On June 5, 2020, the Internal Revenue Service (“IRS”) issued proposed regulations on the excise tax on excess tax-exempt organization executive compensation under Section 4960 of the Internal Revenue Code (the “Excise Tax”). This tax, which was enacted as part of tax reform in 2017, applies to certain tax-exempt organizations (or related organizations) that pay annual remuneration in excess of $1 million or so-called “excess parachute payments” to certain “covered employees” (generally, employees who were among the five highest-compensated employees of the organization for a given taxable year or any prior taxable year in 2017 or later).
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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.
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.
Under newly released rules, certain tax-exempt organizations are no longer required to disclose personally identifiable donor information on their annual Form 990 filings. This change does not affect Section 501(c)(3) or Section 527 organizations.
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.
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.
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.
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.
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).
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.
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.
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.
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”).
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.
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.
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.
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.
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.
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.
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.