EO Tax Journal

1 – 38 Comments and More Coming? (Notice 2010-39)

2 – IRS’ Role in Overseeing Political Expenditures to Grow? (Washington Post article)

3 – Rare School Case? (Denial Letter 201033039) Continue…

1 – More on Friends of Fiji

Following up on yesterday’s post regarding attorney Richard Fox’s recent letter to the IRS about Friends of Fiji, it has been reported in the tax press that an attorney for the House Committee on Oversight and Government Reform — who was involved in the committee’s ACORN investigation last year — has contacted Fox about Friends of Fiji’s tax-exempt status and the alleged self-dealing by its two directors. Hopefully, the IRS is already on the scene. If not, why not?

2 – Why Appeal a Slam Dunk?

When the Foundation of Human Understanding case came down last year, it was a brilliant recitation of facts and law by the chief judge of the U.S. Court of Federal Claims, resulting in the proper finding that the foundation did not qualify as a church. (Okay, I admit, one of my favorite EO attorneys, Milt Cerny, said the associational aspects of a church may need to be redefined in the internet age.)

If you’re still with me, then why appeal? To me, just a waste of time and money, but I suppose the foundation was determined — just like VSP is one determined litigant — and just like VSP, seeking cert is probably the next step for the foundation. In any event, I’m reprinting the court of appeals’ opinion, which makes relatively short shrift of the foundation’s arguments for church status.   Continue…

1 – With friends like this, who needs enemies?

Friends of Fiji is no friend of Ray Styles, who made a $250,000 donation pursuant to a donor-advised fund agreement, only to find that his contribution had been commandeered by Friends of Fiji’s two sole directors and officers. Attorney Richard Fox has been battling on Styles’ behalf for a number of years. I am reprinting below Fox’s recent letter to the IRS seeking a review of Friends of Fiji’s tax-exempt status under section 501(c)(3) and liability under sections 4941 and 4945.

The Friends of Fiji scandal is not new news. Fox wrote about Friends of Fiji in a February 25, 2010 article for The Chronicle of Philanthropy. See “National Heritage Foundation Debacle Offers Lessons about Donor-Advised Funds.” In addition, Victoria Bjorklund mentioned Friends of Fiji in her April 6, 2009 remarks at Georgetown Law’s annual EO tax program. See transcript of “Charitable Giving Update,” EOTJ, vol. 14, no. 5, p. 50.

Based on the information set forth in Fox’s letter, it appears that Friends of Fiji no longer qualifies for tax-exempt status, and there is a real issue as to whether its two directors and officers, Gary Nerison and James Bickel, should be subject to self-dealing taxes under section 4941. Hopefully, the IRS’ Big Four for EO matters — Douglas Shulman, Steve Miller, Sarah Hall Ingram, and Lois Lerner — will give Nan Downing approval to initiate an overdue audit.

2 – What are we to make of Revocation 201032050?

I’ve been told that the IRS routinely approves applications from private medical practices as long as there is some educational activity. Why a private medical practice would want (c)(3) status has always been a mystery to me, but that’s a question for another day. Continue…

1 – The New York State Bar Association Tax Section has submitted its Report No. 1217 to the Congress, to the Treasury, and to the IRS. (Have there really been 1,217 reports?) The latest report concerns section 514 of the Code, Unrelated Debt-Financed Income.

For those who are only vaguely familiar with section 514, the report gives a good rehash of section 514 and its history. For those interested in reforming or eliminating section 514, the report provides a detailed “reexamination,” which may set the tone for future debates. All in all, a good effort by the NYSBA.

2 – In regard to last week’s cubicle discussion, I’ve been told all cubicles are not created equal. Unfortunately, most cubicles are designed with the purpose of fitting the maximum number of people in the least amount of space. Think flying coach. However, well-designed cubicles — think flying first class — are designed to maximize efficiency and productivity. Still, most workers, if given a choice, will take four walls and a door, even if it’s a tiny office.

The tragedy of the EO Division is that it is worse off than before the reorganization and its move to 1750 Pennsylvania Avenue. While no one claims the office space — the bull pens — of 1111 Constitution Avenue are great, the building does have a certain charm, and it is where the action is. 1750 Pennsylvania Avenue may as well be in the middle of Alaska. Being near the White House has no cachet, unless you like staring through the fence.

The reorganization was supposed to bring greater prominence to the EO function. Well, they lied. If you just look at its space, the EO Division remains the sad sack of the IRS. Return it to 1111 ASAP. Continue…

Old Business

In regard to “Our Tongue-Tied IRS” (Email Update 2010-110), I’ve been told “It’s the cubicles, stupid,” as in “It’s the economy, stupid.”  

According to my informants, cubicle existence — at 1750 Pennsylvania Avenue, home of the EO Division — is a bummer, along with no library, no nothing. It’s flying coach in a plane full of unhappy passengers. JetBlue, anyone?

As one former IRSer has noted, “Cubicles are: ‘space efficient, personnel and work inefficient.’ The government wasted the money it saved on cubicles by wasting the time of very expensive personnel through constant interruptions and distractions. Why return a phone call when you are supposed to be quiet?”

My view: The overwhelming chorus seems to be that everyone hates cubicles. From my personal observations over the years, no one ever seems to be in their cubicles. Where they are I don’t know. Some may be working at home. Some may be working the night shift. Some may be working at Starbucks, but the short is, nobody may be at their cubicle when you call.

Cubicles are for cold callers and complaint centers, where no one lasts more than a month. Putting folks with 19 years of education or more in a cubicle is insulting and demeaning. The IRS is paying its tax law specialists $70,000 to $90,000 a year (the working grade salary in the EO Division). Rather then drive these folks to drink, at least give them a place where they can work and where they may want to be. “Penny-wise, pound-foolish” is the only way to describe the IRS’s treatment of its worker bees.

More Old Business

In regard to the Optimist Clubs’ rulings (Email Update 2010-111), former IRSer Conrad Rosenberg had these comments:

“Highlighting how nebulous the meaning of ‘social welfare’ can be, I once wrote (this would have been sometime during the neolithic age) a piece for either the late lamented EO Handbook or possibly for a CPE article. My illustration, as I remember it, postulated two diametrically opposed organizations, both of which would have no problem qualifying under (c)(4). The first was organized and operated primarily for the purpose of guaranteeing the preservation of certain acreage in South Philadelphia for the indigenous wildlife (mostly rats and squirrels); the second was intent on dedicating the identical tract to the development of a football stadium that would supposedly benefit the surrounding deteriorated community. The IRS would make no value judgment in deciding that both would meet the requirements of (c)(4), although an objective argument could well be made that neither would.” Continue…