BCLP Charity Law

Main Content

Delaware Revised Statutes – Part II

Delaware Revised Statutes – Part II

September 6, 2010

Authored by: Nathan Boyce

I don’t like members. Not as individuals, but as a non-profit corporate law term of art, mostly because it so often leads to confusion.  I plan to rant more about this in a future blog. But for purposes of analyzing the changes to the Delaware General Corporation Law (“DGCL“) though, I will simply note that in many jurisdictions, a “member” is someone (other than a director or delegate) entitled to vote for directors; members also generally get to vote for important corporate actions, like mergers and dissolutions. And, in all jurisdictions I know of, a non-profit corporation may, but is not required to, have members. If it doesn’t, its directors themselves may vote for the next slate of directors and approve all corporate actions. As I noted in my August 19 post, unlike most jurisdictions, Delaware does not have a nonprofit corporation act; rather corporations that want to

Charities and Life Insurance – A Growing Trend?

Life insurance has always been an important part of charitable giving.  Although there are legitimate uses, over the years the IRS has identified certain abuses regarding the use of life insurance in charitable planning.  In our practice, we have seen a recent surge in charitable planning techniques involving life insurance.  Before your charity accepts a gift of life insurance, you should consider several issues, including the following:  (1) the application of Section 170(f)(10), the so-called “charitable split-dollar rules” (which, if applicable, impose an excise tax on the charity equal to 100% of the premium payments), (2) applicable state insurable interest laws, (3) private inurement, private benefit, and excess benefit rules, (4) unrelated business income rules (and debt-financed income rules, to the extent the life insurance was acquired with borrowed funds), (5) the partial interest rules (impacting both the income and gift tax deduction of the donor), (6) I.R.C. § 4944, the jeopardizing investment rules, and I.R.C. §

Don’t Forget to Maintain Donation Records

September 2, 2010

Categories

In order to be entitled to a charitable deduction for cash donations, a donor must maintain records providing evidence of the donation.  For example, for tax years after August 17, 2006, a donor must maintain a bank record or a written receipt from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution in order to deduct any contribution of cash, check, or other monetary gift (additional rules apply for donations of $250 or more).

The Tax Court re-emphasized the strictness of this requirement in a recent case.  In Fessey v. Comm., T.C. Memo. 2010-191 (Aug. 30, 2010), the taxpayer alleged that he donated $920 in cash in 2004 to a church by way of $20 weekly cash donations made to the church’s offering plate.  The taxpayer provided the Court with a computer printout listing the date, amount, and recipient of his donations.  However, the taxpayer did not produce a receipt or any form

FAQs for Delinquent Form 990 Filers

August 30, 2010

Categories

FAQs for Delinquent Form 990 Filers

August 30, 2010

Authored by: Keith Kehrer

The IRS just released “Frequently Asked Questions” regarding its one-time relief for charities that face automatic revocation of tax-exempt status for failure to file Form 990, Form 990-EZ, or Form 990-N. As we discussed in our July 26 post, the IRS is providing limited relief to small charities that failed to file Form 990-EZ or Form 990-N for the past three years. The IRS estimates more than 300,000 charities may lose their tax-exempt status but is giving charities until October 15, 2010 to file the delinquent Form 990-EZ or Form 990-N and maintain tax-exempt status. The IRS released the Frequently Asked Questions, which may be accessed by clicking here, to provide additional information regarding this one time relief.

Change Your Activities? Don’t Forget to Tell the IRS

August 27, 2010

Categories

When a charity significantly expands or changes its activities, it must inform the IRS by disclosing the activities on its next filed Form 990.  The Form 990 includes questions regarding whether the filing charity has undertaken any significant activities not listed on a prior Form 990, whether the charity ceased conducting, or made significant changes in how it conducts any activities, and requires the charity to describe the changes in an attached schedule. The Form 990 also asks whether the charity made any significant changes to its articles or bylaws, and requires such documents be included with the Form 990.  Although disclosing the changes on the next Form 990 satisfies a charity’s obligation to update the IRS, it does not provide any comfort that the new activities do not jeopardize the charity’s exempt status because there is no guaranty any IRS agent will review (or approve) such changes.  

