In Uncategorized on 07/29/2019 at 15:42

A legitimate front is every dodger’s desideratum. But legitimacy hangs on the operation of the front. We saw that in my blogpost “Charity Is As Charity Does,” 8/26/13.

“It’s what you do, not what you say you will do.”

Today STJ Daniel A. (“Yuda”) Guy confronts Giving Hearts, Inc., 2019 T. C. Memo. 94, filed 7/29/19, ostensibly a charitable fundraiser but actually a lead-generator for a home-improvement-flogger.

Window Plus was the home-improver, and sold via telemarketing. Unfortunately, the National Do Not Call Registry severely limited their marketing plan. So they devised Giving Hearts, which would call prospects using the charitable exemption from Do Not Call, seek donations but flogging the home-improvements, and tried it out.

The trial balloon burst when the MI State AG dropped in,  and blew the whistle to IRS when the prospects complained about the phony pitch.

Giving Hearts passes the organizational test. Its paperwork says all the proper mantras. It is organized for charitable purposes. And it operates, “…(at least in part) to further a charitable purpose.  In short, petitioner collects donations from Window Plus and transfers those funds to other charitable organizations.  Petitioner correctly asserts that the Code does not preclude the use of for-profit enterprises, such as Window Plus, to solicit or collect charitable donations.

“What petitioner overlooks or fails to acknowledge, however, is that the standard for tax-exempt status prescribed in section 501(c)(3) requires that an organization be ‘operated exclusively’ for an exempt purpose.” 2019 T. C. Memo. 94, at pp. 11-12. (Footnote omitted).

And what the Window Plus crowd was doing doesn’t pass muster.

“Petitioner’s corporate sponsorship agreement, by design and in effect, permits for-profit businesses (such as Window Plus) to invoke its name as part of a telemarketing pitch intended, first and foremost, to generate sales leads and revenues.  In other words, although telemarketing calls are ostensibly made on petitioner’s behalf, the real purpose of the calls is business promotion.  As the corporate sponsorship agreement and the telemarketing pitch make clear… a participating business would be obliged to make a charitable contribution to petitioner only when a potential customer agreed to an in-home product demonstration.” 2019 T. C. Memo. 94, at p. 13.

And don’t blame the MI AG.

“Petitioner contends that ‘the investigatory and intervening action’ undertaken by the State of Michigan and respondent created an appearance of self-dealing (between petitioner and Window Plus) and impaired its ability to recruit other businesses to participate in its corporate sponsorship program.  Petitioner misses the point.  Simply put, whether other for-profit enterprises participated in petitioner’s corporate sponsorship program would not alter the fact that petitioner was not operated exclusively for one or more exempt purposes as discussed herein.  See sec. 1.501(c)(3)-1(c)(1), Income Tax Regs.” 2019 T. C. Memo. 94, at p. 14.



  1. […] Taishoff had The Front-Redivivus.  The Latin part of the title means “reborn” or something like that.  If you went […]


  2. […] Taishoff had The Front-Redivivus.  The Latin part of the title means “reborn” or something like that.  If you went […]


Leave a Reply to IRS Should Not Be Worrying About Do Not Call Registry - Financial News Tips Cancel reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: