Paul Streckfus, Editor
1 – More on EO Compliance
2 – Some of This Stuff You Just Can’t Make Up — They Oughta Make a Movie
The St. Petersburg Times should get a Pulitzer Prize for its continuing investigation of the U.S. Navy Veterans Association. It’s really an unbelievable story — maybe not on a par with Bernie Madoff, but close, and the chutzpah — out of this world.
Over the years I have suggested to the IRS that they keep the tax press informed of speaking engagements of their top tax officials. Since the answer has always been no-can-do, we in the tax press are forced to troll the internet. When an organization lands a big fish from the IRS to speak at one of their gatherings, they usually put it on their website, and that information then ends up on the internet.
Checking the internet this past weekend I came up with a summary of Lois Lerner’s recent remarks in North Carolina, reprinted herein. I also came up with a fun article on Lois in her alumni magazine. It’s a couple of years old, but it gives us new insights into Lois’ “meteoric rise to the top levels of the federal government.” (The author of the article may have been a little star-struck.) I’m just sorry I’m not able to reproduce all the photos of Lois — and to think she once told me she was camera shy!
1 – Lois Lerner: No More Business As Usual
2 – EO Director Has Reached ‘Rock Star Status’ with the IRS
I’ll begin the week by surveying the latest news for those of you who have been away traveling with President Obama.
1 – Not Another Cat Story
This story should give all cat lovers a warm feeling.
2 – The Chronicle of Higher Education’s Annual Salary Report
The New York Times and Washington Post — and I’m sure numerous other newspapers — weigh in on the The Chronicle of Higher Education’s latest salary report.
3 – Who Needs To Be a College President to Make Big Bucks?
The Baltimore Sun continues to do eye-opening exposes. Has anyone ever seen a Maryland state charity regulator? I haven’t, and I’ve lived in the state my entire life. The article notes that Maryland has a law that governs the composition of boards at nonprofits that receive public mental health funds, which says that no one can serve on the board of such an organization if an “immediate family member” works for that organization. I think that’s a great rule that should apply to all section 501(c)(3) public charities nationwide.
1 – Cat Blamed for Starting Fire with Toaster Oven
2 – More on “Is More Always Better?”
3 – Just Hang Up on Charity Phone Solicitations
1 – Old Business
In regard to critiques of the EO function in these pages in recent days, Tex writes that the IRS folks are starting to remind him of his beloved Dallas Cowboys. Switching analogies, Tex gives the IRS until the end of the year before he says three strikes and you’re out.
Strike One is no FY 2011 workplan: “We haven’t seen one for two years,” he says. Strike Two is no PACI report. Tex notes that the 2008 PACI report is now over a year-and-a-half late. Strike Three is the 7611 regs, proposed in July 2009. “That should have been a two-minute drill,” he says. He wants to know why the IRS can’t make a couple of decisions and be done with this mini-project, especially at a time when some churches are openly challenging the IRS on politicking.
My view: The IRS has about three weeks to accomplish any of these objectives this year. Once December arrives, the IRS pretty much shuts down as people start using their accumulated leave time.
2 – Medical Residents Have Their Day in Supreme Court
Kudos to the New York Times for having the Supreme Court briefs filed in Mayo Foundation for Medical Education and Research, et al. v. U.S. Just go online (www.nytimes.com) to the story below and click on the briefs.
Lots of good stuff is piling up on my desk, so I need to catch up over the next few days and my apologies for any delayed responses to incoming emails. Today, because of taping problems, I have abbreviated comments of Peter Lorenzetti, an IRS area manager, who discusses EO examinations. Most of the discussion should be familiar to those of you who are regularly engaged in audits, but he does mention a recent IRS move to a national EO closing agreement coordinator, Lisa Schultz, so that may be new news even for experienced hands. A recent letter from an EO revenue agent to me may add perspective to Peter’s comments. Tomorrow I will be commenting on the state of the EO function, and as homework I recommend, if you have time, reading Pablo Eisenberg’s article, “State and Federal Regulators Must Do More to Police Nonprofits,” that appears in the current issue (Nov. 4) of The Chronicle of Philanthropy.
I’m also including today an article from the Christian Science Monitor, “Advocacy Groups Won’t Get Supreme Court’s Ear on Campaign Finance,” that has been getting attention. If you can stand one more article on campaign finance, it’s recommended reading.
1 – Giants Win World Series
2 – Ellen Aprill on Section 501(c)(4) Organizations, the Gift Tax, and the Disclosure Rules
3 – Western Conference on Tax-Exempt Organizations Coming Up
1 – Milton Hershey Must Be Rolling Over in His Grave
If it wasn’t so sad, it would be funny. I know I’m going to Pumpkin World and Jungle Joey’s on my next trip to Pennsylvania. For earlier reports on the Milton Hershey School, see email updates 2010-147 and 2010-149.
