> 
> governments of a metropolitan region by studying and recommending regional policies directed
> 
> at the solution of mutual problems. Although some of the plans and policies formulated by the
> 
> organization could only be carried out through legislative enactments, the organization did not
> 
> direct its efforts or expend funds in making any legislative recommendations, preparing
> 
> prospective legislation, or contacting legislators for the purpose of influencing legislation. Rev.
> 
> Rul. 70-79 holds that the organization qualifies for IRC 501(c)(3) status because of the
> 
> educational nature of its activities and because it abstained from advocating the adoption of any
> 
> legislation or legislative action to implement its findings."
> 
> 
> 
> The CPE text also includes the following description of another revenue ruling:
> 
> 
> 
> "The organization described in Rev. Rul. 70-79 can be distinguished from the organization
> discussed in Rev. Rul. 62-71, 1962-1 C.B. 85. The latter organization is a corporation formed
> for the purpose of supporting an educational program with regard to a particular doctrine or
> theory. It was the announced policy of the organization to promote its philosophy by educational
> methods as well as by the encouragement of political action. Most of the publications
> disseminated by the organization, together with a substantial part of its other activities, dealt with
> the theory advocated. This theory or doctrine can be put into effect only by legislative action.
> Rev. Rul. 62-71 concludes that while the portion of the organization’s activities that
> consisted of engaging in nonpartisan analysis, study and research and making the results thereof
> available to the public, when considered alone, may be classified as educational within the
> meaning of IRC 501(c)(3), the organization was primarily engaged in not only teaching but
> advocating the adoption of a particular doctrine or theory that can become effective only by the
> enactment of legislation. Since the primary objective of the organization can be attained only
> by legislative action, a step that the organization encouraged or advocated as a part of its
> announced policy, as opposed to merely engaging in nonpartisan analysis, study and research and making the results thereof available to the public, it is an action” organization as that term is
> defined in Reg. 1.501(c)(3)-1(c)(3) of the regulations. Accordingly, the organization does not
> qualify for IRC 501(c)(3) exempt status."
> 
> I do not think I know enough about how ALEC or the NCSL Foundation operate to make a conclusion regarding them under these authorities.  
> 
>   Ellen
>  
> 
> 
> On Tue, Apr 24, 2012 at 6:20 AM, <BZall at aol.com> wrote:
> Well, I was going to let this lie fallow. After all, Ellen criticized me for incompletely describing Rev. Rul. 70-79, but I simply summarized the ruling and QUOTED the IRS Exempt Org Division's own internal training materials:  "Rev. Rul. 70-79 holds that the organization qualifies for IRC 501(c)(3) status because of the educational nature of its activities and because it abstained from advocating the adoption of any legislation or legislative action to implement its findings." Kindell & Reilly, http://www.irs.gov/pub/irs-tege/eotopicp97.pdf, see pp. 275; see also pp. 302, 274-76. As to the complaint that I was mixing the rules for electing and non-electing charities: that 1997 IRS CPE text contains our most substantive explanation of the rules governing BOTH  electing and non-electing charities. Since we have no definition of lobbying for non-electing charities, it's useful to include the IRS's own thinking on what it means; Ellen offered the 1970 Rev.Rul. and I added the 1997 IRS interpretation from the two IRS EO specialists expected to know, who quoted several other useful Rulings. I was negligent in not mentioning and explaining the distinction  for those who think they understand it but don't really (see below). We had a whole thread on this some time back.
>  
> As to Ellen's question of whether having legislators as members should affect whether given actions are considered lobbying (and leaving aside Judy and Jack's CPE analysis), Ellen, you mentioned only analogizing to testimony (e.g., Treas. Regs. 53.4945-2(d)(2)); I would suggest you consider another element of non-partisan analysis: public (or at least non-targeted) distribution (under -2(d)(1)). One explanation is that it is not so much whether legislators are members so much as it is the use of the materials for public education or advocacy communications. One key to the "making available" regs is whether the communication is directed only to "persons who are interested solely in one side of a particular issue." E.g., Treas. Regs. 53.4945-2(d)(1)(iv); see also Example 10 (organization that did not make substantial distribution of a nonpartisan report prior to or contemporaneous with a lobbying communication).  Even legislators can educate. On the spectrum of research and education, issue advocacy, lobbying, and electioneering, it would appear that it is as much the principal use of the materials as the happenstance of who receives it. So, for example, the incidental receipt of a newsletter by a legislator who also happens to be a member of the organization should not (and does not) convert the genuinely educational or issue advocacy nature of the publication into a lobbying message. And see also subsequent use (as I mentioned yesterday), -2(d)(1)(v); it would seem the subsequent use rules would affect your analysis. (Oh, and given your insistence on the Sect. 115 character of NCSL being critical, I wonder about your analysis of their c3 foundation in this specific context?)
>  
> And finally, there are enough non-exempt organization lawyers on this list that I can't let Mark Schmitt's comment stand without a warning. Please do not use Mark Schmitt's comment as a guide to lobbying analysis, especially of private foundation activities. Private foundations' legislative activities are governed, in part, by IRC section 4945, and Treas. Regs. 53.4945-2, "Propaganda influencing legislation", which is, in its modern version, expressly tied to IRC Section 4911 (for electing charities). See, e.g., Treas. Regs. 53.4945-2(a)(1). And, of course, the original topic of discussion ("Nonpartisan analysis, study, or research") is treated explicitly in Treas. Regs. 53.4945-2(d)(1), which also includes the "directly encouraging" definition. -2(d)(1)(vi). And see especially Examples 8, 9, 10 and 11.  Go to the IRS (or very well-done Alliance for Justice, http://www.afj.org/for-nonprofits-foundations/about-advocacy/lobbying.html) materials for more. (His point about whether ALEC should elect to be governed by the mechanical test, on the other hand, is perfectly valid opinion.)
>  
> I won't cover all the rest lest this limited topic grow new wings.
>  
> Barnaby Zall
> Of Counsel
> Weinberg, Jacobs & Tolani, LLP
> Please note our new address:
> 10411 Motor City Dr., Suite 500
> Bethesda, MD 20817
> 301-231-6943 (direct dial)
> www.wjlaw.com
> bzall at aol.com
> 
> 
>  
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> -- 
> Ellen P. Aprill
> John E. Anderson Professor of Tax Law
> Loyola Law School
> 919 Albany Street
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