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 After receiving widespread criticism, the Internal Revenue Service (“IRS”) has withdrawn proposed regulations regarding the substantiation of charitable contributions.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).
The ever increasing cyber-attacks and data breaches targeting the private sector and government agencies, and the increased focus on cybersecurity plans and preparedness, may seem like remote risks for nonprofit organizations. Because nonprofits have not been as vigorously targeted for attacks as their for-profit and government counterparts, the sector has been slower to adapt to the threat environment and allocate their often scarce resources to cyber preparedness and protection. Perhaps this can be explained, in part, by a nonprofit’s organizational focus on mission and programming, limited resources (underscored by pressure to reduce administrative, overhead, and compliance costs in favor of programmatic expenditures), and a sense of their charity status, or “halo,” providing protection from any risk.
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.
One of the more contentious requirements imposed by the New York Non-Profit Revitalization Act is the new Section 713(f) of the Not-for-Profit Corporation Law, which states that no employee of a not-for-profit organization can serve as Board chair or hold any title with similar responsibilities. Implementation of Section 713(f) previously was delayed until January 1, 2016, and on October 26, Governor Andrew Cuomo signed into law a bill which delays the effective date, for another year, until January 1, 2017. According to the memorandum accompanying the bill, the delay is necessary because “the Legislature requires more time to study the impact of this prohibition on not-for-profit organizations.”
On September 15th, the Internal Revenue Service (the “IRS”) issued much anticipated guidance (the “IRS Notice”) that should help facilitate mission-related investing by private foundations organized as corporations.
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.
In a recent article in Private Funds Management, Dahlia Doumar and Carl Merino discuss planning opportunities and challenges faced by private equity managers who are considering a donation of their carry or their stake in a management company to a donor-advised fund.
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.
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.
With cybercrime striking everywhere from government agencies to Major League Baseball, each new hack is making headlines, launching inquiries, and triggering lawsuits. Although most of the focus has been on private sector companies and governmental agencies, nonprofit organizations are not exempt (no pun intended) from cyber threats or their consequences.
An article in the Stanford Social Innovation Review suggests that the language non-profits use to describe their operations fails to adequately and efficiently convey the complexity of their work. For-profits rely on a large vocabulary to describe their business models.
On June 16, 2015, the White House issued a press release highlighting private sector commitments and a series of executive actions related to investment in clean energy innovation. The release coincided with yesterday’s clean energy investment summit, at which Vice President Joe Biden described more than $4 billion of independent commitments by major foundations, institutional investors, and other long-term investors to fund climate change solutions, including innovative technologies with the potential to reduce carbon pollution.
Since the first social impact bond financing was launched in the United Kingdom in 2010, more and more attention is being directed to pay-for-success (or social impact) financing, both domestically and abroad.
The New York Attorney General has issued guidance about the audit oversight requirements under the Non-Profit Revitalization Act. The AG’s Guidance—issued without fanfare by the Charities Bureau on February 24—will be of interest to most charities that are required to register to conduct charitable solicitations in New York.
Representative Dave Camp, the current chair of the House Ways and Means Committee (the “Committee”), introduced a discussion draft of the Tax Reform Act of 2014 (the “Camp Bill”) on February 26, 2014. Although it is widely predicted that the Camp Bill will not pass, exempt organizations should still examine it closely, because it is emblematic of a new trend in legislative proposals dealing with tax reform.
As we reach Day 500 of the IRS Section 501(c)(4) controversy (with a shout out to the Tax Prof Blog for keeping count), the IRS is continuing to implement restructuring of the Tax Exempt and Governmental Entities Division (“TE/GE”). In a statement made on September 9, 2014, the IRS announced that the current Office of Division Counsel/Associate Chief Counsel (TE/GE) will be split into two offices: the Office of Associate Chief Counsel (TE/GE), which will report to the deputy chief counsel (technical), and the Office of Division Counsel (TE/GE), which will report to the deputy chief counsel (operations). With this restructuring, IRS field attorneys will be part of the Office of Division Counsel and IRS national office attorneys will be part of the Office of Associate Chief Counsel.
The Treasury Department and IRS released the 2014-2015 Priority Guidance Plan on August 26, 2014. The Guidance Plan lists a total of 317 projects that are priorities for allocation of Treasury Department and IRS resources for July 2014 through June 2015. Of these, only sixteen relate directly to exempt organizations. Eleven of the sixteen are carryovers from the 2013-2014 Priority Guidance Plan; the remaining five projects are new, but two of these (dealing with Form 1023-EZ and related streamlined application procedures) were completed before issuance of the 2014-2015 Plan.
New York’s Non-Profit Revitalization Act (the “Act”) went into effect on July 1, 2014. This is the second in a two-part series of easy-to-miss points about the Act. For last week’s installment, view post titled "6 Easy-to-Miss Points about New York’s Non-Profit Revitalization Act, Part I of II." Patterson Belknap’s complete summary of the Act is also available if you’d like to delve more deeply.
In our May 2014 blog post, “Introducing Form 1023-EZ,” we provided an overview of the new streamlined three-page Form 1023-EZ, which the Internal Revenue Service (the “IRS”) was set to introduce this summer for small charities seeking tax exemption. The IRS formally announced the Form 1023-EZ’s introduction on July 1, 2014. Now that the form is live, we would like to highlight the key updated points.
July 1, 2014 - The New York Non-Profit Revitalization Act goes into effect today. To mark the occasion, we offer up six easy-to-miss points about the Act. Here are the first three. Three more will follow next week.
With the effective date of the New York Non-Profit Revitalization Act (the “Act”) just around the corner (July 1, 2014), the New York Attorney General’s Charities Bureau has just released updated guidance publications on the procedures that New York not-for-profit corporations must follow for dissolutions (with and without assets), mergers and consolidations, and sales and other dispositions of all or substantially all of a corporation’s assets.
IRS Commissioner Confirms that Controversial Proposed 501(c)(4) Regulations will be Scrapped and Redone
In an interview with the Center for Public Integrity, IRS Commissioner John Koskinen confirmed that the proposed regulations regarding the political campaign activities of Section 501(c)(4) social welfare organizations will be revised in light of the substantial – and primarily negative – public comments received by the IRS.
In the past year, the Tax Exempt and Government Entities Division (“TE/GE”) of the Internal Revenue Service (“IRS”) has been engulfed in controversy, resulting in sweeping changes in both its personnel and operations. The controversy began in May 2013, when Lois Lerner, at the time the Commissioner of TE/GE, revealed at an American Bar Association (“ABA”) Tax Section conference that the IRS had used inappropriate criteria to identify and scrutinize exemption applications from organizations with certain words in their names, such as “Tea Party” and “patriot.”
In what may be a sea change in how new non-profit organizations seek tax-exempt status, the Internal Revenue Service (the “IRS”) has announced that it is releasing the Form 1023-EZ, a “Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code” this summer, and that eligible organizations will immediately be able to utilize the form in seeking tax-exempt status.
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