2 – What Audits of Colleges and Universities Are Telling Us
We’re continuing to complete transcripts of the recent EO Committee meeting in Toronto. Today I have the panel on colleges and universities. At first I thought it would be just a rehash of the interim report, but it turned out to be much more interesting than that.
1 – Old Business
2 – Partial Transcript of D.C. Bar Program on EO Politicking
The transcription process is always a challenge. In the case of a recent D.C. Bar program, I was unable to get a good recording of the remarks of Karl Sandstrom, one of the speakers. Rather than tossing the transcript, I am sending along the remarks of Jim Joseph and Marc Owens. If Karl would like to work on his comments, I would be happy to send him what we have.
With Halloween coming, I am reminded of what happened to one set of tapes I sent my transcriber a few years ago. Apparently her mailperson left the envelope containing the tapes on her door sill. The day being Halloween, trick-or-treaters who came by must have been irritated that she was not home to give them candy, so they ripped the envelope apart and threw the tapes in her bushes. When I told her later that the tapes should have arrived, she looked around and luckily found them intact in the bushes. I guess you could say a tape in the hand is worth two in the bush.
3 – Clergy VOICE’s Letter to IRS re the Fellowship Foundation
Last week I reprinted (Email 2010-148) a Washington Post article, “Sponsor of National Prayer Breakfast Received Money from Alleged Terrorist Group.” Today I’m reprinting the letter that was the basis for the article.
1 – New York Times’ Primer on EO Tax Law
2 – Ofer Goes Where Lions Fear to Tread: Is a Political Contribution a Gift?
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1 – New York Times’ Primer on EO Tax Law
Who would have guessed that the New York Times would devote two articles appearing today in its print edition to explain basic concepts of EO tax law. Of course we know “basic concepts” don’t take you far in EO election tax law, as it’s all facts and circumstances, as Judy Kindell is fond of explaining. The Times’Michael Luo gets it mostly right in his bold attempt to go where no IRS has gone before. I’ve noted in CAPS my comments.
1 – Old Business
2 – Upcoming Programs
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1 – Old Business
In regard to yesterday’s email update, former IRSer Bill Brockner chides me for not pointing out that Senator Durbin is incorrect in his press release in stating that “U.S. tax law requires that the primary purpose of 501(c)(4) organizations … cannot be political….” According to Bill, “There is no primary purpose test for (c)(4)s — including most if not all (c)s aside from (c)(3)s. What we have for (c)(4)s is a primary activity test, which is more quantifiable than a purpose test — if you can figure what and how to quantify.”
In regard to Wednesday’s email update, in which I noted recentPhiladelphia Inquirer articles about the Milton Hershey School, the newspaper has a blistering editorial today:
Inquirer Editorial: Hershey deals leave bad taste
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.
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.”
1 – Fresh Off the Wire
The New York Times continues its review of 501(c) organizations involved in politicking and the IRS that seemingly does nothing. Today’s article, “Hidden Under Tax-Exempt Cloak, Political Dollars Flow,” focuses on Americans for Job Security, “a pro-business group based in the Washington suburbs that had spent tens of millions of dollars since the late 1990s roughing up Democrats with negative advertisements around election time” that is “a front for a coterie of political operatives, devised to sidestep campaign disclosure rules.” Americans for Job Security is another nonprofit advocacy group that critics say “allow moneyed interests to influence elections without revealing themselves” by devoting itself “to politically charged ‘issue advocacy,’ much of it negative.”
Emboldened by Citizens United, Americans for Job Security, according to the Times, “paid close to $4 million for ads directly attacking nine Democratic candidates for Congress. That made it among the first to abandon the old approach of running ads that stopped just short of explicitly urging voters to elect or reject individual candidates.”
The article asks “whether, under cover of its tax-exempt mission ‘to promote a strong, job-creating economy,’ the group is largely a funnel for anonymous donations.” A director at Public Citizen is quoted as saying: “A lot of nonprofits game the system, but A.J.S. is unusual in that they so blatantly try to influence elections and evade disclosure. By any common-sense, reasonable interpretation of what they do, they are in violation of the rules.”
According to the article, “In 2007, Public Citizen filed complaints with the Internal Revenue Service and the Federal Election Commission, contending that Americans for Job Security spent the vast majority of its resources electioneering — running ads close to elections — contrary to I.R.S. guidelines for tax-exempt, nonprofit business groups. Public Citizen said it never heard back from the I.R.S.”
2 – Yesterday’s Update Continued
Today I am following up on the Associated Press story, “Tax-Exempt Status of 3 Bowls Challenged,” noted yesterday. What follows are a new release and excerpts from the complaint filed by Caplin & Drysdale on behalf of Playoff PAC.
