Abstract
The bad news is that exempt entities are squarely involved in tax shelters and the controversies over them. This bad news has important implications for exempt organizations, their managers and board members, and their professional advisors. Shelters are identified not by core principles but by transactional indicia. One of the central indicia of a tax shelter is the presence of a tax-indifferent party, including various types of exempt entities. Abuse of the Section 170 charitable contribution deduction rests on the time-honored expedient of over-valuing tangible and intangible property contributed to section 501(c)(3) organizations. These shelters thus involve two elements - valuation and a charitable donee operating as an accommodation party. In addition to exemption from taxation, exempt organizations seem to offer some insulation from nettlesome questions about the business purpose for the transfer to the exempt entity and the legitimacy of the larger transaction. Congress has enacted a range of penalties applicable to parties to tax shelters, including the managers and professional advisers of exempt entities serving as tax-indifferent accommodation parties.