On July 1, 2022, the IRS, Director of Exempt Organizations issued an array of final adverse determinations with respect to organizations seeking exemption under 26 U.S.C. sections 501(c)(3), 501(c)(4), and 501(c)(7). In these Private Letter Rulings, the IRS Exempt Organizations Division denied tax-exempt status to the organizations. A common theme runs through all the Rulings: The organization applying or under review for tax exemption failed the organization test and/or the operational test applicable to the requirements for the exemption sought.
Private Letter Rulings are not binding on any taxpayer except the taxpayer to whom the Ruling is directed. But, the Rulings are instructive and give an idea of the organizational and operational criteria that the IRS Exempt Organizations Division needs or wants to see in order to grant tax exemption. Due care should be taken with applications for tax exemption. The exemption, if available, is a privilege, not a right, and the IRS is not shy to deny that privilege when appropriate based on the organization or operations of the applying entity.
For additional information on legal and tax issues facing tax-exempt and nonprofit organizations, search this Freeman Law Insights blog for topics such as:
Three-Part blog on Tax Exemption and Unrelated Business Income Rules
Can Nonprofits Fundraise for Other Nonprofits?
What is a Section 509(a)(3) Supporting Organization?
Representing Texas Nonprofit Corporations
Below is a Freeman Law Insights Summary of those recent IRS Private Letter Rulings:
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