By
Paul Whitfield Horn Professor of Law,
Texas Tech University School of Law
Professor of Law, Emeritus
University of New Mexico School of Law
Sanchez, Mowrer & Desiderio, P. C.
Albuquerque, New Mexico
Mat #40880556
A Thomson Reuters business

Page
PRE FACE ---------------------------------------------------------------------------------V
TABLE OF CASES------------------------------------------------------------------------------XXV
Chapter 1. Overview of the Nonprofit Sector ----------------------------1
I. Nature of a Nonprofit Organization --------------------------------------1
Note --------------------------------------------------------------------------------2
Questions -----------------------------------------------------------------------3
Association for Preservation of Freedom of Choice v. Shapiro --------3
Note -------------------------------------------------------------------------------------5
Questions ------------------------------------------------------------------------6
Slee v. Commissioner --------------------------------------------------------------6
Questions ------------------------------------------------------------------------------8
Haring v. Blumenthal -------------------------------------------------------------8
Note -----------------------------------------------------------------------------------14
Questions -----------------------------------------------------------------------15
Big Mama Rag v. United States --------------------------------------------15
National Alliance v. United States----------------------------------------20
Questions --------------------------------------------------------------------------24
Nationalist Foundation v. Commissioner ---------------------------------25
Problem ----------------------------------------------------------------------------27
II. Organizational Structure of a Nonprofit Organization ---------------27
A . Trust--------------------------------------------------------------------27
Restatement, Trusts ----------------------------------------------------28
§ 348. Definition of Charitable Trust.----------------------__ ____ 28
Restatement, Trusts----------------------------------_______ --28
§ 364. Indefinite Beneficiaries ----------------------------------28
Restaterp.ent, Trusts --------------------------------------------28
§ 380. Extent of Trustee's Powers-------------------_____________ 28
B. Association-------------------------------------------------------------------29
Uniform Unincorporated Nonprofit Association Act ---------------29
Problem ----------------------------------------------------------------__ 29
Note----------------------------------------------------------------------30
C. Nonprofit Corporation -----------------------------------------------------30
1. Model Nonprofit Corporation Acts ---------------------------______ _ 30
2. Status of a Nonprofit Corporation as a Charitable Trust -----
Uniform Supervision of Trustees for Charitable Purposes
31
Act ----------------------------------------------------------------------32
California Government Code ----------------------------------------32
§ 12580 -------------------------------------------------------_ __________ 32
§ 12581----------------------------------------------------_ ____________ 32
Younger v. Wisdom Society --------------------------------------------33
People v . George F . Harding Museum --------------------------36 xiii

xiv
TABLE OF CONTENTS
Page
II. Organizational Structure of a Nonprofit Organization-Continued
Question ---------------------____ __ ___ _____ _ ___ _ _ __ __ 39
Commonwealth of Virginia v. The JOCO Foundation ------40
Questions ----------------------------___ __ -_ _ ___ ___ _ __ _ _ _ 46
Note ------------------------__ --_ _ __ __ __ ___ ______ _ 46
Question ----------------------------------------__ _ __ ___ ___ _____ 46
Dodge v . Trustees of Randolph-Macon Woman ' s College --46
Note ------------------------------------__ _____ __ __ ____ _ _ _ 50
Problem --------------------------------_ __ __ ___ ____ _ _ __ 50
III. Nongovernmental Organization (NGO)--------------------------50
IV . Foreign Nonprofit Organizations and Philanthropy Abroad----51
Notes----- ___ ___ _ __ _____ ___ __ ____ ___ _ __ _ _ _ ____ __ __ _ -------_ __ _ _ _ ____ __ ____ __ __ __ _ _ 52
