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U.S. District Court Finds Mayo Clinic Qualifies as an “Educational Organization”; Awards $11.5M UBTI Refund

By Richard M. Corn, Amanda H. Nussbaum, David Miller, Stuart Rosow and Carrie Slaton on Posted in IRS, Not-for-Profit, Tax, Tax-Exempt Organizations
Introduction Tax-exempt organizations, while not generally subject to tax, are subject to tax on their “unrelated business taxable income” (“UBTI”).  One category of UBTI is debt-financed income; that is, a tax-exempt organization that borrows money directly or through a partnership and uses that money to make an investment is generally subject to tax on a … Continue Reading

IRS Releases Guidance on Requirements for Limited Liability Companies to Qualify as Tax-Exempt Entities

By Amanda H. Nussbaum, Stuart Rosow and Rita N. Halabi on Posted in IRS, Not-for-Profit, Tax-Exempt Organizations
On October 21, 2021, the Internal Revenue Service (the “IRS”) released Notice 2021-56 (the “Notice”), which sets forth the additional requirements a limited liability company (“LLC”) must satisfy to obtain a determination letter recognizing its tax-exempt status under sections 501(a) and 501(c)(3) of the Internal Revenue Code.[1] The Notice also requests public comments by February … Continue Reading

The Impact of Americans for Prosperity Foundation v. Bonta on Donor Disclosure Laws

By Amanda H. Nussbaum, Richard M. Corn and Carrie Slaton on Posted in IRS, Not-for-Profit, Tax-Exempt Organizations
On July 1, 2021, the Supreme Court struck down a California donor-disclosure law as facially unconstitutional in its decision in Americans for Prosperity Foundation v. Bonta.[1]  The law required nonprofits operating or soliciting contributions in California to disclose to the Attorney General of California information about all of its donors who contribute more than $5,000 … Continue Reading

Final Regulations on Executive Compensation Excise Tax (Section 4960) Carries Forward Most Concepts from Proposal

By Amanda H. Nussbaum, James Huffman, Katrine Magas and Seth Safra on Posted in Executive Compensation, IRS, Tax Reform, Tax-Exempt Organizations
On January 19, 2021 the Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) published in the Federal Register Final Regulations (the “Final Regulations”) interpreting the excise tax under Section 4960 of the Internal Revenue Code on certain executive compensation paid by tax-exempt organizations. The Final Regulations maintain most of the concepts from … Continue Reading

10 Keys to Excise Tax on Executive Compensation Paid by Tax-Exempt Organizations

By Seth Safra, Amanda H. Nussbaum, Katrine Magas and James Huffman on Posted in Executive Compensation, IRS, Not-for-Profit, Tax Reform, Tax-Exempt Organizations
Proposed Regulations under Section 4960 of the Internal Revenue Code provide important guidance for tax-exempt organizations and their affiliates regarding an excise tax on certain executive compensation.  The U.S. Department of the Treasury (“Treasury”) and Internal Revenue Service (the “IRS”) are accepting comments until August 10, 2020.  (Throughout this post, “Sections” refer to sections of … Continue Reading

IRS Issues Final Regulations on Nonprofit Donor Disclosure Requirements

By Amanda H. Nussbaum and Elizabeth Johnston Wytock on Posted in IRS, IRS Filings, Not-for-Profit, Tax-Exempt Organizations
On May 26, the Internal Revenue Service (“IRS”) and the U.S. Department of the Treasury issued final regulations (the “Final Regulations”) relaxing nonprofit donor disclosure requirements under section 6033[1] of the Internal Revenue Code (the “Code”) for many non-charitable tax-exempt organizations. Stated generally, section 6033 requires organizations exempt from taxation under section 501(a) (including section … Continue Reading

Proposed Regulations Provide Guidance to Exempt Organizations on Identifying Separate Unrelated Trade or Businesses

By Stuart Rosow, Amanda H. Nussbaum, David Miller, Janicelynn Asamoto Park and Bowon Koh on Posted in IRS, Tax-Exempt Organizations
On April 23, the Treasury Department and the Internal Revenue Service (the “IRS”) issued helpful proposed regulations under section 512(a)(6) of the Internal Revenue Code (the “proposed regulations”).  Section 512(a)(6) was enacted as part of the 2017 Tax Cut and Jobs Act (the “TCJA”) and requires exempt organizations (including individual retirement accounts) to calculate unrelated … Continue Reading

