As we pointed out in our Oct. 19, 2010 entry, it might have been worthwhile to delay filing a new Form 1023 until the IRS launched its “Cyber Assistant” online version which enabled online filing at a substantreduced fee. However, buried in Internal Revenue Bulletin 2011-1 is the following statement:

“… the Service does not expect Cyber Assistant (a Web-based software program designed to assist organizations in preparing their application for recognition of exemption under § 501(c)(3) of the Internal Revenue Code (Form 1023)) to become available in 2011.”

Therefore, if you were waiting to file a Form 1023 until this service was available, you might consider proceeding with the paper version, even at the higher fee. Generally, an organization has 27 months from the date of formation to file the Form 1023, and if the tax exempt status is approved by the IRS, the organization will be deemed to be tax-exempt since the formation date (and donations to the organization since the formation date will generally be deductible to the donors).

On January 20, the IRS released its Exempt Organization Newsletter, Issue Number 2012-02. Topics include the following:

1. IRS Launches New Online Search Tool
2. IRS to Co-sponsor Conference on Nonprofit Governance
3. Academic Institution Initiative
4. Top 10 Helpful Features on the IRS Website

On January 12, the IRS released its Exempt Organization Newsletter, Issue Number 2012-1. Topics include the following:

1. Updated Procedures for Issuance of Rulings and Determinations
2. 2012 User Fees for Exempt Organizations Matters
3. More Guidance on Reporting Employer Health Care Coverage on Forms W-2
4. Renew Your Preparer Identification Number
5. Workshops for Small and Medium-Sized Exempt Organizations
6. SSA/IRS Reporter Features Informative EO Articles
7. Revised Form 2848, Power of Attorney and Declaration of Representative
8. Fact Sheet 2012-5, Choosing a Tax Preparer

In the weeks before the 2010 election, every other tv commercial seemed to be a political ad sponsored by a concerned citizens group regarding a particular candidate.    Most of these groups are organized as tax-exempt Section 501(c)(4) social welfare organizations or Section 501(c)(6) trade associations.  Although a Section 501(c)(4) or Section 501(c)(6) organization may engage in political campaign activities in furtherance of its exempt purposes (subject to applicable  state and federal campaign finance laws), such activities must not constitute the organization’s primary activities. See e.g., Rev. Rul. 81-95, 1981-1 C.B. 332; Kindell & Reilly, “Election Year Issues,” 2002 IRS EO CPE Text.  

Watchdog groups have been calling on the IRS to investigate many of the high profile organizations behind the ads, questioning whether these organizations should maintain their status as a Section 501(c) organization in light of what they would argue is substantial political activity.  As things heat up for the 2012 election year, I anticipate even more political ads sponsored by Section 501(c) organizaitons.  I also anticipate that there will be even more IRS scrutiny and resources devoted to compliance.  In order to protect tax-exempt status, any Section 501(c)(4) and Section 501(c)(6) organization that engages in political campaign activities should be cautious to maintain sufficient sufficient records to demonstrate that their primary activities are not political campaign activities.  This includes a proper allocation of expenses among the organization’s activities, such as overhead.

The IRS recently issued an Audit Technique Guide to provide guidance to IRS agents for the examination of charitable contributions of conservation easements.  The Guide incliudes a discussion of the general requirements for charitable contributions and additional requirements for contributions of conservation easements.  The Guide provides a good overview for advisors and donors exploring a possible contribution of a conversation easement.

As a consumer and parent, I love garage sale-ing–you never knew what you will find. Garage sales are especially helpful for Christmas shopping for young children. In my opinion, there is no reason to buy a new present for anyone under the age of 5. And for anyone under the age of 18 months, there is no reason to get any presents at all. (In my experience, no matter what you wrap up, (more…)

On December 20, the IRS released its Exempt Organization Newsletter, Issue Number 2011-20. Topics include the following:

1. IRS Offers Tips for Year-End Contributions
2. Renew Your PTIN Now
3. Sharpen Your Record Keeping Skills

On December 16, the IRS released its Exempt Organization Newsletter, Issue Number 2011-19. Topics include the following:

1. IRS Announces Two Month Suspension of IRS Modernized e-File Operations for 990 Filers
2. IRS Reminds Hospital Organizations of 2011 Filing Requirements and Requests Additional Public Input
3. IRS Issues 2012 Optional Mileage Rates
4. Renew Your PTIN Now
5. Exempt Organizations to Offer Internships for Students Interested in Nonprofit Management
6. 2012 Workshops for Small and Medium-Sized 501(c)(3) Organizations
7. Revised Publication 557 Now Available
8. Treasury Issues Report on Supporting Organizations and Donor Advised Funds

In 2006, Congress instructed Treasury to prepare a report regarding supporting organizations (SO) and donor advised funds (DAF), including whether contributions to SOs or DAFs should be deductible and/or whether SOs and DAFs should be subject to minimum distribution requirements.   This long-awaited report was released by Treasury on December 5 and can be found by clicking here.   Based on a quick review of this 100+ page report, there are no recommendations that would seem to require additional regulation beyond those amendments made by the Pension Protection Act of 2006 – the report concludes contributions are generally deductible, and no minimum distribution requirement is necessary.  Of course, the report does not end the discussion – indeed, Senator Grassley immediately criticized the report calling it disappointing and unresponsive.  Please stay tuned for more commentary as we continue to digest this report.

Yesterday we briefly posted the news about the combination of Holme Roberts & Owen (HRO) into Bryan Cave.  The Tax-Exempt and Charitable Planning Team is particularly excited about this combination, which will add substantial depth and experience to our Team.  The following is a brief introduction to HRO’s Nonprofit Organizations and Religious Organizations Practice Teams, which will be combining with our Team effective January 1, 2012:

HRO’s longstanding Nonprofit Organizations Practice Team is organized to provide nonprofit clients with the full range of legal experience needed to use their limited resources effectively to address virtually unlimited community needs. The Practice Team is composed of lawyers who specialize in the tax and corporate laws distinct to this important sector of the community, and lawyers who practice in a wide variety of other legal areas, but who have specific knowledge of the unique nonprofit issues in their areas of expertise.

HRO represents a diverse nonprofit client base that includes major foundations, educational and cultural institutions, health care providers, and sports organizations. In addition, HRO brings a distinct expertise and substantial client base in the religious sector. HRO’s religious organization clients include:

• Compassion International
• The Navigators 
• Young Life 
• Fellowship of Christian Athletes 
• The Salvation Army – Western Territory 
• Catholic Health Initiatives Colorado 

Both Stuart Lark and John Wylie devote significant time to the religious organization client base, and they have developed substantial expertise on religious accommodations in various laws.  John has recently guided a major religious organization in a restructure of its international operations, including the formation of two offshore trusts.  And Stuart is currently representing in the Colorado Court of Appeals two large religious organizations which are challenging the position of government agencies that their activities are not sufficiently religious to merit sales and property tax exemptions.