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No More Horsing Around

No More Horsing Around

February 3, 2011

Authored by: Keith Kehrer

In PLR 201104066, the IRS revoked the tax-exempt status of an organization formed to guard the purity of a certain breed of horses, promote interest therein, and help fund research on the genetics of the breed.  The organization also maintained a website that contained links to private sellers of such horses.  The IRS concluded that the website links caused the organization’s assets to inure to the benefit of private individuals.  The breeders earn a profit, and private benefit, by being able to sell horses and/or stud services to interested persons, and the organization facilitated these sales.  One lesson for other charities is to use caution when linking to for-profit websites.

Document! Document! Document!

January 30, 2011

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Document! Document! Document!

January 30, 2011

Authored by: Keith Kehrer

It is critical for charities and their boards to maintain documentation regarding their exempt activities.  This includes board minutes, financial records, receipts, and other documents related to its activities.  In PLR 201102065, the IRS revoked the tax-exempt status of a charity that failed to provide any documentation that proved it conducted charitable activities for the audit period.  Although this is an extreme case, it is a reminder for all boards to document through minutes their meetings and decisions, and organizations to maintain documents related to their exempt activities, including documents necessary to prepare Form 990.  You never know when the IRS or state Attorney General may require a charity and its board to account for its activities.

Seller “Gifts” and Down Payment Assistance Crackdown

The IRS continues to crackdown on down payment assistance programs that involve “gifts” by the selling party.  Under these programs, the organization offers down payment assistance to buyers who cannot afford the 3% down payment necessary to qualify for a federally insured (HUD) loan.  In order to raise the funds, the organization requires participating sellers to agree to donate the 3% down payment to the organization.  Despite the fact that the “donation” by the seller matches the buyer’s 3% down payment (which is transferred to the seller as part of the purchase price), these organizations maintain that the down payment assistance is funded with other donations.  However, these organizations rarely demonstrate funds from any other sources.  In Private Letter Ruling 201102064, released today, the IRS denied tax-exempt status to another organization structured in this manner on the basis that the organization operates with a substantial non-exempt purpose and for the benefit of

Senator Turns Focus to Churches

January 9, 2011

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Senator Turns Focus to Churches

January 9, 2011

Authored by: Keith Kehrer

Senator Charles Grassley (R-IA) has been a driving force behind recent efforts to improve transparency in the charitable sector, including the revisions to the Form 990, Annual Information Return and focus on governance policies.  Senator Grassley recently turned his focus to churches and other religious organizations.  At his request, the Evangelical Council for Financial Accountability (” ECFA”), a national accreditation organization for churches and other religious organizations, will lead an independent, national effort to review and provide input on major accountability and policy issues affecting churches .   According to ECFA’s website, the newly formed “Commission on Accountability and Policy for Religious Organizations” will address some of the most challenging tax and policy issues involving religious organizations, including whether churches should file the same highly-detailed annual information return that other nonprofits must file (Form 990); whether legislation is needed to curb abuses of the clergy housing allowance exclusion; whether the current prohibition

Happy New Year – Its Time for Resolutions

January 1, 2011

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Happy New Year from the Tax-Exempt and Charitable Planning Team!   For many of us, with the New Year often comes resolutions (I know for me, I renew my annual resolution to get in shape).   The IRS is not immune to this process and recently released its 2011 “resolutions” in the form of its annual Priority Guidance Plan.  The 2011 Plan includes the following priorities:

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