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On Nov. 26, 2001 I sent our reply to the IRS regarding our plans to "live within
IRS's non-profit regulations". Recall that at our Oct. 4, 2001 conference with IRS they promised to send a Post Conference Development Letter. That letter finally arrived 11/21/01 as I was walking out the door for Thanksgiving travel. Here is our official response in Q & A format. (IRS letter of Oct. 26, 2001 addressed to Adversity.Net) "Dear Applicant: "We are considering your application for recognition of exemption under 501(c)(3) of the Internal Revenue Code. To complete our consideration we need the following information over the signature of one of your principal officers or directors. (Letter continues below, including our responses to IRS's questions.) |
IRS
Documents:
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| Q-1 | Please state whether in addition to or in lieu of web links to news articles, your future articles will contain the title of the news article, author, publisher, date, and use actual "fair use" quotes." |
| A-1 | In the future, our news article postings will contain the article’s title (as published in the news source), the author, publisher, date of original publication, and direct quotes from the cited article. We will not insert paraphrases or opinions of our own in such postings. |
| Q-2 | Please state whether the source of facts underlying any editorial will be readily available to the reader. A link to the archives of the newspaper would not suffice because a large number of newspapers would create a prohibitive cost to the reader and not all newspapers provide archived information. |
| A-2 | The source of facts underlying any editorial will be readily available to
Adversity.Net’s readers in the form of annotated footnotes including direct quotes
from the third party sources or other authorities. Additionally, as a convenience to our readers, we will provide web-links to the supporting material if such links are available with the understanding that these links do not constitute "making the source of the facts" available to our readers. |
| Q-3 | Please state whether you will comply with the four-part methodology test of Rev. Proc. 86-43. |
| A-3 | Adversity.Net will comply with the four-part methodology test
enumerated in Rev. Proc. 86-43 which stipulates that the presence of any of the following
four factors indicate that an activity or communication is not educational within the
meaning of Section 501(c)(3): 1. Presentation of viewpoints unsupported by facts as a significant portion of the organization's communications; 2. Distorted facts; 3. Substantial use of inflammatory and disparaging terms and conclusions based on strong emotional feelings rather than objective evaluations; and ... 4. The approach used is not aimed at developing the audience's understanding because it does not consider their background or training in the subject matter. (Readers: See Footnote 1, below) |
| Q-4 | Please state whether or not you will discuss, publish information on, or provide an opinion on, a candidate’s views during a political campaign. An individual becomes a candidate once they have declared their candidacy. |
| A-4 | Adversity.Net will not discuss, publish information on, or provide an opinion on, a candidate’s views during a political campaign. |
| Q-5 | Please state whether or not you will host a discussion of, or provide an opinion on, a party’s platform during a political campaign. |
| A-5 | Adversity.Net will not host a discussion of, or provide an opinion
on, a party’s platform during a political campaign. However, Adversity.Net does provide an unmoderated discussion board on our web site which is open to the public. Adversity.Net does not endorse or support the views expressed in this public discussion board. We do not censor or otherwise edit the content of the discussion board except in instances of obscenity, profanity, threats of violence, or use of racial slurs. |
| Q-6 | Please state whether or not you will, in any other way, intervene in a political campaign. |
| A-6 | Adversity.Net will not intervene in a political campaign. |
| Q-7 | Please state whether you are making an election under 501(h). |
| A-7 | Adversity.Net has chosen to make an election under 501(h) and we have included a completed IRS Form 5768 with this correspondence. (Readers: See Footnote 2, below) |
SUMMARY: I believe the IRS was being straight with us at our Oct. 4, 2001 conference -- at least from the perspective of their arcane and convoluted regulations governing non-profit organizations. I have taken their Oct. 4 advice into consideration in framing our response (above) to this 10-26-01 "Post Conference Development Letter".
WHAT COMES NEXT: If we have answered the 7 questions above correctly, IRS should now issue us a "Prospective Exemption" which is kind of a 5 year probationary non-profit status during which period we can accept tax-deductible contributions just like any other non-profit organization. I expect a ruling from IRS on this matter within 2 - 3 months. Yeah, it seems like a long time, but they ARE the IRS, and they ARE a huge and slow bureaucracy.
-- Tim Fay (editor@adversity.net)
FOOTNOTES:
| Note 1: |
I am concerned, as you should be,
about potential pitfalls with IRS's wording of this 4-part "test", in
particular: What constitutes "distorted" facts? To give an example: The U.S. Office of Personnel Management published a report states in part that the EEOC workforce is comprised of 48% blacks vs. 6.4% representation of comparably skilled blacks in the civilian workforce. Adversity.Net did a little extra math and pointed out, correctly, that the difference between these two figures (48% minus 6.4%) represents 41.6% OVER-hiring of blacks by the EEOC (based on the presumed goal of Affirmative Action is to have "proportional representation" of all the various skin colors employed at the EEOC). (See OPM Report) Does IRS consider this a distortion? Similarly, what constitutes "substantial use of inflammatory and disparaging terms and conclusions"? Adversity.Net frequently refers to Affirmative Action as "reverse racism", "a quota scam", and so on. Will this cause us to flunk IRS's test? Several non-profit groups (including most recently the Christian Coalition) have sued the IRS over the unconstitutional vagueness of such rules as well as over the uneven way in which these rules are enforced. Adversity.Net doesn't have money for lawsuits, so we gotta play nice (i.e., by IRS's rules). End of Note 1. [RETURN to Q&A] |
| Note 2: | 501(h) option. In a nutshell, Adversity.Net elected this
option because IRS strongly encouraged us to do so at our Oct. 4, 2001 conference.
Basically, 501(h) allows exempt organizations to do some limited lobbying IF we report our
expenditures on such activities, and IF we keep those expenditures below a certain
threshold. Here's the mind-numbing boilerplate from the IRS regs: Section 501(c)(3) states that an organization exempt under that section will lose its tax-exempt status and its qualification to receive deductible charitable contributions if a substantial part of its activities are carried on to influence legislation. Section 501(h), however, permits certain eligible 501(c)(3) organizations to elect to make limited expenditures to influence legislation. An organization making the election will, however, be subject to an excise tax under section 4911 if it spends more than the amounts permitted by that section. Also, the organization may lose its exempt status if its lobbying expenditures exceed the permitted amounts by more than 50% over a 4-year period. For any tax year in which an election under section 501(h) is in effect, an electing organization must report the actual and permitted amounts of its lobbying expenditures and grass roots expenditures (as defined in section 4911(c)) on its annual return required under section 6033. See Schedule A (Form 990). Each electing member of an affiliated group must report these amounts for both itself and the affiliated group as a whole. For more details, see section 4911 and section 501(h). End of Note 2. [RETURN to Q&A] |
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