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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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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
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.”