Analysis of Obtaining Tax Exempt Status of a Presently

Unrecognized Camping Association

Exam # 257710

Dean Emeritus Nicholas P. Cafardi

Tax Exempt Organizations

LAWS C571.01

Submitted April 15

Spring Semester, 2011

 INTRODUCTION

I am currently a member of a medium sized, yet close-knit association

of friends that engages in camping activities, (hereinafter referred to as “the

camping group”). Previously, members of the camping group have operated

as individuals during our camping activities; members bore most costs of the

camp separately and provided equipment for the camp in a piecemeal ad

hoc fashion. In addition, some members had little interaction with the rest of

the group with the exception of one annual camping event. However,

approximately a year ago, due to problems registering a land reservation for

a large group as individuals, as well as natural affinity between group

members and a desire to socialize more often, the camping group decided to

formally organize.

Currently, the camping group has formalized its membership,

instituted a controlling board of directors, and holds quarterly meetings of all

members. During one of these quarterly meetings, a discussion was brought

up regarding the extent of the formality of our organization. From that

conversation, a decision was made to create an organizational bank account.

That decision created uncertainty as to our ability to obtain a bank account

in the name of the organization without any formal recognition from a

governmental body. Although our research revealed that we would be able

to obtain an account even though the group is unrecognized by a

governmental body, some members of the group expressed an interest

2
about the benefits and possibility of becoming a recognized organization.

This paper analyses the options that the camping group has in becoming a

recognized organization.

A TAX EXEMPT NONPROFIT ORGANIZATION

When thinking of organizing an a group of people and creating an

business-type entity, a first inclination might be to mirror some of the

prevalent forms of businesses that exist, such as various types of

partnerships, corporations, or even the newer forms of unincorporated

associations.1,2 These are all valid modes of organization. However,

organizing through one of those types of organizations only assigns liability

and leadership. Since the camping group will not be operating to generate

revenue for its constituent members, an organization with different tax

structuring is being considered. The camping group is considering seeking

recognition as a type of nonprofit organization.

Nonprofit organizations are a subset of all business organizations that

do not distribute any net earnings to owners or shareholders, and instead

use revenue to further the goals of the organization.3,4,5 Furthermore, there

is an even more narrowly defined type of nonprofit organization known as a

tax exempt nonprofit organization. This classification is highly desirable

because of the financial benefits that can it can bestow. Such benefits can

include exemption from federal, state, and local taxes, special grants,

3
government funding, special postage rates, and tax deductions for

contributing donors.6 In order to receive these financial benefits, an

organization must meet certain strict qualifications. However, there are

numerous ways that an organization can meet these qualifications. These

qualifications vary and are specified within the definitions of the many types

of nonprofit organizations listed within the Internal Revenue Code at sections

501, 521, and 526-530.7,8

The most prevalent type of tax exempt organization is the section 501(c)(3)

organization.9,10 As such, it will be the initial focus of the camping group’s

desire to organize.

THE RATIONALE BEHIND TAX EXEMPTION

There is no one main rationale behind exempting nonprofit

organizations from taxation. The first rationale is that there is a tradition of

extending such benefits. Organizations have been receiving tax benefits

even before the 18th century. Those organizations in the distant past that

first received preferential tax treatment were usually churches or some type

of religious organization. Besides the historical tradition of granting tax

benefits, there is a morality issue of unjustly performing double taxation.

This is the case in organizations that are not very financially distinct from its

individual members. There are more rationales that explain why tax

exemption exists, though not discussed here. Additionally, there are even

4
more philosophical theories underneath the rationales of tax exemption, the

most popular or which are discussed infra.

The most popular theory behind tax exemption is the subsidy theory.

