A last minute addition to the budget appropriations bill enacted by Congress this month has created new opportunities for philanthropic planning. Section 41110 of the bill creates a limited exception from the private foundation excess business holdings excise tax under Section 4943 of the Internal Revenue Code.
After a short period of deliberations by the House of Representatives (the “House”) and the Senate, President Trump signed the final version of H.R. 1 into Public Law No. 115-97 on December 22, 2017 (the “New Law”). The New Law makes substantial changes to the Internal Revenue Code, and our previous alerts discussed the New Law’s evolution in detail and the impact on tax-exempt organizations of certain provisions of the initial versions of the New Law introduced by the House and the Senate.
On November 16, the House of Representatives passed an amended version of H.R. 1, the “Tax Cuts and Jobs Act,” by a vote of 227-205 (the “House Bill”). On November 20, 2017, the Senate Finance Committee released the Senate’s proposal for its own version of the bill (the “Senate Proposal”). Our previous alert discussed the impact on tax-exempt organizations of certain provisions of the House Bill and Senate Proposal.
The Internal Revenue Service (the “IRS”) has issued Notice 2017-73 (the “Notice”) which outlines approaches the Department of the Treasury (“Treasury”) and the IRS are considering with respect to the regulation of certain issues relating to Donor Advised Funds (“DAFs”). Written comments on the issues raised in the Notice may be submitted by March 5, 2018.
On November 2, 2017, House Ways and Means Committee Chairman Kevin Brady (R-TX) introduced H.R. 1, the “Tax Cuts and Jobs Act” (the “Initial House Bill”). Our previous alert discussed the possible impact of certain provisions of the Initial House Bill on tax-exempt organizations. On November 16, 2017, the House of Representatives passed an amended version of H.R. 1 by a vote of 227-205 (the “Final House Bill”). The Final House Bill promises substantial changes to the Internal Revenue Code of 1986, as amended (the “Code”).
On November 2, 2017, House Ways and Means Committee Chairman Kevin Brady (R-TX) introduced H.R. 1, the “Tax Cuts and Jobs Act” (the “Bill”). At over four hundred pages, the Bill promises substantial changes to the Internal Revenue Code of 1986, as amended (the “Code”).
On October 5, Rep. Mark Walker (R-NC) introduced the Universal Charitable Giving Act of 2017 (H.R. 3988), which would allow individuals who do not itemize their deductions to receive income tax deductions for charitable contributions. Currently, only individuals who itemize their deductions can avail themselves of the charitable deduction. Individuals would be able to claim “above-the-line” deductions for charitable contributions, subject to a cap of one-third of the standard deduction (about $2,100 for individuals and $4,200 for married couples). The bill would not change the availability of the charitable deduction as it exists under current law.
The IRS will permit 401(k) plans, 403(b) plans, and certain other qualified plans to make plan loans through more streamlined procedures and hardship distributions under liberalized rules to participants and their family members who lived or worked in disaster areas that were impacted by Hurricane Harvey and Hurricane Irma, so long as those disaster areas were among those listed as eligible for individual FEMA assistance.
This morning, the Office for Civil Rights of the Department of Education issued a “Dear Colleague” letter rescinding the Obama administration’s school sexual assault guidance. The Department also issued a new set of Questions and Answers on Campus Sexual Misconduct. The new guidance follows a speech delivered by Secretary of Education Betsy DeVos earlier this month in which Secretary DeVos announced a formal rulemaking process regarding the process colleges and universities must follow with respect to Title IX-related complaints. We recommend that educational organizations review this new guidance.
Among the many elements of corporate housekeeping and compliance that demand the time and attention of directors and officers (and staff), minutes often seem like a burden. No one doubts that minutes matter. A well-documented board meeting creates an important historical record that can guide future deliberations and may prove useful during Board disagreements, litigation, Attorney General investigations, other governmental enforcement actions, or an audit by the IRS. However, clients often nervously ask whether there is a legal standard regarding how much detail minutes should contain.
A Q&A with Partner Tomer J. Inbar has been featured in the Stanford Social Innovation Review’s Summer 2017 Supplement, “Navigating Risk in Impact-Focused Philanthropy”. The Q&A, led by Maya Winkelstein of Open Road Alliance, focuses on understanding and managing the legal risks associated with a foundation’s programmatic work, which can help increase the likelihood that the work will have impact.
