The Internal Revenue Service (IRS) released a section 4943 ruling last week, Private Letter Ruling (PLR) 202143001, which is very similar to PLR 202142004. The only variance is that PLR 202142004 is to “Public Charity,” whereas PLR 202143001 is to “Foundation.” Denial 202141028 is a travel tour case in which the IRS referenced Revenue Rulings 77-366 and 77-430 as precedent, and they continue to be relevant in future cases.
The PLR is heavily redacted, so we are unsure of all the exact facts. Knowing the facts and circumstances is important because the exemption for travel tour cases depends on all the facts and circumstances. According to the PLR, the travel tour would stop in various countries and would last for several days. The application stated that the travelers would have the following opportunities:
To engage and work alongside community leaders, local people;
Give travelers the opportunity to actively participate in bettering the environment and the communities, which enables them to become better global citizens; and
Create tremendous benefits such as carrying out valuable and meaningful change during their travels.
As Bruce Hopkins states on page 654 of his book The Law of Tax-Exempt Organizations, Twelfth Edition: “Whether travel tour activities conducted by an exempt organization are substantially related to an exempt purpose is determined by an analysis of all of the relevant facts and circumstances, including how a travel tour is developed, promoted, and operated,” citing Section 1.513-7(a) of the Treasury Regulations, which, while addressing unrelated trade or business under IRC Section 513, contains seven examples of travel tours also applicable to exemption cases.
The IRS ruled that the applicant failed to provide any additional information from which it can be concluded that its activities exclusively further or advances a purpose described in IRC Section 501(c)(3). The IRS also stated the applicant operated for a substantial nonexempt recreational and commercial purpose. The presence of these substantial nonexempt purposes precludes exemption under IRC Section 501(c)(3).
The IRS seems to agree with Mr. Hopkins. See the EO ATRI textbook for 1979, Chapter T, “Travel Tour Programs – Effect on IRC Section 501(c) Exemption and UBIT Liabilities,” pp. 453-485, wherein it is stated: “Each individual case must be resolved on the particular facts and circumstances,” but with a warning, “There is much controversy in this area.”
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