A. Synopsis of French Law on Non-Profit Organizations ------__ 52
1. Associations -----------------------------------___ 52
2 . Foundations ----------------------------_ __ ____ _ _____ _ ___ 55
3. Public Interest Foundations -----------------------55
4. Corporate Foundations------------------------____ 56
B. Synopsis of Italian Law on Nonprofit Organizations-------57
Note ---------- _ _ _ _ __ _ ___ _ _ _ __ ____ _______ _ _ __ ___ ____ ----------------__ 58
Revenue Ruling 63-252-------------------------58
Revenue Ruling 66-79 -------------------------_ __ _ _ _ _ ___ _ 62
Question-__ _ __ _ _ _ _ _ __ ___ _______ ___ __ _ ___ _ ____ __ _ _ __ _ -------------65
Note ----__ __ _ _ _ __ ___ _ _ _ __ ____ _ _ _ ___ _ __ ________ __ _ -------__ _ _ _ _ _ _ ___ _ _ 65
Chapter 2. The Nonprofit Corporation -----------------------_ _ _ 66
1. Nature of a Nonprofit Corporation ----------------------66
In re Mt. Sinai HospitaL---------------------____ _ _ __ 66
II. Creation of a Nonprofit Corporation ----------------------69
A. Articles of Incorporation ---------------------70
B. Bylaws -----_ ____ _ _ _ _ _ ___ _ _ _ ______ ____ _ ____ _ ___ __ __ __ ---------------71
C. Authorization to Conduct Affairs in Another State --------_ 71
D. Obtaining Tax-Exempt Status __ __ ___ _ __ ___ _ _____ _ ____ _ _ _ ____ ___ ___ __ __ __ __ 71
III. Directors ------- _ _ _ __ ____ __ ____ _ ___ _ _ _ _ _ _____ _ __ __ ___ _ _____ -----__ ___ _ _ _ _______ 71
A. Management of a Nonprofit Corporation ---------------------71
Bailey v. American Soc . for Prevention of Cruelty to Animals -72
Solomon v. Hall-Brooke Foundation, Inc . -------------74
B . Meetings of Directors--------------------------------76
C. Removal of Directors _ _ ____ __ _ _ _ _ __ _ _ __ _ _ _ ___ _ _ _ __ _ ________ _ _ __ _ _ __ _ ____ _ __ _ _ 77
Grace v . Grace Institute ----------------------------------__ _ 77
Collins v. Bein e cke _ _ __ __ ___ __ __ _ ___ ___ _ _ __ __ _ ___ ______ _ ____ __ ___ ___ ___ __ ----__ 80
IV. Members --------__ _ ___ ___ ____ _ _ __ __ ___ ___ ___ _ ______ __ _____ ------------___ 81
Moore v. Christ's Christian Fellowship Church, Inc. ------_ _ _____ __ 82
Note -------__ _______ ___ _ _ ____ _ _ ____ _ ___ _ ___ __ __ _ _ _ __ _ ____ _ __ ____ ___ _ _ ___ _ ____ _ ___ ____ _ 84
A. Rights of Members _____ ___ __ _ ___ _ __ __ ___ __ __ _ __ _ _ _ _ _ _ _ ___ _ __ _ ___ _ _ __ __ _ _ ___ _ _ _ _ 84
In Re Mt . Sinai Hospital __ __ ___ _ _ _ ____ _ __ ___ _ __ __ _ _ __ _ _ ____ ___ _ _ __ ___ ___ ____ _ 84
Harris v. Board of Directors of Community HospitaL ---___ __ __ __ 86
B. Meetings___ _ ___ ____ __ _____ __ ____ ___ _ __ _ _ __ __ ___ __ _ -------_ _ ____ _ _______ _ 89
C. Removal of Members __ __ ___ _ _ ___ _ ____ _ __ _ _ __ ___ _ _ __ _ ___ __ ______ __ _ ____ _ __ __ _ __ 89
Raulston v . Ev e rett -----_ ___ __ ___ ___ ____ _ ____ ___ ___ _ ____ _ _ _ __ __ ____ __ _ _ ____ 90
Question -------------- _ _ _ ____ _ __ _ _ ___ __ _ ______ _ __ _ __ -_ _ __ _ _ _ __ _ _ _ _ ___ 93
Bartley v. Augusta Country Club , Inc. ---------------------93

TABLE OF CONTENTS xv
Page
IV. Members-Continued
Rowland v. Union Hills Country Club ----------------------------------94
D. Members' Derivative Actions -------------------------------------------__ _ _ 97
Notes ------------------------------------------------------------------------97
Chapter 3. Governance of a Nonprofit Organization --------------98
1. State Standards of ConducL------------------------------------_ ______ --___ _ 98
A. Fiduciary Obligations ------------------------------------------------___ _ 99
Litwin v . Allen------------------------------------------- ----------_____ __ 99
Questions--------------------------------------------------_ ________ 101
Stern v. Lucy Webb Hayes Nat'l Training School-Deaconesses,
Missionaries ------------------------------------------------------------------101
Louisiana World Exposition v. Federal Insurance Co. ------_ _____ 108
Note----------------------------------------------------------___ ___ 112
Questions------------------------------------------------------------_________ 113
Uniform Prudent Management of Institutional Funds Act _____ __ 114
Model Nonprofit Corporation Act of 1987 ---------------------------115
Section 8.30. General Standards for Directors -----------------115
Section 8.32. Director Conflict ofInterest.
