EO Tax Journal

The President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 on Friday. I reviewed the Act for extenders of interest to EO practitioners. Here’s what I came up with:

Partial List and Discussion of Temporary Tax Provisions (“Extenders”) Extended

H.R. 4853, Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

Signed by the President on December 17, 2010

Listed are bill provisions as enacted, plus explanations provided by the Joint Committee on Taxation (footnotes omitted) in its December 10, 2010 technical explanation (JCX-55-10) Continue…

It’s Friday, it’s snowy, and it’s cold. And the holiday season begins in earnest for many folks this weekend or maybe just shopping for that special gift for that special someone. (Those jewelry store ads are the worst.)

My advice: buy a book or read a court case. I have both for you today.

I didn’t expect to enjoy reading an 800-page book about Warren Buffett, but I did. I saw it in the library and thought, what the heck, if it doesn’t grab me in the first 50 pages, it can go back and I’ll start reading about Mickey Mantle (The Last Boy — and the End of America’s Childhood, by Jane Leavy).

Actually I found I could not put the Buffett book down (The Snowball — Warren Buffett and the Business of Life, by Alice Schroeder). As I think the author says, simple tastes, complex man.

We all know Buffett is giving billions to charity through the Gates Foundation. His views toward charity and charities developed over time. In the early seventies, he was delighted to help bring to light the Boys Town scandal. What was the key document in the investigation?

Here are Buffett’s quoted words: “I was sitting there in the family room doing the Form 990 for the Buffett Foundation, and it just hit me — if I had to file a return, maybe they did too.” Twenty days later they got the Boys Town Form 990 from the IRS. (Try doing that today.)

Later in the seventies, Buffett was getting advice about foundations from Walter Annenberg. His advice to Buffett: be very wary lest your money end up in the hands of a McGeorge Bundy, who Henry Ford II described as “the most arrogant son of a bitch in the country, who developed the lifestyle of an Arabian prince on Ford Foundation money.”

The book has the best definition of leverage I’ve seen. Leverage is like gasoline. In a rising market, a car uses more of it to go faster. In a crash, it is what makes the car blow up. A lesson seemingly always forgotten.

Tax Court Creates Another Tax Shelter? Pun Intended.

I’m reprinting an interesting 7-6 Tax Court decision. I personally agree with the dissenters. While the vast majority of ministers don’t have the problem of multiple homes, if I’m a televangelist with millions of dollars coming in, why not have ten homes and use this case to have the parsonage allowance under section 107 apply to all of them? Continue…

As promised, here’s my critique of the EO workplan, much of it taken from comments from readers over the past year. One reader did advise me, “Be nice to Lois, we don’t want her up and retiring on us.”

So, here goes, from page 1 to 29. Page 1 is a letter from Lois. It’s very positive — EO has had “a robust educational program, a more efficient determination process, and a comprehensive compliance program.” The “three major themes” are very catchy: “EO Integrates; EO Supports and Collaborates; and EO Invests.” Wonderful letter, beautiful photograph. How’s that for being nice?

Page 2 is labeled “Compliance.” Here’s where I start getting tough (sorry, Nan). Page 2 has a graph that is hard to read for these old eyes, but I’ll use my magnifying glass. The graph tells us that in FY 2009 — of 16,960 returns examined — 6,773 pertained to compliance checks and 10,187 pertained to traditional examinations. Continue…

1 – The EOTJ Mailbag

Milt Cerny, McGuireWoods LLP, Richmond, Virginia, had this to say about the Wisconsin Alumni Research Foundation’s recent letter on supporting organizations, reprinted here yesterday:

“Paul, the letter to Treasury by Carl Gulbrandsen, Managing Director of WARF, regarding concern of the university community on the limited exception for government-related Type III supporting organizations to one entity, is correct when he indicate that this artificial restriction will hamper these organizations from fulfilling their mission. We represent a number of public universities with supporting organizations that support various activities and programs of the universities that are separately incorporated. To limit this support to ‘one supported organization’ is detrimental to the mission of many of these institutions. The limitation regarding financial support that the proposed regulations appear to place on what is ‘functionally related’ to determine ‘substantially all’ or the ‘substantial part’ test should be expanded to include other factors. Treasury regulations have recognized ‘qualitative’ rather than ‘quantitative’ measures such as financial support to measure substantially all or to satisfy substantial part tests. Carl has identified an important issue that needs correction. Milt.”

2 – EO Workplan Dropped under the EO Christmas Tree

With time rapidly running out for delivery this year and having missed Hanukkah, Lois Lerner and her elves presented the EO community with an early Christmas gift — the EO work plan. Who knows, the PACI report may be released in time for Kwanzaa, and maybe the IRS and Treasury will celebrate New Year’s Eve with the release of the final SO regulations.

The workplan is now posted on www.irs.gov. In remarks this morning to a frozen tax press (23 degrees at 9:30 am, with a high of 29 expected), Lois Lerner and her team reviewed the work plan, now titled “Exempt Organizations FY 2010 Annual Report and FY 2011 Work Plan.”

I’ll have my remarks on the report and work plan tomorrow. If anyone has reactions today, please send them along to me (pstreckfus@gmail.com) and I’ll include them in my missive tomorrow.
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1 – The EOTJ Mailbag

1 – The EOTJ Mailbag

In regard to Ron Schultz’s departure from the IRS, noted yesterday, Bonnie Brier, Senior Vice President, General Counsel & Secretary of New York University, had this to say:

“Paul, As you often note (bemoan), with retirements over the past decade there has been a huge loss of experienced EO personnel, with a resulting loss of institutional EO knowledge. While talented people join EO, first they face the learning curve and then they may move on — either to other areas within the IRS or to private practice. While Ron Schultz’s return to private practice does not fit that usual mode of an IRS staffer retiring after a long and distinguished career in EO, I view it as another significant loss. Ron is a great listener, thinker and problem solver, someone who can take on a huge project with grace and candor and get it done. Beyond his intelligence and other talents, his ‘Minnesota nice’ went a long way in making him effective. In my view, he joined the Form 990 fray at exactly the right time to make for a better end product. Steve Miller certainly appreciated Ron’s talents, taking Ron with him as he moved up the IRS ladder. That was great for Steve and the IRS, but EO’s loss. So a ‘tip of the hat’ to Ron as he returns to private practice. Best, Bonnie.” Continue…