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

[Ellen Aprill]

A clarification of the law. Once an organization achieves c-3 status,
contributions to it are deductible until the IRS announces revocation of
its c-3 status. Deductibilty of contributions is not denied retroactively.

Ellen
On Apr 24, 2012 11:47 AM, "Lillie Coney" <coney at epic.org> wrote:

> 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 <http://www.wj/>
>> bzall at aol.com
>>
>>
>>
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>
>
>
> --
> Ellen P. Aprill
> John E. Anderson Professor of Tax Law
> Loyola Law School
> 919 Albany Street
> Los Angeles, CA 90015
> 213-736-1157
>
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