IRS Issues New Guidance for Virtual Currency Donations

By Jeremy Naylor and Brianna Reed on Posted in Articles, Charitable Giving, IRS, Not-for-Profit, Tax-Exempt Organizations
The U.S. Internal Revenue Service (IRS) quietly added two new questions and answers regarding virtual currency donations to its answers to Frequently Asked Questions on Virtual Currency Transactions (FAQs) on December 26, 2019.  The two new answers address the responsibilities of charitable organizations when accepting donations of virtual currency, including cryptocurrency. For a discussion of … Continue Reading

IRS Provides Guidance on Unrelated Business Income Tax Refunds

By Amanda H. Nussbaum and Amy Zelcer on Posted in IRS, Not-for-Profit, Tax-Exempt Organizations
On Friday, December 20, 2019, President Trump signed into law government funding legislation for the 2020 fiscal year that includes a provision repealing Section 512(a)(7), commonly referred to as the “parking tax,” with retroactive effect to the date of its enactment.[1]  Section 512(a)(7) was enacted pursuant to the 2017 U.S. tax legislation known as the … Continue Reading

Simplification of the Net Investment Income Tax for Private Foundations

By Amanda H. Nussbaum and Brianna Reed on Posted in Charitable Giving, Client Alert, IRS, Not-for-Profit, Private Foundations, Tax-Exempt Organizations
On December 20, 2019, President Trump signed into law changes to the private foundation excise tax on net investment income under Section 4940 of the Internal Revenue Code.[1] For purposes of Section 4940, net investment income is the excess of gross income from interest, dividends, rents and royalties (“gross investment income”), plus capital gain net … Continue Reading

Parsonage Exclusion Found by Seventh Circuit to Be Constitutional

By Amanda H. Nussbaum, Richard M. Corn and Christine N. Younger on Posted in IRS, Not-for-Profit, Religious Organizations, Tax-Exempt Organizations
On March 15, 2019, the U.S. Court of Appeals for the Seventh Circuit held in Gaylor v. Mnuchin that the tax exemption for “ministers of the gospel” (defined below) under Section 107(2) of the Internal Revenue Code (the “Code”) does not violate the Establishment Clause[1] of the First Amendment and, therefore, is constitutional, overruling the … Continue Reading

IRS Releases Interim Guidance on New Excise Tax on Executive Compensation Paid by Tax-Exempt Organizations

By Steven Einhorn, Tyler Forni, David Miller, Amanda H. Nussbaum and Ira G. Bogner on Posted in IRS, Tax-Exempt Organizations
On December 31, 2018, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “IRS”) released Notice 2019-09 (the “Notice”), which provides interim guidance under Section 4960 of the Internal Revenue Code. Very generally, Section 4960 imposes a 21% excise tax on certain tax-exempt entities (and certain related organizations) that pay remuneration in … Continue Reading

Inclusion of Qualified Transportation Fringe Benefits in UBTI: Guidance, Relief, and Rumors of Possible Repeal

By Amanda H. Nussbaum and Amy Zelcer on Posted in IRS
December 10, 2018 saw significant activity with respect to Section 512(a)(7) of the Internal Revenue Code (the “Code”), which requires tax-exempt employers to increase their unrelated business taxable income (“UBTI”) by amounts paid or incurred for qualified transportation fringe benefits provided to employees, including the provision of parking and public transportation benefits. Section 512(a)(7) was … Continue Reading

IRS Announces Relief from the “Once-In-Always-In” Requirement for Excluding Part-Time Employees Under 403(b) Plans

By Steven Einhorn and Caroline Cima on Posted in IRS
Last week, the IRS released Notice 2018-95 to provide transition relief to 403(b) plans that improperly excluded certain employees.  Specifically, Notice 2018-95 targets employers that may have erroneously excluded part-time employees from eligibility to make elective deferral when the employees should have been eligible to participate under the “once-in-always-in” requirement (“OIAI”).  According to the OIAI … Continue Reading

Proskauer’s 23rd Annual Trick or Treat Seminar

By Amanda H. Nussbaum on Posted in IRS, Labor
Proskauer’s 23rd Annual Trick or Treat Seminar was held on Wednesday, October 31. The Seminar discussed: Sexual Harassment in the #MeToo Era Taxing Times for Tax-Exempt Organizations: The Impact of Tax Reform on Executive Compensation and Employee Benefits for Tax Exempt Organizations Recent, Spooky Tax Changes Affecting the UBTI Rules Amanda Nussbaum welcomed everyone and briefly … Continue Reading