----___ ___ _ __ __ ________ 115
Questions-----------------------------------------------------_ _ ______ 116
Northeast Harbor Golf Club v. Harris ----------------------------------116
B. Indemnification of Directors -------------------------------------_____ _ 122
John v. John -----------------------------------------------------_ ________ 123
Note----------------------------------------------------------------____________ 126
C. Disposition of Assets upon Dissolution ------------------------------- 127
Holden Hospital Corp. v. Southern Illinois Hosp. Corp. --_ _____ 127
Note----------------------------------------------------------------------130
Sharpless v. Religious Society of Friends --------------------------130
Question----------------------------------------------------------------- ___ 133
D. Enforcement of Fiduciary Obligations ----------------------------___ 133
In re Estate of Stern-------------------------------------- --------133
Questions----------------------------------------------------------------------135
In Re Milton Hershey SChooL ---------------------_ ___ _ ___ _____ ________ 136
Question -----------------------------------------------_ _ _ 140
Herzog Foundation, Inc. v. University of Bridgeport ------__ ____ _ __ 140
Russell v. Yale University ------------------------------------------------147
Howard v. Administrators of Tulane Educational Fund------- ___ 149
E. Volunteer Immunity from Liability-------------- __ _____ __ _____________ __ 154
II. Federal Standards of Conduct ---------------------------------------155
A. Self-Dealing ----------------------------------------------------------155
Estate of Reis-------------------------------------------- ----------------156
B. Excess Benefits Transactions------------------------------_ _______ ---161
Caracci v. Commissioner --------------------------------------------___ _ 161
Note----------------------------------------------------------------_____ ___ 176
Questions---------------------------------------------------------------- 176
Notes ----------------------------------------------------------------------__ 177
Question-----------------------------------------------------------------___ 179
Spitzer v. Grasso -----------------------------------------------------__ ____ 179
Problem----------------------------------------------------------__ _______ ____ 182
Chapter 4. Charitable Organizations ---------------------------------------_ __ 183
1. Background -----------------------------------------------------------------------_____ 183
Questions -----------------------------------------------------------------___ ____ 184

xvi
TABLE OF CONTENTS
Page
II. Section 50 l(
III. Organizational and Operational Tests ---------------------------------------- 185
Better Business Bureau v. United States -------------------------------------186
Questions --------------------------------------------------- ------------------------- --- 189
IV. The Charitable Purpose Test----------------------------------------------------- 190
Monterey Public Parking Corp. v. United States --------------------------190
Note --------------------- ---------------------------------------------- ------------------- 194
Columbia Park and Recreation Ass'n v. Commissioner -----------------194
Questions ----------------------------------------------------------- ----- -------------- - 207
Notes ----------- ---------------------------------------- -------------------------- ---- ---- 207
V. Social Welfare Organizations----------------------------------------------------- 208
Regan v. Taxation With Representation--------------------------------------- 209
Questions ----------------------- --- ---- ----------------------------------- -------------- 213
Vision Service Plan v. United States ------------------------------------------213
Notes -------------------------- ------------------------------ ------- ----------- ----------- 220
Chapter 5. Obtaining and Maintaining Tax Exempt Status -------- 221
I. Obtaining Tax Exempt Status --------------------------------------------------- 222
II. Maintaining Tax Exempt Status ------------------------------------------------ 222
A. Commercial Activity ----------------------------------------------------------- 223
Note ---------------------------- ---- ------------- ------------- --- ----- ---- ----------- 223
Note ---------------------------------------- ----------------------------------------- 224
Living Faith, Inc. v. Commissioner --------------------------------------225
Questions- ---------------- ---------------- -------------------------------------- --- 234
Note ------------------------------------- --------------------- ------------- ---------- 235
B. Private Benefit -- --------------------------------------------------- ------------- 235
American Campaign Academy v. Commissioner ---------------------235
Question ----- ----------- --------------------------------- -------- --- --------------- 252
Plumstead Theatre Society v. Commissioner --------------------------253
Note ---------------------- --------------------------------- ------- --- ---------- ------ 254
C. Private Inurement --------------- -------------------- -- ---- ----- --------- ------ 254
Church of Scientology of California v. Commissioner --------------254
Note -- ------------------------------ --- ------------- ------- ------- --- ---------------- 263
United Cancer Council, Inc. v. Commissioner ------------------------263
Note --------------------- ---------- ----------------------------------------- --------- 270
