Senate Report No. 94-1318
United States Senate
1976-2 C.B. 597 (1976)
- Written by Daniel Clark, JD
Facts
With the passage of the Revenue Act of 1950 (1950 act), Congress imposed an income tax on some, but not all, otherwise-tax-exempt organizations on the income those organizations made on business activities unrelated to the organizations’ tax-exempt purposes. With the passage of the Tax Reform Act of 1969 (1969 act), Congress extended this unrelated-business taxable income (UBTI) to almost all tax-exempt organizations, including § 501(c)(7) social clubs. Before the passage of the 1969 act, the Internal Revenue Service (IRS) established an auditing practice whereby the IRS would not scrutinize a § 501(c)(7) organization as long as no more than 5 percent of the organization’s gross receipts came from nonmembers of the organization. After the passage of the 1969 act, Congress concluded that the IRS’s 5 percent test was no longer necessary. In response, Congress amended the tax laws. The Senate’s Committee on Finance issued a report explaining the changes to the law.
Rule of Law
Issue
Holding and Reasoning ()
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