In addition to Form

IRS Releases Ten Tips for Taxpayers Making Charitable Donations

August 26, 2010

Categories

The IRS is always so helpful, and has just published “Ten Tips for Taxpayers Making Charitable Donations” (IRS Summertime Tax Tip 2010-21). You can view the item on the IRS website by clicking here and the website has links for IRS publications along the charitable giving lines. Since most of you that read this blog are affiliated with tax-exempt organizations as officers, advisors or consultants or advise high-net-worth charitable donors, this may be a resource for your donors or clients, or maybe you actually are inclined to give yourself, not that there’s any pressure or anything.

Accepting Gifts… Should You?

Accepting Gifts… Should You?

August 24, 2010

Authored by: Erika Labelle

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

Facing Late Filing Penalties – Don’t Despair (At Least Not Right Away)

August 22, 2010

Categories

Many small and medium sized charities are run almost entirely by volunteers and have little or no paid staff. It is not unusual for such charities to inadvertently fail to timely file Form 990 or Form 990-EZ. The IRS imposes a penalty of $20 a day for failure to timely file Form 990 or Form 990-EZ. The IRS will send a penalty letter to late-filing charities imposing the penalty with interest. Where the charity can show reasonable cause, however, we have had success convincing the IRS to abate and refund the late-filing penalty. For example, if the charity has a history of compliance, is run by volunteers (or has little or no paid staff), and puts procedures in place to ensure future compliance, the IRS has been willing to abate and refund the penalty. Although there can be no guaranty, if your charity is faced with a late filing penalty, contact your

Delaware Revised Statutes – Part I

Delaware Revised Statutes – Part I

August 19, 2010

Authored by: Nathan Boyce

About two years after buying our latest family car, we had the manufacturer repair the video of the car’s DVD player.  (We once drove cross-country without this working and it was a tryyyyyyying experience; I’m not sure how my parents did it.  Of course, lots of things were different back then: not only did we not wear our seatbelts in the van, the seatbelts were stuffed down in the seat so as to not be in our way.  We often travelled with more passengers than there were seatbelts anyway, so perhaps by removing any chance at safety for all of us, my parents were tipping their hat at the principle of fairness.  Or perhaps they knew that until someone put TVs in cars, their only chance for driving sanity lay in us distracting ourselves with games, like Twister and hide-and-go-seek.  After the DVD player’s video was repaired, I couldn’t get the audio to work.  I

Charitable Income Tax Deduction Limitations – Part II – Gifts of Appreciated Assets

August 17, 2010

Categories

Last week, I posted about the income tax deductibility limitations for gifts of cash to a public charity versus a private foundation.  Today:  the same analysis but for long-term, capital assets that have a fair market value at the date of the donation higher than the donor’s cost basis in the property.

In general, the AGI* deductibility limitation for gifts of long-term holdings of appreciated assets made to public charities (or “50% charities”) is reduced to 30% unless the donor elects to step down the deductible contribution base of the long-term capital gain property from fair market value to cost basis. Therefore, in general, gifts of long-term appreciated marketable securities to a public charity can be deducted at their fair market value on the date of the gift, subject to the 30% AGI deduction limitation, and any overage may be carried over for up to five additional tax years, but if the donor

The attorneys of Bryan Cave LLP make this site available to you only for the educational purposes of imparting general information and a general understanding of the law. This site does not offer specific legal advice. Your use of this site does not create an attorney-client relationship between you and Bryan Cave LLP or any of its attorneys. Do not use this site as a substitute for specific legal advice from a licensed attorney. Much of the information on this site is based upon preliminary discussions in the absence of definitive advice or policy statements and therefore may change as soon as more definitive advice is available. Please review our full disclaimer.