Tax Cases

  • The U.S. Supreme Court wrote that, while for most nonprofit organizations "exemption from federal income tax is intended to encourage the provision of services that are deemed socially beneficial," social clubs are "exempted from tax not as a means of conferring tax advantages, but as a means of ensuring that the members are not subject to tax disadvantages as a consequence of their decision to pool their resources for the purpose of social or recreational services" (Portland Golf Club v. Commissioner, 497 U.S. 154, 161-162 (1990)).T


  • The U.S. Supreme Court wrote that Congress has an "especially broad latitude in creating classifications and distinctions in tax statutes" (Regan v. Taxation With Representation of Washington, 461 U.S. 540, 547 (1983)).


  • The U.S. Supreme Court wrote that tax exemption as a business league "is not available to aid one group in competition with another within an industry" (National Muffler Dealers Association, Inc. v. United States, 440 U.S. 472, 488 (1979)).


  • "[I]n view of the fact that bequests for public purposes operate in aid of good government and perform by private means what ultimately would fall upon the public, exemption from taxation is not so much a matter of grace or favor as rather an act of public justice" (Harrison v. The Barker Annuity Fund, 90 F.2d 286, ____ (7th Cir. 1937)).


  • A federal court of appeals wrote that "[s]pecial benefits to taxpayers, such as tax exemption status, do not turn upon general equitable considerations but are matters of legislative grace" (Mercantile Bank & Trust Company v. United States, 441 F.2d 364, ___ (8th Cir. 1971)).


  • A federal court of appeals wrote that "[i]f the charity's contract with the fundraiser makes the latter an insider, triggering the inurement clause of section 501(c)(3) and so destroying the charity's tax exemption, the charitable sector of the economy is in trouble" (United Cancer Council, Inc. v. Commissioner, 165 F.3d 1173, 1176 (7th Cir. 1999)).


  • A federal court of appeals wrote that "[t]here is nothing [in the facts of the case] that corporate or agency law would recognize as control" and that the trial court used the word control "in a special sense not used elsewhere, so far as we can determine, in the law, including the federal tax law" (United Cancer Council, Inc. v. Commissioner, 165 F.3d 1173, 1178 (7th Cir. 1999)). [This was written over three years after the intermediate sanctions rules had been enacted.]


  • A federal court of appeals wrote that treatment of a professional fundraising firm as an insider for private inurement purposes "threatens to unsettle the charitable sector by empowering the IRS to yank a charity's tax exemption simply because the Service thinks the charity's contract with its major fundraiser too one-sided in favor of the fundraiser, even though the charity has not been found to have violated any duty of faithful and careful management that the law of nonprofit corporations may have laid upon it" (United Cancer Council, Inc. v. Commissioner, 165 F.3d 1173, 1179 (7th Cir. 1999)).


  • A federal court of appeals wrote that a "slight and comparatively unimportant deviation from the narrow furrow of tax approved activity is not fatal" (St. Louis Union Trust Co. v. United States, 374 F.2d 427, 431-432 (8th Cir. 1967)).


  • A federal district court wrote this commentary about a sentence in the tax regulations concerning the primary purpose test: "Sadly, the last sentence of that section is a horrible amalgamation of negatives arranged like an inside joke prompting laughter only from seasoned and sadistic bureaucrats" (St. David's Health Care System, Inc. v. United States, ___ F. Supp. 2d ____, ____ (W.D. Tex. 2002)).


  • The U.S. Tax Court opened an opinion stating that the issue of revocation of tax-exempt status "turns on the question [of] whether petitioner's sale of its hospital . . . was for less than fair market value" (at 176), yet a few pages later the court wrote that "fair market value plays an important role but is not determinative herein" (at 182) (Anclote Psychiatric Center, inc. v. Commissioner, 76 T.C.M. 175 (1998)).


  • The U.S. Court of Federal Claims wrote that the "judiciary will liberally construe, and rightfully so, provisions giving exemptions for charitable, religious, and educational purposes" (American Institute for Economic Research v. United States, 302 F.2d 934, ___ (1962)).


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