Bryan Cave Tax Exempt and Charitable Planning Team

IRS Exempt Organization Newsletter 2012-9

Keith Kehrer — Thu, 17 May 2012 15:21:44 +0000

On May 16, the IRS released its Exempt Organization Newsletter, Issue Number 2012-09. Topics include the following:

EO redesigns homepage on IRS.gov
Holly Paz named Director, EO R&A
May 30 EO webinar: Starting and Operating Charities for Disaster Relief
IRS seeks applications for Volunteer Income Tax Assistance Program grants
Information for employers on health care benefits reporting
News for enrolled agents awaiting renewal cards
Telephone Excise Tax refund deadline July 27
TEB to host two free telephone forums

1. EO redesigns homepage on IRS.gov

EO reorganized its homepage into eight categories based on what most visitors want to know. Comments? Questions? Please send your feedback to Customer Education & Outreach’s mailbox.

2. Holly Paz named Director, EO R&A

Holly Paz was formally named as Director of Exempt Organizations (EO) Rulings and Agreements (R&A) effective May 6. She is responsible for managing EO’s determination letter program and the development of guidance and rulings.

3. May 30 EO webinar: Starting and Operating Charities for Disaster Relief

This webinar explains the basic requirements for staring a tax-exempt charity and the ways new and existing organizations can properly provide disaster relief under federal tax rules.

It will cover:

the kinds of help organizations can provide
operational and recordkeeping requirements including fundraising and working with volunteers
rules for recipients of disaster relief
the deductibility of charitable contributions made to organizations

The live presentation will be 2 p.m., Wednesday, May 30. Click here to register.

In early June, this presentation will be posted on the IRS Video Portal – where you can also view these EO webinars:

Starting off Right – What New 501(c)(3) Organizations Need to Know Started a new 501(c)(3)? Keep it on track with this helpful webinar.
Starting off Right – What New NON-501(c)(3) Organizations Need to Know
This webinar provides information for new nonprofits, including: 501(c)(4) – Social Welfare groups 501(c)(5) – Labor, Agricultural & Horticultural 501(c)(6) – Business Leagues 501(c)(7) – Social Clubs 501(c)(8) – Fraternal Beneficiary Societies 501(c)(10) – Domestic Fraternal Societies.
International Activities of Domestic Charitable Organizations
This webinar helps U.S. domestic charitable organizations understand the rules for tax-exempt status in the international arena.

4. IRS seeks applications for Volunteer Income Tax Assistance Program grants

The Internal Revenue Service is accepting applications for the Tax Counseling for the Elderly and Volunteer Income Tax Assistance grant programs, which will allow some organizations to apply for annual funding for up to three years.

5. Information for employers on health care benefits reporting

New information is available on the Form W-2 Reporting of Employer-Sponsored Health Coverage page of IRS.gov. This information includes a chart detailing the types of coverage to report, transition relief for many employers and questions and answers about the reporting requirements.

6. News for enrolled agents awaiting renewal cards

Some enrolled agents are still experiencing delays in the processing of renewal applications. Enrollment cards with an expiration date of March 31 are valid for another 60 days or until receipt of a new card. Search Delay for some enrolled agents awaiting renewal cards on IRS.gov for additional information.

7. Telephone Excise Tax refund deadline July 27

Announcement 2012-16 reminds taxpayers to request a Telephone Excise Tax Refund if they have not done so. The Service stopped collecting the tax on long distance service in 2006. Since then it has administered a simplified procedure for taxpayers to request a refund of excise taxes paid. Taxpayers have until July 27, 2012 to request refunds.

8. TEB to host two free telephone forums

The office of Tax Exempt Bonds (TEB) plans to host two free telephone forums.

Compliance rules related to arbitrage and rebate May 17, 2 p.m. ET Register online. A PDF of a PowerPoint presentation of the topics to be discussed will be available here on or before May 17.

Examination process June 7, 2 p.m. ET: Register online. A PDF of a PowerPoint presentation of the topics to be discussed will be available here approximately one week before the forum.

For more information, go to Tax Exempt Bonds Community on IRS.gov.

