Text: Nonprofit Law (The Life Cycle of a Charitable Organization) by E. Schmidt

Text: Nonprofit Law (The Life Cycle of a Charitable Organization) by E. Schmidt and A. Madison
IRS publication 3833(irs.gov)
Read Chapters/websites attached and answer each problem in 1-2 paragraphs, please use citations from the text. Outside sources are welcomed in addition to the text provided.
Chapter 4- Read pages 145-173 and answer the problem question
Following are some problems that ask you to put on the hat of an IRS examiner.
Should you issue a positive determination letter, recognizing each organization as a
§501(c)(3) organization that has a “charitable” purpose? What is your reasoning
behind this decision? If you do not have sufficient information to make a decision,
what questions would you ask? If your response is to deny recognition as a §501(c)
(3) organization, what facts would you need to make you change your mind? After
each fact pattern are resources that you could use to help make your decision, but
also consider the theoretical reasons for tax exemption and the principles used in
determining whether health care and disaster relief organizations should be
recognized as having a “charitable” purpose under IRC §501(c)(3).
1. Environmental protection: The Pevnick Land Trust is an organization that Jason
Pevnick started last year in order to preserve the back 40 acres of his 100-acre farm
in perpetuity. The land is not particularly ecologically sensitive, but Pevnick foresees
the day when suburban creep will arrive in his area. The nearest town, a suburb of
Large Metropolis, is 20 miles away. The 40 acres are not farmed. See Rev. Rul. 76-
204, 1976-1 C.B. 152; Rev. Rul. 78-384, 1978-2 C.B. 174; Dumaine Farms v. Comm’r,
73 T.C. 650 (1980).
2. Legal aid: Pass the Bar is a legal organization devoted to providing basic legal advice
to middle-income people. In an attempt to make the customer feel comfortable, the
setting is in a bar, not a traditional legal office. Customers pay $25 for each
consultation, which comes with a free soft drink and pretzels. The fee does not
begin to cover costs. Pass the Bar plans to make up the difference through
charitable donations and by winning attorneys’ fees from opposing parties. Pass the
Bar’s founder, Margherita Drinker, explained on Form 1023, “The poor have legal aid
and the wealthy have more lawyers than they need. The middle class has been
neglected.”
3. Sperm donation clinic: Friendly Fertility Clinic, a nonprofit corporation founded by
Simon Says, provides Mr. Says’s sperm free of charge to women seeking to become
pregnant through artificial insemination or in vitro fertilization. The clinic seeks tax
exemption as a §501(c)(3) charitable organization because it operates exclusively.