D. Excess Benefit Transaction-------------------------------------------------- 271
E. Action Organization -------------------- ------------- ------- ------------- ---- -- 273
1. Lobbying Activity ----- ----------------- ------ ---- -- ------ -- ---------------- 273
Christian Echoes National Ministry, Inc. v. United States---- 274
Notes ---------------------------------------------------- ---- ---- ---- ----------- 280
Notes --------------- ----------------------------------------------- ---------- --- 284
Problem ----------- -------------------------- ------------------------------ ---- 286
Note ------- -------- -------------------------------------- -------- ---- ----------- 286
Problem -- --------------- ---------------- --------------- ------ --- -------------- 287
2. Political Campaigns --- --- ------------- ------------------ ------------ --- --- 287
Notes --------------------------------- ---- --------- ---------- ----- ---- ---------- 288
F. Public Policy ------------ ------------------- ----- --------------------------------- 289
Bob Jones University v. United States ----------------------------------289
Questions- --------------------- ---------------------- -------------- ----- --- -------- 292
G. Annual Reporting Requirements ------------------------------------------ 293

TABLE OF CONTENTS xvii
Page
Chapter 6. Public Charities -----------------------------------------------------295
I. Requirements for Public Charity Status---------------------------------_____ 295
II. Section 509(a) Organizations-------------------------------------------296
A. Section 509(a)(1) Organizations ------------------------------------------297
1. Churches---------------------------------------------------------------------297
2. Educational Organizations ---------------------------------------297
3. Hospitals and Medical Research Organizations -----------------298
4. Organizations for the Benefit of Colleges and Universities--- 298
5. Governmental Units -------------------------------------------299
6. Publicly Supported Organizations ------------------------------- 299
One-Third Support Test -----------------------------------------299
Facts and Circumstances Test ---------------------------301
Unusual Grants ------------------------------------------------------------ 302
Problem ---------------------------------------------------------------302
B. Section 509(a)(2) Organizations ------------------------------------------302
1. One-Third Support Test..
------------------------------------------303
Questions --------------------------------------------------------------------304
2. One-Third Investment Income Test ---------------------------304
Note ________________________ ___ _____ _ __________ _ _________ ----------------304
Problem ____________ _______ ______ _ _ __ _____________ _ ____ ______ _ ---------305
C. Section 509(a)(3) Organizations -----------------------------------------305
1. Organizational Test -------------------------------------------- 305
2. Operational Test -----------------------------------------------306
Lapham Foundation, Inc . v. Commissioner--------------------307
Notes-------------------------------------------------------------------314
D . Section 509(a)(4) Organizations ---------------------------------------- 315
E . Filing Requirements ------------------------------------------------------ 316
Chapter 7. Private Fomidations -----------------------------------------------317
I. Private Operating Foundation-------------------------------------------318
II. Excise Tax -------------------------------------------------------319
Note ---------------------------------------------------------------------------------320
Problem --------------------------------------------------------------------------------- 320
Note ______ ______________ _ _________________________________ --------------------------- 321
III. Self-Dealing _ _ ___________________ _ ________________________________ --------------___ 321
Notes---------------------------------------------------------------------------321
Estate of Reis v. Commissioner ------------------------------------------322
Questions ------------------------------------------------------------------------------325
Problems------------------------------------------------------------------------ 325
IV. Failure to Distribute Income ----------------------------------------------------326
Question ---------------------------------------------------------------------- 326
Note ______________________ _________ ________ _ __ _____ ______ -------------------------------326
Problem __________________ ____ ________ _________________ ____ ___ --------------------- 327
Note _____ __ ____________ _____ __ __ _____ __ __ ____ _____________ -------------------------------327
In re Estate of John A. Hermann-------------------------------------------- 327
Question -------------------------------------------------------------------------------332
V . Excess Business Holdings -----------------------------------------------------332
Notes --------------------------------------------------------------------------332
VI. Jeopardizing Investments --------------------------------------------------------333
Notes------------------------------------------------------------------------- 333
VII. Taxable Expenditures ----------------------------------------------------333
Mannheimer Charitable Trust v. Commissioner ------------------------334

xviii
