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Nonprofits Take on the COVID-19 Crisis: Enhanced Deductibility Benefit for Large Cash Gifts to Charity and for Non-Itemizers

The newly enacted Coronavirus Aid, Relief, and Economic Security Act (commonly known as the “CARES Act”) includes provisions designed to encourage charitable contributions of cash, by allowing individual donors to charities to deduct up to 100% of their 2020 adjusted gross income (“AGI”), over and above the usual cap of 60% (or 50% if charitable contributions are made through a combination of cash and other assets).  For corporate donors, the deduction cap is raised to 25%, over and above the usual cap of 10%. Unused deductions allowable under the CARES Act may be carried forward into future tax years, subject to the traditional deductibility limitations, which will be restored in 2021.

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Nonprofits Take on the COVID-19 Crisis: Starting a New Charitable Organization

As we have previously reported, charitable organizations and employers are able to play an important role in providing disaster relief in response to the COVID-19 crisis.  During this crisis, individuals may be seeking new ways to help, including by starting new charitable organizations.  We describe below some alternatives to consider before forming a new charity, as well as a high-level summary of the necessary steps to form a new charitable organization. 

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Nonprofits Take on the COVID-19 Crisis: Employer-Provided Disaster Relief

As we previously reported, charitable organizations are able to play an important role in providing disaster relief in response to the COVID-19 crisis.  Special rules are relevant to employers that wish to provide hardship support to their current and former employees during this time.  In light of the unique nature of this crisis, additional guidance may be forthcoming from the IRS.

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Nonprofits Take on the COVID-19 Crisis: A Primer on Disaster Relief

The spread of the novel coronavirus (COVID-19) has caused dramatic upheaval to public health, social relations, and the economy.  The full impact of the virus remains uncertain, and the coming weeks and months will present tremendous challenges domestically and abroad.  Charitable organizations are well positioned and have a unique opportunity to help those affected by the virus.  Over the years, the Internal Revenue Service has provided useful guidance on how 501(c)(3) organizations can provide aid during times of disaster.  That guidance tends to evolve as society faces different types of disasters, and the needs of individuals differ depending on whether a disaster takes the form of a terrorist attack or a hurricane or—as we are quickly learning—a pandemic.  The summary below is based on guidance developed to date, but may evolve as charitable organizations and the federal government develop innovative and vital approaches responding to the current crisis and its unique impacts.

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A Congressional Christmas Miracle

Just in time for the holidays, Congress gave two gifts to tax-exempt organizations as part of the new government funding bill signed into law on December 20, 2019.

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IRS Issues Interim Guidance Regarding Compensation Tax

As we previously reported, the Tax Cuts and Jobs Act, which was signed into law at the end of 2017, imposes an excise tax on certain tax-exempt organizations equivalent to 21% of “excess compensation” (including certain severance payments) paid to certain current and former employees.  Under the new Section 4960 of the Internal Revenue Code, the tax is payable by the tax-exempt organization and, if applicable, a “related organization” (on a proportional basis).  Section 4960 defines excess compensation for such employees as (i) the amount of remuneration, other than “excess parachute payments,” in excess of $1 million and (b) any “excess parachute payment” (including severance or other payments made upon separation).

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Governor Gives Sole Members the Boot

We previously reported on A.B. 10336-A (Paulin) / S.B. 8699 (Gallivan) (the “Bill”), which would amend Section 601(a) of the New York Not-for-Profit Corporation Law to raise the minimum number of members of a not-for-profit membership corporation from one to three.  The Bill was signed into law by Governor Cuomo on December 21, 2018.  It will go into effect on July 1, 2019.  New York not-for-profit corporations, and all organizations with New York not-for-profit affiliates, should review the legislation to determine whether any action is required.

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IRS Issues Guidance Regarding College and University Excise Tax

As we previously reported, the 2017 tax reform bill instituted an excise tax on the investment income of certain private colleges and universities under new Section 4968 of the Internal Revenue Code (the “Code”).  The Internal Revenue Service (the “IRS”) and the Department of the Treasury (“Treasury”) have now issued Notice 2018-55 which provides guidance (including notification of an intent to issue regulations) regarding the calculation of net investment income for purposes of Code Section 4968(c).

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The More (Members) the Merrier? Or, So Long, Sole Members

The New York Assembly and Senate recently passed legislation – A.B. 10336-A (Paulin) / S.B. 8699 (Gallivan) (the “Bill”) – that would raise the minimum number of members of a not-for-profit membership corporation to three through amendment of Section 601(a) of the New York Not-for-Profit Corporation Law (the “NPCL”), which currently permits a minimum of one member. The Bill would provide an exception for membership corporations with a sole member that is a corporation, joint-stock association, unincorporated association or partnership, but only if that sole member is “owned or controlled” by at least three persons.

