Jump to content

World Record Gobbledygook - from I.R.C. Section 509(a):


Recommended Posts

For purposes of paragraph (3) , an organization described in paragraph (2) shall be deemed to include an organization described in section 501©(4) , (5) , or (6) which would be described in paragraph (2) if it were an organization described in section 501©(3).

Can anybody top this for incomprehensibility?

Please post anything that you think might rival or even overtake this model of complete unfathomable text produced by our beloved Senators and Congressmen. Let's start a list!

Kirk Maldonado

Link to comment
Share on other sites

Kirk, I'm more than a little embarrassed to admit that your quote makes perfect sense to me.

Lori Friedman

Link to comment
Share on other sites

Here's the result of my attempt to make that language a bit more comprehensible for those who are less gifted at statutory interpretation than Lori:

If an organization that meets the requirements of section 501©(4), (5), or (6)

would satisfy the rules of section 509(a)(2) (relating to certain support requirements)

if those rules would be applied in the same manner if the organization met the requirements of section 501©(3),

then that organization will be treated as if it were described in section 509(a)(2)

for purposes of applying the rules of section 509(a)(3) (relating to certain operational requirements imposed on entities that are funded by organizations described in section 509(a)(2)).

If anybody can improve my revised version, please post your replacement language.

Kirk Maldonado

Link to comment
Share on other sites

Very simplistic - but does that translate to....

Some non-profit organizations under 501© may also be defined as a private foundations under 509(a).

Been a while since I looked at non-profits.

JanetM CPA, MBA

Link to comment
Share on other sites

Kirk, thank you for saying that I'm gifted with the tax code, but I'm afraid that's not true at all. I just happen to work with Sec. 509(a) on a daily basis.

People actually seem to be interested in this esoteric subject (go figure?), so I'll take a stab at explaining it.

Sec. 501©(3) creates both (1) public charities and (2) private foundations. For a number of very compelling reasons, every Sec. 501©(3) organization wants to be a public charity. Certain 501©(3) organizations automatically have public charity status because of what they do -- schools, hospitals, religious institutions, etc. For other organizations, Sec. 509(a) determines the classification.

Sec. 509(a) provides 3 methods for public charity status. The first 2 methods involve mechanical tests of broad-based public support. The 3rd approach is to be a "supporting organization" -- not publicly supported itself, but very closely aligned with one that is.

Kirk's gobbledygook describes the types of organizations that can qualify as "supported". Of course, other public charities qualify. Also, a Sec. 501©(4) civic group, Sec. 501©(5) labor or horticultural organization, and Sec. 501©(6) business league can be supported if it would otherwise satisfy one of the public support tests.

Here's a real-life example from my own practice. A labor union formed a 501©(3) scholarship fund. The hope was that the scholarship fund would receive tax-deductible contributions from a wide variety of sources. That never happened, and the scholarship fund still receives 100% of its contributions from the union. This 501©(3) organization isn't publicly supported at all. But, it's a supporting organization for the 501©(5) labor union, which certainly has broad-based public support (all those individual membership fees).

Lori Friedman

Link to comment
Share on other sites

Lori:

Although you attempted to attenuate my compliment on your powers of statutory interpretation (by saying that you frequently work with that provision), I believe that the ability to comprehend the gobbledygook that comprises the IRC transcends which particular section you are reading.

When you mentioned "Kirk's gobbledygook" in your post, I hope you were referring to my quotation of the statutory provisions of section 509, rather than to my attempt to translate those provisions into a form that is easier (note I didn't say "easy") to comprehend. That is because my goal was to convert that statutory "gobbledygook" into plainer (note I didn't say "plain") English.

Kirk Maldonado

Link to comment
Share on other sites

"I know that you believe that you understood what you think I said, but I am not sure you realize that what you heard is not what I meant."

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

Link to comment
Share on other sites

Guest getaxa

funny I was reading this to pass the time but it has legitimate business info. Please clarify for me. I know that a 501c3 can get a letter of determination from the IRS to say that is what they are. Can the same organization get a 509 a ruling to say that they are a public entity? A " you are public 501c3 determination letter" would help me out. You also stated that there are 3 tests to determine if the 501c3 is public or not. What are those tests? I can't speak IRS at all, so any help would be great.

Thanks in advance.

Link to comment
Share on other sites

When you mentioned "Kirk's gobbledygook" in your post, I hope you were referring to my quotation

But of course! Kirk, I apologize if my wording led you to believe otherwise. Your clear and concise writings are the very opposite of gobbledygook.

Red Sox 7, Yankees 2

So, H, what are your plans for this Sunday evening?

getaxa, the IRS provides an "advance ruling" (new organization) or "definitive ruling" (established organization) concerning 501©(3) non-private foundation status. But, the term "definitive ruling" is somewhat misleading. The recognition is a really just a snapshot of the organization's status at one given time. The true determination is ongoing, and a public charity can "tip" to private foundation status if its circumstances change.

You also wanted to how a public charity avoids being classified as a private foundation. As I mentioned earlier, certain organizations (schools, hospitals, churches, etc.) are public charities simply because of what they do, not because of how they're funded. These organizatins don't have to jump through any Sec. 509(a) hoops. Other organizations, however, have to demonstrate:

1. Public support - Sec. 509(a)(1) support test, or

2. Public support - Sec. 509(a)(2) support test, or

3. Supporting organization - Sec. 509(a)(3)

The two mechanical support test are too complicated to describe here. They look similar at first glance, but they're actually very different in execution. The Sec. 509(a)(1) is the preferred method; an organization uses the Sec. 509(a)(2) test only if it has to do so.

I hope this is helpful. I had no idea that so many participants at a benefits message board would be interested in this stuff!

Lori Friedman

Link to comment
Share on other sites

I believe it'll be broadcast on ESPN, which will be nice for those of us out here in the diaspora. It's Wells v. Johnson, right? You gotta love it...both guys are over the age of 40.

Lori Friedman

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...