TABLE OF CONTENTS
Page
VII. Taxable Expenditures-Continued
Question ------__________ ____ _____________ _ _ _ _ __________ _ _ ___ __ _ _ _____ _______ _ _ _ _________ 345
Chief Counsel Advisory _____ _ _____ _____ __ __ _ __ ___ _ ___ ___________ _ ______________ _ 345
VIII. Termination of Private Foundation Status ______________________________ __ __ 352
Gladney v. Commissioner____ ___ _ _ _ _ ____________ _____ ________ __ ___ _ ______ _ _ __ ______ 353
Note ------------________________________________ _ ___________________ _ ___ ___ __ _____________ 359
Problem -------__________________________________________________________________________ 359
Chapter 8. Fundraising __________________ _ ____ __ ______________________________________ 360
I. The Importance of Fundraising _ _____ _ ___ __ _____________ _ ___ _ _ _ ____ _ ____ _ ___ ____ 360
II. Regulation of Charitable Solicitations------------------------------- 361 ·
Riley v. National Federation of Blind of North Carolina----------361
Question ----_______ __ _________ _____ _______ _ ___ _ ____ _ _____ _ ______ _ __ _ ___ _ _ __ _ _ _ __ _ _ ___ _ _ 370
Madigan v. Telemarketing Associates, Inc. __ ________ ___ ______ ______ _ _ __ _____ 371
Note ----------_________________________ _ _____________________________________ __ ___________ 377
Questions -----__ __ __________ _____ _ _ ___ _____ ______ ___ _ _ ________ _ ______ _ __ __ ____________ 377
United Cancer Council Inc . v. Commissioner _______________________________ 377
Question ------__________________________________________________________________________ 382
III. Charitable Contribution Deductions ____ _ _ _____ _ ____ _ _ ________ _ _ _ _ _____________ 382
A. Quid Pro Quo ____________________________________________________________________ 383
United States v. American Bar Endowment------------------ 384
Revenue Ruling 67-246---------------------------------_______ 387
Revenue Procedure 90-12 __________________________________ __ _______________ 395
Notes --____________ __ _______________ _ _ ____ ____ _ _____________________ _ _________ _ _____ 399
B. Services __________________________ ___ _______________________________________________ 399
C. Timing _ ____ __ _ _____________________________________________________________________ 400
D. Unconditional Gift ________________ __ ____________ ___ ________ _ ___ _ ____ _ __________ 400
E. Amount of Deduction ----------------------____________________ ___ ___________ 401
1. Amount of Contribution _______________ _ ___ _ _____ ___ _____ _______ _ ________ 401
2. Long-Term Capital Gain Property _______ _ _____________ _ ______ _ _ __ ___ 401
Note __ _ ____________ __ ___________ _ ____ _ ____ ___ _____________________________ __ _ _ _ _ 402 ·
3. Ordinary Income Producing Property _____ _ _ ___ ___ _______ ___________ 403
4. Percentage Limitations ________ _ __ _ ______________________ _ _______________ 403
5. Carryforward of Charitable Contribution Deduction -__ _ _______ 405
F. Appraisals of Donated Property----------------------------405
Revenue Procedure 66-49 ____________________________ _ ___ ___ ___________ _ ____ 406
Note-___________ __ ________ _ ___ __ _ _ __ _ _ ___ _ ___ ___ _ _____________ _ _________ _ _ ____ ___ ____ 409
G. Substantiation __________________________________________________ _ ________________ 409
Note___________ _ ____ _ __ _ _____ _ ____________ ___ _ ___ _______ _ __________ _ ____ __ _ _ _ _ ____ __ _ 410
H. Donor Advised Funds _ _ _________ __ _____ _ __________________ _ ____ ____ ______ _ _ -- 410
Notes ______________________ _ _ _ _ _______ ______ _ _ ____________ ___ _ __ __ __________________ 412
I. Deferred Giving __ _ ________ _ _____ ____ _______ __ _ _ _ _ _ ___ ________ _____ _ _ ____________ 412
1. Charitable Remainder Trusts ______________ _ ___________________________ 414
Revenue Procedure 2005-52-------------------------------- 415
Revenue Procedure 2005-53--------------------------------420
Note -____ __ ________________ _ _ _ ______ __ _____________ _ ____ _ ______________ _ __ ___ __ 423
2. Charitable Gift Annuity------------------------------------------ 423
IV. Cy Pres Doctrine __________________________________________________________________ __ _ 425
United States v . Cerio- _ _ _____________ _ ___ _ _______ _____ ___ ___ ____ _ _____ _ _ _______ _ _ __ _ 425
Notes -_ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Questions ----___ _ ______________ ___ ______ ____ _ _ _ _ ___________ _ _ _ _ __ _ _ _____________________ 438
Note -------______ _ _ _______ __ _____ _ _______ _______ ___ ________ _ ____ _ ____ _ _ _ _ _ _ __ _ _ 438

TABLE OF CONTENTS xix
Page
IV. Cy Pres Doctrine-Continued
Niemann v. Vaughn Community Church ------------------------------------439
Note ------------------------------------------------------------------------ 445
Chapter 9. Unrelated Business Taxable Income--------____________ _ __ 446
Note-------------------------------------------------------------------------------------446
I. History of the Unrelated Business Income Tax ---------------------___ 447
A. Pre-Revenue Act of 1950 ------------------------------------------- 447
B. The Revenue Act of 1950------------------------------------------------- 448
C . The Regulations----------------------------------------------------- 449
Questions---------------------------------· ------------------------------__ 450
II. Organizations to Which 'UBIT' Applies ------------------------------450
III. Elements of the Unrelated Business Income Tax (UBIT)-------- _______ 450
