Tax Exempt Organizations: The Identity of Applicants for Tax-Exempt Status is Not Confidential Return Information Protected Under the Internal Revenue Code

teapartyIn 2013, a major scandal broke over the treatment of “Tea Party” groups that applied for tax-exempt status, as the public learned that the IRS had singled out certain groups for special scrutiny that created long delays in processing their applications. Shortly after the scandal broke, a class action was filed against the United States, seeking damages. Complaint, NorCal Tea Party Patriots v. IRS, No. 1:13-cv-00341-SJD (S.D. Ohio).

On March 22d, the Sixth Circuit addressed a discovery dispute over the confidentiality of the names of the groups that were members of the plaintiff class, denying a mandamus petition filed by the government and ordering it to comply with the district court’s prior orders to produce the information.… Read More

A Level Playing Field: A Challenge to Special Treatment of Section 501(c)(3) Applications Moves Forward.

Qualification as a tax-exempt entity under Section 501(c)(3) of the Internal Revenue Code carries a variety of benefits, including the ability of donors to claim a deduction for contributions. To qualify for these benefits, an entity will file an application requesting that the IRS determine that it is entitled to tax exempt status under Section 501(c)(3).
Last week, the United States District Court for the District of the District of Columbia issued a very interesting opinion dealing with a claim that a particular entity seeking tax exempt status was subjected to special procedures due to the views that it espoused. Z Street, Inc.Read More

A Charity Wins: A Favorable Result Under Pennsylvania’s HUP Test.

Given recent developments under the HUP test, a win by a non-profit in a real estate tax exemption case qualifies as news; in Alliance for Building Communities v. County of Lehigh Board of Assessment Appeals, No. 1150 CD 2012, (Pa. Commw. July 22, 2013), the Commonwealth Court reversed a trial court determination that a non-profit was not a “purely public charity.”

The non-profit, Alliance for Building Communities, is a Pennsylvania non-profit corporation that is tax exempt under Section 501(c)(3) of the Internal Revenue Code and also enjoys an exemption from Pennsylvania’s sales and use tax. Alliance for Building Communities v. County of Lehigh Board of Assessment Appeals, slip op.Read More

A Look at Charitable Tax Exemptions in Pennsylvania, an Afterword.

Shortly after I finished writing on Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, No 16 MAP 2011, (Pa. Apr. 25, 2012), I saw another opinion from the Commonwealth Court denying a charitable tax exemption to another summer camp affiliated with an Orthodox Jewish group on the basis that it did not do enough to relieve governmental burdens at the local level. Camp Hachshara Moshava of New York v. Wayne County Board of for the Assessment and Revision of Taxes, No. 1016 C.D. 2011 (Pa. Commw. May 23, 2012).

As I noted in part three of my coverage ofMesivtah Eitz Chaim of Bobov, there are some serious problems with the approach that the Commonwealth Court has taken.Read More

A Look at Charitable Tax Exemptions in Pennsylvania, Part Three.

This will wrap up my discussion of Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, No 16 MAP 2011, (Pa. Apr. 25, 2012), which held that a camp affiliated with an Orthodox Jewish congregation did not qualify as a “purely public charity” under the Pennsylvania Constitution because it did not meet the definition of that term under the HUP test that the Court adopted in Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. 1985).

In my view, the Supreme Court announced the correct rule on the question that it addressed, but its affirmance of the Commonwealth Court upholds a bad result.Read More

A Look at Charitable Tax Exemptions in Pennsylvania, Part Two.

This will continue my discussion of Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, No 16 MAP 2011, (Pa. Apr. 25, 2012), in which a divided Supreme Court held that a camp affiliated with an Orthodox Jewish congregation did not qualify as a “purely public charity” under the Pennsylvania Constitution because it did not meet the definition of that term under the HUP test that the Court adopted in Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. 1985).

The Pennsylvania Constitution specifically requires that all taxes “be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax .Read More

A Look at Charitable Tax Exemptions in Pennsylvania, Part One.

The idea that religious institutions are generally exempt from tax is almost ingrained; most non-lawyers would not think twice about it. And most lawyers recognize that churches and synagogues are usually tax-exempt. As a consequence, it is a little startling to see an entity that is related to a religious group lose a case over a tax exemption, but that is what happened recently in Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, No 16 MAP 2011, (Pa. Apr. 25, 2012).

The Pennsylvania Constitution provides authority for the legislature to exempt “institutions of purely public charity,” although the exemption from real estate tax is limited to “that portion of the real property of such institution which is actually and regularly used for the purposes of the institution.” Pa.Read More

Pension Plan Terminations for Exempt Organizations with Unrelated Business Income.

Section 4980 of the Internal Revenue Code imposes an excise tax of twenty percent on any reversion that an employer receives upon termination of a “qualified plan.” I.R.C. § 4980(a). The excise tax may not apply if the employer is a tax-exempt entity, because Section 4980(c)(1)(A) defines a “qualified plan” to exclude a “plan maintained by an employer if such employer has, at all times, been exempt from tax under subtitle A [of the Code].” Even tax-exempt entities can be subject to tax, however, if they have unrelated business income. See I.R.C. § 511.

What happens when a tax-exempt entity that has had liability for unrelated business income tax receives a reversion following termination of a pension plan?Read More