Organizations Fight IRS on Mailing-List Income
January 15, 1998 | Read Time: 1 minute
Common Cause and Planned Parenthood Federation of America have taken the I.R.S. to U.S. Tax Court.
The organizations are fighting the government’s determination that they must pay income tax on proceeds generated by renting donor mailing lists. Both cases will be heard in court at the same time: The trial is scheduled to begin February 17 in Washington.
Common Cause and Planned Parenthood regard the mailing-list proceeds as royalties, which are exempt from taxation under federal law. They also say that the list rentals are not a regularly conducted business, which also would merit a tax exemption.
But the I.R.S. maintains that the earnings are taxable as unrelated business income, and it has billed Common Cause for $206,456 and Planned Parenthood for $134,200 for three years’ worth of back taxes.
Tax-exempt organizations across the country will watch the court case closely. Although not a primary source of revenue for most groups, the rental of mailing lists can supplement an organization’s budget.
The I.R.S. lost a similar case in 1996 when the U.S. Court of Appeals for the Ninth Circuit in San Francisco held that the Sierra Club did not owe income tax on its list rentals.