Atlanta Humane Society 2012 Pet Parade – Bryan Cave LLP Walk Team

Brent Howard — Thu, 03 May 2012 14:34:10 +0000

From TrustBryanCave.com

Kimberly E. Civins and Brent A. Howard serve on the board of the 1873 Society Club, the junior board for the Atlanta Humane Society (“AHS”), and organized a Bryan Cave LLP walk team for AHS’ Pet Parade. The Pet Parade is an annual event that helps promote AHS and raises money for AHS while giving dogs exactly what they want, play time and a walk. The Bryan Cave walk team had a lot of fun and helped raise money for AHS. AHS is the oldest private charitable organization in Atlanta, founded in 1873. Originally chartered to protect women, children, and animals, AHS is now a widely recognized pet adoption center, clinic, and educational program provider, which has been serving Atlanta at 981 Howell Mill Road since the 1930s. AHS does not euthanize for time or space. To adopt, volunteer or donate, you can visit AHS’ website.

The Bryan Cave Team

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How Would You React?

Keith Kehrer — Tue, 01 May 2012 09:25:21 +0000

How would your board of directors react if it discovered potential wrong doing? The answer to this question is critical. Recently, Robert Carlson, the Missouri Assistant Attorney General who oversees charity enforcement in Missouri, indicated that a board’s quick action to address an issue, such as a potential breach of fiduciary duty or misuse of charity assets, may keep the board of directors and/or charity from being sued by the Attorney General’s office. Such a reaction includes a proper investigation of warning signs. The IRS has similarly provided that a board’s reaction will be a key factor in determining whether the IRS will seek revocation of exempt status in instances involving private inurement, including whether the board has corrected the current situation (which may include firing and suing the offending party) and put safeguards in place to prevent future problems before the IRS gets involved. See Treas. Reg. 1.501(c)(3)-1(f). While it is not possible to prevent all acts of wrongdoing, the manner in which a board reacts when potential wrong-doing is discovered is critical to (i)demonstrate that the board has satisfied its fiduciary duties, (ii) protect the charity and board from potential lawsuit, and (iii) maintain tax-exempt status.

Governance and Compliance

Keith Kehrer — Wed, 25 Apr 2012 02:57:46 +0000

In 2008, the Form 990 was re-designed to include, among other things, significant governance disclosures. The IRS justified the disclosures in part on the belief that organizations with good governance are more likely to comply with the law. Since 2008, the IRS has been studying the connection between governance and compliance. Among other things, the IRS developed a governance checklist that was used in exams to probe governance practices. In a recent speech, Lois Lerner, the IRS Director of Exempt Organizations, provided that the initial results of the IRS study confirm that good governance and compliance go hand and hand. Ms. Lerner stated that exempt organizations with a written mission statement, those that follow the procedures of the rebuttable presumption to establish compensation, and those whose Form 990s were reviewed by the entire board of directors, are more likely to be tax compliant than those that do not follow those practices. Ms. Lerner’s full comments may be viewed by clicking here.

Although these comments are certainly no surprise, I strongly recommend all charities use the IRS governance checklist to perform their own self-assessment. A copy of the checklist may be found by clicking here. A copy of the checklist guide sheet may be found by clicking here. The charity may also review its responses to Part VI of the Form 990 regarding governance. I also recommend a review of our article, Having Good Policies is Good Policy. Merely because a charity does not check “yes” to a particular question on the checklist or Part VI of the Form 990 does not mean the charity lacks good governance or that a change is necessary to ensure compliance. However, it likely raises an issue for review and consideration by the board to determine whether a change may make sense.

