¹TD 8978 (1/22/02).

²For example, in Church of the Transfiguring Spirit, Inc., 76 TC 1 (1981), a church paid virtually all its income to its ministers as housing allowances; as a result, it lost its exempt status. In Carl B. Carter, TC Memo 1958-166, an organization lost its exempt status when its founders commingled their own income with the organizations revenues and paid personal expenditures from its funds. In Help the Children, Inc., 28 TC 1128 (1957), an organization lost exempt status when it paid contributions to doctors to entice them to work at a city-operated free clinic.

³See Michael T. Caracci, 118 TC 379 (2002), for an example of intermediate sanctions. In that case, family members and three S corporations they owned were assessed Sec. 4958 excise taxes because the transfer of assets from three exempt home healthcare organizations to the three S corporations was not quid pro quo. The FMV of the transferred assets was much larger than the consideration paid in the exchange, giving rise to taxable excess benefits. Assessment of intermediate sanctions was appropriate to penalize the tax indiscretions, but the court ruled that the excess benefits were not sufficient to question the three organizations exempt nature as a whole.

⁴See id. and note 2, supra.

⁵See H Rept No. 104-506, 104th Cong., 2d Sess. (1996), p. 59, n. 15.

⁶See Sec. 4958(c)(1) and Regs. Sec. 53.4958-4 and -5.

⁷IR-2004-127 (10/20/04); see Regs. Sec. 53.4958-3(a)(e). Facts and circumstances may show that a person does not have a substantial influence over the organization if (1) the person has taken a bona fide vow of poverty; (2) the person is a contractor (such as an attorney or accountant) whose sole relationship with the exempt entity is providing advice; (3) the individuals direct supervisor is not a disqualified person; (4) the person is not involved in significant management decisions; or (5) preferential treatment provided is the same for all donors.

⁸See Regs. Sec. 53.4958-6(b).

⁹Gemological Institute of America, 17 TC 1604 (1952).

¹⁰See, Brauer, Tyson, Henzke and Kawecki, An Introduction to I.R.C. 4958 (Intermediate Sanctions), Exempt Organizations Continuing Professional Educational Technical Instruction Program for FY 2002 (IRS, October 2001), App. 2, Compensation, and App. 3, Property, pp. 327333; Miller, Rebuttable Presumption Procedure is Key to Easy Intermediate Sanctions Compliance, Tax Information for Charities and Other Non-Profits, located at www.irs.ustreas.gov/charities/index.html; and Miller, Easier Compliance is Goal of New Intermediate Sanction Regulations, 14 Tax Notes Today 148 (1/22/01).

¹¹Founding Church of Scientology, 412 F2d 1197 (Ct. Cl. 1969).

¹²IRS Letter Ruling (TAM) 200243057 (7/2/02).

¹³See Regs. Sec. 53.6071-1 and Notice 96-46, 1996-2 CB 212.

¹⁴See Regs. Secs. 53.4958-1(d)(1) and (6) and 301.6724-1(b), (c) and (d), pertaining to an exempt organizations failure to report an economic benefit as compensation.

¹⁵See the Better Business Bureaus website, at www.bbb.org.

¹⁶See the American Institute of Philanthropys website, at www.charitywatch.org.

¹⁷The measures are consistent with guidelines suggested by charity-monitoring organizations; see BBB Wise Giving Alliance Standards for Charitable Accountability, at www.give.org; American Institute of Philanthropy, note 16 supra, and Charities Review Council, at www.crcmn.org .

¹⁸The National Council of Nonprofit Associations provides links to many state-sponsored salary surveys, at www.ncna.org.

¹⁹Contemporaneous substantiation by the organization can include Form W-2, 1099 or 990 and includes Form 1040 for the recipient. Other documentation is also acceptable, such as employment contracts. These forms of written substantiation are covered in detail in Regs. Sec. 53.4958-4(c)(3).

²⁰See Kalick, The IRS Focuses on Automatic Excess Benefit Transactions and Compensation, 16 Taxn of Exempts 3 (July/August 2004).

²¹Id., at p. 4; and Brauer and Henzke, Jr., Automatic Excess Benefit Transactions Under IRC 4958, Exempt Organizations Continuing Professional Educational Technical Instruction Program for FY 2004 (IRS, 2003).

²²See note 5 supra, at p. 56.

²³People of God Community, 75 TC 127 (1980).

²⁴Gemological Institute of America, note 9 supra.

²⁵See, e.g., GCMs 38283 (2/15/80), 38905 (10/6/82) and 39674 (6/17/87).

²⁶Ann. 92-83, IRB 1992-22, 59.

²⁷See Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 104th Congress (JCS-12-6, 12/18/96).

²⁸See Sec. 132(a)(g).