The subsidy theory states that tax exemption is justified on the basis of the

public benefits conferred by the organizations, which relieve burdens on the

government by providing goods and services that society or government is

unable or unwilling to provide. Therefore, the government provides financial

support as a legislative grace.11 There is some criticism of this theory,

though. Critics of the subsidy theory claim that such tax benefits are the

equivalent of tax expenditures, and subsequently believe that direct

subsidies would be more efficient.12

There are four main alternatives to the traditional subsidy theory; they

are the income measurement theory, the capital formation theory, the

altruism theory, and the donative theory. The income measurement theory

asserts that nonprofit organizations are exempt from taxation “because

there is no practical and traditional tax accounting method to measure the

net income of the entity.”13 The capital formation theory suggests that

nonprofit organizations deserve exemption to balance out their inadequate

access to the traditional form of capital-equity investment.14 Under the

altruism theory, nonprofit organizations are also deemed as appropriate for

tax subsidies because the founders of nonprofits chose to forgo profits in the

name of public benefits.15 The final theory to be discussed, the donative

5
theory, states that nonprofits that are capable of attracting substantial

donations from the public should receive corresponding tax benefits.16

There are more theories and principles of tax exemption that have

been omitted. While these are unimportant for the analysis of the camping

group, it must also be noted that the regulations of tax exemption of

nonprofit organizations are not immune to politics, and some regulations

have originated simply as the result of self-interested lobbying performed by

special interest groups.

THE 26 U.S.C. 501(c)(3) ORGANIZATION

Section 501(c)(3) provides exemption for:

Corporations, and any community chest, fund, or foundation,

organized and operated exclusively for religious, charitable,
scientific, testing for public safety, literary, or educational
purposes, or to foster national or international amateur sports
competition (but only if no part of its activities involve the
provision of athletic facilities or equipment), or for the prevention
of cruelty to children or animals, no part of the net earnings of
which inures to the benefit of any private shareholder or
individual, no substantial part of the activities of which is
carrying on propaganda, or otherwise attempting, to influence
legislation (except as otherwise provided in subsection (h)), and
which does not participate in, or intervene in (including the
publishing or distributing of statements), any political campaign
on behalf of (or in opposition to) any candidate for public
office.17,18

Section 501(c)(3) organizations must be organized and operated

exclusively for one of the aforementioned purposes, may not inure any

earnings to a private shareholder or individual, may not attempt to

6
substantially influence legislation, and may not participate in any political

campaigning activities.19

The benefits of having tax exempt 501(c)(3) status include exemption

from federal income tax and eligibility to receive tax-deductible charitable

contributions.20 In addition, most states also offer additional tax exemptions

for organizations that qualify as 501(c)(3) organizations. There is a limitation

on these benefits, however. For contributions to be tax deductible, the

contribution must be a gift of money or property without receipt or

expectation of receipt of adequate consideration, made with charitable

intent.21

There are also some responsibilities that come with recognition as a

501(c)(3) organization. Section 501(c)(3) organizations must fulfill the

following responsibilities: keeping adequate records, filing required returns,

providing donor substantiation, obeying disclosure laws, generating public

support, avoiding “excess benefits” for insiders, shunning political activity,

limiting legislative activity, and limiting unrelated business activity.22

Despite the possible burdens that will be incurred if the camping group

is recognized as a 501(c)(3) organization, this is still the most beneficial way

to organize the camping group as a nonprofit organization. The benefits of

the 501(c)(3) vastly outweigh the costs of recognition as well as compliance

once initial recognition has occurred. There are initial barriers to recognition

as a 501(c)(3) organization, though. There are four basic tests conducted by

the Internal Revenue Service that can be applied to determine tax exempt

7
status, (the organizational test, the operational test, the private inurement

test, and the political activities test), as well as two court created tests, (the

commerciality doctrine and the public policy doctrine).23,24

Each of the aforementioned tests will be examined with respect to the

camping group. While failure of any of these tests could result in the denial

of 501(c)(3) status, they will be examined in a loosely based order of

increasing significance.

COURT IMPOSED LIMITATIONS ON TAX EXEMPTION

The Public Policy Doctrine

The U.S. Supreme Court ruled that tax exemption as a charitable

organization is available only where the organization is operating
in conformity with federal public policy.25 This rule of law, a
judicially imposed overlay of the statutory law, is known as the
public policy doctrine.26

The public policy doctrine originated with the 1958 case of Tank Truck

Rentals, Inc. v. Comm’r.27 Tank Truck Rentals held that fines assessed in

violation of Pennsylvania state law were not “ordinary and necessary”

deductible business expenses because they violated the declared policies of

the state.28 Later, in Bob Jones Univ. v. U.S., the Court adopted the view that

the purpose of a charitable entity “may not be illegal or violate established

public policy.”29,30,31

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 The camping group will not fail if examined under the public policy

doctrine. The camping group abides by all federal laws as well as any local,

nongovernmental regulations enforced at any camping locations we use.

