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FAQs for Delinquent Form 990 Filers

August 30, 2010

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FAQs for Delinquent Form 990 Filers

August 30, 2010

Authored by: Keith Kehrer

The IRS just released “Frequently Asked Questions” regarding its one-time relief for charities that face automatic revocation of tax-exempt status for failure to file Form 990, Form 990-EZ, or Form 990-N. As we discussed in our July 26 post, the IRS is providing limited relief to small charities that failed to file Form 990-EZ or Form 990-N for the past three years. The IRS estimates more than 300,000 charities may lose their tax-exempt status but is giving charities until October 15, 2010 to file the delinquent Form 990-EZ or Form 990-N and maintain tax-exempt status. The IRS released the Frequently Asked Questions, which may be accessed by clicking here, to provide additional information regarding this one time relief.

Change Your Activities? Don’t Forget to Tell the IRS

August 27, 2010

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When a charity significantly expands or changes its activities, it must inform the IRS by disclosing the activities on its next filed Form 990.  The Form 990 includes questions regarding whether the filing charity has undertaken any significant activities not listed on a prior Form 990, whether the charity ceased conducting, or made significant changes in how it conducts any activities, and requires the charity to describe the changes in an attached schedule. The Form 990 also asks whether the charity made any significant changes to its articles or bylaws, and requires such documents be included with the Form 990.  Although disclosing the changes on the next Form 990 satisfies a charity’s obligation to update the IRS, it does not provide any comfort that the new activities do not jeopardize the charity’s exempt status because there is no guaranty any IRS agent will review (or approve) such changes.  

In addition to Form

IRS Releases Ten Tips for Taxpayers Making Charitable Donations

August 26, 2010

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The IRS is always so helpful, and has just published “Ten Tips for Taxpayers Making Charitable Donations” (IRS Summertime Tax Tip 2010-21). You can view the item on the IRS website by clicking here and the website has links for IRS publications along the charitable giving lines. Since most of you that read this blog are affiliated with tax-exempt organizations as officers, advisors or consultants or advise high-net-worth charitable donors, this may be a resource for your donors or clients, or maybe you actually are inclined to give yourself, not that there’s any pressure or anything.

Accepting Gifts… Should You?

Accepting Gifts… Should You?

August 24, 2010

Authored by: Erika Labelle

Charitable organizations receive all types of donations, including cash,  personal property, and even business interests.  Often times, the charity is so excited about a potential gift that no diligence is completed prior to acceptance, and failure to complete diligence on gifts can turn out to be costly.    Take gifts of real property – these are very common and can be financially beneficial to a charity.  However, without completing diligence, the charity may find that it now owns a superfund site.   Another not-so-obvious example is a donation of stock.  Although most donated stock is marketable, certain types of stock, including stock in an S corporation (usually small, family owned corporations), are not.  This post explores the implications of a charity accepting gifts of S corporation stock.  

Subchapter S corporations can only have certain types of shareholders.  Generally, these “permissible shareholders” include individuals (who are not nonresident aliens), estates, certain trusts, and certain exempt organizations.  We will

Facing Late Filing Penalties – Don’t Despair (At Least Not Right Away)

August 22, 2010

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Many small and medium sized charities are run almost entirely by volunteers and have little or no paid staff. It is not unusual for such charities to inadvertently fail to timely file Form 990 or Form 990-EZ. The IRS imposes a penalty of $20 a day for failure to timely file Form 990 or Form 990-EZ. The IRS will send a penalty letter to late-filing charities imposing the penalty with interest. Where the charity can show reasonable cause, however, we have had success convincing the IRS to abate and refund the late-filing penalty. For example, if the charity has a history of compliance, is run by volunteers (or has little or no paid staff), and puts procedures in place to ensure future compliance, the IRS has been willing to abate and refund the penalty. Although there can be no guaranty, if your charity is faced with a late filing penalty, contact your

Delaware Revised Statutes – Part I

Delaware Revised Statutes – Part I

August 19, 2010

Authored by: Nathan Boyce

About two years after buying our latest family car, we had the manufacturer repair the video of the car’s DVD player.  (We once drove cross-country without this working and it was a tryyyyyyying experience; I’m not sure how my parents did it.  Of course, lots of things were different back then: not only did we not wear our seatbelts in the van, the seatbelts were stuffed down in the seat so as to not be in our way.  We often travelled with more passengers than there were seatbelts anyway, so perhaps by removing any chance at safety for all of us, my parents were tipping their hat at the principle of fairness.  Or perhaps they knew that until someone put TVs in cars, their only chance for driving sanity lay in us distracting ourselves with games, like Twister and hide-and-go-seek.  After the DVD player’s video was repaired, I couldn’t get the audio to work.  I

Charitable Income Tax Deduction Limitations – Part II – Gifts of Appreciated Assets

August 17, 2010

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Last week, I posted about the income tax deductibility limitations for gifts of cash to a public charity versus a private foundation.  Today:  the same analysis but for long-term, capital assets that have a fair market value at the date of the donation higher than the donor’s cost basis in the property.

In general, the AGI* deductibility limitation for gifts of long-term holdings of appreciated assets made to public charities (or “50% charities”) is reduced to 30% unless the donor elects to step down the deductible contribution base of the long-term capital gain property from fair market value to cost basis. Therefore, in general, gifts of long-term appreciated marketable securities to a public charity can be deducted at their fair market value on the date of the gift, subject to the 30% AGI deduction limitation, and any overage may be carried over for up to five additional tax years, but if the donor

IRS Offers Informational Workshops

IRS Offers Informational Workshops

August 15, 2010

Authored by: Nathan Boyce

The IRS Exempt Organizations Division is offering one-day workshops for small and mid-size section 501(c)(3) exempt organizations. Each workshop will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations. An introductory workshop is designed for administrators or volunteers who are responsible for an organization’s tax compliance. For additional information regarding these free IRS workshops, click here.  Similar virtual workshops are also available (click here). These are great opportunities for officers and directors of 501(c)(3) organizations.

Charitable Income Tax Deduction Limitations – Part I – Gifts of Cash

August 13, 2010

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Maybe it’s a little premature, as it’s still summer in most of the country, but as we approach year end, perhaps it’s a good time for a refresher on the charitable donation income tax limitations.  Personally, I’m not at the stage of my wealth lifetime where these issues apply to me.  However, I aspire to have issues like these to worry about someday.  For those of you already there, or for those of you who have clients or donors who are, here is a reminder of the deduction amounts and limitations for gifts of cash to a public charity versus a private foundation.

In general, gifts of cash made to public charities receive the most favored tax treatment. These organizations are generally referred to as “50% charities” because the AGI* percentage limitation for income tax deductions applicable to charitable contributions to these organizations is 50%. These organizations are favored because

Building Family Philanthropy Through Private Foundations

August 13, 2010

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I’ve noticed a trend in our estate planning practice — an increasing interest in establishing private non-operating foundations. This is interesting given the advantage that donor-advised funds provide over foundations, most notably the reduced administrative burdens on a family who opt for donor-advised funds over foundations. There are also extremely well run donor-advised funds to pick from, funds with great track records and high customer satisfaction ratings. So what is the reasoning? I think it stems from a desire of a parent to teach philanthropy to their children, grandchildren, and possibly great-grandchildren. Family members are typically on the board of directors of the foundation so they are forced to come together and make decisions about how grants are made. The hope is having family members convening in one place and spending time discussing charitable gifts will provide a springboard for other charitable giving. Even though the foundation document typically provides

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