There are numerous charities established to raise funds to support the extra-curricular activities or tuition of students.   In most cases, parents and students help raise funds by volunteering their time (e.g., working at concession stands, selling coupon books or candy, ect).   In order to be fair to those who volunteer, there is often an urge to earmark the funds raised to those students who volunteered (or whose parents volunteered) to be available by those students to pay for their extra-curricular activities or tuition.   However, as the charity discovered in PLR 201130012, such earmarking results in an improper private benefit that resulted in revocation of tax-exempt status.  Therefore, charities formed to raise funds for students must resist the urge to earmark funds for particular students and instead are used to benefit a broad class of students.

On August 8, the IRS released its Exempt Organization Newsletter, Issue Number 2011-14.  Topics include the following:

1. New Form for Miscellaneous Determination Requests
2. IRS Names New TE/GE Division Counsel
3. Basic Rules for Restructuring Tax-Exempt Obligations
4. Register Now for Remaining 2011 Tax Forums
5. August 25: Free Employee Plans Free Phone Forum on Plan Corrections

Click here to review IRS Newsletter Issue 2011-14.

Imagine you are talking to a friend of a friend at a party, who says that you can avoid ever paying income taxes by taking six simple steps:

(1) form a corporation with the word “church” in the title;
(2) appoint yourself president/minister of the church;
(3) transfer your home, car, weekly income and other assets to the church;
(4) transfer your debt (mortage), car loans, etc. to the church;
(5) continue to spend your time and money as you did before;
(6) have the church pay you for your services as president/minister and pay your expenses (home, car, credit cards, kid’s tuition, etc.)

What would you do? (more…)

On July 22, the IRS released its Exempt Organization Newsletter, Issue Number 2011-13.  Topics include the following:

1. EO to Present New Webinar on International Activities of Domestic Charitable Organzations
2. Register Now for Fall Workshops for Small and Medium-Sized 501(c)(3) Organizations
3. IRS Seeks Comments on Updated Rules for Communications with Appeals Office
4. IRS Issues Letters to Preparers Who Failed to Follow PTIN Rules
5. TEB Issues Report on Charitable and Governmental Financings Projects

Click here to review IRS Newsletter Issue 2011-13.

The IRS has released Form 8940, Request for Miscellaneous Determination, that tax-exempt organizations will use to request certain determinations about their tax-exempt status.  In addition to foundation status issues, organizations will use Form 8940 to obtain advance approval of certain activities and exemption from Form 990 filing requirements.

Although Form 8940 is a step in the right direction, it does not go far enough.  As I indicated in my prior post, there currenly is no process for a tax-exempt organization to seek IRS approval of expanded or changed activities.  Form 8940 should be revised to include a new Type of Request, “Notice of Material Change in Activities,” that will allow tax-exempt organizations, in their sole discretion, to file a notice of such changes and request an updated determination letter that such activities do not jeopardize the charity’s exempt status.  We will continue to promote this concept and keep you posted of new developments.