The camping group, in its preliminary by-laws, also specifically prohibits drug

usage and underage drinking.

The Commerciality Doctrine

The commerciality doctrine originated out of the concept that nonprofit

organizations, with the benefits bestowed upon it by the government, should

not compete with commercial organizations in the business sector.32 The

basic premise of the commerciality doctrine is that:

A tax-exempt organization is engaged in a nonexempt activity

when that activity is engaged in in [sic] a manner that is
commercial in nature. An activity is a commercial one if it has a
direct counterpart in, or is conducted in the same manner as is
the case in the realm of for-profit organizations.33

The commerciality doctrine also “appears to hold that once a tax exempt

organization acquires a substantial commercial purpose, it no longer

qualifies as tax exempt.”34 This is very similar to phrasing in the operational

test, discussed infra. In fact, this court created doctrine is so closely related

to the operational test that some scholars believe that the commerciality

doctrine is a superfluous restating of an already codified regulation. This

9
doctrine poses problems for organizations that have some type of

commercial activity which mimics other normal for-profit activity.

The camping group will probably not have a problem meeting the

requirements of the commerciality doctrine. Most of our activities involve

camping, which, other than paying for land rental and purchasing supplies, is

a noneconomic activity. The only possibly violation of the commerciality

doctrine that could occur would be by holding social functions with members

outside of the camping group. Although our camping group has not done

this before, we have been guests of other camping groups’ social functions,

some of which charged an admission fee to cover the costs of food and

drinks. While the camping group would eventually like to hold social events

with nonmembers, as it stands currently, the camping group has not

previously engaged in that activity and has no immediate plans to do so.

INTERNAL REVENUE SERVICE TESTS FOR TAX EXEMPTION

The Political Activities Test

(3) Action organizations.

(i) An organization is not operated exclusively for one or
more exempt purposes if it is an action organization as defined in
subdivisions (ii), (iii), or (iv) of this subparagraph.
(ii) An organization is an action organization if a substantial
part of its activities is attempting to influence legislation by
propaganda or otherwise. For this purpose, an organization will
be regarded as attempting to influence legislation if the
organization:

10
 (a) Contacts, or urges the public to contact, members
of a legislative body for the purpose of proposing,
supporting, or opposing legislation; or
(b) Advocates the adoption or rejection of
legislation...
(iii) An organization is an action organization if it
participates or intervenes, directly or indirectly, in any political
campaign on behalf of or in opposition to any candidate for
public office…
(iv) An organization is an action organization if it has the
following two characteristics:
(a) Its main or primary objective or objectives (as
distinguished from its incidental or secondary objectives)
may be attained only by legislation or a defeat of proposed
legislation; and
(b) it advocates, or campaigns for, the attainment of
such main or primary objective or objectives as
distinguished from engaging in nonpartisan analysis, study,
or research and making the results thereof available to the
public…35,36

The political activities test is the first of the tests used by the Internal

Revenue Service to be discussed. Like all of the tests used by the Internal

Revenue Service, the political activities test is codified in the Code of Federal

Regulations. The political activities test has two elements; electioneering

activities and lobbying activities.

Electioneering activities, as described by the Internal Revenue Service,

are: directly or indirectly participating in, or intervening in, any political

campaign on behalf of (or in opposition to) any candidate for elective public

office, contributing to political campaign funds or public statements of

position (verbal or written) made on behalf of the organization in favor of or

in opposition to any candidate for public office, and voter education or

registration activities with evidence of bias that (a) would favor one

11
candidate over another; (b) oppose a candidate in some manner; or (c) have

the effect of favoring a candidate or group of candidates.37 Certain activities

are not prohibited; exceptions exist for activities that simply encourage

people to participate in the electoral process in a non-partisan manner.38

The Internal Revenue Service defines lobbying as:

…contacting, or urging the public to contact, members or

employees of a legislative body for the purpose of proposing,
supporting, or opposing legislation, or advocating the adoption or
rejection of legislation.39

The Internal Revenue Service does allow some lobbying by 501(c)(3)

organizations. However, an organization does not qualify for, or will lose, tax

exempt status if lobbying is a “substantial” part of its activities.

