An organization was created as a self-styled “online ministry.” Its primary functions are to be the conduct of one or more seminars and the sale of books. Previously, this entity’s founder sold a seminar and books she authored by means of a personal website. The founder and any other authors are to retain the copyrights to books and other materials to be promoted and sold on the entity’s website. They also will retain the royalty interests, although they will direct 10 percent of the proceeds to this entity. Not surprisingly, the IRS, observing that this organization will be the “primary advertiser and purveyor of [the] founder’s books and seminars,” held that this entity could not qualify as a charitable, educational, or religious organization by reason of application of the private benefit doctrine (Priv. Ltr. Rul. 201232034).
This organization claimed to be a “virtual church.” In this ruling, as opposed to prior ones (see, e.g., the August 2012 issue), the IRS recognized the Foundation of Human Understanding case (first summarized in the October 2009 issue), which invoked an associational test as a predicate for church status. The IRS wrote that a website “does not qualify as a place of worship,” nor do individuals accessing a website “constitute a congregation assembled to worship.” Moreover, this organization does not ordain ministers, have schools for religious instruction, or perform sacraments such as weddings or funerals. Another factor that precluded church status in this case is the fact that the organization encourages its “members” to maintain membership in other churches. [10.3, 20.11]
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