(b) Trade or Business

p. 518. Add another item to “Nature of Items Sold” in Exhibit 11.2:

• Is the nexus between information on items sold and objects displayed and used in the school, church, museum, or other type of exempt organization sufficient to create the necessary relatedness?

(b) Permitted Businesses

p. 535, note 130. Insert following existing text:

For example, the IRS ruled that a low-income housing program for the elderly, operated by a private foundation by means of a disregarded limited liability company, was a functionally related business in that it relieved the poor and distressed (Priv. Ltr. Rul. 201603032).

*p. 543. Insert following first paragraph, before heading:

(e) Provision of Technical Advice

A private operating foundation's program of providing “technical assistance” to neighborhood nonprofit organizations and government agencies was held to not be an unrelated business and not the type of activity giving rise to excise taxation under the excess business holdings rules.^157.1

In this situation, a private operating foundation furthered its charitable purpose through collection, analysis, interpretation, and sharing of data concerning a metropolitan region to improve community decision making. Some of this information was made available to the public by means of the foundation's website.

The foundation also offered technical assistance to an array of nonprofit organizations and government agencies. The foundation represented to the IRS that it administers an extensive screening process to ensure that each project it agrees to undertake for one of these organizations will provide information and insight to advance its mission. Information provided to its “clients” was added to the foundation's repository for use in other projects.

This foundation previously absorbed the costs of providing this technical assistance. To engage in more projects that will bring in valuable new data and identify research questions not previously explored, the foundation proposes to charge a “reasonable fee” for assistance requests. The foundation represented that it will set its pricing in alignment with clients' ability to pay.

The IRS concluded that the foundation's technical assistance services are substantially related to the performance of its exempt functions because the projects generate research data that serve its charitable ends and provide new data for the foundation's use. Further, this assistance enabled client organizations to perform their charitable activities. Thus, the IRS ruled that these activities do not constitute an unrelated business and amount to a functionally related business for purposes of the excess business holdings rules.