United States Drops Appeal in Case Where Court Prevented it from Retroactively Revoking Organization’s Tax Exempt Status

January 13, 2009

At the request of the United States, the Court of Appeals for the District of Columbia recently dismissed the United States’ appeal of Democratic Leadership Council, Inc., v. United States, 542 F. Supp. 2d 63 (D.C. DC 2008), a case in which the District of Columbia District Court clarified the circumstances in which the IRS may retroactively revoke an organization’s tax exempt status. In a prior news item, we provided a summary of the Democratic Leadership Council case.

As a result, the decision of the District Court in the case will remain applicable. The District Court had held that retroactive revocation of an organization’s tax-exempt status is only appropriate if either of the requirements of Treasury Regulation Section 601.201(n)(6) are met: First, if the tax exempt organization was not operating within the terms of its exemption ruling during the years at issue. Second, if the tax exempt organization omitted or misstated a material fact in its original application for recognition of its exemption.

The McGuireWoods LLP Nonprofit and Charitable Advisory Services provides advice and guidance that enables charities and other nonprofits to operate successfully in the increasingly complicated, regulated, and competitive environment facing nonprofits today.

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