[EL] Fwd: 501(c)(4)'s and "exclusively"

Mon May 20 10:53:33 PDT 2013

There is a lot of truth here:

_Click  here: IRS Was Afraid of the Constitution, the Obama Scandal 
Suggests - The New  York Sun_ 
(http://www.nysun.com/national/irs-was-afraid-of-the-constitution-the-obama/88305/)  

It is extremely difficult to get the IRS into court to test their vague  
laws and vague "facts and circumstances" test.  The will run you through  the 
ringer and at the last possible moment give in so you cannot get them it  
court.  Jim Bopp

In a message dated 5/20/2013 1:49:17 P.M. Eastern Daylight Time,  
white at lfa-law.com writes:

Section  501 is not the only place in the Code where the terms like “
exclusively” are  modified to mean something less than all.  Section 351, 
regarding  corporate formation, permits tax-free formation of a corporation provided 
that  the exchange of property is “solely” for issuer stock.  The same 
section  explains later that gain is taxed only to the extent that “other” 
property is  received – a significant modification of the general rule.  I have 
long  told my students, “America, what a country!” because in America “
solely” can  mean not “solely.” 
John J. White, Jr. 
_white at lfa-law.com_ (mailto:white at lfa-law.com)  
(425) 822-9281 ext. 321   
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From:  law-election-bounces at department-lists.uci.edu  
[mailto:law-election-bounces at department-lists.uci.edu] On Behalf Of  Ellen Aprill
Sent: Monday, May 20, 2013 10:31 AM
To:  law-election at department-lists.uci.edu
Subject: [EL] Fwd: 501(c)(4)'s  and "exclusively"
Here again is what I posted on this question last week.  I would add that 
the "primarily" gloss also eliminates any possible  doubts about fundraising 
efforts.  Without "primarily," some groups might  wonder if fundraising for 
their exempt purpose is the same as engaging in that  purpose. 

Ellen

-------

Ellen P. Aprill

John E. Anderson Professor of Tax Law

Loyola Law School

919 Albany Street

Los Angeles, CA 90015

213-736-1157

---------- Forwarded message ----------
From: Ellen  Aprill <_ellen.aprill at lls.edu_ (mailto:ellen.aprill at lls.edu) >
Date: Wed,  May 15, 2013 at 10:06 PM
Subject: 501(c)(4)'s and "exclusively"
To: _law-election at department-lists.uci.edu_ 
(mailto:law-election at department-lists.uci.edu) 

Much  has been made of the fact that section 501(c)(4) says that such 
organizations  must be "exclusively" for promotion of social welfare while the 
501(c)(4)  regulations say that "exclusively" means "primarily." 

I would like to put that regulatory move in context by  noting that the 
regulations under 501(c)(3) also say "exclusively" means  "primarily."  That 
is, this reinterpretation of "exclusively" is not  unique to 501(c)(4)'s.

In part, the reinterpretation of "exclusively" is necessary  because the 
Internal Revenue Code recognizes and allows tax exempts to engage  in 
unrelated business activities.  Yes, such activities are subject to  tax, but the 
elaborate system of the unrelated business income tax clearly  acknowledges 
and accepts that these organizations need not engage exclusively  in their 
exempt purpose.  (The recent report on colleges and universities  from the IRS 
had much to say about how these groups incorrectly reporting and  
calculating their unrelated business income tax, but compliance with the UBIT  rules 
is a separate issue.)

Further, I have questions and concerns about a rule that  establishes a 
bright line test for (c)(4) political campaign intervention,  such as the 5-10% 
that Democracy 21 and the Campaign Legal Center have  proposed.  Under such 
a test, what happens to groups that engage in  political campaign 
intervention more than 10% but are not engaged primarily in  such activity as section 
527 requires?   Would they simply be taxable  organizations?  (See Don 
Tobin, "Political Advocacy and Taxable Entities:  Are They the Next Loophole?" 6 
First Amend. Rev. 41.)  It seems to  me that any change establishing a 
bright line for 501(c)(4) campaign  intervention requires changes to section 527 
as well so that 527 applies to  all campaign intervention the bright line 
amount (for all noncharitable exempt  organizations, not just (c)(4)s). 

Perhaps I am missing something or others on the list have  other 
suggestions that, I hope, they will share. 

Ellen

------ 

Ellen P. Aprill

John E. Anderson Professor of Tax Law

Loyola Law School

919 Albany Street

Los Angeles, CA 90015

_213-736-1157_ (tel:213-736-1157) 

=

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