Month: March 2011

Focus on Congress

EO Tax Journal 2011-56

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Nobody’s happy today — Senator Grassley is irked by Rahm Emanuel, the Council on Foundations is irked by Treasury, House Republicans are irked by AARP, and AARP’s management is irked by House Republicans All in all, I’d say March has been an irksome month.

1 – Comments of Senator Grassley on Funding of Chicago Mayoral Transition by Private Foundations

2 – Council on Foundations Chides Treasury over Lack of Urgency in Revising Rev Proc. 92-94

3 – April 1 Hearing on AARP’s Organizational Structure and Finances Scheduled and Report Released; AARP’s Response

Focus on Courts

EO Tax Journal 2011-55

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1 – Update on Joint Ventures

Attorney outlines implication of section 501(r) for joint ventures — healthcare tax practitioners may want to take note.

2 – Tax Court Holds Deductions for Facade Easement Not Properly Substantiated under Section 170

Am I the only one who thinks we could balance the federal budget by getting the IRS to audit every taxpayer claiming a facade easement? In the case reprinted below, if it were me and I planned on deducting a total of $705,000 as a charitable contribution for a facade easement, I’d be super careful. Sounds like the taxpayer in this case was anything but, neglecting to provide on Form 8283 the necessary information to satisfy section 170(f), and paid the price in Tax Court. Appeal, anyone?

Focus on IRS and Treasury

EO Tax Journal 2011-54

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Do EO tax practitioners need to know about section 403(b) plans? Yes and no. Probably enough to respond to a general inquiry about them. I assume that at most large firms the pension experts would step in if a 501(c)(3) client wanted to set up a 403(b) plan. At smaller firms I suppose it would be up to the EO practitioner. In one of my prior lives I actually set up a very simple 403(b) plan, mainly to see if any of the employees were interested.

One of the IRS’s 403(b) experts, Jason Levine, discussed these plans at the recent 47th annual Washington Nonprofit Legal & Tax Conference. I’m reprinting his outline, which readers may find as a check of their knowledge of this area, especially in light of some recent developments.

Section 403(b) Plan Update

Transcripts (Other)

EO Tax Journal 2011-53

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1 – Nader on Athletic Scholarships

I haven’t been a fan of Ralph Nader’s for many years, but I do have to agree with him on his latest effort that athletic scholarships serve no educational purpose.

2 – State Charity Regulators Meeting in New York

While the ongoing program of state charity regulators at Columbia Law School does not appear to deal directly with tax issues, I thought readers would be interested in knowing a little about what our friends in the states are interested in — information gleaned from their conference agenda.

3 – Marc Owens’ Critique of the EO Workplan/Annual Report

Today I have the transcript of Marc Owens’ remarks on the EO Division’s FY 2011 workplan, as delivered on March 10 at the 47th annual Washington Nonprofit Legal & Tax Conference. Yesterday I sent along his outline (see email update 2011-52).

Transcripts (Other)

EO Tax Journal 2011-52

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Tomorrow I will have a transcript of Marc Owens’ remarks on the EO Division’s FY 2011 workplan, as delivered on March 10 at the 47th annual Washington Nonprofit Legal & Tax Conference. Today I have his outline, which indicates his areas of concern and interest.

“DUCK AND COVER”
DEALING WITH IRS AUDIT PLANS FOR TAX EXEMPTS

Current News and Developments

EO Tax Journal 2011-51

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1 – No Surprise Here — Supreme Court Follows My Advice

Earlier this year, I wrote that if the justices of the Supreme Court are as smart as they think they are, they will deny cert in the case of Foundation of Human Understanding. Well, yesterday they did. Actually, that’s too bad, it would have been nice to have had a definition of a “church” from the High Court. For the denied cert petition, see Email Update 2011-7.

2 – Current Issues Affecting Private Foundations

I believe readers who work with private foundations will find information presented by Victoria Bjorklund of Simpson Thacher & Bartlett LLP, New York, at the recent 47th Annual Washington Nonprofit Legal & Tax Conference, to be of interest.

Focus on Congress

EO Tax Journal 2011-50

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Senator Grassley in the News – Part 2

On Friday, I reprinted the comments of Professor John Colombo on the comments of Senator Charles Grassley (R-Iowa). It has been suggested to me that I run Senator Grassley’s comments so that readers will know exactly what he said and in what context and then readers can be in a position to better evaluate both Senator Grassley and Professor Colombo’s comments.

