On September 16, 2015, the IRS issued proposed regulations concerning the time and manner for donee organizations to file information returns that report required information about charitable contributions. The proposed regulations would implement an exception to the requirement that a taxpayer who claims a charitable contribution deduction for any contribution of $250 or more to obtain substantiation in the form of a “contemporaneous written acknowledgement” from the donee organization.
Previously, some taxpayers have argued that donations can be substantiated by filing an amended Form 990, even years after the claimed donation is made; however, the IRS has rejected this position. Instead, pursuant to the proposed regulations, the IRS will develop an optional “specific-use information return for donee reporting” intended to provide for timely reporting, while also minimizing reporting burdens on donees and protecting donor privacy.
In April, the New York State Attorney General’s office released guidance addressing key provisions of the New York Not-for-Profit Corporation Law. For in-depth analysis of the Attorney General’s guidance, click here for an article by Proskauer attorneys Roger Cohen and Ellen Moskowitz. For this blog’s coverage of the New York Not-for-Profit Corporation law, click here.
The Financial Accounting Standards Board (“FASB”) has issued an exposure draft of a Proposed Accounting Standards Update, Presentation of Financial Statements of Not-for-Profit Entities, which would make significant changes to the current reporting rules. The FASB believes that each of the proposed changes will improve the usefulness of the information provided to stakeholders, reduce the complexity of reporting, or both. One significant focus of the changes is to make clear which funds are available for expenditure in the organization’s discretion and which are not. Continue Reading
On March 31, 2015, the Commissioner of the IRS reported in a speech to the National Press Club that the IRS is “under new management” due to major changes in management staff over the last few years. Many of these management changes, as well as changes in organization and procedures, were in the Tax-Exempt and Governmental Entities (TEGE) branch of the IRS.
Organizational Changes. Previously, an Exempt Organizations Rulings and Agreements branch was responsible for issuing exemption determination letters. This function was headquartered in Cincinnati but several types of applications were required to be referred to an EO Technical branch in Washington (formerly referred to as the National Office). EO Technical also issued private letter rulings and gave technical advice. This was unlike other branches of the IRS. Elsewhere branches of the IRS Chief Counsel’s office, rather than technical staff reporting to the associate commissioners, were responsible for the private letter ruling and technical advice function. In Announcement 2014-34, the IRS explained that its Tax Exempt and Government Entities Division (TE/GE) was being realigned. Technical responsibility for preparing technical advice and private letter rulings, as well as revenue rulings, revenue procedures, announcements, and notices, was shifted to TEGE Counsel effective January 2, 2015. The EO Rulings and Agreements branch will retain its authority to issue determination letters approving or denying tax-exempt status as well as miscellaneous determinations addressed in Form 8940. Continue Reading
Late last year, the Internal Revenue Service (“IRS”) issued a letter ruling, PLR 201446025, providing that, in certain instances, a nonprofit corporation exempt under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and incorporated in State A was not required to file a new application for tax-exempt status (IRS Form 1023) when it changed its domicile to State B by filing “Articles of Domestication” in State B and “Articles of Conversion” in State A.
In the ruling, the law of State B stated that the corporation’s filing of “Articles of Domestication” would not affect its original incorporation date. The law of State B also stated that the corporation would be considered the same corporation as the one that existed under the laws of State A, the state in which the corporation was previously domiciled. Similarly, the governing law of State A stated that following the corporation’s filing of “Articles of Conversion,” the corporation would continue to exist without interruption and be able to maintain its same liabilities and obligations.
Proskauer’s 19th Annual Trick or Treat Seminar was held on Friday, October 31.
The Seminar discussed:
- Charitable giving techniques
- Labor and employment issues with using volunteers and interns
- Recent developments in employee benefits
In her introductory remarks, Amanda Nussbaum discussed recent tax developments, including the development of IRS Form 1023-EZ, the process for reinstatement of tax-exempt status, and the proposed regulations under Section 501(c)(4), and introduced the presenters. Continue Reading
Our work on behalf of our client, Angkor Hospital for Children (“AHC”), in Siem Reap, Cambodia, reached a milestone with a New York Supreme Court order on September 15, 2014, transferring all the assets from a New York not-for-profit organization, Friends Without a Border (“FWAB”), to a Hong Kong company limited by guarantee, Angkor Hospital for Children Limited (“AHC HK”), established for charitable purposes.
AHC, located in Siem Reap, Cambodia was founded by photographer Kenro Izu in gratitude for the inspiration he received from the country’s ancient monuments, which he captured in his photographic series “Light Over Ancient Angkor.” Being Cambodia’s first teaching hospital, one of only two in the country, AHC draws patients who suffer from serious illness and often from acute malnutrition as well. They travel for hours, or even days, usually from rural areas, seeking higher level care that cannot be found in their own communities. AHC not only provides the neediest of these patients with free treatment, but also reimburses their travel costs in order to ensure that they will not hesitate to seek care when it is needed. AHC has also established a satellite clinic in the district town of Sotnikum in order to reach a larger number of poor children in the rural communities. Between AHC and the satellite clinic, over 150,000 children are treated each year.
The Advisory Committee on Tax Exempt and Government Entities (“ACT”), an IRS advisory panel, made several recommendations on issues relating to unrelated business taxable income (“UBTI”) in its annual report to the IRS (the “Report”). In recent years, the IRS has focused on UBTI reporting for tax exempt organizations; issues relating to UBTI reporting were addressed in Colleges and Universities Project Final Report, which was released in April last year. In light of the IRS’ increased focus on UBTI reporting, ACT selected UBTI as a focus for its annual project.
The rollout of the New York Nonprofit Revitalization Act of 2013 (the “Revitalization Act”), effective July 1, 2014, is causing challenges for many New York charities as the compliance date approaches. For more information on the challenges resulting from the rollout of the Revitalization Act, click here. For more coverage on the Revitalization Act, click here.
A New York court has held that the State’s regulatory limits on executive compensation and administrative expenses for entities that receive state funds unconstitutionally exceed proper regulatory authority. The regulations, which implemented a 2012 executive order by Governor Andrew Cuomo and went into effect on July 1 of last year, were promulgated in substantially similar form by thirteen different New York State agencies. Although other plaintiffs have challenged the regulations, this is the first time a court has held that they are unconstitutional.
On April 9, in Agencies for Children’s Therapy Services, Inc. v. New York Department of Health, the Nassau County Supreme Court held that the Department of Health (“DOH”) “strayed from the administrative into the legislative field” in promulgating the regulations, which, among other things, prohibit the use of more than $199,000 in State funding to compensate certain executives and employees of entities that receive at least 30 percent of their overall in-state revenues from the State. Using the factors identified in the New York Court of Appeals’ holding in Boreali v. Axelrod, 71 N.Y.2d 1 (1987), to determine whether DOH “had usurped the role of the legislature in making public policy assessments,” the Supreme Court concluded that: Continue Reading