IRS Denies Exempt Status To Historical Interpreters

This post was originally published on Forbes May 4, 2015

Some of the more fascinating people that I met as I covered the Civil War Sesquicentennial in "real time" (i.e. being in the exact place that key events took place exactly 150 years later) were historical interpreters.  They were different from reenactors who put on uniforms and do some marching and maneuvering and then stay in camps of greater or lesser authenticity. My main takeaway from watching reenactors is that canons are loud and reenactors are safety conscious, which is a good thing.  One of the interpreters referred to reenacting as "powder burning".  Some reenactors, of course, have very deep knowledge of the "Late Unpleasantness", but they don't have to.

Historical Interpreters

The interpreters are a different story.  They represent a particular individual and are supposed to have very deep knowledge.  The ones I met tended to shift pretty seamlessly from their character to their real life personal.  One of my favorite encounters was on Day 2 of the battle of Gettysburg when I ran into John Buford (Michael Smith).

You have to admire somebody who can take on character that had been portrayed by Sam Eliot

Of course, historical interpreters are not limited to doing Civil War generals.  Jesse Piaia does Margaret Fuller, among a number of other prominent women. Rob Velella does Edgar Allan Poe.

How Is A Historical Interpreter Like A Tax Blogger?

So here is a question - Why is a historical interpreter like a tax blogger? - Neither of them has given up his day job.  On the historical interpreter side, rumor has it that Kenneth Serfass, who is superb by the way, does pretty well with his Ulysses Grant.  That's what somebody from Lincoln's Generals told me anyway.  Lincoln's Generals had the inside track with the Park Service and were well represented at the Appomattox Sesquicentennial with their own General Grant (E.C. Fields)

Historical Interpreters And Tax Exempt Status

All this is by way of introduction to my discussion of Private Letter Ruling 201515037.  Private letter rulings are redacted with letters substituted for names.  Sometimes I can penetrate the redaction, but I had no luck with this one.  I like to substitute names I have made up for the letters, pretty much to make it more colorful.

Barbara and Charlie are a married couple who actually make some money as historical interpreters.  We can't tell from the ruling whether they still have day jobs.  They have created an educational program designed to teach "history, humanity, leadership and the power of one" (I have not figured out what the power of one is).  We could imagine them portraying Franklin and Eleanor Roosevelt for example.  The program is presented in schools, libraries and theaters.

Barbara formed a not for profit corporation.  Let's call it "Interesting Times" - IT. IT now runs the presentations and sells books and programs developed by Barbara, to which Barbara still owns the rights. Barbara gets a percentage of the proceeds with the balance going to administer the program.

The interesting question is what the point is of  applying for exempt status.  It would have been a lot easier to form a for-profit corporation that could make an S election or a limited liability corporation that Barbara and Charlie would be able to treat as a partnership.  The answer is that they wanted "to pursue funding through grants and donations so that they could expand the program".

Many entities that apply to the IRS for exempt status are really not seeking a federal tax benefit of any sort.  The organizations seek exempt status so that they can  serve liquor or run bingo games or avoid transparency in the matter of donations for political activity. That last is what gave us the interminable IRS Scandal.  And then there is the reason that IT is seeking exempt the status.  A certain patina of respectability and access to grants.  At least in the case of IT, it did not work out well.

You do not meet the provisions of Section 1.501(c)(3)-1(c)(1) of the Regulations because more than an insubstantial part of your activities is not in furtherance of an exempt purpose; you took over B and C's sole proprietorship to obtain grant money to conduct the same activities as well as provide similar compensation to B and C after taking a small percentage for your operations. These facts show you are operating for substantial non-exempt private purposes.

There some other issues, but I think that part is the heart of the matter.

IRS Should Be Collecting Taxes

I think the moral of this story is that it is a bad idea to rely on the IRS to provide imprimaturs of a sort on organizations that really have no significant tax exposure themselves.  The IRS has a big enough job collecting taxes that it does not need people with laudable purposes applying to them for an extra dose of credibility.