This test has no application to the camping group. The camping group

is an apolitical group; the camping group has not, and will not engage in any

political activity.

The Private Inurement Test

(2) Distribution of earnings. An organization is not operated

exclusively for one or more exempt purposes if its net earnings
inure in whole or in part to the benefit of private shareholders or
individuals...40,41

The private inurement test is one of the fundamental ideas behind the

creation of nonprofit organizations—that, generally, these organizations exist

to carry out a specific goal, not to benefit private ownership.

12
 Courts will look to multiple factors in determining whether there has

been private inurement. Two main situations that could indicate private

inurement are excessive compensation and non-arm’s length transactions.42

In considering those situations, courts will look to “the reasonableness of the

amount paid, the reason why it was paid, the type of agreement which

confers the benefit, the persons involved in forming the agreement[,] and

the persons who have control of the payments.”43

Problems can arise when there is an overlap of control of an

organization and the benefits that it grants. While an overlap of benefit and

control does not always preclude exemption, the potential for abuse is great.

An example of this type of abuse is highlighted in Church of Modern

Enlightenment v. Comm’r.44, 45 In Church of Modern Enlightenment, the

“church” paid for “parsonage expenses” that were, in reality, the president

of the church’s day to day living expenses, such as rent, utilities, clothing,

and food.46

The camping group can possibly pass the private inurement test. No

one of the board of directors of the camping group receives any type of

compensation. All of the expenses that are incurred by the camping group

are for communal use. Nothing purchased is ever owned or used by specific

people. The only issue the camping group would have with the private

inurement test is whether the camping group as a whole is large enough to

be considered a public rather than a private benefit. This could be a

13
significant problem; however, I believe that the nature of the group and the

way benefits are disbursed could possibly overcome this test.

The Operational Test

The final two Internal Revenue Service tests are very similar. Both tests

relate to 501(c)(3) exempt purposes. The operational test focuses on the

organization’s activities, whereas the organizational test focuses on the

organization’s articles of organization or comparable governing document.47

The text of the operational test in the Code of Federal Regulations is as

follows:

(c) Operational test--(1) Primary activities. An organization will

be regarded as operated exclusively for one or more exempt
purposes only if it engages primarily in activities which
accomplish one or more of such exempt purposes specified in
section 501(c)(3). An organization will not be so regarded if
more than an insubstantial part of its activities is not in
furtherance of an exempt purpose.48,49

“Section 501(c)(3) provides that to be tax exempt[,] an organization

must be organized and operated exclusively for an exempt purpose.”50

However, this section of the code has been interpreted as to mean that the

operations of the organization must “primarily” be in furtherance of an

exempt purpose, not that the entirety of all activity be in furtherance of an

exempt purpose.51 Once again, the possibility of recognition of tax

14
exemption hinges on a quasi-arbitrary term, such as “primarily” or

“substantially.”

In using the operational test, a broad “facts-and-circumstances”

inquiry is used, by considering the existence or nonexistence of an espoused

primary purpose, and then examining the size and extent of the activities

which are in furtherance of one or more exempt purposes.52 The

operational test poses a significant problem for the camping group. While

the camping group does not currently engage in any profit making activities

outside of collecting dues and fees from members, its main purpose may not

qualify under section 501(c)(3).

As stated before, 501(c)(3) organizations encompass organizations

operated exclusively for religious, charitable, scientific, testing for public

safety, literary, or educational purposes, to foster national or international

amateur sports competition, to promote the arts, or for the prevention of

cruelty to children or animals. The only avenues that the camping group

could pursue are advocating that it: 1) provides enough affiliated physical

activities, (such as hiking/climbing/etc.), to qualify under an amateur athletic

association, or 2) provides an educational service by teaching camping and

wilderness skills. Either argument is on quite shaky ground; unfortunately,

the camping group will probably fail the operational test.