Excerpt from the March 1, 2011 Hearing before the Senate Committee on Finance titled, “How Did We Get Here? Changes in the Law and Tax Environment Since the Tax Reform Act of 1986.”

Focus on IRS and Treasury

EO Tax Journal 2011-48

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1 – Compensation Update

2 – Proposed Regs Address Expanded Statutory Disclosures to State Officials
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1 – Compensation Update

The New York Times has an interesting article today, “Immune to Cuts: Lofty Salaries at Hospitals.” Here are salaries noted at New York hospitals:

• At Bronx-Lebanon Hospital, the chief executive was paid $4.8 million in 2007 and $3.6 million in 2008.

• At New York-Presbyterian Hospital System, the chief executive was paid $9.8 million in 2007 and $2.8 million in 2008.

• At Mount Sinai Medical Center, the chief executive was paid $2.7 million in 2008.

• At North Shore-Long Island Jewish Health System, an executive was paid $2.4 million in 2008

Are these salaries subject to review? According to the Times,

“Under current policies, the State Health Department monitors executive salaries, though much of the compensation data the hospitals provide to the state do not jibe with the tax forms that they must file. In any event, the state does not regulate the salaries, viewing them as decisions that are entirely up to the hospitals’ boards. ‘Basically, the state does not set compensation rates for private businesses, even if taxpayer funding is a major revenue stream,’ said Claudia Hutton, a spokeswoman for the Health Department. ‘We don’t have any authority to set compensation levels or even to advise.’ New legislation proposes to give that authority to the state.”

My comment: All these hospitals are listed in Publication 78, even though the spokeswoman for the New York Health Department calls them “private businesses.” Also, why does “the compensation data the hospitals provide to the state not jibe with the tax forms that they must file”? Are these “tax forms” the 990s?

2 – Proposed Regs Address Expanded Statutory Disclosures to State Officials

The IRS recently released proposed regulations under section 6104(c) of the Internal Revenue Code, as amended by the Pension Protection Act of 2006 (reprinted below). Section 6104(c) expands permitted disclosures to appropriate state officers, ASOs for short. I’ve reprinted section 6104(c) below for those who want to track how the proposed regs follow the statute.

The expansion of section 6104(c) disclosure should be helpful, but unfortunately its impact will be limited to those states that have dedicated charity officials. In addition to charities, section 6104(c) now covers other than section 501(c)(3) organizations, but only to the extent necessary to administer state laws regulating the solicitation or administration of charitable funds or charitable assets.

Query: Did these proposed regulations really require over four years to bring to fruition? And how many more years will it take to make them final?

Transcripts (Other)

EO Tax Journal 2011-47

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Today I have the transcript of the discussion by two IRS experts on tax-exempt bonds. This completes our effort of transcribing five panels of the February 4 daylong meeting of the TE/GE area councils. Here are our prior transcripts:

“Update from the IRS” (Holly Paz) — Email Update 2011-33
“Three Year Revocation, Consequences, Reapplying for Exempt Status” (Matthew Giuliano) — Email Update 2011-36
“The 2010 Form 990” (Steve Clarke) — Email Update 2011-39
“Compliance Programs for Exempt Organizations: From Policy to Practice” (Joyce Hellums and Gerry Griffith) — Email Update 2011-44

Tax Exempt Bonds

What follows are the February 4 remarks of Victoria Tsilas and Johanna Som de Cerff, attorneys in Branch 5 of the Financial Institutions & Products Division, IRS Office of Chief Counsel, as delivered at the TE/GE Councils’ annual meeting. The moderator of the panel is Christopher Ballard of Honigman Miller Schwartz and Cohn LLP, Ann Arbor, Michigan.

Current & Quotable

EO Tax Journal 2011-45

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Readers have told me they found of interest the summary of a Council on Foundations’ survey of governance and expenses of foundation boards reprinted last week (see Email Update 2011-41). Happening this week is the annual “Foundations on the Hill” day, sponsored by COF and the Forum of Regional Associations of Grantmakers, which involves foundation employees visiting congressional offices in Washington.

