IRS Issues Liberal Ruling Regarding Exempt Organizations and Political Action Committees


Last month the IRS issued Private Letter Ruling 201127013 (the “Ruling”), which held that an organization classified as a Section 501(c)(3) public charity (the “Parent”) will not lose its Section 501(c)(3) tax-exempt status as a result of (i) a controlled Section 501(c)(4) entity’s (“501(c)(4) Organization”) establishment and operation of two political action committees, SPAC and FPAC, and (ii) the Parent and its subsidiaries’ (“Tax- Exempt Subsidiaries”) establishment and operation of a voluntary payroll deduction plan for employees to contribute to any Section 527 political organization.


By way of background, the Parent is a comprehensive, regional, integrated health care system. The network provides a full range of health care services including diagnosis, treatment, research, education, medical equipment and home health care. The Parent is either the sole member or holder of all issued and outstanding shares of stock in each of the Tax-Exempt Subsidiaries.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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