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§ 3.4 PUBLIC CHARITIES AND PRIVATE FOUNDATIONSBy contrast, a charitable organization established to award scholarshipssolely to members of a designated fraternity was ruled to be exempt as an educationalorganization. 335 Basically, when a class of individuals is involved as beneficiaries,the sufficiency of the class for purposes of ascertaining whethercharitable activities are being engaged in is a matter of degree to be assessed on acase-by-case basis. 336 Traditional charitable classes include the impoverished,students, the elderly, and the disabled 337 ; sometimes, the IRS looks to seewhether a “broad public interest” is being served. 338 There are, of course, limitationswithin the bounds of reason on the IRS’s reach in applying this doctrine. Asone court observed: “To our knowledge, no charity has ever succeeded in benefitingevery member of the community. If to fail to so benefit everyone rendersan organization noncharitable, then dire times must lie ahead for this nation’scharities.” 339§ 3.4 PUBLIC CHARITIES AND PRIVATE FOUNDATIONSThe federal income tax deduction, or the extent of this deduction, for a contributionof money or property to a charitable organization often depends on the taxclassification of the donee organization. From the perspective of the tax law, not335 Rev. Rul. 56-403, 1956-2 C.B. 307.336 A private foundation proposed to develop two parcels of property and sought a ruling from the IRS that thefunds to be expended to that end would be considered qualifying distributions for purposes of IRC § 4942 (theprivate foundation mandatory charitable grant-making rules). The IRS acceded to that request with respect toonly one of the properties, which was to be improved by creating a recreational facility available to the generalpublic. As to the second property, however, which was to be developed by establishing a computer instructionfacility, the IRS ruled that the funds would not be qualifying distributions because of the limitations on accessto the property. Priv. Ltr. Rul. 9702040.The IRS ruled that contributions to a fund established by a tax-exempt hospital were deductible as charitablecontributions when the donors were the hospital, its employees, and employees of its affiliates; the fund providedemergency assistance to financially needy individuals who had suffered economic hardship due to accident,loss, or disaster. The more than 9,000 potential beneficiaries included 2,900 current employees of thehospital and 600 former employees. Priv. Ltr. Rul. 9316051. The IRS reconsidered this ruling because of itsbelief that it was inconsistent with the rules as to tax-exempt charitable organizations. Priv. Ltr. Rul. 9704028.Nonetheless, the IRS subsequently upheld the deductibility of contributions to this fund (the one in Priv. Ltr.Rul. 9316051), reiterating the presence of a charitable class and noting that the hospital would not be makingany grants to the fund. Priv. Ltr. Rul. 9741047.This policy may be changing again. Initially, the IRS ruled that a private foundation can make grants to oneof these disaster relief and emergency hardship programs, when the grants are for charitable purposes andcause only incidental private benefit. Priv. Ltr. Rul. 9516047. Subsequently, however, the IRS held that grantsof this nature are not for charitable purposes, amount to private inurement, result in self-dealing, are not qualifyingdistributions, and are taxable expenditures. Priv. Ltr. Rul. 199914040.337 See, e.g., Rev. Rul. 77-246, 1977-2 C.B. 190 (elderly and disabled recognized by the IRS as charitable classes);Rev. Rul. 76-244, 1976-1 C.B. 155 (organization undertaking home delivery of meals to the elderly and disabledheld charitable).338 See, e.g., Rev. Rul. 75-196, 1975-2 C.B. 155 (law library held to be educational because access to it by lawyerswas held to be a public benefit); Rev. Rul. 69-545, 1969-2 C.B. 117 (promotion of health held charitable becauseof overall benefit to community).339 Sound Health Association v. Commissioner, 71 T.C. 158, 185 (1978).The requirement of a charitable class is usually applied only when assessing the status of a charitable organization.That is, this type of a class is usually not required with respect to religious or educational entities. Asto the latter, for example, the exempt function is that of disseminating knowledge; there are many rulings holdingthat organizations conducting educational programs for a limited group qualify as IRC § 501(c)(3) entities.See, e.g., Rev. Rul. 68-504, 1968-2 C.B. 211; Rev. Rul. 65-298, 1965-2 C.B. 163. Yet the IRS sometimes appliesthe charitable class requirement in the context of a putative educational organization. See note 335. 103