Revenue Procedure 86-43
Internal Revenue Service
1986-2 C.B. 729 (1986)
- Written by Daniel Clark, JD
Facts
The United States Treasury Department issued Treasury Regulation § 1.501(c)(3)-1(d)(3) to clarify the scope of the income tax exemption for educational organizations codified in § 501(c)(3) of the Internal Revenue Code (code). The regulation was meant to exclude from the exemption organizations that existed primarily to promote unsubstantiated opinions. In Big Mama Rag, Inc. v. United States, 631 F.2d 1030 (D.C. Cir. 1980), the United States District of Columbia Circuit Court of Appeals held the regulation to be unconstitutionally vague. Later, the Internal Revenue Service (IRS) denied the educational exemption to an anti-Semitic organization called National Alliance, and National Alliance sued. In that suit, the government, rather than invoking the text of § 1.501(c)(3)-1(d)(3), justified the denial of the exemption to National Alliance by using four newly formulated criteria, collectively called the methodology test. On appeal, in National Alliance v. United States, 710 F.2d 868 (D.C. Cir. 1983), the District of Columbia Circuit Court of Appeals endorsed the use of the methodology test and held in favor of the government. In response, the IRS issued Revenue Procedure 86-43 to formally adopt the methodology test.
Rule of Law
Issue
Holding and Reasoning ()
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