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1) WWW.ALSTON.COM Federal Tax ADVISORY n MARCH 1, 2016 Private Foundations and Lobbying Loren E. Parks v. Commissioner, 145 T.C. No. 12 (2015) The Tax Court mostly ruled against a private foundation and its main contributor and foundation manager by approving the assessment of the private foundation excise tax on lobbying expenditures. However, the court gave them a partial victory as to one set of expenditures. The reasoning of the court for that victory could prove to be useful to private foundations. A private foundation is a Section 501(c)(3) organization that is not a “public charity.” In general terms, it is an organization with qualifying purposes and activities but is funded by a person who controls it. While it is subject to the limits on lobbying and political activities that apply to all charities, it and its managers also can be subject to excise taxes on expenditures for such purposes. The Parks Foundation was a private foundation that ran radio ads in several years opposing or supporting several voter initiatives (referenda) in Oregon. The three tests for the taxable expenditures are: • The communication addresses “specific legislation.” • The communication “refers to” that legislation. • It “reflected a view on” the legislation. The court ruled that the initiatives were legislation (which was not disputed) and that the ads referred to them. It also ruled that most of the ads reflected a view, although that was done in an indirect way. But in two ads, the foundation did not reflect a view. Those two ads appeared to state facts that were generally true, though incomplete and possibly misleading. In other words, they showed one side of the story. The IRS asserted that the foundation was required to be “educational” by stating both sides so that the hearer could decide for herself. This advisory is published by Alston & Bird LLP to provide a summary of significant developments to our clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under court rules of certain jurisdictions.

2) WWW.ALSTON.COM 2 There was a basis in the regulation for the two-sided discussion requirement. However, the IRS also had issued other guidance that did not contain that requirement as a specific element of an educational “full and fair exposition.” Based on that other guidance, the court ruled for the foundation. The IRS may appeal the issue it lost, but if it does, the foundation is likely to appeal the rulings against it, which it may do in any event. But if the decision is not reversed on appeal, it stands for the proposition that a private foundation may be able to avoid the excise tax for lobbying communications if it states true facts for its side of the debate. It also should avoid doing so in an “inflammatory” manner. It should be observed that Mr. Parks was not denied his charitable contribution deduction, even for the spending that was subject to the excise tax. For additional information, call Jack Cummings at 919.862.2302.

3) 3 If you would like to receive future Federal Tax Advisories electronically, please forward your contact information to FederalTax.Advisory@alston.com. Be sure to put “subscribe” in the subject line. Click here for Alston & Bird’s Tax Blog. If you have any questions or would like additional information, please contact your Alston & Bird attorney or any of the following: Federal Tax Group Sam K. Kaywood, Jr. Co-Chair 404.881.7481 sam.kaywood@alston.com Edward Tanenbaum Co-Chair 212.210.9425 edward.tanenbaum@alston.com George Abney 404.881.7980 george.abney@alston.com Scott Harty 404.881.7867 scott.harty@alston.com Clay A. Littlefield 704.444.1440 clay.littlefield@alston.com John F. Baron 704.444.1434 john.baron@alston.com Brian D. Harvel 404.881.4491 brian.harvel@alston.com Ashley B. Menser 919.862.2209 ashley.menser@alston.com Henry J. Birnkrant 202.239.3319 henry.birnkrant@alston.com L. Andrew Immerman 404.881.7532 andy.immerman@alston.com Matthew Moseley 202.239.3828 matthew.moseley@alston.com James E. Croker, Jr. 202.239.3309 jim.croker@alston.com Stefanie E. Kavanagh 202.239.3914 stefanie.kavanagh@alston.com Danny Reach 704.444.1272 danny.reach@alston.com Jasper L. Cummings, Jr. 919.862.2302 jack.cummings@alston.com Brian E. Lebowitz 202.239.3394 brian.lebowitz@alston.com Heather Ripley 212.210.9549 heather.ripley@alston.com WWW.ALSTON.COM © ALSTON & BIRD LLP 2016 ATLANTA: One Atlantic Center  n  1201 West Peachtree Street  n  Atlanta, Georgia, USA, 30309-3424  n 404.881.7000 n  Fax: 404.881.7777 BEIJING: Hanwei Plaza West Wing  n  Suite 21B2  n  No. 7 Guanghua Road  n  Chaoyang District  n  Beijing, 100004 CN BRUSSELS: Level 20 Bastion Tower  n  Place du Champ de Mars  n  B-1050 Brussels, BE  n  +32 2 550 3700  n  Fax: +32 2 550 3719 CHARLOTTE: Bank of America Plaza  n  101 South Tryon Street  n  Suite 4000  n  Charlotte, North Carolina, USA, 28280-4000  n 704.444.1000 n  Fax: 704.444.1111 DALLAS: 2828 North Harwood Street  n  18th Floor  n  Dallas, Texas, USA, 75201  n 214.922.3400 n  Fax: 214.922.3899 LOS ANGELES: 333 South Hope Street  n  16th Floor  n  Los Angeles, California, USA, 90071-3004  n 213.576.1000 n  Fax: 213.576.1100 NEW YORK: 90 Park Avenue  n  15th Floor  n  New York, New York, USA, 10016-1387  n 212.210.9400 n  Fax: 212.210.9444 RESEARCH TRIANGLE: 4721 Emperor Blvd.  n  Suite 400  n  Durham, North Carolina, USA, 27703-85802  n 919.862.2200 n  Fax: 919.862.2260 SILICON VALLEY: 1950 University Avenue  n  5th Floor  n East Palo Alto, California, USA, 94303-2282  n 650.838.2000 n  Fax: 650.838.2001 WASHINGTON, DC: The Atlantic Building  n  950 F Street, NW  n  Washington, DC, USA, 20004-1404  n 202.239.3300 n  Fax: 202.239.3333