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
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
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
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
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
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
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
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
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
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
For a discussion of section 403(b) plan compliance, please see the post on Proskauer’s Employee Benefits & Executive Compensation Blog.… Continue Reading
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
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
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
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 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
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
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
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
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
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
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
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
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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