The Law of Tax-Exempt Organizations, 10th Edition 2014 Cumulative Supplement

CHAPTER ONE

Definition of and Rationales for Tax-Exempt Organizations

*§ 1.2 Definition of Tax-Exempt Organization

§ 1.7 Freedom of Association Doctrine

§ 1.2 DEFINITION OF TAX-EXEMPT ORGANIZATION

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This anomaly of a tax-exempt organization being an entity that is subject to various taxes is addressed in the Internal Revenue Code. There it is written that an organization that is exempt from tax^15.1 shall nonetheless be subject to certain taxes^15.2 but, notwithstanding that tax exposure, “shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes.”^15.3 The IRS advanced the argument that an organization, having paid tax on unrelated business income for some of its years, should not be considered a tax-exempt organization for a federal tax law purpose,^15.4 but that argument was rejected by a court as being inconsistent with the purpose of the quoted statute.^15.5

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The staff of Congress's Joint Committee on Taxation estimated that, for the federal government's fiscal years 2013–2017, the tax expenditure for the income tax charitable contribution deduction ...