EO Tax Journal

1 – How to “Elevate” When You Disagree with the IRS

Don’t forget to cc Lois and Nan.

2 – To Err Is Human, To Forgive Is Divine

Recently-released PLR 201106019 should be of interest to anyone active in the area of colleges and universities. The initial ruling, PLR 200625035, has been found to be in error and has been replaced by PLR 201106019.

3 – DAF Donors Beware

Background: Ray Styles made a $250,000 donation pursuant to a donor-advised fund agreement, only to find that his contribution had been commandeered by the DAF’s two sole directors and officers. For prior coverage, see Email Update 2010-114. Continue…

EO Excerpts from Treasury’s Green Book

“Something old, something new, something borrowed, something blue” describes this year’s Treasury/IRS wish list, as set out in the recently-released General Explanations of the Administration’s Fiscal Year 2012 Revenue Proposals. I’m reprinting items that I think are of interest to EO tax practitioners. The entire document is available at: http://www.treas.gov/offices/tax-policy/library/greenbk12.pdf Continue…

As promised yesterday, today I have the transcript for the sixth and final panel of the January 21 meeting of the EO Committee of the ABA’s Tax Section. Yesterday I sent out the handout for this panel, which I’m sure everyone has now read. Speaking of reading assignments, I recommend Stephanie Strom’s article in today’s New York Times, “IRS Takes on Tax Abuse by Charity Support Groups.”

As you read the panel transcript, you will see that joining the list of those having made the now notorious bar quip is Doug Mancino, joining an exclusive club of EO notables (set out below). As I mentioned last year, the first few times I thought it was cute, but finally I said enough, that future references would be compiled. As I print out the remarks of recent honorees, I now wonder, who will rise to the occasion and make a bar quip come May? Or is mostly a January phenomenon, as reflected in the following list?

January 21, 2011 meeting: “This is the last panel between you and the bar so I’d like to keep us on time but fortunately for us Fred [Gerhart] has put a wonderful topic that will keep you glued to your seats and away from the bar during the next hour….” (Doug Mancino)

January 22, 2010 meeting: “I know it’s very hard to be on a panel that is followed by a cash bar….” (Elaine Waterhouse Wilson)

September 25, 2009 meeting: “We are now to our last panel of the day, the only panel standing between you and the cash bar.” (Fred Gerhart)

January 9, 2009 meeting: “Our last panel of the day and the last panel standing in the way of the cash bar is now approaching.” (Mike Clark)

May 9, 2008 meeting: “… hopefully we’ll hear from you either at the mike or, if it gets too close to five, out at the bar.” (Sarah Hall Ingram)

January 18, 2008 meeting: “We’re the last panel standing between you and the cocktail hour….” (Mike Clark)

Speaking of Doug Mancino, he is truly one of the giants of the EO bar, but I do have to take issue with one statement of his at the January EO Committee meeting (transcript reprinted below) where he said: “I saw the recent statistics from the IRS showing audit rates for all taxpayers. It was kind of interesting because the audit rate for nonprofit or tax-exempt organizations was, I believe, 3.7 percent….”

I’m not sure where Doug gets his 3.7 percent figure, but there is a wide disparity between his figure and the figures we’ve batted around recently in these email updates. Here’s what I said in Email Update 2010-185 (12/16/10) about audit information provided by the IRS:

“The graph [that is set out in the current IRS workplan] tells us that in FY 2009 — of 16,960 returns examined — 6,773 pertained to compliance checks and 10,187 pertained to traditional examinations. These figures sound like a lot, but we know, thanks to Sandy Deja and Marc Owens, that these figures need further examination. In my November 18 email update, Sandy points out that, of those 10,187 returns examined, only 3,445 were Forms 990 and 990-EZ. The rest were mostly employment tax returns (4,582) and 990-Ts (962). We also know, thanks to Marc, that most audits involve more than one year, so an audit of one organization may involve multiple 990s. My best guess was that this translated to 1,723 organizations being subject to a traditional audit in FY 2009. Marc was not as precise, estimating 1,500-to-2,000 audits. Regardless, we are talking a .002 audit rate, not 2 %, but .2 %, pretty close to infinitesimal, especially when you exclude targeted audits described later in the [IRS] report. So, my comment is that the IRS is leaving out some important data that the public may find of interest. Perhaps next year the report can include a statement that, out of an EO universe of 1.8 million entities, of which 1.2 million are (c)(3)s, only about 2,000 are subject to a traditional audit, and only about 1,000 are subject to a compliance check.”
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Update on Executive Compensation and Intermediate Sanctions

