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IRS Exempt Organization Newsletter 2011-6

April 10, 2011

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On April 6, the IRS released its Exempt Organization Newsletter, Issue Number 2011-6.  Topics include the following:

  • IRS Announces Qualified Disaster Treatment for Japan
  • Sharpen Your Skills: Attend a Workshop for Small and Mid-size 501(c)(3) Organizations
  • Registration is Open for the 2011 IRS Nationwide Tax Forums
  • IRS Has New Videos About Creating Preparer Tax Identification Numbers (PTINs)
  • New Guidance on Section 403(b) Plan Terminations
  • IRS Releases 2010 Data Book
  • Click here to review IRS Newsletter Issue 2011-6.

    Proposed Regulations Regarding State Inspection of IRS Records

    March 20, 2011

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    The IRS released Proposed Regulations (which may be obtained by clicking here) that provide guidance to states regarding the process by which they may obtain or inspect certain returns and return information (including information about final and proposed denials and revocations of tax-exempt status) for the purpose of administering state laws governing certain tax-exempt organizations and their activities.  The Proposed Regulations provide that those state organizations who meet cetain safeguard and procedural requirements may receive information from IRS to be used in the administration of state laws governing charitable organizations, charitable solicitation, and administration of charitable funds. The information available under the Proposed Regulations is greater in scope than what was available under former Code Sec. 6104(c) and it comes at an earlier stage in IRS’s administrative and enforcement processes.

    Nonmember Income and 501(c)(7) Social Clubs

    March 15, 2011

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    Social clubs may be exempt from federal income taxation if they meet the requirements of Section 501(c)(7) of the Code.   Although social clubs are generally exempt from tax, theyare subject to tax on their unrelated business income which generally includes all income from non-members.   In addition, a social club may lose its exempt status if it receives too much unrelated income.  The IRS has released a new chart and other new web content on tax issues of social clubs. Social clubs may click here to review this material and confirm how nonmember/nontraditional income may affect the tax-exempt status of a social club under Section 501(c)(7).

    FREE IRS Webinar for Non-501(c)(3)s

    February 23, 2011

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    FREE IRS Webinar for Non-501(c)(3)s

    February 23, 2011

    Authored by: Keith Kehrer

    The IRS is offering a free webinar on Thursday, February 24, 2011, at 2pm Eastern, for new 501(c)(4), (c)(5), (c)(6), (c)(7), (c)(8) and (c)(10) tax exempt organizations — including social welfare, labor and agricultural organizations, business leagues, trade associations, social clubs, andfraternal organizations — and the tax professionals who represent them.  The webinar will provide information regarding annual filing requirements, avoiding loss of exemption, and available tools.  For more information, please click here.

    IRS Releases New Publication for Ministers and Religious Workers

    February 20, 2011

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    The IRS recently released Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.   The Publication provides information regarding the special rules under the Self-Employment Contributions Act and the Federal Insurance Contributions Act applicable to Ministers and Clergy.  For additional information, click here.

    No More Horsing Around

    No More Horsing Around

    February 3, 2011

    Authored by: Keith Kehrer

    In PLR 201104066, the IRS revoked the tax-exempt status of an organization formed to guard the purity of a certain breed of horses, promote interest therein, and help fund research on the genetics of the breed.  The organization also maintained a website that contained links to private sellers of such horses.  The IRS concluded that the website links caused the organization’s assets to inure to the benefit of private individuals.  The breeders earn a profit, and private benefit, by being able to sell horses and/or stud services to interested persons, and the organization facilitated these sales.  One lesson for other charities is to use caution when linking to for-profit websites.

    Document! Document! Document!

    January 30, 2011

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    Document! Document! Document!

    January 30, 2011

    Authored by: Keith Kehrer

    It is critical for charities and their boards to maintain documentation regarding their exempt activities.  This includes board minutes, financial records, receipts, and other documents related to its activities.  In PLR 201102065, the IRS revoked the tax-exempt status of a charity that failed to provide any documentation that proved it conducted charitable activities for the audit period.  Although this is an extreme case, it is a reminder for all boards to document through minutes their meetings and decisions, and organizations to maintain documents related to their exempt activities, including documents necessary to prepare Form 990.  You never know when the IRS or state Attorney General may require a charity and its board to account for its activities.

    Seller “Gifts” and Down Payment Assistance Crackdown

    The IRS continues to crackdown on down payment assistance programs that involve “gifts” by the selling party.  Under these programs, the organization offers down payment assistance to buyers who cannot afford the 3% down payment necessary to qualify for a federally insured (HUD) loan.  In order to raise the funds, the organization requires participating sellers to agree to donate the 3% down payment to the organization.  Despite the fact that the “donation” by the seller matches the buyer’s 3% down payment (which is transferred to the seller as part of the purchase price), these organizations maintain that the down payment assistance is funded with other donations.  However, these organizations rarely demonstrate funds from any other sources.  In Private Letter Ruling 201102064, released today, the IRS denied tax-exempt status to another organization structured in this manner on the basis that the organization operates with a substantial non-exempt purpose and for the benefit of

    Senator Turns Focus to Churches

    January 9, 2011

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    Senator Turns Focus to Churches

    January 9, 2011

    Authored by: Keith Kehrer

    Senator Charles Grassley (R-IA) has been a driving force behind recent efforts to improve transparency in the charitable sector, including the revisions to the Form 990, Annual Information Return and focus on governance policies.  Senator Grassley recently turned his focus to churches and other religious organizations.  At his request, the Evangelical Council for Financial Accountability (” ECFA”), a national accreditation organization for churches and other religious organizations, will lead an independent, national effort to review and provide input on major accountability and policy issues affecting churches .   According to ECFA’s website, the newly formed “Commission on Accountability and Policy for Religious Organizations” will address some of the most challenging tax and policy issues involving religious organizations, including whether churches should file the same highly-detailed annual information return that other nonprofits must file (Form 990); whether legislation is needed to curb abuses of the clergy housing allowance exclusion; whether the current prohibition

    Use it or Lose it

    December 7, 2010

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    Use it or Lose it

    December 7, 2010

    Authored by: Keith Kehrer

    When I was a kid, my mother would always tell me to “move it or lose it” – although I am not 100% certain, I think she was telling me to please move out of her way.  As tax revenues have declined, we have seen local tax assessors more frequently telling charity owners of real property to “use it [property] or lose it [property tax exemption].”