The Organizational Test

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 (b) Organizational test--(1) In general.
(i) An organization is organized exclusively for one or more
exempt purposes only if its articles of organization…:
(a) Limit the purposes of such organization to one or
more exempt purposes; and
(b) Do not expressly empower the organization to
engage, otherwise than as an insubstantial part of its
activities, in activities which in themselves are not in
furtherance of one or more exempt purposes.
(ii) In meeting the organizational test, the organization's
purposes, as stated in its articles, may be as broad as, or more
specific than, the purposes stated in section 501(c)(3)...
(iii) An organization is not organized exclusively for one or
more exempt purposes if its articles expressly empower it to
carry on, otherwise than as an insubstantial part of its activities,
activities which are not in furtherance of one or more exempt
purposes, even though such organization is, by the terms of such
articles, created for a purpose that is no broader than the
purposes specified in section 501(c)(3)...
(iv) In no case shall an organization be considered to be
organized exclusively for one or more exempt purposes, if, by
the terms of its articles, the purposes for which such organization
is created are broader than the purposes specified in section
501(c)(3)...
(v) An organization must, in order to establish its
exemption, submit a detailed statement of its proposed activities
with and as a part of its application for exemption…53,54

The organizational test is very similar to the operational test. Whereas

the operational test checks for what activities the organization actually

performs, the organizational test checks for how an entity is formally

organized. “The organizational test requires that the articles of organization

… described in IRC 501(c)(3) contain an explicit statement that its purposes

are 501(c)(3) exempt purposes.”55 (The document to be reviewed need not

be articles of organization; other pertinent documents include articles of

incorporation, articles of association, trust indenture, or a constitution).56

16
 An organization is deemed to be organized as an validly exempt

organization if the creating document: 1) limits the purposes of the

organization to only exempt purposes, 2) does not empower the organization

to engage in any substantial activity that is not in furtherance of exempt

purposes, and 3) permanently dedicates the organization’s assets to 501(c)

(3) purposes on dissolution.57 The organizational test also incorporates an

idea similar to the “four corners rule” in contract law:

The requirement that [an] organization's purposes and powers

must be limited by the articles of organization is not satisfied if
the limit is contained only in the bylaws or other rules or
regulations. Moreover, the organizational test is not satisfied by
statements of [an] organization's officers that [they] intend to
operate only for exempt purposes. Also, the test is not satisfied
by the fact that [the organization’s] actual operations are for
exempt purposes.58

The camping group has yet to formalize any type of articles of

organization or articles of incorporation. However, if the camping group does

still choose to be formally recognized, it will use sample language promoted

by the Internal Revenue Service to ensure compliance.59,60 The camping

group will make sure that all three of the previously mentioned criteria are

met. However, the camping group has the same problem with the

organizational test that it did with the operational test. It is very likely that

the group’s main purpose of benefiting those that engage in camping will be

held to be an exempt activity. No matter how the articles of organization are

worded, an organization predicated upon an exempt purpose will not be

granted tax exempt status.

17
 THE 26 U.S.C. 501(c)(7) ORGANIZATION

While, unfortunately, recognition as a tax exempt 501(c)(3)

organization will probably not be possible for the camping group, there is an

alternative mode of organizing. Section 501(c)(7) organizations are similar

to Section 501(c)(3) organizations only in two ways; they must be organized

and operated exclusively for one of exempt purposes listed in the Internal

Revenue Code and they may not inure any earnings to a private shareholder

or individual.61 However, there is a different scope to the definition of

“exempt purposes” when dealing with section 501(c)(7) groups. Section

501(c)(7) of the Internal Revenue Code provides for exemption of:

Clubs organized for pleasure, recreation, and other nonprofitable

purposes, substantially all of the activities of which are for such
purposes and no part of the net earnings of which inures to the
benefit of any private shareholder.62

As the code states, section 501(c)(7) organizations must be organized for

pleasure, recreation, or other similar purposes.63 This definition is much

broader and less stringent than the requirement that 501(c)(3) be in the

public interest.64

While the Internal Revenue Code allows the purposes of 501(c)(7)

organizations to vary in much more diverse ways than 501(c)(3)

organizations, there are other limits placed on 501(c)(7) organizations

beyond 501(c)(3) organizations. Section 501(c)(7) organizations must: meet

strict guidelines as to how it obtains income from nonmember and

18
investment sources, provide an opportunity for personal contact among

members, have limited membership, be supported by membership fees,

duties, and assessments, and not have a governing instrument that contains

a provision that provides for discrimination against any person based on

race, color, or religion.65,66

The benefits resulting from organizing as a 501(c)(7) are much more

limited than a 501(c)(3). A special point must be made that section 501(c)