Last year, we posted about amendments to the New York Not-for-Profit Corporation Law (the “NPCL”) and the New York Estates, Powers and Trusts Law (the “EPTL”) here and here. As we noted, the amendments were signed into law last year and take effect on May 27, 2017 (with the exception of the amendment to NPCL Section 713(f) regarding employees serving as board chairs, which took effect January 1, 2017).
Earlier this week we reported on proposed bills regarding the repeal or modification of the “Johnson Amendment” which established the absolute prohibition on political campaign activity by 501(c)(3) charitable organizations. On May 4, President Trump issued an executive order, “Promoting Free Speech and Religious Liberty,” which, among other things, addresses enforcement of the prohibition by the Internal Revenue Service (IRS).
During his presidential campaign, President Trump promised to repeal the “Johnson Amendment” which established the absolute prohibition on political campaign activity by 501(c)(3) charitable organizations. After his inauguration, President Trump promised to “destroy” the amendment (specifically with respect to churches), and three bills have been introduced in the 115th Congress to modify the prohibition or eliminate it completely for all 501(c)(3) charitable organizations.
Many tax exempt employers sponsor Section 403(b) retirement plans to help their employees save money for retirement. A 403(b) plan offers the ability for an employee to make pre-tax contributions to the plan (similar to the way a 401(k) plan operates) and such contributions can be invested and are not subject to tax until the employee makes a withdrawal from the plan, which is usually after retirement. Under tax rules issued in 2007, all 403(b) plans were required to have a written plan document (no later than December 31, 2009) in order to maintain the tax favored status for an organization's plan.
In the twelve days since his inauguration, President Donald Trump has issued a flurry of executive orders relating to, among other things, the proposed repeal of the Affordable Care Act, the construction of oil pipelines, the building of a wall on the Mexican border, and immigration restrictions. These executive orders have begun the process of fulfilling many of the promises President Trump made during the campaign, and it seems likely that additional executive orders will continue to be issued.
A federal court development has delayed enforcement of the recently enacted New York State legislation (described in our prior blog post) requiring 501(c)(3) organizations to publicly disclose the identities of certain donors if those 501(c)(3) organizations make donations to 501(c)(4) organizations engaged in significant lobbying in New York.
Over the summer, we posted about Bill No. A. 10365B/S. 7913, containing amendments to the New York Not-for-Profit Corporation Law (the “NPCL”) and the New York Estates, Powers and Trusts Law (the “EPTL”) here. After introduction in May and passage by both houses in June, the bill was delivered to the Governor earlier this month and signed into law on November 28.
Bill No. A. 10742/S. 8160, introduced during the final hours of the spring legislative session and signed into law by Governor Andrew Cuomo, requires 501(c)(3) organizations to publicly disclose the identities of certain donors if those 501(c)(3) organizations make donations to 501(c)(4) organizations engaged in significant lobbying in New York. These new disclosure requirements will take effect on November 22, 2016.
Tax-exempt organizations will soon receive guidance regarding the issues most likely to trigger an examination by the Internal Revenue Service (IRS), says Sunita Lough, Commissioner of the IRS Tax-Exempt and Government Entities Division (TE/GE). On a recent call discussing TE/GE’s newly released FY 2017 work plan, Ms. Lough indicated that this interim guidance, which will likely come in mid-October, will be designed to provide nonprofits with a better understanding of how the IRS uses information document requests (IDRs) in order to more efficiently resolve compliance issues.
The 2016 U.S. presidential campaign has reached a fevered pitch, with a little over a month remaining before Election Day. After Monday’s debate between Hillary Clinton and Donald Trump, the stakes are high and the American public is turning to social media to express powerful emotions ranging from excitement to exhaustion, and to support their chosen candidate (or oppose the other).
The Internal Revenue Service (the “IRS”) has announced plans to update Revenue Ruling 67-390 that requires an organization to “re-apply” for tax-exemption if it changes its corporate structure, including in situations where an exempt organization reincorporates under the laws of another state (even where there is no change in corporate/charitable purposes).
On August 29, 2016, the United States District Court for the Southern District of New York dismissed in its entirety a complaint against the New York Attorney General filed by Citizens United and Citizens United Foundation, challenging the Attorney General’s policy of requiring charities to disclose the names, addresses, and total contributions of their donors in connection with registration to solicit funds in New York.
