Download: Nonprofit Law Podcast #39 (mp3, 7:06)
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Your guide to the laws impacting nonprofits.
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Commensurate in Scope ruling
- A recent private letter ruling, the IRS applied a somewhat controversial standard to reject exempt status to an organization that was a faith-based organization that also was creating tax-friendly financial plans for it's constituency.
- Remember, that it is totally feasible for a charity to engage in business activities and engage in business activities, however there are limitations out there (UBIT, etc.)
- But also remember that charitable organizations must be"exclusively" formed for charitable activities
- The commensurate in scope standard is that you have to have sufficiently large enough charitable programming relative in size to the financial resources of the organization.
- The organization in the PLR was only spending 1% (according to the IRS) on charitable activity, so this was an easy one from their perspective
- However, where does one draw the line? And how do you handle organizations such as The Nature Conservancy that have literally billions of dollars locked into land? Are they less allowed now to engage in business activities?
- This goes hand in hand with my call last episode for an (admittedly semi-overstated) Apollo Project on nonprofit regulation. We need more clarity and less ambiguity coming from the IRS
IRS Denies Tax-Exempt Status to Group That Spends Too Little Money on Charitable Programs, Chronicle of Philanthropy
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This podcast provides general information about legal topics but it is not a complete discussion of all legal issues that arise in relation to nonprofits nor is it a substitute for legal advice. This podcast does not create an attorney-client relationship. This is general legal information and the contributors make no warranties regarding the general legal information provided in this podcast , and disclaim liability for damages resulting from its use to the fullest extent permitted by the applicable law