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Over the last several days, there have been significant developments relating to the Tax Cuts and Jobs Act, the pending tax reform legislation in Congress.[1]  On Thursday, a detailed summary of the Senate Finance Committee’s proposal was released (the “Senate Markup”),[2] and the House Ways and Means Committee voted (in a 24-16, party-line vote) to advance their bill for consideration by the full House of Representatives (the “House Bill”).[3]  This alert describes certain provisions of the Senate Markup and House Bill that would have the most significant impact on the nonprofit community, including important differences between the two proposals.  We described significant elements of the initial version of the House Bill last week in “New Rules for Tax-Exempt Organizations in the Tax Cuts and Jobs Act.”

On October 26, 2015, the IRS released final regulations under Sections 141 and 145 of the Internal Revenue Code concerning the use of property financed with tax-exempt bond proceeds.  The bulk of the new regulations fill a long-reserved spot in Treasury Regulation Section 1.141-6 concerning allocation of bond proceeds to financed property.  In addition, in an important new development, amendments to Treasury Regulations Sections 1.141-3 and 1.145-2 now provide that partnerships that include governmental entities or Section 501(c)(3) tax-exempt organizations can use and own bond-financed property.  Permitted use is in proportion to the exempt’s ownership of the joint venture, except to the extent that the use generates unrelated business income for the exempt joint venturer.  The new regulations can be applied to outstanding bonds as well as new bonds.

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.

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.