What follows are the January 21 remarks of Robert W. Friz, PricewaterhouseCoopers, Philadelphia, and Ralph E. DeJong, McDermott Will & Emery, Chicago, as delivered to members of the EO Committee of the ABA’s Tax Section. The moderator of the panel is Douglas M. Mancino, McDermott Will & Emery, Los Angeles. Continue…

1 – Valentine’s Day Greetings to the IRS

Lots of love coming out of Congress these days.

2 – Need for EOs in Egypt

Milt Cerny sees need to redo actions of 22 years ago.

3 – Clarification of Remarks

No whining intended.

4 – When is a Cult a Cult?

The boys go at it (again).

5 – More on the Milton Hershey School

I sincerely hope the IRS has opened an audit by now. If not, why not? And why no “60 Minutes” coverage? Instead, the venerable “60 Minutes” had a “revealing” interview of Lady Gaga last night. Welcome to 21st Century investigative journalism.

6 – Doings at Hershey School Nothing New

Fritz Mondale on the Sister Kenny Institute.

7 – Handout for EO Committee Panel on Executive Compensation and Intermediate Sanctions

I’ll have the transcript for the sixth and final panel of the January 21 meeting of the EO Committee of the ABA’s Tax Section tomorrow. The presentations tend to follow the handout, but the handout is more extensive in certain areas. Continue…

The University of North Carolina Tar Heels’ 16-point lead wasn’t enough, as Duke won last night’s battle of central Carolina. Maybe UNC was distracted by its IRS audit.

1 – Correction

Yesterday I noted Lawrence Wright’s 24,000 word article in the current issue of the New Yorker about the Scientologists. I made the following comment: “Somewhat surprising, at least to me, is that nowhere in the 24,000 words is there any mention of the church’s battles with the IRS or the eventual IRS capitulation.”

One of my eagle-eyed readers said not so fast, and pointed out the following paragraph in the article:

“The Church of Scientology had recently gained tax-exempt status as a religious institution, making donations, as well as the cost of auditing, tax-deductible. (Church members had lodged more than two thousand lawsuits against the Internal Revenue Service, ensnaring the agency in litigation. As part of the settlement, the church agreed to drop its legal campaign.)”

So let me correct myself. Out of approximately 24,000 words, 55 words addressed the Scientologists’ battle with the IRS. That’s less than 1% of the story (.002), so I still consider that a significant omission if the objective of the article was to give readers a full understanding about the “church” and its history. I’ve read that the article is a prelude to a book, so maybe the battle with the IRS will receive more attention there.

My concern with the IRS’ recognition of the Church of Scientology has always been that it legitimized the organization, so that people who might have been skeptical about joining were reassured by the IRS’ recognition. The Church also used the IRS’ recognition as proof that it was a legitimate institution, able to say that the IRS saw it as no different from any other church. I’ve never thought that the evidence supported such a conclusion; instead, as the New Yorker article documents, the group appears to be more in the nature of a cult. And, lest we forget, the IRS ignored the Supreme Court’s decision in Hernandez in order to legitimize payments for services as tax-deductible contributions.

2 – Transcript of the Fifth Panel of the January 21 Meeting of the ABA’s EO Committee

Editor’s note: The handouts were sent out in yesterday’s email update.

Give It Back: Donor Fraud, Bankruptcy, Remorse or Mistake Continue…