On Tuesday, Rep. Earl Blumenauer (D-Ore.) welcomed these visitors with a rousing luncheon speech: “If you’re not at the table, you’re on the menu,” and less dramatically, “It’s very important for you to make sure that you are engaged, that you are being heard.”

In this vein, I think readers may find of interest excerpts from COF’s 2011 legislative agenda:

Legislative Agenda for Philanthropy for the 112th Congress
The Council on Foundations, Arlington, Virginia

Transcripts (Other)

EO Tax Journal 2011-44

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As promised yesterday, I am sending out the transcript of the fifth panel of the February 4 meeting of the TE/GE area councils, which is on tax compliance, featuring Gerry Griffith and Joyce Hellums. They’ve added “Post-conference Editor’s Notes” to make sure that readers have the most up-to-date information, so a double thanks to them for not only giving but editing their remarks.

Compliance Programs for Exempt Organizations: From Policy to Practice

What follows are the February 4 remarks of Gerry Griffith of Jones Day, Chicago, and Joyce Hellums of Ernst & Young, Austin, as delivered at the TE/GE Councils’ annual meeting. The moderator of the panel is Christopher Ballard of Honigman Miller Schwartz and Cohn LLP, Ann Arbor, Michigan.

Transcripts (Other)

EO Tax Journal 2011-43

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So far I have sent out transcripts of the first three panels of the February 4 daylong meeting of the TE/GE area councils in the following email updates:

“Update from the IRS” (Holly Paz) — Email Update 2011-33
“Three Year Revocation, Consequences, Reapplying for Exempt Status” (Matthew Giuliano) — Email Update 2011-36
“The 2010 Form 990” (Steve Clarke) — Email Update 2011-39

This week I am going to jump out of order and go to panel five, as we are having some problems with transcribing panel four. Today I’m sending along the handout prepared for panel five, which served as the basis for Gerry Griffith and Joyce Hellums’ remarks, to be followed tomorrow with the transcript of their presentation.

Current & Quotable

EO Tax Journal 2011-41

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Some interesting statistics on foundations were released today by the Council on Foundations. 

News Release, March 4, 2011

Foundation Management Survey Reveals Governance and Expenses of Foundation Boards

Findings Inform Efforts to Strengthen Leadership, Mission

Current & Quotable

EO Tax Journal 2011-40

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Citizens for Responsibility and Ethics in Washington (CREW) has released an interesting report, reprinted below, that is noted in today’s New York Times, “Wife’s Charity Offers Corporate Tie to a Governor.” The article notes that a foundation set up by the wife of the governor of Louisiana “is among the newest of charities set up by elected officials, including members of Congress, or their families that are mutually beneficial: companies seeking to influence politicians or curry favor can donate unrestricted amounts of money, while the officials benefit from the good will associated with charitable work financed by businesses.”

For an earlier Times’ article on the same topic, see “Congressional Charities Pulling In Corporate Cash,” September 5, 2010, noted in Email Update 2010-125.

Transcripts (Other)

EO Tax Journal 2011-39

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Today I have a transcript of the third panel of the February 4 daylong meeting of the TE/GE area councils. A transcript of the first panel, “Update from the IRS” with Holly Paz, appeared in email update 2011-33, and a transcript of the second panel, “Three Year Revocation, Consequences, Reapplying for Exempt Status” with Matthew Giuliano, appeared in email update 2011-36. These transcripts are giving EO tax practitioners across the country insights into the IRS’ current thinking, so I think we are all indebted to the IRS and the TE/GE area councils for helping make this happen.

The 2010 Form 990

What follows are the February 4 remarks of Steve Clarke, Tax Law Specialist, EO Rulings & Agreements, IRS, as delivered at the TE/GE area councils’ annual meeting. The moderator of the panel is Kathy Pitts of Ernst & Young.

PLRs, TAMs, and Denial Letters

EO Tax Journal 2011-38

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This week’s interesting private letter ruling is PLR 201108037, reprinted below. I find it interesting even though its outcome is so obvious that one has to wonder why the organization and its Power of Attorney representatives spent $10,000 to get the ruling. That’s one of my questions — why? And if I am correct that it is “so obvious,” why did it take the IRS over two years to rule? Or is that the time it now takes to get a PLR?