§504 — Status after organization ceases to qualify for exemption under section 501(c)(3) because of substantial lobbying or because of political activities
41 citing cases
Statute Text — 26 U.S.C. §504
An organization which—
was exempt (or was determined by the Secretary to be exempt) from taxation under section 501(a) by reason of being an organization described in section 501(c)(3), and
is not an organization described in section 501(c)(3)—
by reason of carrying on propaganda, or otherwise attempting, to influence legislation, or
by reason of participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for public office,
shall not at any time thereafter be treated as an organization described in section 501(c)(4).
The Secretary shall prescribe such regulations as may be necessary or appropriate to prevent the avoidance of subsection (a), including regulations relating to a direct or indirect transfer of all or part of the assets of an organization to an organization controlled (directly or indirectly) by the same person or persons who control the transferor organization.
Subsection (a) shall not apply to any organization which is a disqualified organization within the meaning of section 501(h)(5) (relating to churches, etc.) for the taxable year immediately preceding the first taxable year for which such organization is described in paragraph (2) of subsection (a).
Treasury Regulations
-
Treas. Reg. §1.504-1Attempts to influence legislation; certain organizations formerly described in section 501(c)(3) denied exemption
Section 504(a) and this section apply to an organization that is exempt from taxation at any time after October 4, 1976, as an organization described in section 501(c)(3), and that ceases to be described in that section because it—
(a) Is an action organization within the meaning of § 1.501(c)(3)-1(c)(3)(ii) or (iv), on account of activities occurring after October 4, 1976, or
(b) Is denied exemption under the provisions of section 501(h) (see § 1.501(h)-3 or § 56.4911-9).
This section does not apply, however, to an organization that was described in section 501(h)(5) and § 1.501(h)-2(b)(3) (relating generally to churches) for its taxable year immediately preceding the first taxable year for which it is no longer an organization described in section 501(c)(3). An organization to which section 504(a) and this section apply shall not be treated as described in section 501(c)(4) at any time after the organization ceases to be described in section 501(c)(3). Further, an organization denied treatment as an organization described in section 501(c)(4) under this section may not be treated as an organization described in section 501(c) other than as an organization described in section 501(c)(3). For rules relating to recognition of exemption after exemption is denied under section 501(h), § 1.501(h)-3(d).
-
Treas. Reg. §1.504-1(a)Is an action organization within the meaning of § 1.
Is an action organization within the meaning of § 1.501(c)(3)-1(c)(3)(ii) or (iv), on account of activities occurring after October 4, 1976, or
-
Treas. Reg. §1.504-1(b)Is denied exemption under the provisions of section 501(h) (see § 1.
Is denied exemption under the provisions of section 501(h) (see § 1.501(h)-3 or § 56.4911-9).
This section does not apply, however, to an organization that was described in section 501(h)(5) and § 1.501(h)-2(b)(3) (relating generally to churches) for its taxable year immediately preceding the first taxable year for which it is no longer an organization described in section 501(c)(3). An organization to which section 504(a) and this section apply shall not be treated as described in section 501(c)(4) at any time after the organization ceases to be described in section 501(c)(3). Further, an organization denied treatment as an organization described in section 501(c)(4) under this section may not be treated as an organization described in section 501(c) other than as an organization described in section 501(c)(3). For rules relating to recognition of exemption after exemption is denied under section 501(h), § 1.501(h)-3(d).
-
Treas. Reg. §1.504-2Certain transfers made to avoid section 504(a)
(a) Scope. Under section 504(b), a transfer described in paragraph (b) or (c) of this section to an organization exempt from tax under section 501(a) may result in loss of exemption by the transferee unless the Commissioner determines, under paragraph (e) of this section, that the original transfer did not effect an avoidance of section 504(a). For purposes of this section, the term transfer includes any use by, or for the benefit of, the recipient of the transfer, but does not include any transfer made for adequate and full consideration.
(b) Transferor and transferee commonly controlled—(1) Loss of exemption. A transfer is described in this paragraph (b) if it is described in paragraphs (b)(2) through (b)(6). The transferee of a transfer described in this paragraph will cease to be exempt from tax under section 501(a), unless the provisions of paragraph (e) of this section apply.
(2) Transferor organization. A transfer is described in this paragraph (b)(2) only if it is from an organization that—
(i) Is or was described in section 501(c)(3), but not in section 501(h)(5), and
(ii) Is determined to be an “action” organization (as defined in § 1.501(c)(3)-1(c)(3)(ii) or (iv)), or is denied exemption from tax by reason of section 501(h) and either § 1.501(h)-3 or § 56.4911-9.
(3) Transferor and transferee commonly controlled. A transfer is described in this paragraph (b)(3) only if, at the time of the transfer or at any time during the transferee's ten taxable years following the year in which the transfer was made, the transferee is controlled (directly or indirectly), as defined in paragraph (f) of this section, by the same person or persons who control the transferor.
