The purpose of this article, then, is first to show how the Service's concession to the first bite rule, without a corresponding restatement of the private benefit doctrine, renders the public powerless to prevent a charity's distribution of profit in certain significant circumstances. In the absence of corrective action, the more aggressive and savvy charities will quickly recognize and exploit the loophole. Second, the article discusses and refines a proposal I have previously made concerning a restatement of the private benefit doctrine in a manner that would close the loophole. Since the private benefit doctrine is very closely related to the prohibition against profit distribution (yet distinguishable nevertheless), it seems only logical that a revision of one rule would occasion a reconsideration of the other. In Part II, I briefly outline the facts and holding of United Cancer Council, Inc. In Part III, I summarize the details of Temporary/Proposed Regulation § 53.4958-4T(a)(3) and provide some speculative predictions from the viewpoint of a charity that seeks to circumvent the prohibition against profit taking. In Part IV, I compare the Service's formal and informal articulations of the private benefit rule and conclude that the informal articulation is better. In Part V, I redefine and restate the doctrine of private benefit in a manner that addresses the distribution of profit much more predictably than would the present formal articulation of that doctrine.
Darryll K. Jones, First Bite and the Private Benefit Doctrine: A Comment on Temporary and Proposed Regulation 53.4958-4T(a)(3), 62 U. PITT. L. REV. 715 (2001).