Freedom Path on the Move: Constitutional Free Speech Challenge to IRS "Facts and Circumstances" Test

The election year may be over, but free speech issues affecting politics and nonprofits remain of prime importance.  The case of Freedom Path, Inc. v. Lois Lerner, et al. presents the question of whether the IRS’s “facts and circumstances” test for tax-exempt organizations’ advocacy speech is constitutional.  The case could impact both free speech legal principles and the IRS’s future handling of nonprofits’ tax-exempt qualifications and activities. 

Background

Freedom Path is a Section 501(c)(4) social welfare organization that engages in “issue advocacy” – that is, communications intended to educate people about a wide variety of public policy issues.  Some section 501(c)(3) organizations also engage in issue advocacy activities, addressing public policy issues as part of their mission.  For both types of tax-exempt organizations, questions of legal permissibility may arise when these communications take on a political hue.  

Would You Like Some “Commerciality” With Your Coffee? Structuring Tax-Exempt Business Activities Under Section 501(c)(3)

Nonprofit leaders often think creatively about entrepreneurially-minded activities and new ways to expand their scope.  The IRS, however, may scrutinize a nonprofit’s more creative entrepreneurial endeavors under the judicially developed “commerciality” doctrine, which addresses the key question, “When do an organization’s operations become too commercial for Section 501(c)(3) tax-exempt qualification?”  Nonprofit leaders thus need to structure their organizations and operations for optimal tax-exempt treatment of business activities.  A new IRS ruling rejecting a coffee shop ministry’s tax-exemption application provides many insights.

What Our Presidential Candidates Can Teach Us About Tax-Exempt Legal Compliance

What do Donald Trump and Hillary Clinton share in common?  Among so many things political and otherwise (go ahead, use your imagination), they both head up charitable foundations, which have recently received media scrutiny for apparently operating outside legal boundaries.  What are the problems?  More importantly for us regular folks, what can prudent and responsible nonprofit leaders learn from these examples?  We will focus here on several areas related to:

  1. State charitable regulation requirements,
  2. Tax exemption principles against private benefit for nonprofit insiders, and
  3. IRS requirements for staying on course with an organization’s tax-exempt purpose.