Tax-Exempts May Limit Fund Investments Pursuant to New IRS Guidance on UBTI

By Scott S. Jones, Arnold P. May, Jeremy Naylor, Amanda H. Nussbaum, Brian Huber and Brianna Reed on Posted in IRS, Private Foundations
On August 21, 2018, the Internal Revenue Service (“IRS”) released Notice 2018-67 (the “Notice”), addressing issues relevant to tax-exempt organizations arising under new Section 512(a)(6) of the Internal Revenue Code (the “Code”), promulgated pursuant to the 2017 U.S. tax legislation that is commonly referred to as the “Tax Cuts and Jobs Act.”  Section 512(a)(6) requires … Continue Reading

IRS Provides Guidance on Searching for Missing 403(b) Participants

By Steven Einhorn on Posted in IRS
On February 23rd, the IRS issued a memorandum to its examiners instructing them not to challenge a 403(b) plan for failing to satisfy the required minimum distribution (“RMD”) rules with respect to missing participants or beneficiaries if the plan sponsor has taken certain specific steps to find them. Generally, the RMD rules require that a … Continue Reading

Updates for Tax-Exempt Organizations from the Senate Bill

By David Miller, Amanda H. Nussbaum, Elizabeth M. Mills, Steven Einhorn and Amy Zelcer on Posted in IRS
Early on December 2, 2017, the Senate passed the Tax Cuts and Jobs Act (the “Senate Bill”).  This blog entry describes certain provisions of the Senate Bill that would have the most significant impact on the nonprofit community, including important differences between the Senate Bill and the prior version of the Senate bill and the … Continue Reading

UPDATE: President Trump Signs “Johnson Amendment” Executive Order Limiting Treasury’s Actions Against Religious Organizations Engaged in Political Campaign Activities

By David Miller and Jo Habenicht on Posted in IRS, Political Campaign Activity, Religious Organizations
Introduction On May 4, 2017, President Trump signed an executive order that directs the executive branch to limit its enforcement of the “Johnson Amendment.” As previously reported, the Johnson Amendment prohibits organizations that are exempt under section 501(c)(3) of the Internal Revenue Code from engaging in political campaign activities.¹ The executive order limits enforcement of the … Continue Reading

Update on the Department of Labor’s New Fiduciary Rules and Subsequent Challenges

By Benjamin Saper on Posted in Fiduciary, IRS, Labor
On April 6, 2016, the Department of Labor under the Obama administration issued a new final rule and exemptions addressing when a person providing investment advice with respect to an employee benefit plan or individual retirement account is considered to be a “fiduciary” under the Employee Retirement Income Security Act of 1974 (“ERISA”) and the … Continue Reading

Is It the End of the Johnson Amendment as We Know It?

By Amanda H. Nussbaum and Jo Habenicht on Posted in IRS, Religious Organizations
While speaking at the National Prayer Breakfast on February 2, 2017, President Trump reaffirmed his commitment to repeal the law that restricts organizations that are tax exempt under Section 501(c)(3) of the Internal Revenue Code (“Code”) from engaging in political campaign activities. This law, enacted in 1954, is commonly known as the Johnson Amendment since … Continue Reading

TIC Form SHC Deadline Approaching to Report U.S. Ownership of Foreign Securities

By Jeramy Webb on Posted in Client Alert, IRS
Form Deadline Is March 3, 2017 Introduction The U.S. Department of the Treasury recently released a revised Form SHC (with corresponding instructions), which is part of the Treasury International Capital (TIC) data reporting system. Form SHC is the mandatory five-year benchmark survey of the ownership of foreign securities (including selected money market instruments) by U.S. … Continue Reading

IRS Announces the Last Day of the Remedial Amendment Period for 403(b) Plans

By Steven Einhorn on Posted in IRS
The Internal Revenue Service recently issued Revenue Procedure 2017-18, which provides that the last day of the remedial amendment period for Code Section 403(b) retirement plans will be March 31, 2020. As discussed below, this means that a sponsor of a Code Section 403(b) plan who timely adopted a Code Section 403(b) retirement plan document … Continue Reading
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