(4) Time of transfer. A transfer is described in this paragraph (b)(4) only if the transfer is made—
(i) After the date that is 24 months before the earliest of the effective date of the determination under section 501(h) that the transferor is not exempt, the effective date of the Commissioner's determination that the transferor is an “action” organization (as defined in § 1.501(c)(3)(ii) or (iv)), or the date on which the Commissioner proposes to treat it as no longer described in section 501(c)(3), and
(ii) Before the transferor again is recognized as an organization described in section 501(c)(3).
(5) Transferee. A transfer is described in this paragraph (b)(5) only if the transferee is exempt from tax under section 501(a) but the transferee is neither—
(i) An organization described in section 501(c)(3), nor
(ii) An organization described in section 401(a) to which the transferor contributes as an employer.
(6) Amount of transfer. A transfer is described in this paragraph (b)(6) only if the amount of the transfer exceeds the lesser of 30 percent of the net fair market value of the transferor's assets or 50 percent of the net fair market value of the transferee's assets, computed immediately before the transfer. For purposes of this paragraph (b)(6)—
(i) The amount of a transfer by a transferor is the sum of the amounts transferred to any number of transferees in any number of transfers, all of which are described in paragraphs (b)(2) through (b)(5) of this section, and the time of the transfer is the time of the first transfer so taken into account; and
(ii) The amount of a transfer to a transferee is the sum of the amounts transferred by a transferor to the transferee in any number of transfers, all of which are described in paragraphs (b)(2) through (b)(5) of this section, and the time of the transfer is the time of the first transfer so taken into account.
(c) Other transfers—(1) Transfers included. A transfer is described in this paragraph (c) if it would be described in paragraph (b) of this section except that either—
(i) The amount of the transfer is less than the amount determined in paragraph (b)(6) of this section, or
(ii) The transferor and transferee are not commonly controlled as described in paragraph (b)(3) of this section, or
(iii) The transferee is an organization described in sections 501(c)(3) and 501(h)(4).
(2) Loss of exemption. The transferee of a transfer described in this paragraph (c) will cease to be exempt under section 501(a) if the Commissioner determines on all the facts and circumstances that the transfer effected an avoidance of section 504(a). In determining whether a transfer effected an avoidance of section 504(a), the Commissioner may consider whether the transferee engages, or has engaged, in attempts to influence legislation and may also consider any factors enumerated in paragraph (e) of this section.
(d) Date of loss of exempt status. A transferee of a transfer described in paragraph (b), (c)(1)(ii), or (c)(1)(iii) of this section will cease to be exempt from tax under section 501(a) on the date that all requirements of paragraph (b), (c)(1)(ii), or (c)(1)(iii) (other than the determination by the Commissioner) are satisfied. A transferee of a transfer described in paragraph (c)(1)(i) of this section will cease to be exempt from tax under section 501(a) on the date of the last transfer preceding notification of the transferee that the Commissioner proposes to treat the transferee as other than an exempt organization.
(e) Transfers not in avoidance of section 504(a). Notwithstanding paragraph (b) of this section, if, based on all the facts and circumstances, the Commissioner determines that a transfer described in paragraph (b) did not effect an avoidance of section 504(a), the transferee will not be denied exemption from tax by reason of section 504(b) and this section. In making the determination called for in the preceding sentence, the Commissioner may consider all relevant factors including:
(1) Whether enforceable and effective conditions on the transfer preclude use of any of the transferred assets for any purpose that, if it were a substantial part of an organization's activities, would be inconsistent with exemption as an organization described in section 501(c)(3);
(2) In the absence of conditions described in paragraph (e)(1) of this section, whether the transferred assets are used exclusively for purposes that are consistent with the transferor's exemption as an organization described in section 501(c)(3);
(3) Whether the assets transferred would be describe in § 53.4942(a)(-2(c)(3) before, as well as after, the transfer if both the transferor and transferee were private foundations;
(4) Whether and to what extent the transfer would satisfy the provisions of § 1.507-2(a) (7) and (8) if the transferor were a private foundation;
(5) Whether all of the transferred assets have been expended during a period when the transferee was not controlled (directly or indirectly) by the same person or persons who controlled the transferor; and
(6) Whether the entire amount of the transferred assets were in turn transferred, before the close of the transferee's taxable year following the taxable year in which the transferred assets were received, to one or more organizations described in section 507(b)(1)(A) none of which are controlled (directly or indirectly) by the same persons who control either the original transferor or transferee.
