EO Tax Journal

This has to be a frustrating time for Democrats. Faced with a possible landslide against them in a couple of weeks, they are complaining to the IRS about Republican groups improperly using section 501(c)(4) status, the latest complaint in a letter reprinted below by Senator Durbin. While these allegations may be correct, I’m not sure what difference it would make even if the IRS were “to quickly investigate the tax status of Crossroads GPS and other [(c)(4)] organizations that are directing millions of dollars into political advertising without disclosing their funding sources,” as Durbin seeks. Yesterday’s Washington Post has added to the fray, with two more articles reprinted below.

The IRS is caught in the middle. And the political consequences could be severe if the IRS were to go after Republican groups. The next Congress could be in Republican hands, with the Republicans controlling not only the tax-writing committees but also the appropriations committees. Best to lay low if you are the IRS.

On the other hand, I can understand the frustration of Democrats. Lack of disclosure is killing them, and adding a Republican Congress to a Republican Supreme Court is going to make it very lonely for the current occupant of the White House.

For the IRS’ EO function, Republican control of Congress may not be so bad. If Senator Grassley regains the chair of the Senate Finance Committee, he should be able to move on his EO initiatives and to demand that the IRS become more active in the EO area. Continue…

Yesterday I mentioned that Cathy Livingston is the new Health Care Counsel, “leading a small group in the Chief Counsel’s office to tackle projects connected with the Affordable Care Act.” I neglected to mention that she will be coordinating IRS efforts in this area with the Chief Counsel in reaching out to folks in TE/GE and other divisions. One of my readers says this will be a huge effort with huge responsibilities — assuming of course that the Republicans don’t repeal the Affordable Care Act next year.

I’ve discussed the situation with the Milton Hershey School. See Email Update 2010-124 (9/3/10), where I observed that the situation reminded me of the Bishop Estate — a relatively small school supported by a massive trust, hence with lots of money sloshing about.

My thanks to Richard L. Fox of Dilworth Paxson, Philadelphia, for sending along two recent articles. I’ve added my comments in CAPs. Continue…

More perils of Paul today. Read only if you need a break in your workday. Also, more politicking developments, read only if you can stand it.

I got up at 5 a.m. today so I could hear the Chief Counsel of the IRS, Bill Wilkins, speak at 8 a.m. at the American Health Lawyers Association’s annual tax program in Arlington, Virginia. As I was waiting for Wilkins to arrive, I was chatting amiably (yes, I can do that) with a fellow whom I assumed was an attendee. Turns out it was Bill Wilkins. My chance to present my strong views on the 509 regs and on how to proceed on section 7611, even my comments yesterday about the Office of Chief Counsel posting litigation developments, gone — gone in my morning haze. It’s obvious I’ll never make a good lobbyist. I hope I didn’t get Susan Brown in trouble. I told Bill she has the remarkable ability of speaking in perfect paragraphs. I suspect the next time Susan briefs Bill, he’ll be deciding whether I was telling him the truth or not.

I also saw and spoke to Judy Kindell, but forgot to ask her my politicking question — again the morning haze. I’m sure the political intervention experts reading this can tell me whether political expenditures by a 100% controlled for-profit subsidiary can be attributed back to the (c)(3) parent. I assume the answer is no so long as organizational formalities are observed, but this seems like a big loophole, especially if you have overlapping boards. Anybody know for sure?

In his remarks, Bill Wilkins did say that Cathy Livingston is the new Health Care Counsel, leading a small group in his office to tackle projects connected with the Affordable Care Act. A number of us were concerned about Cathy because we had not seen her lately, fearing that she had been kidnapped by Tea Partiers who hate the IRS. According to an IRS spokesperson, Cathy’s new position is effective October 10 and her old position — Deputy Division Counsel/Deputy Associate Chief Counsel (EO/ET/GE) — will be posted. A lot of intriguing possibilities here, but I won’t speculate.

Following Bill Wilkins was a trio of IRSers, Steve Clarke, Garrett Gluth, and Peter Lorenzetti. I hope to have a summary of some of their remarks in the near future. While I am sure they were under orders to mention Form 990-N, if I hear one more reminder before Friday about the need for baby organizations to file, I will scream. Come Ocober 15, everyone at the IRS must promise never to mention the e-Postcard ever again. It’s really getting to be cruel and unusual punishment. Continue…

1 – More 501(c)(4) Developments

1 – More 501(c)(4) Developments

For earlier developments, see EO Tax Journal Updates 2010-116, 120, 128, 129, 133, 134, 135, 136, 139, 141, 142, and 143. As I noted in Email Update 2010-128 (9/13/10), “Opening an audit involving the U.S. Chamber of Commerce will bring a firestorm of criticism from Republicans who will charge White House complicity. Clearly a no-win situation for Commissioner Shulman whose budget may be in Republican hands next year.” Continue…

As promised, I have a transcript of the ABA remarks of Phil Hackney, Lois Lerner, and Ruth Madrigal. I think we all owe a debt of gratitude to Ruth for adding one more thing we need to know as EO tax practitioners, FATCA. If you’re not familiar with FATCA, Ruth explains all. And can we get a promise from Lois never to mention 990-N again after October 15? Probably not. Is that the form that takes only 96 hours to complete? Or is that the Form 1023? Let’s see, I charge $500 an hour, so that’s only $48,000 for my services. Because I’m a great guy, I’ll extend my 50% discount, so that’s only $24,000. For the Free Fertility Foundation, that’ll be a bargain if they got a promise of a fixed fee.

If all of this is not exciting enough, the IRS released a draft of the Form 990 (core form) for 2010. Here are some changes I noted:

• Part IV, Question 20b is new: “If [the organization operates one or more hospitals], did the organization attach its audited financial statements to this return? Note: All Form 990 filers that operate one or more hospitals must attach audited financial statements.”

• Part V, Questions 13 and 14 are new:

“13. Section 501(c)(29) qualified nonprofit health insurance issuers
a. Is the organization licensed to issue qualified health plans in more than one state? Note: See the instructions for additional information the organization must report on Schedule O.
b. Enter the amount of reserves the organization is required to maintain by the states in which the organization is licensed to issue qualified health plans.
c. Enter the amount of reserves on hand.

“14a. Did the organization receive any payments for indoor tanning services during the tax year?
b. If ‘Yes,’ has it filed a Form 720 to report these payments? If ‘No,’ provide an explanation in Schedule O.”

• Part XI, Reconciliation of Net Assets, is new.

• Part XII, Financial Statements and Reporting, which had been Part XI, has been tweaked to stress the need for explanations on Schedule O Continue…