CHAPTER TWENTY
Private Inurement and Private Benefit
*§ 20.2 Definition of Net Earnings
*(b) Determining Reasonableness of Compensation
(c) Percentage-Based Compensation
§ 20.5 Other Forms of Private Inurement
(j-1) Business Referral Operations (New)
§ 20.8 Private Inurement and Social Welfare Organizations
*§ 20.9 Private Inurement and Business Leagues
§ 20.10 Private Inurement and Social Clubs
§ 20.11 Private Benefit Doctrine
*(b) Incidental Private Benefit
*p. 507, n. 23. Insert following existing text:
A most puzzling explanation of the doctrine is this: “Inurement involves an expenditure of organizational funds resulting in a benefit which is beyond the scope of the benefits which logically flow from the organization's performance of its exempt function” (Priv. Ltr. Rul. 201347023).
§ 20.2 DEFINITION OF NET EARNINGS
*p. 509, last paragraph. Insert as last sentence:
Thus, a tax-exempt organization was advised by the IRS that, if it entered into a proposed service agreement with a for-profit company (an insider with respect to it), it would lose its exemption because of violation of the private inurement doctrine; the package of special benefits that would flow to the company, measured in relation to the organization's standard agreement, was viewed by the IRS as a price reduction constituting the ...
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