who lessens the burden of state government
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What Does “Lessening The Burdens Of Government” Mean?
January 4, 2018
The year 2018 is shaping up to likely include dramatic cuts in government funding for social services. In order to lessen the impact on tens of millions of Americans, there will need to be a response by donors and the philanthropic community in the form of new organizations – or expansion of existing ones – to focus on the “exempt” purpose of “lessening the burdens of government.”
The pivotal federal tax-exemption statute, section 501(c)(3) of the Internal Revenue, does not explicitly include this phrase. So what is it? Where does it come from?
Exempt Purposes
Section 501(c)(3) is just one paragraph: The 132-word definition of which groups are eligible for the most coveted tax exemption classification that is a prerequisite for grants and charitable donations.
It includes a series of hurdles, the first of which is the “purposes” test:
Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, …. (bolding added)
An organization seeking 501(c)(3) status must be both “organized” and “operated” for one or more approved – that is, “exempt” – purposes. The remainder of the 132-word paragraph includes certain disqualifiers, but they only come into play if the nonprofit applicant can successfully jump through the threshold – “qualifying purposes” – hoop.
Purposes Test
At first blush, these approved “purposes” categories may seem fairly clear and unambiguous, but they are not.
A good example is the “educational” classification: It refers to nonprofit schools and colleges, of course, but also includes many organizations formed to teach the general public about particular topics – some of which are highly controversial or presented from only one side of an issue. There’s a bit of wiggle room in the term “educational” itself, and there is some limited guidance in various Treasury Regulations and in IRS Revenue Rulings. From time to time, though, the matter of qualification under section 501(c)(3) proceeds to a formal administrative dispute with the IRS’s Exempt Organizations Division or, if unresolved at this administrative level, moves on to full-blown litigation in the courts. Depending