Employers are looking for ways to assist employees and their dependents experiencing financial hardship due to the Coronavirus. One potential tax-advantaged method is the use of an existing or newly formed employer-sponsored foundation which qualifies for exemption under Section 501(c)(3).

Under established IRS guidance set forth in Publication 3833, an employer-sponsored foundation may operate a fund which provides financial assistance to employees who experience financial hardship due to a qualifying event, including certain federally declared disasters or emergencies which now include circumstances resulting from the Coronavirus. If the conditions below are satisfied, persons (including the employer and other employees) making donations to the foundation are entitled to a charitable deduction under Section 170 of the Code and financial relief payments made to employees are not included in taxable compensation:

Tax practitioners have long believed that donations could be made to single member LLCs wholly owned by section 501(c)(3) organizations on the theory that, for tax purposes, the donation was treated as made to the charity and not the LLC.  In long awaited guidance, the IRS has finally agreed in Notice 2012-52.  The analysis in the notice is not surprising, and is in fact, exactly what tax practitioners have been arguing ever since disregarded entities came into existence.

Generally, a business entity that has a single owner and that is not a corporation is treated as disregarded as an entity separate from its owner.  These “business entities” are typically limited liability companies. If an entity is disregarded, its operations and activities are treated in the same manner as a sole proprietorship, branch, or division of the owner, and the owner generally reports all income, loss, deductions, and credits on its own tax

Charitable organizations receive all types of donations, including cash,  personal property, and even business interests.  Often times, the charity is so excited about a potential gift that no diligence is completed prior to acceptance, and failure to complete diligence on gifts can turn out to be costly.    Take gifts of real property – these are very common and can be financially beneficial to a charity.  However, without completing diligence, the charity may find that it now owns a superfund site.   Another not-so-obvious example is a donation of stock.  Although most donated stock is marketable, certain types of stock, including stock in an S corporation (usually small, family owned corporations), are not.  This post explores the implications of a charity accepting gifts of S corporation stock.  

Subchapter S corporations can only have certain types of shareholders.  Generally, these “permissible shareholders” include individuals (who are not nonresident aliens), estates, certain trusts, and certain exempt organizations.  We will

Last week, my husband and I attended an event for one of our favorite charities. For a $160 donation, the two of us enjoyed a nice steak and lobster dinner and an open bar. This was a great deal for the charity – since all of the food and drinks had been donated. At the silent auction, I successfully bid on a dinner party for 4, hosted by a famous local chef who donated the item. And I got a great deal on that dinner – it normally goes for $300, and all I paid was $150! My husband won the raffle – for five dollars, he entered for the chance to win all of the money in the pot, and scored a whopping $510! Of course, being the charitable person that he is (and with a bit of urging), he donated the entire amount back to the charity. Finally, after watching the

The IRS recently decided, in PLR 201027015, that a taxpayer who directs her credit card “rebates” to a charitable organization is not required to include the amount in gross income and is entitled to a charitable deduction.

The facts are simple: taxpayers make purchases using their credit cards and as a result of the purchases, they earn “rebates.”  These rebates equal 1% of the taxpayer’s purchases, and the taxpayer can either receive cash back or direct the cash to a charitable organization.  The IRS holds that these rebates are not includable in the taxpayer’s gross income becase these “rebates” are adjustments to the purchase price paid for the item.  The problem is: what item??  Presumably the taxpayer purchased several items from several different retailers.  These facts are clearly different from the cell phone company who charges “$50” for my phone by making me pay $200 up front and requiring me to

The IRS, in PLR 201025078, denied exemption under section 501(c)(7) to a winemaking club.   The club was formed for the specific purpose “to encourage the appreciation of winemaking, promote the responsible use of wine, educate wine tasters and home wine makers, and to promote and support the healthful creation of wine made without sulfites.”  Although the club, had it been properly managed, could have qualified under section 501(c)(3) as an educational organization, the club failed to qualify as exempt under any section due to its commercial nature.  Specifically, the club allowed anyone to become a “member” for a fee, didn’t allow its “members” any actual rights, and didn’t allow its “members” enough socializing amongst each other.  Perhaps if the wine club had been more exclusive in its membership and hosted more parties among its members, the IRS would have granted exemption.  Of course, the club should have also considered adding a few more disinterested board members and

Corporate and family sponsored charitable organizations typically qualify as private foundations because most of their support is provided by the sponsoring corporation or family. Under these circumstances, sponsoring corporations and individuals often limit their donations to cash contributions since the deduction for contributions of appreciated property to a private foundation is generally limited to the cost basis in the property. If the private foundation can qualify as a “conduit” foundation in the year of contribution, however, the amount of the charitable deduction with respect to a donation of appreciated property may equal the fair market value of such property, assuming there is no depreciation recapture with respect to the property.

A private foundation can qualify as a conduit foundation if it (a) satisfies the minimum distribution requirements for the current and all prior years and (b) makes additional distributions in an amount equal to