Day Two of the WCTEO began with EO attorney Bruce Hopkins delivering his always informative and entertaining program on new developments over the past year, focusing particularly on private letter rulings (PLRs). Here are some of the notable PLRs:
- Denying recognition of exemption under 501(c)(3) because of operation in substantially commercial manner: 200944053
- Denying recognition of exemption under 501(c)(3) because of violation of public policy doctrine: 200826043
- Denying recognition of exemption under 501(c)(4) because organization does not serve a community but rather its members: 200809035
- Arrangement where novel written by director, which may be used in exempt functions, generates royalties payable to director's former spouse ruled to provide private benefit: 200913067
- Online "seminary" failed to qualify as church: 200912039
- Sale of grantmaking services by community foundation to charitable organization in its community held to be related business; sale of administrative and clerical services to them held to be unrelated business: 200832027, 200832028
With respect to the redesigned Form 990, Hopkins said he was "struck by how much law the Form introduces." Here are some additional developments he discussed:
- IRS Nonprofit Hospital Study
- Colleges and Universities Compliance Questionnaire
- Private foundation rules that treat non-earmarked general support grants as non-lobbying expenditures are applicable to public charity general support grants for purposes of expenditure test (Alliance for Justice - PLR)
- Once tax-exempt status is recognized, IRS cannot retroactively revoke exemption where there are no material change in facts - Democratic Leadership Council, Inc. v. United States (D.D.C. 2008)
- Federal requirement of > 1 director - Ohio Disability Association v. Commissioner of Internal Revenue (T.C. Memo. 2009-261) ("there are no procedures or personnel in place to ensure that the stated [conflict of interest] policy will be followed or private inurement will not incur")
- Organization lost its status as a church, even though it satisfied some of IRS's 14-point criteria, because it failed the associational test - Foundation of Human Understanding v. United States (U.S. Ct. Fed. Cl. (2009))
Next, there were three concurrent breakout sessions: (1) global issues for private foundations and public charities; (2) licensing, self-generated software and other intellectual property issues; and (3) charitable giving update. I attended the global issues program presented by EO attorney Jane Peebles. She covered all the basics and, with fellow EO attorney Betsy Adler, provided a very helpful set of materials. I particularly appreciated the sample affidavit used for an equivalency determination (one of two alternative due diligence methods required to be used by private foundations when giving to a foreign charity).
CPA Jody Blazek and Stephen Clarke of the IRS presented on Form 990 developments. Blazek provided many helpful tips and cheat sheets to use when preparing the complicated new Form. Among her materials: When is Schedule O Required, Sample Board Questionnaire to Obtain Information Required in Revised 990, and Schedule L Interested Parties by Part and Organization Type.
The final program was an experts panel with three incredibly knowledgeable panelists: Blazek, Hopkins, and Douglas Mancino. They were each asked for 10 quick pearls of wisdom. Here are some of them:
- JB: Public charities should follow foreign grant equivalency determination procedures (or expenditure responsibility).
- BH: Organizations should periodically review their websites for business transactions, lobbying, political activities, and the like (particularly important if they have affiliated organizations).
- DM: Organizations should always analyze the statute of limitations when faced with Ch. 42 taxes, including new taxes on Type III SOs and DAFs.
- JB: The IRS will (eventually) follow up on its FBAR initiative to require reporting of ownership in offshore partnerships and other accounts.
- BH: Charitable gift annuities are investment contracts under federal securities law and not covered by the Philanthropy Protection Act (Warfield v. Bestgen (9th Cir. 2009)).
- DM: Private foundations should consider if there are multiple acts of self-dealing rather than just a single act (foundation managers may be liable for up to $20,000 per act).
Read my post on Day One of the WCTEO here.