IRS Exempt Organization Newsletter 2012-8

Keith Kehrer — Mon, 23 Apr 2012 14:12:19 +0000

On April 19, the IRS released its Exempt Organization Newsletter, Issue Number 2012-08. Topics include the following:

Reminder: Don’t Include Social Security Numbers on Publicly Disclosed Forms
Verifying Exempt Status for Reinstated Organizations
Proposed Rules on Program-Related Investments
EO Director Speaks at Georgetown Law CLE
Guidance on Form 990 and 990-EZ Reporting of Joint Ventures and Other Partnerships
Tax Forums Offer Good Information for Exempt Organizations
Register for Upcoming Workshops for Small and Medium-sized 501(c)(3)s in Nebraska
Free Webinars on Identity Theft/Online Fraud and Ethics

1. Reminder: Don’t Include Social Security Numbers on Publicly Disclosed Forms

Because the IRS is required to disclose approved exemption applications and information returns, exempt organizations shouldn’t include personal information, such as Social Security numbers, on these forms. By law, with limited exceptions, the IRS has no authority to remove that information before making the forms publicly available.

2. Verifying Exempt Status for Reinstated Organizations

A tip for organizations and donors on understanding the Select Check database.

3. Proposed Rules on Program-Related Investments

The Treasury Department issued proposed regulations to update examples of program-related investments by foundations.

4. EO Director Speaks at Georgetown Law CLE

Prepared remarks by Lois Lerner on governance and compliance.

5. Guidance on Form 990 and 990-EZ Reporting of Joint Ventures and Other Partnerships

Announcement 2012-19 makes Form 1065, Schedule K-1 reporting of joint ventures and partnerships optional for tax year 2011.

6. Tax Forums Offer Good Information for Exempt Organizations

Whether you are an attorney, CPA, certified financial planner, enrolled agent or seeking to become a Registered Tax Return Preparer, the IRS Nationwide Tax Forums have something for you, including three days of seminars, hands-on workshops and exhibits of the newest products and services.

This year, the first forum is in Orlando, Fla., starting June 19. One new EO seminar is Heads Up! Keeping Current on Exempt Organizations. This seminar is designed to focus on recent IRS actions impacting EOs. The tax forums will include an updated Form 990 presentation for attendees looking for detailed information about completing this form. Please see the separate registration for these workshops.

You may earn up to 18 CPE credits in one tax forum location. Pre-register by the deadline and save $129. IRS Nationwide Tax Forum Pre-registration is only available for a limited time.

Visit IRS Nationwide Tax Forum for more information.

7. Register for Upcoming Workshops for Small and Medium-sized 501(c)(3)s in Nebraska

It’s not too late to register for our popular workshops for small and medium-sized 501(c)(3) organizations in Nebraska next month.

Each one-day workshop, presented by experienced Exempt Organizations specialists, will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations. This popular introductory workshop is designed especially for administrators or volunteers who are responsible for an organization’s tax compliance as well as those interested in careers in the nonprofit sector.

Registration is now available for the following workshop locations:

Lincoln, NE (May 22) and Kearney, NE (May 24) hosted by University of Nebraska – Lincoln – Extended Education & Outreach / Department of Conferences & Professional Development

For a description of the workshop, as well as a current schedule of dates/locations, go to Calendar of Events.

8. Free Webinars on Identity Theft/Online Fraud and Ethics

Do you know what to do if identity theft strikes you or your clients? Do you know what the IRS is doing to assist? If you answered no to either of these questions, please participate in this free one-hour webinar on May 9. Also, do you need Ethics CE credit? Get the latest information during this free two-hour webinar on May 7.

IRS Releases Examples of Program-Related Investments

Keith Kehrer — Fri, 20 Apr 2012 03:07:57 +0000

The IRS released proposed regulations under Section 4944 providing additional examples of program related investments (PRIs) (PRIs are excepted from the jeopardizing investment rules). The proposed regulations add nine new examples intended to illustrate that a wider range of investments qualify as PRIs than the range currently presented in Treas. Reg. § 53.4944-3(b). The proposed regulations do not modify the existing regulations; rather, they provide additional examples that illustrate the application of the existing regulations. Generally, the charitable activities illustrated in the new examples are based on published guidance and on financial structures described in private letter rulings.The new examples demonstrate that a PRI may accomplish a variety of charitable purposes, such as advancing science, combating environmental deterioration, and promoting the arts. Several examples also demonstrate that an investment that funds activities in one or more foreign countries, including investments that alleviate the impact of a natural disaster or that fund educational programs for poor individuals, may further the accomplishment of charitable purposes and qualify as a PRI.

