EO Tax Journal

For some North Carolinians, the Super Bowl is tonight — UNC at Duke with even the New York Times taking notice. I’m sure Duke graduates Jim Hasson, Marc Owens, and Celia Roady will be glued to ESPN tonight, but I recently learned that Dick Gallagher’s daughter is at Chapel Hill and a fan. If the Tar Heels upset the Blue Devils, Dick will have two Super Bowl wins in one week! And, win or lose, maybe the Duke students can move out of their tents and even go back to class.

1 – Troubles Continue for One of the Grassley Six and New Focus on Scientology

Notably absent from Senator Grassley’s investigation of high profile churches was the Church of Scientology. Now Lawrence Wright’s 24,000 word article in the current issue of the New Yorker about the Scientologists is drawing attention (article available at www.newyorker.com). 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 Senator Grassley’s media ministers has also been in the news recently. In an item reprinted below, the current travails of Bishop Eddie Long are detailed. It seems to me that if the Evangelical Council for Financial Accountability’s Commission on Accountability and Policy for Religious Organizations is to be really successful, it needs to get all six media-based ministries investigated by Senator Grassley to join ECFA or otherwise show greater financial accountability. (For earlier coverage, see Email Updates 2011-4, -10, and -15.)

2 – Handouts for EO Committee Panel on Donor Fraud, Bankruptcy, Remorse or Mistake

I’ll have the transcript of the fifth panel of the January 21 meeting of the EO Committee of the ABA’s Tax Section tomorrow. Today, if you have the time and interest, look at the handouts, which are well-done and serve as the basis for the speakers’ remarks. Continue…

1 – The EOTJ Mailbag

Paul, Lois Lerner recently said she did not know how many entities from the “At-Risk” list actually filed Form 990-Ns during the Voluntary Compliance Program. (See Email Update 2011-21.) I compared the EINs on the At-Risk list to the EINs on an October 15, 2010 list of filed 990-Ns. There were nearly 50,000 matches, indicating organizations that filed a 990-N sometime after the At-Risk list was issued. In other words, about 50,000 organizations listed on the original At-Risk list filed a 990-N during the VCP, thereby saving their exemptions. EO’s hard work to get the word out clearly helped a lot of small nonprofits save their exemptions.

Sandy Deja (exempts@aol.com)

Editor’s Note: Sandy, an Alaska accountant, is the author of the e-books, Prepare Your Own 501(c)(3) Application, and Regain Your Tax Exempt Status and Other Options After IRS Automatic Revocation, both available at www.501c3book.com.

2 – Transcript of Panel Four of the January ABA EO Committee Meeting

Employment Tax Issues in EO Audits

What follows are the January 21 remarks of Ann K. Batlle, Morgan, Lewis & Bockius LLP, Washington, Nancy O. Kuhn, Jackson & Campbell, Washington, and Michael D. Glass, Group Manager, Team Examination Program, Exempt Organizations, IRS, Fort Lauderdale, Florida, as delivered to members of the EO Committee of the ABA’s Tax Section. The moderator of the panel is Michael A. Clark, Sidley & Austin LLP, Chicago. Continue…

1 – Rare Clear Day Welcomed Attendees of Joint Meeting of TE/GE Area Councils

Last Friday, as planned, I went to the joint meeting of TE/GE area councils in Baltimore. In the not too distant future — the IRS and Treasury have ruined the use of the word “soon” — I hope to have transcripts of most of the sessions, so I won’t bother with summaries now.

I can say there were no shocking developments, nothing like in 2007 when Marv Friedlander handed out the very first draft of “Good Governance Practices for 501(c)(3)s” and a riot broke out, with the Baltimore police having to be called to restore order.

Friday’s program began with the IRS’ Holly Paz rehashing Lois Lerner’s January 17 ABA remarks (reprinted last week in Email Update 2011-21) . If Lois doesn’t watch out, she may have competition for best “rehasher.” Holly did affirm what was last week’s hot topic — that PTINs (Preparer Tax Identification Numbers) will be required if you prepare or help prepare a Form 990, 1023, or 1024. If this is news to you, see Notice 2011-6, “Implementation of Rules Governing Tax Return Preparers.”

