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

Mon May 20 10:54:54 PDT 2013

I understand that under ordinary principles of statutory interpretation,
"solely" and "exclusively" often admit of minor exceptions, or play in the
joints.  But that's a far cry from construing them to mean "50.01%."

On Mon, May 20, 2013 at 1:46 PM, John White <white at lfa-law.com> wrote:

> 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.”****
>
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> John J. White, Jr.
> 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>
> Date: Wed, May 15, 2013 at 10:06 PM
> Subject: 501(c)(4)'s and "exclusively"
> To: 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****
>
> ** **
>
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