Yet another court ruling has been issued on a somewhat obscure regulatory requirement that highlights the tension between significant First Amendment rights and the state’s power to threaten them. The context is the power of the States’ Attorneys General, in regulating Section 501(c)(3) charitable organizations, to obtain otherwise confidential major donor information as disclosed on IRS Form 990 Schedule B. The case is Americans for Prosperity Foundation v. Becerra, previously Americans for Prosperity Foundation v. Harris, in which a three-judge panel of the federal Ninth Circuit Court of Appeals recently reversed a District Court Judge’s judgment that such requirement was unconstitutional as applied to the litigants’ specific circumstances. The Court’s ruling demonstrates a fundamental difference in perspective as to the government’s role in the face of compelling First Amendment free speech and freedom of association rights.
Has your nonprofit ever engaged in joint activities with a business, perhaps with resulting revenues? Such arrangements are increasingly common for many Section 501(c)(3) organizations. A key legal requirement is that the tax-exempt organization maintain control of the project, so that its charitable resources will be “exclusively” used in furtherance of tax-exempt purposes, as required by the Internal Revenue Code. What does “control” mean for IRS purposes, and what happens to resulting revenues? Careful planning is essential to answering these questions for optimal tax compliance.
May a nonprofit that makes loans to private individuals and businesses qualify as a Section 501(c)(3) organization? Or is making a loan a “business,” not suitable for public charity status? In the world of microfinance—making small loans to those who lack ready access to funds— the IRS allows for such public charity qualification, albeit within restrictive parameters. Charitable microfinance activities are well grounded in historical practice, they can provide significant societal benefits to disadvantaged communities, and thus they can fulfill tax requirements for “charity.”