Group Exemption

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Group Exemption

A determination by the IRS that several organizations have tax exempt status due to connection to a single, parent non-profit organization. It should be noted that this tax exempt status may be given even before the parent organization has received 501(c)3 status.
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IRS officials have reservations about group exemptions in general, and have suggested that the recent revocation of tax-exempt status for roughly 275,000 groups that failed to file Form 990-N returns for three consecutive years might indicate that parent organizations are not exercising control over their chapters to make sure they file the return as required.
In a report to the IRS this past summer, the Advisory Committee on Tax Exempt and Government Entities (ACT) recommended that the IRS retain the group exemption process but eliminate group returns and require every chapter or subordinate organization to file their own Form 990.
32) The two most important changes related, first, to an extension of the exemption to licenses granted by--competing--parent companies to their joint venture company, (33) which was a result of the Commission's generally benevolent attitude vis-a-vis interenterprise cooperation through formation of joint ventures, (34) and, second, to the early merger of the group exemptions for patent licenses and for know-how licenses respectively into one group exemption regulation for technology transfer agreements in 1996.
c) Administrative responsibilities and deficits While such focusing of antitrust control over industrial property-related restraints of competition on quasi-monopolization cases fits well into the general picture of the Commission's competition policy as it has evolved over the last decade, and shall not be discussed here, (54) exclusive reliance on group exemptions as an instrument of enforcement policy requires a few additional remarks.
58) It is this widening gap between the existing group exemptions and the reality of the market that now obliges the Commission to reassess its entire policy.
which the report collects, mirror the well-known repertoire of pros and cons that have accompanied the group exemptions since their inception and regardless of their permanent "liberalization.
Therefore, the decision on the group exemption for patent license agreements (25) took quite some years, and it did so also because of intensive industry lobbying for a broadening of the exemption.
The Commission may grant individual or group exemptions for those restrictive practices which violate Article 85(1) of the Treaty, but satisfy the criteria of Article 85(3).
Under exclusive distribution, for instance, there is a list of all the Commission's decisions, formal and informal, and the judgments of the Court and Court of First Instance involving the practice, followed by the text of the group exemptions as corrected subsequently together with the Commission's notice on their interpretation, followed by lists of cases on territorial restrictions under several headings with the relevant paragraph numbers to the authorities indicated.
Their discussion of licensing and article 85 manages to steer the reader through case law, advisory rulings and group exemptions to a basic list of do's and don't's that is clear and reasonably concise.
Chapter 8 sets forth the law on distribution agreements, including exclusive distribution and franchising; and here the book analyzes group exemptions, which are available for categories of agreements that comply with the rigid do's and don'ts of Commission regulations.
As Professor Korah notes, by virtue of such very specific authorizations for group exemptions, the Commission steers many transactions into forms that would not otherwise be adopted.

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