As we previously reported, in April 2015 the Financial Accounting Standards Board (“FASB”) circulated a series of proposed changes to generally accepted accounting principles applicable to certain not-for-profit entities in order to provide clearer information to donors, creditors, and other users of financial statements. On August 18, FASB issued the related accounting standards update.
A recently passed Delaware law contains new requirements for committees and subcommittees of nonstock corporations to vote and achieve quorum.
PATH Act 501(c)(4) Matters Update #2: Notification Requirement Clarified; Temporary Regulations and Notification Form Issued
As specified in Notice 2016-09 (discussed in our recent blog post on the PATH Act), the IRS has issued temporary regulations describing new notification procedures and a notification form for certain (current and prospective) Section 501(c)(4) organizations.
On June 23, the people of the United Kingdom voted to leave the European Union. The decision to leave—commonly known as “Brexit”—has dominated headlines, rattled financial markets, and triggered political uncertainty in the United Kingdom and throughout the world. Although the United Kingdom has not yet formally initiated the two-year process to leave the European Union, political, financial, and legal experts are actively working to determine Brexit’s short- and long-term implications.
The New York State Assembly and Senate have passed a bill which, if signed by the Governor, would amend the Not-for-Profit Corporation Law (the “NPCL”) and the Estates, Powers and Trusts Law (the “EPTL”) to clarify and refine some of the changes to both laws effected as part of the 2013 New York Non-Profit Revitalization Act (the “NPRA”). Bill No. A. 10365B/S. 7913 was introduced on May 24, 2016. It passed the Assembly on June 15 and the Senate on June 16, just before the end of the legislative session, and should be delivered to the Governor sometime in the next several months.
We have recently written about the increasing importance of cybersecurity as an aspect of risk management for nonprofits in light of the proliferation of data security breaches across different sectors.
On May 10, 2016, the Internal Revenue Service (“IRS”) published proposed regulations that would impose additional reporting and record-keeping requirements on domestic “disregarded entities” that are wholly owned (directly or indirectly) by a foreign person (e.g., a U.S. limited liability company the sole member of which is a foreign corporation or individual).
Operating in China just became a bit more complex for foreign nongovernmental organizations (NGOs). China’s new “Law on the Management of Foreign Non-Governmental Organizations’ Activities within Mainland China”, which was passed at the 20th meeting of the Standing Committee of the 12th National People’s Congress on April 28, 2016, centralizes the regulation of the registration, management and reporting requirements for foreign NGOs with the Chinese Ministry of Public Security (MPS). The law applies to “foreign NGOs”, which are defined in the law as social organizations including foundations, social groups and think tanks. The law allows foreign NGOs to operate in the areas of economics, education, science, culture, health, sports, environmental protection and poverty and disaster relief while expressly forbidding them from funding or engaging in any for-profit, political or religious activities or engaging in any activities that “endanger state security” or “damage the national or public interest”.
We live in an era of increasingly prevalent cybercrime, and nonprofits are in the crosshairs. Harvard University, Penn State University and two BlueCross BlueShield entities are just a few nonprofit organizations that reported cyberattacks in 2015, breaches to their data security systems ultimately compromising thousands of personal, confidential and proprietary records.
On April 27, National Philanthropic Trust, a public charity dedicated to providing philanthropic expertise to donors, foundations and financial institutions, launched a website on the History of Modern Philanthropy.
Yesterday, Treasury and the Internal Revenue Service (IRS) finalized the regulations describing nine new program-related investment (PRI) examples that were first proposed on April 19, 2012. The final regulations incorporate several helpful amendments that were requested by comments received in response to the proposed regulations.
The IRS and the Department of the Treasury have released proposed regulations that address rules relating to Type I and Type III “supporting organizations” under the Internal Revenue Code (the “Code”) and applicable Treasury Regulations (the “Regulations”).
The Administration’s proposed budget for Fiscal Year 2017 features several proposals that would impact charitable organizations and their donors, including proposals to streamline the private foundation excise tax on net investment income, consolidate the deduction limits for charitable contributions and strengthen the requirements for qualified conservation easements.
The IRS recently announced that, beginning February 29, 2016, Form 990-N (also known as the “e-Postcard”) will be filed through the IRS website rather than through the Urban Institute website.