(7) organizations are the least favored of the tax exempt organizations under

501(c).67 Section 512 limits the exemption of income from the federal

income tax to only dues and fees collected by the organization.68,69 All other

income received by the organization is subject to taxation as unrelated

business income.70

TESTS FOR TAX EXEMPTION UNDER 501(c)(7)

The tests for tax exemption under 501(c)(7) are less numerous and

less specific than those under 501(c)(3). A significant bright line rule for

testing occurs in Revenue Ruling 58-589. In Revenue Ruling 58-589, the

Internal Revenue Service was specifically asked what the criteria or tests

were to be met in determining whether an organization can qualify for tax

exemption benefits under 501(c)(7).71,72

The Internal Revenue Service listed only two criteria; it stated that:

an organization must establish: 1) that it is a club both

organized and operated exclusively for pleasure, recreation[,]

19
 and other nonprofitable purposes and 2) that no part of its net
earnings inures to the benefit of any private shareholder or
individual.73,74

Another significant and straightforward listing of the criteria required to gain

exemption occurs in Revenue Ruling 74-30. Revenue Ruling 74-30 states

that in addition to the other requirements listed supra, there must be an

established membership of individuals, personal contacts, and fellowship

among the members, as well as a comingling of those members must play a

material part in the activities of the organization.75

There is are potential pitfalls and opportunities for abuse with 501(c)(7)

organizations. One such problem occurs when there is a group of loosely

associated or unassociated people that desire to use a nonprofit structure to

perform services that are generally available on a commercial basis.76 These

types of groups do not qualify as tax exempt organizations under 501(c)(7).

Evidence that an organization may be operating on a commercial basis

exists if membership requirements are broad or vaguely stated, initiation

charges/dues are so low that use of organizational facilities by the general

public is encouraged, management is strenuously engaged in expanding club

membership, or management can perpetuate itself through physical and

financial ties to club activities, facilities, or other means.77

There is also an issue of using organizational property to generate

revenue from the general nonmember public.78,79 Section 501(c)(7)

organizations can conduct economic interactions with nonmembers, but

those types of exchanges cannot be used to generate a profit.80 Revenue

20
neutral transactions are allowable, as long as such interactions are incidental

to and in furtherance of the primary purposes of the organization.81

The camping group will easily pass the tests for exemption under

section 501(c)(7). The camping group is organized around camping, which is

an exempt activity, as it is for pleasure and recreation. The camping group

currently does not engage in any other type of nonexempt activity, and

earns no other profits outside of collecting dues and fees as they are needed.

Therefore, there are no earnings to inure any private individuals. The

camping group started as a group of close knit friends with a desire to camp

and include more friends and associates in the activity. Personal contact and

fellowship is one of the main ideas behind the creation of the camping group.

Also, increasing the opportunities of a comingling of the members was the

purpose behind adopting quarterly meetings.

CONCLUSION

After reviewing the two major options that the camping group has in

organizing as a tax exempt organization, it is pretty clear that it can only

qualify as a 501(c)(7). The camping group will most probably fail the

operational and organizational tests required for recognition as a 501(c)(3)

organization. Although camping is a great activity, the rewards of providing

a means to assist a limited group of others and lower barriers to engaging in

the activity for that same group simply to not rise to the level of public

21
benefit. Neither are the physical activities engaged in by the camping group

appropriate for classification as amateur athletics.

While there are still benefits that can be garnered organizing as a

501(c)(7) organization, it is questionable at this point whether it would be

beneficial for the camping group. Granted, all of the income that the group

currently uses would be exempt as a 501(c)(7) organization, as it is from

dues and fees. However, one of the reasons the camping group was

considering recognition as a tax exempt organization was the possibility of

fundraising without the burden of taxation. Any income generated by the

camping group in that fashion would be deemed nonexempt unrelated

business income.

At this point, based on the size, attitude, and financial means of the

camping group, I will be recommending that the organization remain an

unrecognized, unincorporated association. While the burden of

organizational filings, filing fees, the hassle of annual tax returns, and

possibly filing 990-T forms would be justified if the camping group was able

to obtain 501(c)(3) recognition and its benefits, I cannot say the same for

501(c)(7) recognition.