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The Building Block(chain)s of Philanthropy: Exempt Organizations and Blockchain’s Potential

In recent months, news of Blockchain technology has filled headlines.  The ability of Blockchain—which provides a decentralized means of recording and verifying transactions—to shape the financial sector has been widely reported, as have transactions involving Bitcoin and other cryptocurrencies using Blockchain technology.  Programmers and businesses are quickly turning to various Blockchain platforms to develop new applications of this technology, even as regulatory bodies are beginning to pay increased attention to high-stakes cryptocurrency transactions.

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Newman’s Own Law

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. 

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IRS Issues Request for Comments Regarding the Regulation of Donor Advised Funds

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.

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Proposed Legislation Would Broaden Availability of Charitable Deductions

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.

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Department of Education Rescinds Obama-Era Title IX Guidance in Advance of New Rulemaking

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.

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Reminder: N-PCL and EPTL Amendments To Go Into Effect May 27, 2017

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).

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President Trump’s New Johnson Amendment Executive Order: Is the Bark Worse than the Bite?

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).

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Update on Johnson Amendment Repeal Bills

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.

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IRS Announces End Date for 403(b) Remedial Amendments

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.

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Law Passed Amending NPCL

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. 

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IRS Examinations: New Guidance and Issue Areas for Tax-Exempt Organizations

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.

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IRS to Update 1967 Revenue Ruling Relating to Change of Domicile

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). 

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Fall into the GAAP: New Not-for-Profit Financial Reporting Standards Issued

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.

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Keep Calm and Carry On: Philanthropy After Brexit

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.

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NPRA Redux: Proposed NPCL Amendments Approved by Senate and Assembly

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.  

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New DOL Overtime Rule Changes the Landscape for Nonprofits, Too

On May 18, 2016, the U.S. Department of Labor’s Wage and Hour Division (“DOL”) issued a final rule modifying overtime eligibility under the Fair Labor Standards Act.  The final rule increases the salary threshold for overtime eligibility for exempt executive,...
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Proposed Disregarded Entity Regulations: Potential Implications for Charities

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). 

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China’s New Laws on Foreign and Domestic NGOs

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”.

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Managing Cybersecurity Risk for Nonprofit Organizations: A Fiduciary Duty?

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.

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New Website Brings History of Giving to Life

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.

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BREAKING NEWS: PRI Examples Are Finalized, with Improvements

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.

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Proposed Regulations Relating to Type I and Type III Supporting Organizations

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”).

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Provisions Affecting Charities in Proposed Budget

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.

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Form 990-N Filing Changes

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.

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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).

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IRS Withdraws Controversial Proposed Regulations

The people have spoken. After receiving widespread criticism, the Internal Revenue Service (“IRS”) has withdrawn proposed regulations regarding the substantiation of charitable contributions.  

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From the Hill: Recent Legislation Impacting 501(c)(4) Organizations

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.

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IRA Charitable Rollover Provision Becomes Permanent Law

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.

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NYC "Ban the Box” Legislation – Implications for Hiring Practices

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.

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Bill Passed to Amend the New York Not-for-Profit Corporation Law

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.    

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IRS Updates EO Determinations Procedures for Requesting Additional Information

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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Final IRS Regulations Will Impact U.S. Private Foundation Grant-making to Foreign Charitable Organizations

The IRS has released final regulations that will impact how U.S. private foundations determine that a foreign charitable organization – i.e., one not organized under U.S. law or recognized as a public charity by the IRS – is the “equivalent” of a U.S. public charity for certain purposes.  This determination is useful in the context of a private foundation’s compliance with the qualifying distribution rules under Section 4942 of the Internal Revenue Code (the “Code”) as well as with the taxable expenditure rules under Section 4945 of the Code.

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Federal Government and New York State Issue New Guidance on Title IX

Today, more than ever before, higher education lawyers are focusing their attention on issues of sexual harassment and sexual assault under Title IX of the Educational Amendments of 1972.  Title IX protects people from sex discrimination in educational programs and activities at institutions that receive federal financial assistance.  

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Election 2016: A Primer on Political Campaign Activities

As the 2016 Presidential election season heats up—and in light of an internal memorandum on political activity audit procedures circulated within the IRS last month—we’d like to take the opportunity to remind our 501(c)(3) clients, colleagues and friends about of the federal tax law prohibitions on political activities conducted by 501(c)(3) organizations and the applicability of those prohibitions to the activities of employees of 501(c)(3) organizations.

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Federal Court Upholds New York Donor Disclosure Requirement

A federal district court in New York has upheld the New York Attorney General’s policy requiring registered charities to disclose the names, addresses and total contributions of their major donors.  This is the second federal court to rule on this issue, after the United States Court of Appeals for the Ninth Circuit upheld a similar requirement by California’s Attorney General in May in a suit brought by the Center for Competitive Politics, a 501(c)(3) public charity.

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