Several federal circuit courts of appeal have applied Indianapolis Power subsequently with varying degrees of consistency. In Westpac Pacific Food v. Commissioner, the Ninth Circuit determined that advance trade discounts received by the taxpayer in consideration for committing to future volume purchases were akin to security deposits or loans and, thus, not includable in gross income in the year of receipt. On virtually identical facts to those in Westpac, the Third Circuit, in Karns Prime & Fancy Food, Ltd. v. Commissioner, openly disagreed with Westpac and the Ninth Circuit’s application of Indianapolis Power, concluding that funds provided to the taxpayer by its food supplier in exchange for a promissory note and a supply agreement constituted taxable income to the taxpayer in the year of receipt. This article more closely analyzes Karns, and its impact, if any, on future applications of law in this area.

Like other commentators, the article questions the validity of the loan versus other advance payment distinction. Accordingly, the article criticizes Indianapolis Power for perpetuating this distinction and for potentially misapplying its own-stated distinction by inaccurately viewing the deposits received by the taxpayer as loans rather than advance payments for future utility services. Because the Third Circuit in Karns limited its decision and discussion as to whether the cash advance received by the taxpayer constituted a loan, it missed an opportunity to further clarify the disparate tax treatment of other advance payments. Nevertheless, the article ultimately concludes that the Third Circuit correctly applied precedent and ultimately got it right in Karns. By utilizing Indianapolis Power and distinguishing Westpac, the clear import of Karns is that the more two parties to a transaction treat an advance payment (or an advance trade discount) as a loan from its inception, the more likely the recipient will prevail against the IRS in excluding that advance from income upon receipt.

This article contends that with respect to "ancillary" joint ventures (i.e., joint ventures where the exempt organization only contributes an insignificant portion of its assets) the control standard is overly intrusive and unrealistic in light of the current marketplace. This article attempts to provide a more tenable alternative to that standard. Specifically, it offers a two-prong approach to properly address a tax-exempt organization's participation in an ancillary joint venture, asserting that the Internal Revenue Service need only use existing resources, with certain suggested modifications, in a more effective manner. In light of current Congressional inquiry into the compensation practices of tax-exempt organizations, this article specifically advocates for greater use of the intermediate sanctions rules to ensure that such ventures do not confer too much financial benefit to their for-profit participants.

This article contends that these instances of discrimination are intrinsically incompatible with such organizations' "charitable" purpose and mission, and with society's notion of what constitutes a charity. This article contends that such organizations should not continue to enjoy the benefits of tax-exempt status if they engage in discriminatory practices or maintain discriminatory policies. To combat such discrimination, this article proposes the inclusion of an expansive nondiscrimination requirement within Section 501(c)(3). Such a requirement ensures that the stream of tax-deductible dollars (generated by the charitable contributions deduction) received by charities is not used to discriminate against any member or segment of society. The proposal transforms Section 501(c)(3) into the "gold standard" for all tax-exempt organizations, ensuring that their beneficiaries are as diverse and all encompassing as the taxpaying public from whom such organizations draw their support.

In a prior article published in the WISCONSIN LAW REVIEW, I proposed a solution to the problem of discrimination by charitable organizations (a term commonly interpreted to include religious organizations) – enact a broad and well-defined nondiscrimination condition on tax exemption under Section 501(c)(3) of the Internal Revenue Code. Inherent in that proposal is the notion that discrimination by charitable organizations is intrinsically incompatible with such organizations’ purpose and mission. Although my prior article briefly addressed the constitutional and other difficulties inherent in applying a nondiscrimination requirement to religious organizations, it acknowledged the necessity of additional and more thorough discussion on the issue – thus, the focus of this Article. Accordingly, this Article examines the propriety and constitutionality of subjecting religious organizations to a nondiscrimination requirement and crafting a more narrow church exception to that requirement. It proposes statutory and regulatory amendments to prevent certain church-affiliated organizations from avoiding the nondiscrimination requirement.