A. Unrelated Trade or Business ----------------------------------______ 451
Professional Insurance Agents v. Commissioner---___ _ _____________ 451
United States v. American Bar EndowmenL --__ ___________________ ___ 459
Question-------------------------------------------------------_ __ 463
Note --------------- -------- ---- ------- ---- ------- 463
B. Regularly Carried On------------------------------------------ 463
National Collegiate Athletic Ass'n v. Commissioner ----------------464
Question --------------------------------- 471
C . Substantially Related--------------------------------------------471
United States v. American College of Physicians ------------------472
Notes -----------------------------------------------------------______ _ 480
Problems ------------------------------------------------------------------------__ 481
D. Exceptions to "UBIT" --------------------------------------_______ 481
Problems -----------------------------------------------------------------------482
E. Modifications-----------------------------------------------483
1. Rents ------------------------------------------------------------____ 483
Note -----------------------------------------------------------___ 484
2. Royalties ---------------------------------------------------__ _ ____ 484
Sierra Club, Inc. v. Commissioner -----------------------------__ _ 485
Note ---------------------------------------------------------- 490
3. Unrelated Debt-Financed Income -----------------------------------491
University Hill Foundation v. Commissioner -------------------491
Note -------------------------------------------------------------------------503
Problem ----------------------------------------,-----------------------504
Question ---------------------------------------------------------504
Mose and Garrison Siskin Memorial Foundation v. United
States ---------------------------------------------------------- 504
Note ---------------------------------------------------------------------------508
Question ------------------------------------------------------___ 508
Bartels Trust for Benefit of the University of New haven v.
United States -------------------------------------------__ _ 508
Chapter 10. Churches and Other Religious Organizations __________ 518
I. Definition of a "Church" --------------------------------------------518
Foundation of Human Understanding v. Commissioner -------------- 518
Note -----------------------------------------------------------------______ _ 525
Question ------------------------------------------------------------------__________ 525
Lutheran Social Service of Minnesota v. United States ------------- 526
Question --------------------------------------------------------------______ 532

xx
TABLE OF CONTENTS
Page
I. Definition of a "Church"-Continued
Strayhorn v. Ethical Society of Austin------------------------------ __ __ 532
Question ----------- ______________ _ ______________ _ ___________ ----______________ ___ ____ 541
II . Membership ______ ______ ____________ ___ __________ _______ -------___ _____ _ ________ ____ 541
Serbian Eastern Orthodox Diocese v . Milivojevich---------------___ __ 541
Note -----------------------___________ __ ________ __ ___ _ __ -------------___ _______________ 549
III. Association Status -----------------------------------------------__________ _ _ 549
A. Liability of Members of a Religious Organization------------ ___ 549
Notes ---------------------------------------------------------------------------549
Smith v. Calvary Christian Church ---------------------------____ __ 549
Notes ------------------------------------------------------------------______ 554
B . Property Ownership _____________________ __ ______________________ __ _______ _ __ __ 556
Presbyterian Church in United States v . Hull Presbyterian
Church ------------------------------------------------------------556
Holiman v. Dovers-----____ __ ______________ ___ ___ __ __ _ _ _ ________ -------------561
Note-------____ __ _ _ __ _ ______ _________ ____ ___ __ __ __ -------------__________________ 564
Mills v . Baldwin -------------------------------------------------------564
New v. Kroeger ---------------------------------------------------_____ _ 567
Note --------- _________ ____ ____ __ ___ __ ____ ______ _____ ------------------------ 577
Wood v. B enedictine Society of Alabama ------------------------578
IV. Incorporation of Religious Associations-------------:-------------------580
Murphy v. Traylor ---------------------------------------------------------------581
Notes --________ _ ________ __ ___________________________ -__ ______ _ _____________ __ ___________ 585
V. Specialized Tax Issues Relating to Religious Organizations----------587
A. Involvement in Politi ca l Activities ------------------____ _______ _______ _ 587
Branch Ministries v. Rossotti ---_ _________________________ __ ____ _ __________ 587
Note-------___________ _ _______________________ _______ ---------__ ___________________ 594
Revenue Ruling 2007--41------------------------------------------___ _ 594
Notes ------------------_ _______ __ ________ _ ____________ -------______ __ ____ ______ 598
B. Tax Audits of Churches----------------------------------------------599
C. Other Tax Issues----------------------------------------------------600
Problem------____ ______ __ ___________ __ _________ ___ __ ----__ ______ __ _ ___ ______ ____ 601
Chapter 11. Schools ----______ ___ _________ ____ ___ _______ ______ _ __ ______ _ -----------602
