Sometimes I think the IRS gets it flat out wrong when it denies exempt status. I’m going to call the group that got denied in PLR 201335024 the Ale-Free Dungeon (AFD). It looked to me like the source of the problem is a lack of respect for serious gaming. In that way it reminds me a bit of the State of Washington denying Nihon Ki-in Go Institute of the West a property tax exemption referring to a venerable intellectual challenge as a “mere recreational board game”.
AFD (remember I made up that name) seems to be located in a less than edifying community. Apparently absent AFD, the primary forms of entertainment available are bars and casinos. Made me think that maybe they were located in No Name City
The Alternative
AFD seeks to promote sobriety by encouraging table top games.
Your only programs consist of providing free and low cost tabletop gaming activities in a supervised non-alcoholic, sober environment, along with access to gaming accessories that are provided without cost to participants. You are promoting tabletop customizable games, such as card and miniature games (CCGs and CMGs); there is also a strong interest in promoting role-playing games (RPGs). Beginner players can learn and obtain free gaming materials solely for playing. Moreover, you have a redemption system-players get free decks and can learn additional games.
If you are a boomer and the last game you played was Candyland or Chutes and Ladders, you would probably be amazed to see how games have developed since 1960.
The ruling does not specify which games are being used to keep folks sober, but I would speculate that Magic (Full name is Magic the Gathering)is a likely suspect.
Magic
If you ever played the classic card game War (For those of you who haven’t you divide a standard 52 card deck into equal piles and each turn one over each turn, with the higher card winning and ties triggering a more complicate sequence), you have a very small taste of what it is like to play Magic.
In Magic you draw a card each turn from your deck and you are trying to destroy your opponent in a kind of war. The similarity ends there. If you observe a pair playing magic mid-game you will see that they each have cards laid out in front of them. The cards are of a bewildering variety. According to this non-authoritative source, there are over 11,000.
On its face each card has some interesting artwork and sometimes some “color text”, neither of which have significance to the game. There are symbols that indicate how powerful the card is in attack and defense and the cost in terms of “mana” to play it. (Mana is determined mainly by your “land” cards.) Many cards have special powers. For example when Auramancer enters the battlefield, you get to return an enchantment card from the graveyard to your hand. Then there are the “instants” which you can pop out in the middle of things. Frankly, I am terrible at the game myself.
What makes the game really fascinating is the strategic component. Each player decides which cards are in his or her deck. Of course, some of the rarer cards with special powers are hard to come by which creates a speculative collector aspect.
The point for purposes of this discussion is that Magic is a very deep intellectual enterprise. It merits a lot more respect than it gets.
Staying Sober By Gaming
The idea of AFD is that the social aspects of serious gaming can help people maintain sobriety.
Your programs are dedicated to promoting socialization among adults suffering addictions in their lives. You indicated individuals might relapse due to boredom and isolation. Moreover, you want to help those from falling into lifestyles that lead to such problems.
You stated that those with addiction histories are a distressed class and your recreational programs target lower income people because those with means generally have the resources available to address sobriety issues. In addition, you do not publically bill yourself as a treatment program and do not offer counseling or therapeutic type services. You also are not affiliated with any formal support groups.
You wrote you are nearly identical to a 501(c)(3) organization that fosters a supportive, physically active community for individuals who are recovering from alcohol and substance abuse and those who choose to live a sober life. Furthermore, you host events strictly and exclusively to provide a safe, sober environment for individuals who seek to avoid frequenting bars and casinos. You are not just a group of random people getting together to play games. Yours is a program dedicated to promoting socialization amongst individuals suffering addictions in their lives, or as a resource to avoid falling into lifestyles that lead to such problems. Your recreational program focuses upon providing alternative activities during otherwise prolific periods of substance use and the program addresses the primary cause of recidivism in addicts: boredom.
Well they have sure convinced me. I have been in bars and casinos and dabbled a bit in games. There is no doubt that the latter is much healthier and for many people can be just as absorbing. Gaming venues are few and far between. Much of it is done in private homes inaccessible to disconnected individuals prone to serious substance abuse. I could see AFD performing a real service through its program.
IRS Does Not Get It
The IRS wasn’t buying it though.
You have a substantial non exempt purpose of providing regular social and recreational activities to the general public to promote adult sobriety. For example, your organized game playing meets regularly and is composed of both tutorials and organized game play.
………….. your only activity is providing organized game play including tutorials to the community to promote adult sobriety. You are devoting all your time, energy, and other resources to conducting the game play. Therefore, you are operating substantially for noncharitable purposes.
Included in the list of things that qualify under 501(c)(3) are educational, scientific and literary. I really don’t think it is too hard to fit deep serious gaming under one of those. Of course, AFD was mainly working on the charitable angle and I think they had a strong argument there.
Alcohol Free Dungeon Unmasked
As is common with many of its exempt organization rulings, the IRS redacting was pretty easy to penetrate. I was pretty sure that AFD was GameHearts. Cursory research does not support the notion that Kalispell, Montana is any sort of No Name City, although it does seem to have more than its fair share of casinos.
Ron Glick, executive director of GameHearts confirmed with me that his organization was in fact the subject of the ruling. Mr. Glick is the author of several collections of comic book trivia and a fantasy series. I just got One of the Godslayer cycle for my kindle. It is off to a pretty good start, but I’m still not sure I can invest the time in another series. Repairman Jack took a lot out of me. There is a reluctant hero and some magic swords involved. We’ll see.
At any rate Mr. Glick attributes the failure of the IRS to see the merits of his group as rooted in a prejudice in favor of more venerable sobriety programs:
it’s like the US government is supporting a monopoly for all the anonymous programs out there as the only community-based sobriety programs
I’m sure the IRS must have its share of Friends of Bill and certainly friends and relative of Friends of Bill. Alcoholics Anonymous Worldwide Services Inc and the General Services Board of Alcoholics Anonymous Inc which together gross over $20 million per year are, as you would expect, recognized as 501(c)(3) organizations. Some of my favorite fictional characters were active in AA Lenny in Law and Order, Leo in West Wing and, of course, the inimitable Andy Sipowicz of NYPD Blue. Just too bad my father never joined up.
AA is clearly a great movement. Nonetheless, you have to wonder how an IRS agent would view AA if it had just been invented last year. “HMMM. Seems like what you guys do is sit around and tell stories about how terrible you were when you were drinking. Oh yeah. And you drink an awful lot of coffee. I don’t see any exempt activity here.”
I think we need to consider that GameHearts might be able to reach some people that AA might not reach. Mr. Glick told me that GameHearts is appealing the adverse determination in Tax Court. I wish them well and hope to be writing about their victory before long.
You can follow me on twitter @peterreillycpa.
Correction:
In an earlier version of this piece the PLR number was incorrectly stated.