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Private Benefit: What Is It – And What Do We Want It To Be?

Annual Conference of the National Center on Philanthropy and the Law, New York, NY, 2011

48 Pages Posted: 7 Nov 2013  

John D. Colombo

University of Illinois College of Law

Date Written: 2011

Abstract

Beginning with the landmark decision American Campaign Academy v. Commissioner in 1989, the Internal Revenue Service has used the “private benefit” doctrine as a primary tool to police the activities of charitable organizations exempt under Code Section 501(c)(3). Unfortunately, the doctrine literally has no doctrinal content. Unlike its sibling, the private inurement doctrine, the private benefit doctrine has no statutory basis in 501(c)(3). Though the IRS claims the doctrine flows from the 1959 Treasury Regulations, it is a claim that is questionable given the language used, and in any event, this interpretation of the regulations appears not to have been “discovered” until some at least a decade after the regulations were promulgated.

This paper reviews the history and application of the private benefit doctrine, and suggests a specific normative test for application of the doctrine to situations involving a “failure to conserve” charitable assets.

Suggested Citation

Colombo, John D., Private Benefit: What Is It – And What Do We Want It To Be? (2011). Annual Conference of the National Center on Philanthropy and the Law, New York, NY, 2011. Available at SSRN: https://ssrn.com/abstract=2350470 or http://dx.doi.org/10.2139/ssrn.2350470

John David Colombo (Contact Author)

University of Illinois College of Law ( email )

504 East Pennsylvania Avenue
232 Law Building
Champaign, IL 61820
United States
217-333-7985 (Phone)
217-244-1478 (Fax)

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