Private Benefit: What Is It – And What Do We Want It To Be?
John D. Colombo
University of Illinois College of Law
Annual Conference of the National Center on Philanthropy and the Law, New York, NY, 2011
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.
Number of Pages in PDF File: 48
Date posted: November 7, 2013