1 – More on 501(c)(4) Politicking
2 – Alliance Defense Fund and Americans United Square Off Over Pulpit Freedom Sunday
3 – Devilish Plot to Destroy American Way of Life
I’ll focus on subscribers today. It’s nice to see that a goodly number of U.S. News “Best Tax Law Firms” subscribe to these missives. I can’t take credit for their rankings, but I hope I’m adding a little to their knowledge base. Speaking of subscribers, two were in the news yesterday — Jim Bopp on CBS News and Marc Owens in the New York Times. Marc probably wasn’t too happy to have his firm described as “a law firm popular with liberals seeking to set up nonprofit groups.” And it was great to see Sarah Hall Ingram quoted, as we haven’t heard from her since April. Sounds like the TE/GE Commissioner is advocating a “vote for” or “vote against” standard for political intervention.
1 – Alaska’s Sandy Deja’s Latest Interesting Tidbit — 990-N Filings
2 – “Most Disturbing Story of This Year’s Election” — New York Times Editorial
3 – Tax Issues in International Philanthropy — Outline Prepared for Friday’s ABA Meeting in Toronto
1 – More on Milton Hershey School
2 – Times Editorial on Charities and Their Corporate Sponsors
3 – IRS Releases Draft Form EOs Will Use to Calculate New Health Care Tax Credit; Form 990-T To Be Revised to Allow EOs to Claim Credit.
4 – How Many Deja Vus Can There Be? (Bartels Trust v. U.S.)
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1 – Letters to the Editor of the Baltimore Sun (hospital CEOs maligned!)
2 – Lawmakers Love Their Charities and Their Corporate Sponsors (N.Y. Times)
3 – Summary of the Fourth International Conference of Charity Regulators
We won’t know whether a recent Tax Court case (reprinted below) was decided correctly until Jim Hasson has his next panel on UBIT, but I find the rationale used in this case confusing.
If the subject homeowners association is serving Ocean Pines, Maryland, population 10,496, is that a “community” for purposes of section 501(c)(4)? Even the IRS seems to say yes. If that’s a community, should it matter if services (day-time parking) are limited to members of that community? I don’t think so. The issue to me is whether the night-time parking is subject to UBIT, which it clearly is.
Correct me if I’m wrong, but isn’t a church or school analogy appropriate? A church or school restricts its parking to members or students during certain times. No one argues that is not a related use or subject to UBIT. But if the church or school is able to make money off its parking lot when not needed for church or school functions, that is subject to UBIT.
In the case under consideration, the court seems to get confused in its analysis, and focuses on the fact that the two parking lots at issue are eight miles away from the community of Ocean Pines. Why should this matter? The day-time parking clearly benefits the folks from Ocean Pines, but isn’t that part of the community benefit for which Ocean Pines Association received its 501(c)(4) status? The night-time parking is run like your typical commercial parking lot, so UBIT is appropriate on the receipts from this business activity.
Any other opinions?
I don’t know whether us beleaguered males should be outraged or not at an article in today’s New York Times discussing Under Armour sports apparel. According to an analyst for a market research group, “guys buy clothes to look cool or feel cool,” whereas “women buy for fit and color.” Okay, I don’t like the bozo implications, but women do have to admit we are cool.
Another Times’ article is a follow-up to an earlier Times’ story, and sort of a follow-up to my report yesterday on a Baltimore Sun article on compensation of hospital executives.
Practices of Dodgers’ Charity Are Said to Be Under Scrutiny
by Katie Thomas and Michael S. Schmidt, New York Times, August 31, 2010
I’m assuming all readers of this missive subscribe to the IRS’ EO Update, so unless there is something controversial — heaven forbid — I don’t comment on what the IRS has to say. I will say the latest issue (2010-20) is out for anyone who has been napping or, in the case of Bill Brockner, traipsing about Scotland.
In December, 2008, my incredibly shrinking hometown newspaper, the Baltimore Sun, somehow found the resources to do a devastating (for Maryland hospitals) investigative series on hospital debt-collection practices and lack of charity care, which may have been a factor in Congress passing section 501(r). While not as extensive, the Sun has found the resources to do another report on Maryland hospitals, this one focusing on executive compensation, using Form 990 data.
Hospital CEOs Get Seven-figure Salaries, Country Club Memberships
Critics Question Whether Nonprofits Should Pay So Handsomely
By Andrea K. Walker, The Baltimore Sun, August 28, 2010
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)
Today I’m sending along excerpts of three news items I found of interest, with my comments in CAPS.
1 – Praying or preying for Terri Schiavo
Gary Snyder’s Nonprofit Imperative (gary.r.snyder@gmail.com) had this item in a recent post. Hopefully the IRS has taken note:
The New York Times has had two interesting articles in recent days, the second article following an earlier article from the Jewish daily newspaper, Forward. I’m running excerpts of these articles with my comments in CAPS. These articles raise difficult issues under the tax law.