Journal Article

Administrative Law Meets Section 501(c)(3) Charitable Purpose

Aprill, Ellen P

2024

Overview

The broad application of the regulations defining charitable purpose and related revenue rulings as well as their age makes them a particularly good vehicle for considering the implications of recent tax cases invalidating guidance based on administrative law doctrines. [...]most tax lawyers have at least a passing familiarity with § 501(c)(3), making this approach to recent decisions accessible. [...]it demonstrates the enormous potential harm to the tax system from judicial invalidation of old tax guidance based on flaws in the administrative procedure. An organization challenging denial of exemption in a declaratory judgment action under section 7428 could raise administrative law issues like those in the recent cases discussed in this Article.6 Challenges based on the APA have already occurred in connection with charitable deductions, a tax provision closely related to the definition of charitable purpose.7 The broad application of the Regulations defining charitable purpose and related revenue rulings, as well as their age, makes them a particularly good vehicle for considering the implications of recent tax cases invalidating guidance based on administrative law doctrines. [...]most tax lawyers have at least a passing familiarity with section 501(c)(3), making this approach to recent decisions generally accessible. [...]I urge Congress to codify the approach of a recent district court decision, which applied a six-year statute of limitations, accruing from the date tax guidance is issued, to challenges for noncompliance with the APA.8 Second, application of administrative law doctrine to this body of tax laws exposes flaws regarding guidance not only as to charitable purpose but also to tax guidance more generally. Some make a primarily positive argument, taking the position that various doctrines of administrative law do not apply generally to tax guidance under current law,10 in particular, required notice-and-comment for regulations issued under the general authority of section 7805(a).11 Another strand of this scholarship focuses on the harm to the quality and quantity of tax guidance that strict adherence to the APA would produce.12 That is, this latter category of work argues as a normative matter that various aspects of administrative law should not apply to tax guidance. Because I discuss cases taking the position that a wide variety of Service guidance documents must adhere to administrative law requirements related to notice-and-comment rulemaking, I take that application for granted.

• Publisher: American Bar Association
• Subject: Administrative law / Citizen participation / Court decisions / Declaratory judgments / Experiments / Revenue procedures & rulings / Violations