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 income, over expenses paid or incurred in the production or collection of gross investment income or for the management of property held for the production of gross investment income.[2]  Prior to the new legislation, Section 4940 imposed an excise tax of 2% on the net investment income of most domestic tax-exempt private foundations.[3]  This tax rate could be reduced to 1% if a foundation made certain charitable distributions during the tax year equal to or greater than the sum of (a) the assets of the foundation for the tax year multiplied by its average percentage payout for the five tax years preceding that year, plus (b) 1% of the foundation’s net investment income for the tax year.  In order to qualify for the 1% rate, the foundation also could not be liable for any taxes under Section 4942 (taxes on failure to distribute income) for any of the previous five tax years.

On October 23, 2019, Governor Andrew M. Cuomo, signed legislation incorporating the federal Johnson Amendment into New York law. As previously described, the Johnson Amendment denies tax-exempt status under section 501(c)(3) of the Internal Revenue Code (the “Code”) to (and imposes excise taxes on) any organization that engages in political campaign activities. The new legislation amended section 1116 of New York Tax Law, which will now deny tax-exempt status for N.Y tax purposes to any organization that engages in political campaign activities, either on behalf or in opposition of any candidate for public office.

Proskauer’s 24th Annual Trick or Treat Seminar was held on Wednesday, October 31 and discussed timely topics and best practices specifically tailored to the not-for-profit community.

The seminar discussed:

  • Protect Yourself: A Practical Guide to Strategic Risk Management and Insurance
  • How to Solicit a Donor in Fifteen Minutes: The

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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…

As we have previously discussed, the 2017 tax reform act created a new excise tax under section 4960 of the Internal Revenue Code that will affect many tax-exempt employers.  The tax is 21% of certain compensation and can be triggered if an employee receives more than $1 million of…

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…

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…

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