(f) Control. For purposes of section 504 and the regulations thereunder—
(1) The transferor will be presumed to control any organization with which it is affiliated within the meaning of § 56.4911-7(a), or would be if both organizations were described in section 501(c)(3), and
(2) The transferee will be treated as controlled (directly of indirectly) by the same person or persons who control the transferor if the transferee would be treated as controlled under § 53.4942(a)-3(a)(3), for which purpose the transferor shall be treated as a private foundation.
-
Treas. Reg. §1.504-2(a)Scope.
Scope. Under section 504(b), a transfer described in paragraph (b) or (c) of this section to an organization exempt from tax under section 501(a) may result in loss of exemption by the transferee unless the Commissioner determines, under paragraph (e) of this section, that the original transfer did not effect an avoidance of section 504(a). For purposes of this section, the term transfer includes any use by, or for the benefit of, the recipient of the transfer, but does not include any transfer made for adequate and full consideration.
-
Treas. Reg. §1.504-2(b)Transferor and transferee commonly controlled—(1) Loss of exemption.
Transferor and transferee commonly controlled—(1) Loss of exemption. A transfer is described in this paragraph (b) if it is described in paragraphs (b)(2) through (b)(6). The transferee of a transfer described in this paragraph will cease to be exempt from tax under section 501(a), unless the provisions of paragraph (e) of this section apply.
(2) Transferor organization. A transfer is described in this paragraph (b)(2) only if it is from an organization that—
-
Treas. Reg. §1.504-2(c)Other transfers—(1) Transfers included.
Other transfers—(1) Transfers included. A transfer is described in this paragraph (c) if it would be described in paragraph (b) of this section except that either—
-
Treas. Reg. §1.504-2(d)Date of loss of exempt status.
Date of loss of exempt status. A transferee of a transfer described in paragraph (b), (c)(1)(ii), or (c)(1)(iii) of this section will cease to be exempt from tax under section 501(a) on the date that all requirements of paragraph (b), (c)(1)(ii), or (c)(1)(iii) (other than the determination by the Commissioner) are satisfied. A transferee of a transfer described in paragraph (c)(1)(i) of this section will cease to be exempt from tax under section 501(a) on the date of the last transfer preceding notification of the transferee that the Commissioner proposes to treat the transferee as other than an exempt organization.
-
Treas. Reg. §1.504-2(e)Transfers not in avoidance of section 504(a).
Transfers not in avoidance of section 504(a). Notwithstanding paragraph (b) of this section, if, based on all the facts and circumstances, the Commissioner determines that a transfer described in paragraph (b) did not effect an avoidance of section 504(a), the transferee will not be denied exemption from tax by reason of section 504(b) and this section. In making the determination called for in the preceding sentence, the Commissioner may consider all relevant factors including:
(1) Whether enforceable and effective conditions on the transfer preclude use of any of the transferred assets for any purpose that, if it were a substantial part of an organization's activities, would be inconsistent with exemption as an organization described in section 501(c)(3);
(2) In the absence of conditions described in paragraph (e)(1) of this section, whether the transferred assets are used exclusively for purposes that are consistent with the transferor's exemption as an organization described in section 501(c)(3);
(3) Whether the assets transferred would be describe in § 53.4942(a)(-2(c)(3) before, as well as after, the transfer if both the transferor and transferee were private foundations;
(4) Whether and to what extent the transfer would satisfy the provisions of § 1.507-2(a) (7) and (8) if the transferor were a private foundation;
(5) Whether all of the transferred assets have been expended during a period when the transferee was not controlled (directly or indirectly) by the same person or persons who controlled the transferor; and
(6) Whether the entire amount of the transferred assets were in turn transferred, before the close of the transferee's taxable year following the taxable year in which the transferred assets were received, to one or more organizations described in section 507(b)(1)(A) none of which are controlled (directly or indirectly) by the same persons who control either the original transferor or transferee.
-
Treas. Reg. §1.504-2(f)Control.
Control. For purposes of section 504 and the regulations thereunder—
(1) The transferor will be presumed to control any organization with which it is affiliated within the meaning of § 56.4911-7(a), or would be if both organizations were described in section 501(c)(3), and
(2) The transferee will be treated as controlled (directly of indirectly) by the same person or persons who control the transferor if the transferee would be treated as controlled under § 53.4942(a)-3(a)(3), for which purpose the transferor shall be treated as a private foundation.
-
Treas. Reg. §1.504-2(i)§1.504-2(i)
The amount of the transfer is less than the amount determined in paragraph (b)(6) of this section, or
(ii) The transferor and transferee are not commonly controlled as described in paragraph (b)(3) of this section, or
(iii) The transferee is an organization described in sections 501(c)(3) and 501(h)(4).
(2) Loss of exemption. The transferee of a transfer described in this paragraph (c) will cease to be exempt under section 501(a) if the Commissioner determines on all the facts and circumstances that the transfer effected an avoidance of section 504(a). In determining whether a transfer effected an avoidance of section 504(a), the Commissioner may consider whether the transferee engages, or has engaged, in attempts to influence legislation and may also consider any factors enumerated in paragraph (e) of this section.