PATH Act 501(c)(4) Matters Update: Notification Requirement Postponed, Temporary Regulations and Additional Guidance to Follow
Since enactment of the PATH Act, exempt organizations have been waiting for IRS guidance on the new Section 501(c)(4) notification requirement and procedures for seeking IRS determination Section 501(c)(4) status. We’re still waiting for those specifics, but, with Notice 2016-09, the IRS has taken some of the time pressure off (both for itself and the affected organizations).
The people have spoken. After receiving widespread criticism, the Internal Revenue Service (“IRS”) has withdrawn proposed regulations regarding the substantiation of charitable contributions.
The end of the year brings a flood of gifts and grants to public charities, as well as perennial questions about how the donor will benefit in return.
For a year that continued to prominently feature Section 501(c)(4) organizations – in politics, news, and public discourse and debates – it seems fitting to end 2015 with a summary of recent federal legislation that changes (or, in one case, prevents changes to) the rules applicable to Section 501(c)(4) organizations. We anticipate that there will be more to come in 2016, so stay tuned for updates.
The IRA charitable rollover provision of the Internal Revenue Code, which allows individuals age 70½ or older to transfer, tax-free, up to $100,000 per year from an IRA to one or more eligible charities, has become permanent law, retroactive to January 1, 2015. This provision entered the Code as a temporary measure under the Pension Protection Act of 2006. Congress then extended it several times, most recently through December 31, 2014. It was made permanent when President Obama signed the Protecting Americans from Tax Hikes (PATH) Act of 2015 into law last Friday, and the provision will apply retroactively to all eligible IRA charitable rollovers made on or after January 1, 2015.
On October 27, 2015, the New York City Fair Chance Act (the “Act”) went into effect. In passing the Act, New York City joined a growing number of cities and states that passed “ban the box” legislation.
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Thanks But No Thanks: Proposed Charitable Gift Substantiation Regulations Receive a Critical Response
On September 18, the Department of the Treasury and Internal Revenue Service (the “IRS”) proposed regulations relating to the substantiation of charitable contributions made to Section 501(c)(3) organizations. If approved, the proposed regulations would expand the ways in which charities can acknowledge donations. Under the current regulations, charities must provide a contemporaneous written acknowledgement to donors who contribute $250 or more stating (i) the amount of cash and a description of any property other than cash contributed; (ii) whether any goods or services were provided by the organization in consideration of the contribution; and (iii) a description and good faith estimate of the value of any goods or services provided. This acknowledgement is routinely provided as part of the “thank you’s” sent out by charities for contributions they receive, including those that fall below the $250 threshold.
On December 11, 2015 Governor Andrew M. Cuomo signed into a law a bill amending New York’s Not-for-Profit Corporation Law (the “NPCL”), Estates Powers and Trusts Law (the “EPTL”) and Religious Corporations Law (the “RCL”). The amendments are intended in large part to clarify certain provisions of the New York Non-Profit Revitalization Act of 2013 (the “Act”), which reformed statutory requirements relating to governance of not-for-profit corporations and wholly charitable trusts in the state and expanded the Attorney General’s enforcement powers; most provisions of the Act went into effect in 2014.
In April of this year, the Financial Accounting Standards Board (“FASB”) circulated a series of proposed changes to generally accepted accounting principles (“GAAP”) applicable to certain not-for-profits. These changes, which are intended to provide clearer information to donors, creditors, and other users of financial statements, may have a significant impact on not-for-profit financial reporting (which has remained largely unchanged for nearly twenty years) and will, among other things, (i) impact the reporting of operating performance in an entity’s statement of activities and related metrics in the statement of cash flows, (ii) require the use of the direct method for preparing the statement of cash flows, and (iii) modify the reporting disclosure of net assets and “underwater” endowments.
The IRS is, according to Tax Analysts, considering eliminating Schedule B of the Form 990, which asks for the names and addresses of an exempt organization’s contributors and for certain information about contributions received. Tax Analysts reported that, at a program sponsored by the Urban Institute, Tammy Ripperda (Director of Exempt Organizations at the IRS) questioned whether the IRS should ask for the names and addresses of contributors, given that this information is not made public, and whether there is a need for the information from a federal tax law enforcement standpoint.
The Internal Revenue Service (the “IRS”) has updated the procedures applicable to the IRS Exempt Organizations Determinations unit (“EO Determinations”) requests for additional information in connection with applications for tax exemption and related determinations. Under these new rules, applicants have much less time to respond to requests for additional information (and IRS staff have less discretion in granting applicants extensions of time to respond to such requests).
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