Focus on Congress

Focus on Congress

EO Tax Journal 2011-61

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Seems like it has been a long week, so let’s just ease into the weekend. Even tax lawyers are expected to know constitutional law — after all, we did go to law school, didn’t we? — even if some of us were sitting in the back row napping — so I’m sending along today a CRS report that discusses the current ground rules for aid to private schools that I think would be at least embarrassing for an EO lawyer not to know.

Since we’re talking schools, what would a Friday be without a quiz. News sources are reporting that Bristol Palin was paid a total of $332,500 to urge teenagers to abstain from sex ($262,500 in 2009 for 15 to 20 days of work and $70,000 in 2010) by The Candies Foundation, a New York-based foundation, which, according to the Associated Press, is “a division of the apparel brand Candie’s.” According to Reuters,the foundation is “an offshoot of the fashion brand Candie’s, which is part of Iconix Brand Group Inc.,” of which the foundation founder, Neil Cole, is CEO and president. Cole has shrugged off criticism that the foundation, while paying Bristol $262,500 in 2009, made only two grants for $35,000 in 2009.

Query: I’m sure Bristol is worth every cent of what she was paid by the foundation, but let’s suppose she was overpaid. What are the possible tax consequences? Section 4958 would not seem to be an issue, since it does not apply to private foundations and Bristol would not seem to be a disqualified person. That leaves Chapter 42. Section 4941 would not seem to apply since Bristol, again, would not seem to be a disqualified person. But how about section 4945? If a foundation were to pay too much to an individual who is not a disqualified person, would we have a possible taxable expenditure under section 4945(d)?

Focus on Congress

EO Tax Journal 2011-58

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Friday’s House Ways and Means Committee hearing on AARP is probably not worth discussing — except for what it may portend. The what, when, where, and why I covered last week in Email Update 2011-56, for those just tuning in.

After opening statements by Representatives Wally Herger (R-CA), Charles Boustany (R-LA), Dave Reichert (R-WA), and Barry Rand, CEO, AARP (all available on the House Ways and Means Committee website), the first panel of the hearing consisted of Republican committee members beating up on Rand (whose evasiveness would have made the late Everett Dirksen proud) and Lee Hammond, President, AARP Board of Directors. In-between Republican attacks, Democratic committee members defended AARP or attacked the Republicans for a political witch-hunt. For anyone who wants to watch the actual blood-letting, the hearing is available on C-SPAN.

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 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.”

Editor's Notebook Focus on Congress

EO Tax Journal 2011-19

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1 – Endowment Study Shows 12% Return for FY 2010; Grassley’s Reaction

Senator Grassley continues to ask, are endowment payouts failing today’s students? A NACUBO-Commonfund Study of Endowments gives the latest investment returns.

2 – More on Catholic Hospitals

If religious beliefs trump standards of medical care in a hospital, should the hospital qualify as a hospital under section 501(c)(3) of the Internal Revenue Code for purposes of tax exemption? And does it qualify as a hospital under section 170(b)(1)(A)(iii) of the Code?

Focus on Congress

EO Tax Journal 2011-16

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1 – The EOTJ Mailbag

2 – CRS Report on Tax Issues Relating to Charitable Contributions and Organizations

This Congressional Research Service report provides an overview of recent changes affecting tax-exempt and charitable organizations. Experienced EO practitioners probably know of all these developments, but it’s probably worth a scan of the headnotes just to be sure.

Focus on Congress

EO Tax Journal 2011-4

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Latest Developments re Six Media-based Ministries

In addition to issuing a press release late yesterday (reprinted below), Senator Chuck Grassley (R-Iowa) has announced the formation of a commission to go over the tax policy issues involved in media-based ministries. The commission, to be spearheaded by the Evangelical Council for Financial Accountability (ECFA), will be called the Commission on Accountability and Policy for Religious Organizations.

The commission will be chaired by Michael Batts, founder and managing shareholder of Batts Morrison Wales & Lee, P.A., an Orlando-based CPA firm exclusively serving nonprofit organizations and their affiliates. Dan Busby, the ECFA’s president, will serve on the commission in an ex-officio capacity. The commission will have seven-to-nine members and other members will be named in the coming days.

The ECFA will hold a press conference at 10 a.m. Eastern Standard Time on January 7 at the National Press Club in Washington, D.C. in the Murrow Room. The ECFA will post information about the commission’s work on its website at: www.ECFA.org/commission.

Focus on Congress

EO Tax Journal 2010-187

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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)

Current & Quotable Editor's Notebook Focus on Congress

EO Tax Journal 2010-145

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1 – More 501(c)(4) Developments

2 – Information on Recent Tax Court Litigation
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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.”

Editor's Notebook Focus on Congress

EO Tax Journal 2010-141

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The Congressional Research Service released a report titled “Tax-Exempt Organizations: Political Activity Restrictions and Disclosure Requirements,” which I’ve reprinted below. For those closely following these developments, there is nothing new. For folks who wish to be brought up to date, this report is a good synopsis of where we stand today.

Speaking of political activity, this morning I went to the ongoing NAAG/NASCO Conference to hear Lois Lerner and Ruth Madrigal speak. Not to my surprise, Lois and Ruth rehashed their recent ABA comments in Toronto, and I’ll have a transcript of those comments shortly. What did surprise me was Lois’ answer to this question by an attendee: “What about churches and preaching from the pulpit?” Lois emphatically answered: “I’m not going to talk about that.”