I. Role of Private Schools -____________________________________________________ ------602
Pierce v. Society of the Sisters of Holy Names of Jesus and Mary --602
Questions --------- _____ ____ _________ ____ ______ _____ _ __ ______ _ --_________ ___ _________ _ 605
New Life Baptist Church Academy v. East Longmeadow -----------605
Question -------------________ __ _____ ________ _______ __ _ _ ___ ----______ _ _ __ _____ _ __ _ 615
Zelman v . Simmons-Harris ____________ ___ ____ __ __ ____ _____ ___ _______________ __ __ 616
Notes --_________________ ___ __ ______________________ ____ _ _______________________ __ ____ ____ 624
II . Tax Exempt Status of Private Schools -------------------------------_____ 625
Bob Jones University v . United States ______________ ____ _ ____ ___ _______________ 625
Question ---------__ __ ____ _ ______________________ ____ ____________ _ ___________ ___ ________ _ 636
Notes ----___ ______ ___ _ _ _ _ ___ ______________________ __ __ ___ _ ______________ _ __________ __ ____ 636
Questions ----------------- _______________ _ ____ ____ __ __ ____ __ ----_ __ ____ ___ ___ ___ ___ __ 637
Doe v. Kamehameha Schools / Bernice Pauahi Bishop Estate --------638
Questions --------______ ___ _ _ _________ _ _ ____ ________ _____ __ ____ __ ____ ___ __________ __ _____ 648
III. Rights of Students ___________ __ _________ __ ________________________________ _ _____ __ _ _ _ 648
A. Suspension of Students _______ ___ _ ____ __ ___ ___ __ ____ _ _____________ _ __ ___ _____ 648
Harris v. Trustees of Columbia University -----------------------648
Note --__ _ ______________ ___________________ __ ____ __ ___ ______ ______ _ ___________________ 654

TABLE OF CONTENTS xxi
Page
III. Rights of Students-Continued
B. Privacy Rights ---------------------------------------------------------654
Note-------------------------------------------------------------------655
C. Right of Expression ---------------------------------------------655
Question ----------------------------------------------------------------------655
Rumsfeld v. Forum for Academic and Institutional Rights, Inc . 655
Note -------------------------------------------------------------661
Chapter 12. Hospitals ------------------------------------------------662
I. Organizational Structure -------------------------------------------------662
Questions ------------------------------------------------------------------------662
American Hospital Association v. Hansbarg e r ---------------------__ 663
Notes ------- --- -------- -- -------- ----- ----------670
II . Reorganizations of Nonprofit Hospitals ---------------------------------_ 670
Question --------------------------------------------------------------------671
Revenue Ruling 97-21 ------------------------------------------------672
Question ----------------------------------------------------------------------679
Revenue Ruling 98 15 -------------------------------------------------------679
Redlands Surgical Services v. Commission er -----------------------686
Note ----------------------------------------------------------------------696
Questions -------------------------------------------------------------------697
Revenue Ruling 83-157 -------------------------------------------------------697
Notes ------------------------------------------------------------------------699
III. Exemption From Property Taxes -------------------------------------700
Question -----------------------------------------------------------------700
Lamb County Appraisal District v. South Plains Hospital-Clinic ---700
Utah County v. Intermountain Health Care ------------------------------705
Notes---------------------------------------------------------------------718
IV. Abandonment of Nonprofit Hospital Status -----------__________ ____ ________ 719
Queen of Angels Hospital v. Younger -------------------------------------720
V . Conversion to For-Profit Status ---------------------------------------- 722
State of Florida v. Anclote Manor Hospital ----------------------------722
Questions ----------------------------------------------------------------725
Notes-------------------------------------------------------------------------___ 725
Chapter 13. Social Clubs ----------------------------------------------______ 727
I. Nature of Social Clubs --------------------------------------------727
Revenue Ruling 58-501 ---------------------------------------------727
Note --------------------------------------------------------------------------730
II. Right of Association -----------------------------------------------------730
NAACP v. Alabama ----------------------------------------------------___ 730
NAACP v. Button ------------------------------------------------------------733
Note ------------------------------------------------------------------------------736
Board of Dir ecto rs , Rotary International v. Rotary Club of Duarte --737
Question -------------------------------------------------------------------742
New York Stat e Club Association, Inc. v . City of N ew York ----------_ 742
Questions -----------------------------------------------------------______ 750
Boy Scouts of America v . Dale -------------------------------------------750
Note --------------------------------------------------------------------------759
III. Expulsion of Members -------------------------------------------------___ ___ 759
Pollock v. Crestview Country Club Association -----------------------760
