Originally published on Forbes.com Aug 15th, 2013
Applying for 501(c)(3) status is not that onerous, but it is a bit of a project, so you probably don’t want to do it unless you have a pretty neat idea. Well here is a really neat idea. Start a charity that is dedicated to your family. That way income from family property can be exempt and the kids can go to college with scholarships funded by tax deductible donations. That was the idea that a family came up with. I’m going to call them the Seethrees. They were featured in PLR 201330017. This is what their bylaws say about the purpose of the Seethree Association:
— To promote common familial interests of those individuals who are related by blood, marriage or other significant relationship to a common ancestors bearing the primary surname of your Family.
— To maintain, preserve and protect “family land”, located primarily in City State that was first purchased by your ancestors over one hundred years ago. You will use any proceeds from crops, timber or other resources extracted from the “family land” to encourage, facilitate and support the educational aspirations of family members,
— To support activities which enhance familial relationships and communications.
— To compile historical information regarding the common ancestry of the individuals who are members of the Association.
— To cooperate with other organizations and agencies in furtherance of genealogy and other family related activities.
“Our primary activities will include the use of organization receipts to assist the educational endeavors of our members’ children. We intend to create a scholarship fund to supplement other resources that the students will already be receiving. Conditions for eligibility will include enrollment in an accredited institution of higher learning, proof of a minimum grade point average and proof that the funds are used for qualified educational expenses.”
Family solidarity is a great thing. As Edmund Burke remarked:
To be attached to the subdivision, to love the little platoon we belong to in society, is the first principle (the germ as it were) of public affections. It is the first link in the series by which we proceed towards a love to our country, and to mankind.
It is true that pride in one’s family can sometimes be a little over the top, but overall it is still a very positive thing.
You have to wonder why more families don’t start exempt organizations. Well, it may be because, as the PLR explains it does not work – for at least four different reasons:
1. When you conduct activities which manage and protect your land, harvest and sell your timber, and conduct family reunions, you are serving the private interests of your members in a manner similar to the organization described in Revenue Ruling 69-175.
2. Like the organization which was denied exemption in Revenue Ruling 67-367, you have established a plan to award scholarships to members of a preselected group of individuals: your family.
3. You expect to compile historical information regarding the common ancestry of your family members in furtherance of genealogy and family related activities. But, according to Revenue Ruling 80-302, genealogic activities do not advance education to benefit public interest when membership is limited to descendants of a particular family.
4. Finally, we point out that, in the same manner as the Wendy L. Parker Rehabilitation Foundation, Inc., your family members are the substantial beneficiaries of your funds because your activities relieve the your members from the economic burden of providing services to protect your land and provide educational assistance to members and their children.
Other than that Mrs. Lincoln, how did you enjoy the play ?
I’m still puzzled as to how somebody actually thought that this could work. Perhaps like Richard Henry Lee in 1776 while acknowledging that God in heaven is everybody’s God, they felt with pride that God leans a little on the side of the Seethrees. Who knows ? Maybe God does, but the IRS not so much.
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