THE PRIVATE BENEFIT RULE AND INTERACTION OF EXCESS BENEFIT TRANSACTION TAXES WITH REVOCATION

Congress enacted the excise taxes on excess benefit transactions to give the Internal Revenue Service an additional way to enforce the prohibition of inurement with respect to public charities and Section 501(c)(4) organizations. The Proposed Regulations set forth examples designed to illustrate the...

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Bibliographic Details
Published inJournal of Taxation Vol. 104; no. 5; p. 304
Main Authors Michael Folz Wexler, Geske, Alvin J
Format Trade Publication Article
LanguageEnglish
Published New York Thomson Reuters (Tax & Accounting) Inc 01.05.2006
Subjects
Armenian Americans
Art galleries & museums
Collateral
Corporate tax planning
Excess benefit transactions
Excise taxes
Immigration
Noncitizens
Nonprofit organizations
Proposals
Sales
Sanctions
Section 501(c)
Seminars
Tax exempt organizations
Tax regulations
United States > US
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Summary:Congress enacted the excise taxes on excess benefit transactions to give the Internal Revenue Service an additional way to enforce the prohibition of inurement with respect to public charities and Section 501(c)(4) organizations. The Proposed Regulations set forth examples designed to illustrate the requirement that an organization seeking to qualify for tax exemption under Section 501(c)(3) (a "charity") must not be operated for "private benefit" but do not amend the definitional language relating to private benefit. The private benefit rule is not the same as the prohibition of inurement, which looks to the siphoning off of the assets or income of an organization to benefit insiders. IRS is clearly increasing its examination of public charities, especially those that have highly compensated officers and employees. For those who have followed the development of the intermediate sanction rules and are aware of the private benefit rules, the substantive provisions of the Proposed Regulations should not offer any surprises.
ISSN:0022-4863