ABA Tax Section Submits Comments on Scope of Section 514

Keith Kehrer — Mon, 16 Apr 2012 03:16:03 +0000

On April 9, 2012, the American Bar Association’s Tax Section submitted comments to the IRS on the scope of Section 514, the debt-financed income rules. Although Section 512(b) generally provides that income from a charity’s passive investments is not subject to tax, to the extent the investments constitute debt-financed property (property which is held to produce income and with respect to which there is an acquisition indebtedness), such income is subject to the tax on unrelated business income. Issues arise when an exempt organization borrows to fund its charitable program expenses, exempt activities, and related administrative expenses, while at the same time, on its behalf, its investment advisers are buying and selling investments that produce passive investment income. As described in the comments, the IRS has in the past expressed informal concern that a borrowing to fund exempt activities is “acquisition indebtedness” attributable to investment assets when the debt, even though motivated by the needs of the organization’s charitable programs, is incurred contemporaneously with the purchase of investment assets. The comments focus on when a borrowing should be treated as acquisition indebtedness with respect to passive investment assets and provides four examples that are intended to supplement the current Regulations. The comments are a good step in the right direction and may be reviewed by clicking here.

Section 107 Parsonage Allowance Exclusion Limited to One Home

Robert Skinner — Mon, 02 Apr 2012 01:54:04 +0000

The United States Court of appeals for the Eleventh Circuit Court recently ruled that the parsonage allowance exclusion from gross income contained in section 107 of the Code is limited to the rental value of providing a single home. Commissioner v. Driscoll, 2012 U.S. App. LEXIS 2403 (11^th Cir. 2012). The case involved a minister who claimed the parsonage allowance for both his principle residence and his lake house. In addition to turning back a minister’s expansive use of the parsonage allowance, the Eleventh Circuit’s decision addressed important issues related to the interpretation of ambiguous provisions of the Code.The text of section 107(b) limits the parsonage allowance exclusion to the rental allowance paid to a minister to the extent used to rent or provide “a home.” The controversy turned on the question of whether the phrase “a home” should be given a singular or a plural application. In a closely divided opinion, the Tax Court had rejected the argument by the IRS that the exemption should be limited to a single home, holding that nothing in the legislative history or regulations under section 107 required the court to rewrite the phrase “a home” to mean a “single home” or “one home.” Driscoll v. Commissioner, 135 T.C. 557 (2010)

In its decision reversing the Tax Court, the Eleventh Circuit advanced three arguments in support of its conclusion that that phrase “a home” should be limited to a single home. First, the court rejected the Tax Court’s reliance upon the Dictionary Act, 1 U.S.C. § 1, for the proposition that singular terms in the Code also include their plural forms. Although section 7701(p)(1)(1) of the Code contains a list of cross references to the Dictionary Act, including one for the definition of “[s]ingular as including plural,” the Eleventh Circuit relied on section 7806(a) of the Code, which states that cross references “are made only for convenience, and shall be given no legal effect.” In addition, the court noted that the Supreme Court has held that the Dictionary Act does not apply if “the context indicates otherwise.” United States v. Hayes, 555 U.S. 415, 422 n.5 (2009). Therefore, the Dictionary Act would apply only if the context of section 107(2) reasonably supported such an application. After consulting Webster’s Dictionary, the court concluded that the word “home” has singular connotations.

Second, the court noted that the legislative history associated with the Internal Revenue Code of 1954 contains references to “a dwelling house,” “a home,” and “the home,” and concluded that Congress intended for the parsonage allowance exclusion to apply only to one home. While acknowledging that the phrase “a home” may be used to refer to “no particular home,” the court again consulted Webster’s Dictionary and concluded that the word “a” maintains a singular connotation when the context indicates a singular meaning, as it does in section 107.

Finally, the court relied on the principle articulated by the Supreme Court that income exclusions should be “narrowly construed.” Commissioner v. Schleier, 515 U.S. 323, 328 (1995). The Tax Court had rejected a similar argument, finding that, without unequivocal evidence of legislative purpose, a general rule of statutory construction should not be used to change the phrase “a home” to read “a single home” or “one home.” The Eleventh Circuit disagreed and declined to construe any ambiguity in section 107(2) to favor a more expansive reading of the parsonage allowance income exclusion.

