Balancing Community Benefits with Practical Solutions–The Rules Remain Gray
Over the last few years, the Internal Revenue Service (“IRS”) and various courts have provided substantial guidance regarding tax-exempt entities, including requirements relating to the treatment of exempt income and the methods by which private interests may be balanced with community benefits and charitable purposes. A recent Technical Advice Memorandum emphasized the IRS’s concerns about the control of joint ventures between nonprofit and for-profit entities1. In addition, the IRS has successfully defended a denial of tax exemption in Redlands Surgical Services v. Commissioner2 and has offered an important revenue ruling relating to joint ventures among tax-exempt and for-profit entities in Revenue Ruling 98-153. In these instances, the IRS has set forth a fairly rigid set of requirements for offering exempt status to entities and for accepting certain income as tax-exempt.
