On the Record: Taking Out Life Insurance on Your Donors: A Gamble?

Another issue is whether the new plan implicates IRC 501(m), which provides that a 501(c)(3) organization is exempt from tax only if no substantial part of its activities consist of providing “commercial-type” insurance.

Section 501(m)(2) stipulates that if the provision of commercial-type insurance is an insubstantial part of the activities of the organization, then the provision of insurance shall be treated as an unrelated trade or business. While it would seem that the charity should not be viewed as providing insurance, the application of IRC 501(m) must be considered.