Private Philanthropy and Public Needs: A Historical Perspective Robert H. 89 I The Roots of American Philanthropy 89 II Poverty and Poverty 94 III The Gospel of Wealth and the Beginning of Great Foundations. National Endowment for the Arts Dance Tour Program; Cincinnati: Successful fundraising.
Foundations
III Community Foundations and the Tax Laws 1700 Status of community foundations before 1970 under the tax law. Future Role 1706 Current issues involving community foundations. 1706 The future role of community foundations in the private sphere.
TAXES
2046 The nature of the distinction 2046 Tax consequences of the distinction 2046 Impact on environmental activities 2047 II Activities traditionally recognized as charitable or. Public interest litigation 2089 Three basic criteria 2089 Applicable rules 2089 Application of the criteria 2089 Organizational rules 2090 Operational rules 2090 Attorneys' fees 2091 Footnotes 2093 An analysis of the federal tax distinction between public and private charities Laurens Williams and Donald V.
1975) 2099 Introduction 2099
Amendments 2260 In general 2260 Possible areas of amendment 2261 Return to fair market value standard 2261 Limitation of the deduction to costs in the. 2264 Alternatives for the donor 2265 gift of cash 2265 gift of net proceeds after a sale 2265 retention of property or proceeds of sale 2265 Other free transfers 2266 Summary 2266 Views of some tax professors 2266 The effect of the deduction 226 not a deduction 226 Pro-charity substitute for current law Tax treatment of appreciated property contributed to charity Gerard M.
Estate and Gift Taxes
The Direct Matching Grant system will provide a more equitable system of spending federal funds for. Equity from a tax perspective 2420 Equity from a spending program perspective 2421 Equity under the direct matching grant system.
Property Tax
REGULATION
Foundation Statutes 2712 Office of Attorney General 2726 Interstate Relations 2733 Reporting Requirements 2733 Release of Information Required of Certain Exemptions. Agencies 2801 Development and publication of standards 2804 Implementation of standards 2804 Establishment of continuous promotion and control.
Foreign Practices
Taxation of Charitable Organizations 2987 Administrative and Governmental Control 2987 Special Rules Applicable to Religious Groups 2987 VI Italy 2988 Scope of Activities of Private Philanthropic Organizations 2988 Tax Incentives 2988 Matching Grant Programs 2988 Financing of Charitable Organizations 2989 Taxation of Charitable Organizations 2989 Administrative and Governmental Control 298 9 Special Rules Applicable to Religious Groups 2989 VII Japan 2990 Scope of Activities of Private Philanthropic Organizations 2990 Tax Incentives 2990 Matching Grant Programs 2990 Financing of Charitable Organizations 2990 Taxation of Charitable Organizations 2991 Administrative and Governmental Control 2991 Special Rules Applicable to Religious Groups 2991 VIII Sweden 2992 Scope of Activities of Private Philanthropic Organizations 2992 Tax Benefits 2992 Matching Grant Programs 2992 Financing of Charitable Organizations 2992 Taxation of Charitable Organizations 2993 Administrative and Governmental Control 2993 Special Rules Applicable to Religious Groups 2993 Taxation and Philanthropy in Canada R. Example 3062 Modernization – Outdated purposes 3064 Aid to charities - investment policy 3065 General aid, assistance and admonition of charities 3066 Summary 3067 II Tax treatment of charities and their donors 3067 General tax principles 3067 Taxation of charities 3068 Exempt and unrelated income 3068 Denial of income tax relief 3069 The Private Settlement Trust —The private foundation.
FEDERAL OVERSIGHT OF PRIVATE PHILANTHROPY
In Chapter III, we examine the likely impact of the philanthropy of the new office and assistant commissioner, and the reorganization of responsibilities within the Internal Revenue Service. It has been suggested that a new committee be established to take on the agency's current responsibilities for charities.
2579 tradition. Some criticisms of the Service have merit: attitudes toward charitable
We believe that the need for information is critical and that the service is best equipped to meet this need. The audit program of exempted service organizations should not be so disproportionately focused on private institutions;
THE INTERNAL REVENUE SERVICE Statutory Framework
In doing so, these officers are somewhat hampered by (a) cumbersome procedures designed generally to meet the needs of tax collection departments; (b) inadequate authority in relation to other officials near the top of the service hierarchy; (c) the service's understandable emphasis on its role as a tax collector rather than an overseer of non-income generating activities; and (d) the generally inferior qualifications and training of field service staff compared to national office staff. The branch's 110 professional staff members and several individuals in the Office of the General Counsel (and several former technical staff members working in the Audit Division's Exempt Organizations Examination Section) comprise the service's experts on substantive issues affecting exempt taxes. organizations.