22
1
Robert W. Hamilton & Jonathan R. Macey, Corporations Including Partnerships and Limited
Liability Companies 1 (2007).
2
Dwight Drake, Business Planning 38 (2008).
3
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 2
(2008).
4
Id at 10.
5
Gary M. Grobman, The Nonprofit Handbook: Everything You Need to Know to Start and Run
Your Nonprofit Organization (2008).
6
Findlaw, What are the benefits and drawbacks of nonprofit, tax-exempt status?,
http://smallbusiness.findlaw.com/business-structures/non-profit/non-profit-tax-exempt-pro-
con.html
7
26 U.S.C. 501 et seq.
8
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 19
(2008).
9
Internal Revenue Service, Internal Revenue Service Data Book 56 (2010)
10
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 27
(2008).
11
Id. at 145.
12
Id. 90.
13
Id. at 91.
14
Id.
15
Id. at 93
16
Id. at 94.
17
26 U.S.C. 501(c)(3)
18
Internal Revenue Service, Publication 557, Tax Exempt Status for Your Organization 20 (2010).
19
Internal Revenue Service, Exemption Requirements - Section 501(c)(3) Organizations
http://www.irs.gov/charities/charitable/article/0,,id=96099,00.html
20
Internal Revenue Service, Publication 4220, Applying for 501(c)(3) Tax-Exempt Status 2 (2009).
21
Internal Revenue Service, Notice 2004-41, Charitable Contributions and Conservation
Easements (2004).
22
Sandy Deja, Form1023Help.com http://www.form1023help.com/id2.html
23
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 146
(2008).
24
Id at 193.
25
Bob Jones Univ. v. United States, 461 U.S. 574 (1983).
26
Bruce R. Hopkins, The Law of Tax-Exempt Organizations 156 (2011).
27
Tank Truck Rentals, Inc. v. Comm’r, 356 U.S. 30 (1958).
28
Id.
29
Bob Jones Univ. v. U.S., 461 U.S. 574, 591 (1983).
30
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 205
(2008).
31
Bruce R. Hopkins, The Law of Tax-Exempt Organizations 156 (2011).
32
Id.
33
Id. at 100.
34
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 202
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35
26 C.F.R. 1.501(c)(3)-1(c)(3)
36
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 180
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37
Internal Revenue Service, The Restriction of Political Campaign Intervention by Section 501(c)
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38
Id.
39
Internal Revenue Service, Lobbying http://www.irs.gov/charities/article/0,,id=163392,00.html
40
26 C.F.R. 1.501(c)(3)-1(c)(2)
41
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 161
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42
Id. at 174.
43
Id.
44
Church of Modern Enlightenment v. Comm’r, T.C. Memo 1988-312 (1988).
45
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 162
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46
Id. at 164.
47
Internal Revenue Service, Internal Revenue Manual 7.25.3.1.3.6
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48
26 C.F.R. 1.501(c)(3)-1(c)
49
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 154
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50
Id. at 161.
51
Id.
52
Jessica Pena & Alexander L.T. Reid, A Call for Reform of the Operational Test for Unrelated
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53
26 C.F.R. 1.501(c)(3)-1(b)
54
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 146
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55
Elizabeth Ardoin, Organizational Test – IRC 501(c)(3) http://www.irs.gov/pub/irs-
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56
Id.
57
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58
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Id.
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61
Internal Revenue Service, Social Clubs
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62
26 U.S.C. 501(c)(7)
63
Internal Revenue Service, Exempt Purposes - Code Section 501(c)(7)
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64
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 204
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65
Id.
66
Internal Revenue Service, Publication 557, Tax Exempt Status for Your Organization 20 (2010).
67
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 781
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68
Id.
69
26 U.S.C. 512
70
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 781
(2008).
71
Id. at 777.
72
Revenue Ruling 58-589, 1958-2 C.B. 266
73
Id.
74
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 778
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75
Revenue Ruling 74-30, 1974-1 C.B. 137
76
Revenue Ruling 69-635, 1969-2 C.B. 126
77
Internal Revenue Service, IRC 501(c)(7) Organizations http://www.irs.gov/pub/irs-
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78
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 779
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79
Jockey Club v. Helvering, 76 F.2d 597 (2nd Cir. 1935)
80
Nicholas P. Cafardi & Jaclyn Fabean Cherry, Tax Exempt Organizations: Cases and Materials 779
(2008).
81
Id.