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Are Tax-Exemption Challenges Heating Up?

July 5, 2009, 9:16 pm

“The line between an exempt charity and a commercial business has grown ever murkier in our society,” writes John D. Colombo, a University of Illinois Law professor, on the Nonprofit Law Prof blog.

He cites three recent news articles on tax-exemption conflicts or legal challenges under way across the country:

• A 70-acre campground in Georgia described as a “worship site,” though it sports signs reading ‘No Trespassing — Little River Hunt Club.’

• A charity arts venue in Iowa (complete with liquor license) that area bar and club owners say unfairly competes with them when booking and paying performers.

• A 160-room oceanfront property in New Jersey that an order of nuns says is used for religious retreats.

“So when, exactly, is an organization an exempt charity or a hunt club, or a bar with live entertainment, or an ocean vacation spot?” Mr. Colombo asks. “If the legendary Blue Note in New York City decided to convert to nonprofit status and offer jazz-appreciation classes, would it be a tax-exempt charity? If Tesla Motors was formed by environmental activists as a nonprofit dedicated to commercializing an all-electric sports car in order to save the environment, would it be a charity?”

What are your thoughts on these conflicts? Are we entering an era of greater debate over tax-exempt status?

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