Rejecting Charity: Why the IRS Denies Tax Exemption to 501(C)(3) Applicants

T. L. Helge
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Abstract

New charitable organizations generally must file an application for exemption (Form 1023) and await approval from the Internal Revenue Service. Unfortunately, the criteria the Internal Revenue Service uses to evaluate applications has not always been transparent. If an application is approved, the Internal Revenue Service determination letter and the application for exemption are required to be made publicly available and can be requested from the Internal Revenue Service or the organization itself. Prior to 2004, in the case of denials, neither the application nor the Internal Revenue Service’s correspondence setting forth its rationale for the denial were made publicly available. This project is the first of its kind. While others have commented on isolated denial letters, this study is the first to conduct a comprehensive analysis of the Internal Revenue Service denial letters issued from when they first became available in 2004 through January 31, 2017. In conducting this project, I examined 603 determination letters in which the Internal Revenue Service denied exemption to an applicant seeking recognition as charitable organizations described in Section 501(c)(3) of the Internal Revenue Code. This project looks in-depth at the basis on which the Internal Revenue Service denied exemption to these applicants. To provide background for the basis of on which the Internal Revenue Service reviews exemption applications for charitable applicants, Part I of this article describes the requirements to obtain federal tax exemption as a charitable organization. In Part II of this article, I explain the methodology and the process by which I arrived at the data I present. Part III presents the data from my study and my analysis of the manner in which the Internal Revenue Service applies the five-part test for exemption in its review of the applicants who were denied exemption. The data pays particularly close attention to the evidence used by the Internal Revenue Service to support its denial of tax-exempt status. In Part IV of this article, I discuss the implications of my findings on the streamlined application process implemented by the Internal Revenue Service in July 2014. My data identifies concerns with the streamlined exemption process, and I suggest revisions that should be considered to the streamlined exemption process to make it more reliable.
拒绝慈善:为什么国税局拒绝对501(C)(3)申请人免税
新成立的慈善机构一般必须提交豁免申请(表格1023),并等待国税局的批准。不幸的是,美国国税局用来评估申请的标准并不总是透明的。如果申请获得批准,则国税局的裁定信和豁免申请必须公开,可以向国税局或组织本身索取。在2004年之前,在拒绝申请的情况下,无论是申请还是美国国税局(Internal Revenue Service)阐述拒绝理由的信函都不会公开。这个项目是同类项目中的第一个。虽然其他人对孤立的拒绝信发表了评论,但这项研究是第一个对美国国税局从2004年首次发布到2017年1月31日发布的拒绝信进行全面分析的研究。在进行这个项目的过程中,我审查了603封裁定信,在这些裁定信中,美国国税局拒绝了申请豁免的申请人,这些申请人寻求被认定为《国内税收法》第501(c)(3)条所述的慈善组织。这个项目深入研究了美国国税局拒绝豁免这些申请人的依据。本文第一部分描述了慈善组织获得联邦免税的要求,为美国国税局审查慈善申请者免税申请的依据提供背景。在本文的第2部分中,我将解释得出我所呈现的数据的方法和过程。第三部分介绍了我的研究数据和我对美国国税局在审查被拒绝豁免的申请人时适用豁免的五部分测试的方式的分析。这些数据特别关注美国国税局(Internal Revenue Service)用来支持其否认免税地位的证据。在本文的第四部分中,我讨论了我的研究结果对2014年7月美国国税局实施的简化申请流程的影响。我的数据表明了人们对简化的豁免程序的担忧,我建议对简化的豁免程序进行修订,以使其更加可靠。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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