EO Tax Journal

1 – More on “Oh, never mind”

Constitutional crisis or tempest in a teapot? Folks seem split on Commissioner Shulman’s statement last week re late Form 990-N filings. One observer did say Jack Siegel (see his comments reprinted yesterday) was overstating his case in saying that:

“The IRS did not crack down on anybody. It did what Congress instructed it to do. It followed a law passed by Congress. If anyone cracked down on small charities, it was Senator Charles Grassley and his former aide, Dean Zerbe, who were the chief advocates for the provisions in the Pension Protection Act that affected charities.”

According to this observer, Grassley and Zerbe were simply responding to the IRS’ wish for a legislative blessing for such a “crackdown.” Continue…

1 – “Oh, never mind” – Emily Litella

The following notice was posted by the IRS yesterday:

Statement of IRS Commissioner Doug Shulman on the Filing Deadline for Small Charities

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1 – Off to the Land of Oz

2 – More on Nonprofit Pay

3 – Remarks of Commissioner Douglas Shulman to Council on Foundations

I don’t think I am being unfair in saying that this speech, reprinted below, is the kind of speech you give when you want to say nothing — certainly nothing new. It seems to me that this speech was a missed opportunity to say something meaningful to the foundation community.

4 – IRS Releases FAQ on Failure to File Revoctions
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EO skullduggery right under my nose for the past 25 years and I missed it. As has been reported in recent months, Maryland-based Erickson Retirement Communities (ERC) is in bankruptcy court. In brief, ERC is a for-profit developer and manager of nonprofit retirement communities — 501(c)(3)s — in Maryland and nearby states.

ERC was built from scratch by John C. Erickson starting in the early eighties. The first retirement community, Charlestown, is not far from where I grew up in Baltimore. I have an aunt who is a current resident of the grandly named “Renaissance Gardens at Charlestown.” One of her sons, prior to his recent retirement, was one of the top tax officials in Maryland state government.

The ERC “concept” was simple in its design, more complex in execution. After ERC created a retirement community as the developer, it would sell the “campus” to an allegedly independent nonprofit organization, which would finance the purchase, at least in part, by tax-exempt bonds, and then enter into management contracts with ERC. It appears that the numerous nonprofits are largely controlled by National Senior Campuses Inc., a 501(c)(3) supporting organization, which appears to be largely controlled by ERC through overlapping officers and directors.

On April 4, The Washington Post did a great summary of what has transpired in recent years with ERC. Perhaps the IRS could have done more, but at least they were on the scene. My criticism today is directed at the State of Maryland, which, as I have mentioned in the past, is no fan of charity regulation. The reason is mostly political. No aspiring Maryland governor or attorney general wants to run on a platform that includes charity regulation in a state that is saturated with nonprofits. While no one likes excessive government regulation, without any regulation you get cases like ERC, where lots of innocent people get hurt. End of sermon.

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Yesterday’s Washington Post had an article on an unusual “church” in “C Street House Is Target of Clergy’s IRS Complaint.” An article in the Columbus Dispatch is reprinted below, along with a complaint letter to the IRS prepared by the law firm of Caplin & Drysdale, Washington.

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