IRS Exempt Organization Newsletter 2012-7

Keith Kehrer — Tue, 27 Mar 2012 19:19:25 +0000

On March 26, the IRS released its Exempt Organization Newsletter, Issue Number 2012-07. Topics include the following:

Reporting Partnership Interests using Form 1065/Schedule K-1 Optional for Tax Year 2011
IRS Releases FY 2011 Data Book
IRS Revises Publication 1771
IRS Issues Final Regulations on Public Inspection of EO Material
Register for Upcoming Workshops for Small and Medium-sized 501(c)(3)s
YouTube: Work Opportunity Tax Credit
Deducting Charitable Contributions: Eight Essentials

1. Reporting Partnership Interests using Form 1065/Schedule K-1 Optional for Tax Year 2011

The 2011 Form 990, Appendix F instruction (and equivalent instructions in Parts VIII and X) to report interests in joint ventures and other partnerships using Form 1065, Schedule K-1 information is optional for Tax Year 2011. The parallel Form 990-EZ instruction for reporting the organization’s share of assets of joint ventures and partnerships on line 24 using Schedule K-1 information is also optional for tax year 2011.

In reporting on Form 990 or Form 990-EZ its proportionate interests in the revenue, expenses and assets of joint ventures and other partnerships in which it has an ownership interest, an organization generally may report, as in prior years, based on its books and records. Schedule K-1 information must still be used in reporting interests in joint ventures and other partnerships in Schedules H and R.

For more information, view the Significant Changes chart and the 990 Tips page.

2. IRS Releases FY 2011 Data Book

The Internal Revenue Service recently released the 2011 IRS Data Book, a snapshot of agency activities for fiscal year 2011 – Oct. 1, 2010 to Sept. 30, 2011. During the year, the IRS collected $2.4 trillion and processed more than 234 million tax returns.

In addition to information on taxes collected and returns processed, the report also includes information about enforcement, taxpayer assistance, and the IRS budget and workforce, among others.

An electronic version of the 2011 IRS Data Book can be found on the Tax Stats page of www.irs.gov.

3. IRS Revises Publication 1771

The IRS has released Publication 1771 (rev. September 2011), Charitable Contributions – Substantiation and Disclosure Requirements, which explains general rules and specifications for documenting charitable deductions and explains new guidelines that allow charities to electronically mail documentation to donors.

4. IRS Issues Final Regulations on Public Inspection of EO Material

The IRS recently published final regulations on Public Inspection of Material Relating to Tax-Exempt Organizations (TD 9581) that affects organizations that were exempt but are no longer exempt from Federal income tax, and organizations that were denied tax-exempt status.

5. Register for Upcoming Workshops for Small and Medium-sized 501(c)(3)s

It’s not too late to register for our popular workshops for small and medium-sized 501(c)(3) organizations in California in April.

Each one-day workshop, presented by experienced Exempt Organizations specialists, will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations.

This popular introductory workshop is designed especially for administrators or volunteers who are responsible for an organization’s tax compliance as well as those interested in careers in the nonprofit sector.

To register, click on the city of your choice. Registration is now available for the following workshop locations:

San Diego (April 24) hosted by University of San Diego
San Francisco (April 26) hosted San Francisco State University

For a description of the workshop, as well as a current schedule of dates/locations, go to Calendar of Events.

6. YouTube: Work Opportunity Tax Credit

Learn about a new tax law change that affects employers who hire veterans in 2011 and 2012 in this new YouTube video.

Watch this and other videos on the IRS YouTube Channel.

7. Deducting Charitable Contributions: Eight Essentials

Donations made to qualified organizations may help reduce the amount of tax you pay. The IRS has eight essential tips to help ensure your contributions pay off on your tax return.