2587 This vague and somewhat circular ambiguity is compounded by the lack of
Construction of a medical building and facilities for lease to a physician at lower than normal rates, to attract a physician to serve an isolated rural community, is not disqualified for 501(c)(3) exemption because of the personal financial benefit, which the doctor thereby achieves. . Public interest law firms that litigate "on any matter of public interest as determined by the applicant" may qualify under 501 (c)(3) if they present positions on behalf of the public at large, ordinarily do not take cases, where the private economic interests at stake would warrant private legal representation, does not accept fees except in accordance with procedures approved by the Service, is responsible for policies and programs to a board representative of the firm's staff or attorneys, or of any non-501 (c )( 3) organization and is not operated in a way that creates identification or confusion with a private law firm.
2589 does not detract from the program's charitable character, as they are
The Service's treatment of the issue of racial discrimination in private schools illustrates the interaction between concerns about judicial precedent and broader concepts of the public interest. Shortly thereafter, the Service issued Tax Procedure 71-39 (summarized on page 2588 above), which sets forth the guidelines under which public interest law firms will receive 501(c)(3) recognition.
2593 cooperatives). 66 In recent years the National Office has issued about 1,700 rulings
All Service field personnel designated as Key District Specialists are tax agents or tax auditors, both of which are job classifications established by the Civil Service Commission for auditors. Most of the principal district specialists assigned to the Determination Letter Activity Groups are the lower graded tax auditors, many of them with many years of service at that level.
2595 Foundations Under the Tax Reform Act of 1969. The latter course is based on
His proposed provision on the issue has been reviewed by a group-level conference reviewer. If the case involves a new position or a major modification of an old position, or is extremely sensitive, it may be referred to the Chief of the Conference and Review Staff (acting for the Director of the Tax Provisions Division of various and special) to the Interpretive Division of the Office of the Main Council.
2597 Workload.The professional staff of the Exempt Organizations Branch, most of
The head of one of the decision sections is responsible for the training programme, assisted by a Branch training officer who reviews and evaluates the progress of each trainee. Any exemption determination (like any tax question) presents a "legal" question in the sense that it requires a decision as to whether and how the statutory words of the Internal Revenue Code apply to a particular organization or activity.
2599 The Interpretative Division is one of two divisions under the Associate Chief
Revocation or modification of exempt status is initiated by a letter to the organization from the Central District Director informing of the proposed action and the reasons for it. We first review the organization and implementation of the Service's exempt organization audit program and then its results.
2605 The Procedures Section also has two main functions: (1) conducting pre-closing
Although the Service's specific criteria for selecting returns to be audited are not publicly available, the general criteria are set forth by the Service's manual or audit procedures for exempt organizations. Key District Specialists designate ("classify") the returns to be audited by marking the ACR accordingly and sending it to the Philadelphia Computer Center, which then sends back a packet including each of the designated returns.
2607 Audit objectives and techniques. The typical audit of a business enterprise
Chapter 42's emphasis on the excise tax on private foundation audits should, however, be read in conjunction with the Service's 1972 directive on Private Foundation Examination Reports and Procedures, which is a "companion document" to the Audit Techniques Guidelines. Protests in cases other than adverse status determinations are reviewed by the Key District Conference Chief of Staff only if chapter 42 excise or non-business income tax adjustments are involved.151.
2609 regional appellate division conferees have recently started taking the Service's exempt
The Service's performance in these "subversive" Cold War cases appears to have reflected the political climate of the period. Two additional factors, stemming from the fact that exempt organizational matters constitute only a small part of the Service's responsibilities, also appear important.
EFFECT OF THE NEW ASSISTANT COMMISSIONER
A similar concern has been expressed in the past about the Service's administration of tax law provisions relating to exempt organizations. In order to implement the provisions of this bill, it is intended that the main activities mentioned above be transferred from the various offices of the Assistant Commissioner to the new Office of the Assistant Commissioner (Employee Plans and Exempt Organizations).
2623 Exempt Organizations Division has a Technical Branch performing the functions
INTERNAL REVENUE SERVICE
34; that there is a lack of uniformity as to the disposition of the case, or that the case is so unusual or complex as to warrant consideration by a national office."2 J 8. Eliminating this assurance places a high priority on the quality of regional reviewers and on the careful monitoring of regional decisions by the national office.
2627 between the technical staff and the Chief Counsel's office, greater exempt
The eligibility of charities to participate in this federally sponsored fundraising program is controlled by the Chairman of the Civil Service Commission under broad authority given to him by the 1961 Executive Order. The President's Manual states that “only ..agencies that have specific functions in the areas of health, welfare, or recreational services or in the provision of international services consistent with United States policies.
