September 20, 2007 | Read Time: 2 minutes
An organization that provides fertility services to women at no cost does not qualify for a federal tax exemption, in part because its secretary-treasurer is its founder, “sole financial donor,” “principal sperm donor,” and the son of its president, according to an Internal Revenue Service ruling.
As is its policy, the tax agency did not identify the organization that was involved in the case.
According to the IRS, the organization offers women the chance to apply for the group’s fertility services by answering 12 questions on the organization’s Web site. The group uses a computer program to assign a score to the answer. “If the score exceeds a certain threshold, the applicant is accepted,” the revenue service said.
The organization’s funds come from cash and marketable securities donated by the secretary-treasurer, the government said, and the group does not intend to carry out any fund-raising activities.
But the IRS said only three men have donated sperm to the organization, with the secretary-treasurer apparently providing 88 percent of the total number of vials.
What’s more, the IRS said, each of the organization’s officers — and the president and secretary-treasurer are the only officials — is allowed to overrule the score assigned to women applying for services when either officer has “concluded that the applicant had more merit than judged by the computer program’s threshold score.”
The IRS decided that the organization did not “serve a public purpose” in the way it is operated.
“You have not demonstrated that the standards you use for evaluating applicants or selecting recipients have any medical, psychological, or social underpinnings,” the tax agency said.
“Taking into account your structure, governance, and operations, your activities result in the provision of more than an incidental level of private benefit” to the secretary-treasurer and his family, the IRS said, which means the organization does not quality for tax-exempt status.
The IRS’s decision — or determination letter 200736037 — is available on the revenue service’s Web site.
