Facts and Circumstances

(1) Facts and circumstances tending to show substantial influence. Persons,

other than those expressly discussed in the preceding paragraphs, can still exercise substantial influence based on all relevant facts and circumstances. Therefore, they can be disqualified persons. Treas. Reg. 53.4958-3(e)(2) provides factors to help determine if a person has substantial influence over the affairs of an organization. They include, but are not limited to, the following factors:

a. The person founded the organization,

b. The person is a substantial contributor to the organization under Section

507(d)(2)(A), considering only contributions received during the current taxable year and the four preceding taxable years,

c. The person’s compensation is primarily based on revenues derived from

activities of the organization, or of a department or function that the person controls,

d. The person has or shares authority to control or determine a substantial

portion of the organization’s capital expenditures, operating budget, or compensation for employees,

e. The person manages a discrete segment or activity of the organization that

represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole,

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f. The person owns a controlling interest (measured by either vote or value) in

a corporation, partnership, or trust that is a disqualified person, or

g. The person is a non-stock organization controlled directly or indirectly by one

or more disqualified persons.

(2) Facts and circumstances tending to show no substantial influence.

Alternatively, Treas. Reg.53.4958-3(e)(3) provides factors that tend to show a person doesn’t have substantial influence over the affairs of the organization. They include, but are not limited to, the following factors:

a. The person has taken a bona fide vow of poverty as an employee, agent, or

on behalf of a religious organization,

b. The person is a contractor (such as an attorney, accountant, or investment

manager or advisor) whose sole relationship to the organization is providing professional advice (without having decision-making authority) regarding transactions where the independent contractor won’t economically benefit either directly or indirectly (other than from customary fees for professional advice),

c. The direct supervisor of the person isn’t a disqualified person,

d. The person doesn’t participate in any management decisions affecting the

organization as a whole or a discrete segment of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole, or

e. Any preferential treatment a person receives based on the size of the

person’s donation is also offered to all other donors making a comparable contribution as part of a solicitation intended to attract a substantial number of contributions.

(3) See Treas. Reg.53.4958-3(g) for 13 examples illustrating the determination of

disqualified persons.