2635 chapters, in other areas of charitable activity as well. We believe the Chairman
It seems clear, then, that these terms were intended to have the same meaning in the postal laws as they do in the tax laws. All such “promotional” organizations are equally disqualified by the Postal Service from the preferential postal rates that would otherwise be available to religious, educational, scientific or philanthropic organizations.
2637 charities and 501(c)(4) "social welfare" organizations are that the latter remain free
Established by Presidential request, the advisory committee consists of eleven citizens appointed by the AID Administrator. AID regulations require that any organization applying for registration with the advisory committee be recognized by the Internal Revenue Service under section 501(c)(3) and, in addition, demonstrate that it is.
The service's records were good (if not perfect) in this regard, and this is known. The service appears to have performed well in carrying out what is arguably its most sensitive task -- deciding qualifications for exempt status.
2643 duplicated, the new commission would be staffed initially with exempt organization
The Service's administration of the unrelated business income tax would require dual audits, both by the Service and Commission staff, for all 501(c)(3) organizations. The tax would then be administered by two agencies, as the unrelated business income tax would continue to apply to other categories of exempt organizations, which would remain under the jurisdiction of the Service (see page 2602 above).
2645 Second, it is difficult to determine the extent of fraud and similar abuses in
Meanwhile, the role of the service remains important, particularly as the general public may consider the service's recognition of exempt status as a certificate of continued reliability of a public charity? © I. The service may similarly alert the public to other types of "obvious" non-compliance with the law or regulations".
2649 where such person is in existence for less than twelve calendar months, then
First, the tasks of the new agency could be transferred to the tax service. Second, the new agency could be an independent regulatory agency along the lines of the Securities and Exchange Commission.
2655 directed exclusively to the organization's voting membership; (2) is an invitation to
The solicitation statement would contain essential information relating to the solicitation and the organization preparing it, presented in a form prescribed by the new agency. In these cases, the rules may require that certain information be provided at the time of the solicitation—by telephone or in the text of a media advertisement—with a clear statement that the full solicitation statement is available upon request.
2657 Development) and its affiliated organizations, published "Standards of Accounting
Rule 10b-5 under the Securities Exchange Act of 19343 3 1 makes it illegal in connection with the purchase or sale of a security. Substantially identical language was adopted in the Interstate Land Sales Full Disclosure Act relating to the lease or sale of lots in any subdivision containing 50 or more lots. fraud in connection with solicitations subject to the proposed disclosure requirements.
2659 violations of chapter 42 of the Code, but these apply only to private foundations
Regardless of position on this issue, we believe that federal reasonable sanctions should apply to all 501(c)(3) organizations. Third, it inhibits the growth of a case law interpreting the exempt organization provisions.
2663 (c) charitable donations by broad purpose, including at a minimum
With additional funding and staff, the agency could immediately begin publishing philanthropy statistics. Moreover, there are indications that the agency will soon launch a more useful program in this area.
2665 Act, but public comments should provide useful information and supplement the
We propose that the Operations Section of the new Exempt Organizations Section include separate sections for Private Foundation Examinations and Public Charity and Miscellaneous Examinations. Responsibility for the exempt organization master file should be jointly coordinated between this staff and the Operations Branch of the Exempt Organizations Division.
2667 Appendix
The Peterson Commission focused on private foundations addressed by the Tax Reform Act of 1969. See Foundations, Private Giving, and Public Policy, Report and Recommendations of the Commission on Foundations and Private Philanthropy (Chicago, 1970).
2669 10. Code § 7803(a)
- IRM (11)671.224.2
- IRM 4(11)31
- IRM (11)671
- Ibid., at 608
Because of the benefits of Service recognition (see next note), some church groups and small public charities that are exempt from the § 508 filing requirement nevertheless choose to obtain 501(c)(3) Service recognition. For the annual service year, the total tax-exempt expenditure for audits of organizations was budgeted for audits of private institutions.
2681 165. The Service's Chief Counsel is not in the career service, but he is organizationally an
Schoenfeld, head of the Procedures Department, Exempt Organizations Research Division, Audit Department, Internal Revenue Service, in. The agency is technically referred to in the bill as the Minister of Finance "or his designee."
JUDICIAL REMEDIES AND RELATED TOPICS
The Code was also amended to allow reduction of the termination tax on private foundations if a state court took appropriate action to safeguard the foundation's funds. These measures were an open admission that withdrawal of the exemption was an inadequate sanction to prevent violation of the provisions of the Code.
2699 Supreme Court, Treasury and Service officials and the private bar. It would logically
PRIVATE BENEFIT
These activities are now prohibited in connection with private foundations under section 4944, which imposes a tax on the fiduciaries of a charitable organization who authorize an investment knowing that it jeopardizes the accomplishment of the organization's exempt purposes. Like the ban on self-dealing, the sanctions can be either court-imposed equitable remedies or penal taxes or a combination of the two.
