Category Archives: I.R.S.

IRS’ 2009-2010 Priority Guidance Plan Items Impacting Tax-exempt Organizations

The joint Department of Treasury/Internal Revenue Service priority guidance plan for 2009-2010 contains the following items of interest to tax-exempt organizations:Revenue procedure to provide terms for hosts of Cyber Assistant software (used to generate Form 1023 exemption applications eligible for reduced user fee). Continue Reading

IRS Releases Governance Check Sheet to be Used by EO Exam Agents

The Internal Revenue Service is at it again. The IRS recently released a Governance Check Sheet that its examination agents will use when examining charitable organizations (other than private foundations), along with a Guide Sheet providing instructions on how to use the Check Sheet. According to the IRS’s webpage for exempt organization governance issues, the Check Sheet “will be used by IRS’ Exempt Organizations Examination agents to capture data about governance practices and the related internal controls of organizations being examined. The data will be included in a long-term study to gain a better understanding of the intersection between governance practices and tax compliance.” These materials are in addition to the governance training materials previously released by the IRS. Continue Reading

Nonprofit Law Jargon Buster – Private Inurement v. Private Benefit

The private inurement rule and private benefit rules exist to ensure that charitable assets are preserved for the benefit of the public and not diverted to private use. This is a fundamental concept that distinguishes tax-exempt organizations from for-profits.

The rules originate in the language of Code Section 501(c)(3). Code Section 501(c)(3) contains the specific requirement that:

[N]o part of the net earnings of [the exempt organization] inures to the benefit of any private shareholder or individual . . . .

In addition, under the regulations, an organization is not treated as organized and operated for exclusively exempt purposes “unless it serves a public rather than a private interest,” Based on this provision, tax exempt status is not available to any organization if its net earnings inure to the benefit of private individuals “in whole or in part.”

In practice, the law distinguishes between different degrees of inurement depending upon who is being benefitted. The two types of inurement are referred to as “private inurement” and “public benefit.”
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