IV. Taxation of Social Clubs ------------------------------------------------_ 764
Portland Golf Club v. Commissioner------------------------------_____ 765
Notes ----------------------------------771

xxii
TABLE OF CONTENTS
Page
V. Business Use of a Social Club ---------------------------------------------------- 772
Revenue Procedure 71-17 ---------------------------------------------------------- 772
Note ---------------------- ------------------ -------- ------------------------ ----- --------- 775
VI. Fraternities and Sororities -------------------------------------------------------- 775
Zeta Beta Tau Fraternity v. Commissioner ---------------------------------775
Problem ----------------------------- --- --- --------------- ---------------------- --------- 783
Chapter 14. Trade and Professional Organizations -------------------- 784
I. Trade Association Status ---------------------------------------------------------- 784
National Muffler Dealers Association, Inc. v. United States -----------784
Guide International Corporation v. United States ------------------------790
II. Trade Shows -------- ---- --- --- ------- ----------------------- --------------- ------------ 792
III. Political Activities- ---------------- ---------- ---------- --- --------------- ------------- 792
American Society Of Association Executives v. United States ---------793
Questions ----------------------------------------- ---------- ------ -------- ----- ---- ----- 798
Note ---------------------- ----------------------------------- --------------------------- -- 798
Association of the Bar of New York v. Commissioner --------------------799
IV. Antitrust Regulations- -------------------- --- --------------------- ------- ---------- - 803
Goldfarb v. Virginia State Bar --------------------------------------------------803
National Collegiate Athletic Assoc. v. University of Oklahoma -------810
V. Membership in Trade Associations --------------------------------------------- 819
Austin v. American Association of Neurological Surgeons -------------819
Chapter 15. Political Organizations and Political Advocacy ------- 824
I. Taxation of Political Organizations -------------------------------------------- 824
II. Separate Fund for Political Expenditures of Nonprofit Organizations --- ----------------------------------- ---------- --------------------- ---- ---------- 825
Note -------------------------------------------------------------------------------------- 826
III. Political Activities of § 501(c)(3) Organizations --------------------------- 827
Note ------------- --------- ---- ------- ---------- --- --- --- ---- ------------------------------ 827
IV. Regulation of Political Organizations------------------------------------------ 828
Notes ---- ----------- --------------- -------------------------------- ----- ---------------- -- 828
Question --------------------------- ---------------- ---- --- ------ ---------------------- -- 829
Federal Election Commission v. Beaumont ---------------------------------829
Note ------------------------------------------ ---------------- --- --- ----- ---- ---- --------- 836
Note ----------------------- ------------------- --- ------------------------ -------- ----- ---- 837
Note ------ ----------------- ------------------------------------------ ---- ------------- ---- 841
Questions -----------_____________________ -_ ---- ---------- ---------- ----------- ----- ----- 842
Federal Election Commission v. Wisconsin Right to Life ---------------842
Note ------- ----------______________________ -___ ---- ------------ --- ---- ------------- ----- -- 847
Note ---- ---------_________________________________________ ------ -------- ---------------- -- 848
Question ------- --- -__________________________ ---------- ------------- ------------------ -- 849
Citizens United v. Federal Election Commission --------------------------849
Citizens United v. Federal Election Commission --------------------------853
V. Registration Requirements for Tax Exempt Political Organizations 854
Note ------------- ------ _______________________________ --__ ---- ------------------------ ---- 856
Chapter 16. Homeowners' Associations -------------------------------------- 857
I. Nature of Homeowners' Associations------------------------------------------ 857
Note ------ ----------------- -----__________________ ------------------ ------------- --------- 858

TABLE OF CONTENTS xxiii
Page
II. Rights and Liabilities of Members---------------------------------____________ 858
Goglio v. Star Valley Ranch Association------------------------------- _______ 859
Question --------------------- ----------------------------------------------------------- 860
Inwood North Homeowners' Association, Inc. v. Harris ----------------861
Question ------------------------------------ -------------------------------------------- 864
Brooks v. Northglen Association------------------------------------------- -----864
Question --------- ------------- --------------- ------------------------------------------- 868
Trustees of the Prince Condominium Trust v. Prosser ------------------868
Question --- ---- ------- --- ---------------------------------- ----------------------------- 870
Ashcreek Homeowner's Association, Inc. v. Smith ------------------------870
Question --- ------------------- ------------ ---------- -------------------- --------- ------- 874
INDEX - - - - - - - -- - - - -- - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
877