Normally I’d expect Lois to give the usual IRS gobbledygook answer, such as “We’re looking into that, but of course I can’t say anything about any particular church.” So what’s the difference in her saying, “I’m not going to talk about that.” Well, I’m not blaming Lois, since I’m sure she is merely reflecting the IRS’ say-nothing position, but the IRS should be talking about churches and politicking from the pulpit.

The Alliance Defense Fund is encouraging pulpit politicking. See Email Update 2010-137. I don’t see how the IRS can walk away from this challenge. Yet all we’ve heard from the IRS is, “I’m not going to talk about that.” Last week, Marc Owens may have said what Lois cannot say (see Email Update 2010-139). According to Marc, the IRS has “effectively abandoned the field” at a time of heightened political activity by all exempt organizations, including (c)(3)s. He added: “We seem to have a haphazard IRS enforcement system now breaking down completely.” Marc of course formerly held Lois’ job, so I don’t see how the IRS cannot respond to his comments, unless what he is saying is true, in which case there is no good response possible.

On a more cheery note, Ruth Madrigal’s predecessor, Emily Lam, has rejoined Skadden, Arps, Slate, Meagher & Flom LLP as Counsel in the Washington, D.C. office. Emily’s practice will focus on tax controversy and exempt organizations matters.

Focus on Congress

EO Tax Journal 2010-89

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1 – Old Business

In regard to yesterday’s email update that included a proposed revenue ruling on the treatment of the discharge of indebtedness under the UBTI rules, CPA Sarah Harlan of Lake Oswego, Oregon, is of the opinion that unrelated business income is not an issue. According to Sarah, years ago she asked the IRS’ Dave Jones about how to treat discharge of indebtedness. Dave checked with his colleagues in Income Tax whose responsibilities included section 170, and they were of the opinion that the IRS would treat forgiveness of debt to a tax-exempt entity as a donation by any individual or corporate creditor. Hence, under this tax treatment, there would be no unrelated business income issues. Other comments?

Editor's Notebook Focus on Congress

EO Tax Journal 2010-70

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ACT Committee

The IRS announced yesterday (IR-2010-61) the selection of two new EO members of the Advisory Committee on Tax Exempt and Government Entities (ACT): Karen A. Gries of LarsonAllen LLP, Minneapolis, Minnesota, and Celia Roady of Morgan Lewis & Bockius, LLP, Washington, D.C.

Focus on Congress Focus on IRS and Treasury

EO Tax Journal 2010-63

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1 – IRS Auditing $1.2 Million Salary Paid to Fired University President

I’m guessing the audit of the Kansas City University of Medicine and Biosciences (see article below) is part of the exams generated by the IRS’ college and university initiative. If so, the school joins Harvard University, Lamar University, Suffolk University (Boston), Texas A&M University, and the University of Texas on my list of identified school audits.

2 – Senator Grassley Comments on CBO Report on Collegiate Arbitrage

Are colleges and universities double-dipping when it comes to tax breaks?
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Editor's Notebook Focus on Congress

EO Tax Journal 2010-59

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Since Friday’s email update, my mailbox has been overflowing with queries about Nan Downing — who she is, and what EO tax practitioners can expect from the IRS’ new top cop.

I hope to have a transcript of Nan’s remarks on last Thursday in the near future. Unfortunately, Nan speaks softly (but carries a big stick?) and the acoustics weren’t good, so we’ll see if my transcriber can overcome these obstacles.

Focus on Congress Focus on IRS and Treasury PLRs, TAMs, and Denial Letters

EO Tax Journal 2010-46

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A bit of this and that today. I expect to have a transcript of an interesting governance discussion that occurred last week featuring Fred Goldberg, Lois Lerner, and Suzanne McDowell if — and this is a big if — my transcriber — a big fan of Kentucky — can recover from Kentucky’s loss to West Virginia in the NCAA Men’s Basketball Tournament.

1 – Ten Tips for Deducting Charitable Contributions

2 – Six Important Facts about Tax-Exempt Organizations

3 – Grassley on New Hospital Provisions

4 – Providing Administrative Services Will Not Constitute Unrelated Trade or Business (PLR 201012052)

5 – Transfer of LLC Units to PF Will Not Constitute Self-Dealing or Recognition of Gain to Donors (PLR 201012050)

Focus on Congress Focus on IRS and Treasury PLRs, TAMs, and Denial Letters

EO Tax Journal 2010-40

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My bookshelf

I kind of skimmed Sarah Palin’s book, Going Rogue, so I shouldn’t comment on what I didn’t really read. From another source, I learned that Palin has ancestors from County Roscommon in Ireland. Well, my mother’s family goes back to County Roscommon, too. Who knows, I may be a distant cousin. If Palin becomes President, someone remind her of that. I’d like to be an ambassador, preferably to a country where the living is good and the toasts never end.

Focus on Congress Focus on IRS and Treasury

EO Tax Journal 2010-16

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1 – EO Revenue Procedures Updated

The annual updating of the basic EO revenue procedures has taken place with few changes.

Rev. Proc. 2010-4, on TE/GE letter ruling requests, has mostly minor revisions. An additional circumstance under which EO Technical will not issue letter rulings is added as section 6.18.