IRS Exempt Organization Newsletter 2012-6

Keith Kehrer — Thu, 15 Mar 2012 14:02:47 +0000

On March 14, the IRS released its Exempt Organization Newsletter, Issue Number 2012-06. Topics include the following:

Reliance for Contributors and Grantors
Removing an Organization from the Auto-Revocation List
Select Check Data Alerts
IRS Encourages Employers to Check Out the Small Business Health Care Tax Credit
IRS and Treasury Invite Recommendations for 2012-13 Guidance Priority List
Winter 2012 Statistics of Income Bulletin Features Exempt Organizations Topics
Check Out the IRS YouTube Channel
IRS to Co-Sponsor Conference on Nonprofit Governance

1. Reliance for Contributors and Grantors

For deductibility and other purposes specified in Revenue Procedure 2011-33, contributors and grantors can rely on the exempt status and foundation status of an organization as posted on either the Exempt Organizations Select Check Pub 78 data page or the Statistics of Income (SOI) Tax Stats – Exempt Organizations Business Master File Extract (EO BMF) (unless they have specific knowledge to the contrary). Prior to the introduction of EO Select Check, the electronic Publication 78 and EO BMF were updated on different schedules, causing some confusion. Now both the Select Check Pub 78 Data and EO BMF are updated monthly, but not necessarily on the same day.

To assist you in your searches, the IRS is now publishing the date the data was posted to each of the three applications on EO Select Check, as well as on EO BMF. For further information, read this FAQ and review the Select Check Search Tips.

2. Removing an Organization from the Auto-Revocation List

Some organizations have asked why their name has not been deleted from the auto-revocation list after they have reapplied and their tax-exempt status has been reinstated. The auto-revocation list is the official IRS record of organizations that have lost their exempt status for failing to file for three consecutive years. Organizations will not be deleted from the list – even if they subsequently reapply for exemption and are reinstated. See FAQ.

If, however, an organization provides documentation to show that it is listed erroneously, either because the organization filed or had an IRS determination of no filing requirement, its name will be deleted. For additional information, see these FAQs newly reorganized into helpful categories.

3. Select Check Data Alerts

A new feature, Data Alerts, provides additional details for power download users on the EO Select Check page. If you notice any data inconsistencies, contact Customer Account Services (CAS) at 1-877-829-5500.

Related Link:

IR-2012-34, IRS Creates Online Search Tool for Easier Check On Information About Exempt Organizations

4. IRS Encourages Employers to Check Out the Small Business Health Care Tax Credit

With the calendar year 990 filing due date and business tax filing deadlines fast approaching, the Internal Revenue Service encourages small employers that provide health insurance coverage to their employees to check out the small business health care tax credit and then claim it if they qualify.

The recently-revamped Small Business Health Care Tax Credit page on IRS.gov is packed with information and resources designed to help small employers see if they qualify for the credit and then figure it correctly. These include a step-by-step guide for determining eligibility, examples of typical tax savings under various scenarios, answers to frequently-asked questions, a YouTube video and a webinar.

5. IRS and Treasury Invite Recommendations for 2012-13 Guidance Priority List

Notice 2012-25 invites public comment on recommendations for items that should be included on the 2012-2013 Guidance Priority List. The Treasury Department’s Office of Tax Policy and the IRS use the Guidance Priority List each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance.

6. Winter 2012 Statistics of Income Bulletin Features Exempt Organizations Topics

The IRS recently released the Winter 2012 Statistics of Income SOI Bulletin. This issue includes a number of articles on subjects of interest to tax-exempt organizations including Split-Interest Trusts, Unrelated Business Income Tax Returns and Domestic Private Foundations

7. Check Out the IRS YouTube Channel

Did you know that the IRS YouTube Channel features tax tips on many topics, including a number of subjects of interest to tax-exempt organizations? Check out videos on charitable contributions, classification as employees and independent contractors, the small business health care tax credit, and the annual filing requirements for small tax-exempt organizations and many more.

8. IRS to Co-sponsor Conference on Nonprofit Governance

The IRS, Georgetown Law School and Independent Sector will co-sponsor a program on Nonprofit Governance: Empowering Board Leadership on Wednesday, April 18, 2012 at the Georgetown Law Center. Find more information and register online today.