41 Citing Cases
798, 957. Then in 1969 Congress “established, under article I of the Constitution of the United States, a court of record to be known as the United States Tax Court.” Tax Reform Act of 1969, Pub. L. No. 91-172, § 951, 83 Stat. 487, 730 (codified as amended at § 7441).7 Congress intentionally designed the Tax Court, like its predeces
at 394 (codified as amended at 29 U.S.C. sec. 794(a) (2006)), reaches "any program or activity conducted by any Executive agency". Mr. Savoy also complains ofviolations ofthe Americans with Disabilities Act of 1990 ("ADA"), Pub. L. No. 101-336, 104 Stat. 327, but the ADA does not applyto Federal agencies. See Pitts v. Commissione
Said payments shall be reviewable pursuant to Section 504 and 510 ofthe IMDMA [Illinois Marriage and Dissolution ofMarriage Act] and shall terminate upon further order ofCourt, JUDITH's death, ADRIO's death, JUDITH's remar- riage, or JUDITHresiding on a conjugal basis with another person.
The Court finds this is a case that utilizing the factors in Section 504 for an award of permanent maintenance is warranted .
504 (2000)); Powers v. Commissioner, 100 T.C. 457, 470, 473 (1993), affd. on this issue, revd. in part and remanded on other issues 43 F.3d 172 (5th Cir. 1995). For a position to be substantially justified, there must be substantial evidence to support it. Pierce v. Underwood, supra at 564-565; Powers v. Commissioner, - 12 - supra at 473. Pet
798, 957, Congress changed the name of the Board to the "Tax Court of the United States" but did not change the latter tribunal's designation as an independent agency within the Executive Branch. . That designation was changed in the Tax Reform Act of 1969 (1969 Act), Pub. L. 91-172, sec. 951, 83 Stat. 487, 730. There, through it
§ 504(a·)(1) (APA does not apply where 'a matter {is] subject to a subsequent trial of the law and the facts de novo in a court')." APA section 554, to which the Court of Appeals presumably was referring, provides rules governing agency adjudications "required by statute to be determined on the record after opportunity for an agen
section 504 (1994), 28 U.S.C. section 2412 (1994), and sections 7430 and 6673(a)(2)(B), Messrs. Izen and Jones asked the Court for an award of attorney's fees and costs to their clients. Relying on Fed. R. Civ. P. 11, Tax Court Rule 230, and section 6673(a)(2)(B), Messrs. Izen and Jones also contended that the Court should impose sanctions against
section 504 (1994), 28 U.S.C. section 2412 (1994), and sections 7430 and 6673(a)(2)(B), Messrs. Izen and Jones asked the Court for an award of attorney's fees and costs to their clients. Relying on Fed. R. Civ. P. 11, Tax Court Rule 230, and section 6673(a)(2)(B), Messrs. Izen and Jones also contended that the Court should impose sanctions against
section 504 (1994), 28 U.S.C. section 2412 (1994), and sections 7430 and 6673(a)(2)(B), Messrs. Izen and Jones asked the Court for an award of attorney's fees and costs to their clients. Relying on Fed. R. Civ. P. 11, Tax Court Rule 230, and section 6673(a)(2)(B), Messrs. Izen and Jones also contended that the Court should impose sanctions against
section 504 (1994), 28 U.S.C. section 2412 (1994), and sections 7430 and 6673(a)(2)(B), Messrs. Izen and Jones asked the Court for an award of attorney's fees and costs to their clients. Relying on Fed. R. Civ. P. 11, Tax Court Rule 230, and section 6673(a)(2)(B), Messrs. Izen and Jones also contended that the Court should impose sanctions against
504 and 28 U.S.C. sec. 2412 (1994)); see also Republic Plaza Properties Partnership v. Commissioner, T.C. Memo. 1997-239. - 8 - Petitioners contend that, based on the definition of "incurred" set out above, they have incurred the full attorney's fees and costs in this matter. We disagree. Petitioners' liability for fees and costs in this matt
Citing Lawrence v. Commissioner, 27 T.C. 713 (1957), revd. on other grounds 258 F.2d 562 (9th Cir. 1958), we stated that we would continue to use 1981 as the base year for -17- making the COLA calculation, unless the Court of Appeals to which an appeal would lie had held otherwise. Golsen v. Commissioner, 54 T.C. 742, 756-757 (197
section 504 and 28 U.S.C. section 2412 (1994), allows courts to award attorney's fees and other expenses to a prevailing party in actions against the Government. At times we will draw on the more extensive case law under the EAJA in order to interpret an analogous provision in section 7430. Kenagy v. Unites States, 942 F.2d 459 (8th Cir. 1991) (whe