When I was a younger person with numerous pretensions and abundant spare reading time, if asked for my favorite to work to revisit regularly, I probably would have cited some bleak French or Russian literature that I may have read one and a half times (generous) but nonetheless decided was core to my personality.

Having traded (some of) those pretensions and (nearly all of) that spare reading time and attention span for the life of a nonprofit tax lawyer, the answer now might be Revenue Ruling 67-4: a 56-year old one-page-long ruling about when publishing counts as an educational activity for 501(c)(3) purposes. Life comes at you fast, etc.

Revenue Ruling 67-4 is not even mentioned in the 501(c)(3) application-denial ruling that caught my eye this week. But it easily could have been. And I think it pairs neatly with something that is cited: the commerciality doctrine, as articulated in Living Faith, Inc. vs. Commissioner, a 32-year old tax case about a religious health food store.

So, join me in a discussion of these two great works of “literature”, and the 501(c)(3) publisher that never was.

So, you've set your sights on that elusive IRS tax-exempt status, only to find yourself entangled in a web of forms, regulations, and uncertainty. We're here to illuminate the paramount significance of an often underestimated factor that can shape the destiny of your tax-exempt aspirations – the administrative record.

There are times when I read over the most recent batch of IRS 501(c)(3) denial rulings and shed a tear (figuratively speaking, of course) for the shattered dreams of well-intentioned but misguided applicants. This is not one of those times.

There was a batch of six IRS denial rulings that came across my desk, and I will probably cover at least a few of the other five eventually. But my penchant for schadenfreude drew me to the one that mentioned blatant partisan campaign intervention and prohibited benefits to a multi-level marketing company. And honestly, it’s much worse than that.

Let’s do a quick recap as an excuse to cover these two issues, one of which is as “black-and-white” as they come (electioneering) while the other (managing private benefit so that a relationship to an affiliated for-profit does not cost the 501(c)(3) its exempt status) is typically a very gray area and one that we spend a lot of time talking to clients about in order to get the balance right. But, honestly, I just wanted to share some insane facts.

I can’t promise I’ll write up every 501(c)(3) denial letter from the IRS. I would like to think that one day, the IRS will be replete with resources and separating out wheat from chaff so efficiently that no EO law blogger could keep pace. But we are not there yet. And I enjoy this and believe in these denial letters as useful reminders of the rules enough that, for now, we’ll keep this going.

To that end, we have 4 new rulings this week, at least 3 of which are at least interesting in the sense of “I could easily see someone setting up a 501(c)(3) wanting to do something like this, and not quite getting why it doesn’t work.” And another that I can’t pretend anyone would want to read.

Our ongoing series on 501(c)(3) denials continues with not one but two rulings addressing a frequent topic of discussion: open source software development as a tax-exempt activity.

(A denial letter also came out for a rodeo that wants to be a 501(c)(3), but as a San Francisco-based attorney, I talk to a lot more open-source applicants than I do rodeos.)

I often make the comment about practicing non-profit law that it is hard to give advice and get people to listen to it when it feels like the regulators are not minding the store. I even wrote a blog about it for my prior firm in the context of exemption applications.

Every once in a while though, the IRS breaks its silence, says ‘no’ to a non-profit, and people like me try to gather the scraps and learn something from it.

To that end, I thought it might be useful or entertaining to start a series on IRS Denial Rulings. They are somewhat rare and so redacted that it is hard to make any sense of them, but they are all that the tax gods are willing to offer us. So, we must make of them what we can and draw overbroad conclusions.

Let’s get started with PLR 202127040 (aka the Case of the Anime Convention That Was Apparently Too Fun).