The next IRSer on the podium was Matthew Giuliano, who discussed the three-year revocation cases. He promised that answers to all questions will be answered shortly on the IRS website, but in the meantime keep filing those e-Postcards (and Form 1023s, if now necessary).

The IRS’ Steve Clarke discussed the topic that has made him famous, the new Form 990. (How soon we forget Ron Schultz!) I’ll have to check the transcript, but I think Steve was the IRSer who said the governance questions are here to stay, and so stop complaining (or words to that effect).

I was glad to see two IRS bond people on the program, since I have been arguing for years that EO practitioners need to be aware of post-issuance compliance, which is generally ignored by hospitals and universities. In addition to this session, I hope to have a transcript of the recent ABA Tax Section program on “Practical Approaches to Implement Post Issuance Compliance after Issuance of Tax-Exempt or Direct Pay Subsidy Bonds,” so everyone can become a bond expert (or at least know enough to fill out Schedule K).

The session on EO tax compliance must have been too hot for the IRS to handle, as their designated speaker was unable to attend, but private practitioners Gerry Griffith and Joyce Hellums did their best to scare everyone into full tax compliance.

There was one final session on Circular 230, but I had to go home and feed the cats, so I’m afraid hungry cats won out over your professional responsibilities. Sorry about that.

2 – Transcript of the Third Panel of the January Meeting of the ABA’s EO Committee Continue…

One item today, and tomorrow no report because –

– the TE/GE area councils meet tomorrow in my hometown of Baltimore featuring Steve Clarke, Matthew Giuliano, Liz Henn, Holly Paz, Johanna Som de Cerff, and Vicky Tsilas, all from the IRS. With luck, I’ll be able to provide readers of these missives with transcripts of what they have to say.

The weather gods seem to hate this annual gathering in Baltimore. Two years ago we had torrential rain, and there was water everywhere. Last year we had one of the major snowstorms, causing the program to conclude early so folks could get to the airport before it shut down. This year we are expecting the skies to remain clear until Friday night, when an “icy mix” is predicted, but hopefully everybody will be on their way by then. Getting here may be the problem for many attendees because of the current weather conditions in their hometowns, but my Chicago correspondents tell me they will make it to Baltimore even if they have to crawl all the way.

So hopefully I will succeed in my mission tomorrow, and recipients of these email updates can read about what was said in the warmth of their own house. (Sorry, I won’t have the transcripts in time for the Super Bowl in case that game turns boring.)

CREW Seeks IRS Investigation of the American Future Fund Continue…

Today’s transcript of the second panel of the January 21 meeting of the EO Committee of the ABA’s Tax Section relives a battle we had in these missives last year. On May 18, 2010, the IRS extended the filing deadline for many small organizations that had, under the law, lost their tax-exempt status as of May 17, 2010 for failure to file the Form 990-N (e-Postcard). I referred to this as the “Oh, never mind” notice in honor of SNL’s Emily Litella in Email Update 2010-72. The IRS notice set off a flurry of commentary (see Email Updates 2010-73,  -74, and -75).

Turning to the recent panel discussion, I’m inclined to agree with Victoria Bjorklund that “exemption is a privilege and so if you’re going to get it, you should be able to do something as simple as the 990-N filing.” The way I see it, section 501(c)(3) exemption is the greatest gift the IRS can give anyone. Forgetting UBIT, you can set up an organization that is not subject to income tax nor lots of other taxes and you can give this organization tax-deductible contributions. What a deal!

On the other hand, I’ve recounted in these pages the story of the late Dorothy Day and her Catholic Worker Movement. For those coming in late, the IRS in the seventies went after her for not filing Form 990s. Her response: “I’m too busy helping the poor; I have no time for filling out government forms.” Well, the New York media took this story and ran with it, contrasting the saintly Dorothy Day with the heartless IRS. Not the kind of publicity the IRS needs.

So the battle continues today in the guise of whether small, do-good organizations should be expected to file even something as simple as a Form 990-N or whether we should just leave them alone. The ABA panel discussion, reprinted below, is only the latest iteration of this debate. Continue…