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Planning and the Death of the Death Tax

On Wednesday afternoon the White House again proposed eliminating the so-called death tax as part of its tax reform plan, but the details remain sparse.  When pressed for specifics Director Cohn simply stated that with the implementation of the administration’s tax plan, the death tax would disappear.

The phrase “death tax” entered the popular lexicon by way of tax reformers wanting to summarize and caricature the several parts of the Federal transfer tax system.

What is the Death Tax?

The death tax could refer to the estate tax alone or to any combination of other taxes that grew out of the estate tax regime.  The modern estate tax was introduced in 1916.  In its current form it imposes a top rate of 40% on transfers above $5,490,000 per person made at death.

After the estate tax was instituted, savvy taxpayers quickly realized that a deathbed gift would avoid the estate

Charitable Income Tax Deductions: The Rockefeller Edition

March 29, 2017

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Billionaire David Rockefeller passed away this week at the age of 101.  According to Forbes magazine, during his lifetime, the well-known philanthropist gave away nearly $2 billion.

In light of this newsworthy charitable donation, we thought now would be a good time to remind everyone of some of the basic income tax deductions available for gifts to charities.

Section 170 of the Internal Revenue Code (the “Code”) governs income tax deductions for charitable contributions. In the case of an individual making a cash gift to a Section 501(c)(3) organization classified as a “public charity” (such as churches, schools, hospitals, and governmental units), the gift is deductible for federal income tax purposes so long as the aggregate gifts do not exceed fifty percent (50%) of the taxpayer’s adjusted gross income (“AGI”) for the taxable year.

In the case of a contribution of capital gain property to a public charity, a taxpayer can only deduct

Important Information on W-2/SSN Data Theft Scam

March 28, 2017

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A dangerous email scam currently is circulating nationwide and targeting employers, including tax exempt entities, universities and schools, government and private-sector businesses. The scammer poses as an internal executive requesting employee Forms W-2 and Social Security Number information from company payroll or human resources departments. They may even send an initial “Hi, are you in today” message before the request.

The IRS has established a process that will allow employers and payroll service providers to quickly report any data losses related to the W-2 scam. See details at Form W-2/SSN Data Theft: Information for Businesses and Payroll Service Providers. If notified in time, the IRS can take steps to prevent employees from being victimized by identity thieves filing fraudulent returns in their names. There also is information about how to report receiving the scam email even if you did not fall victim.

As a reminder, tax professionals who experience

Benefactors Beware: Fake Charities Included in IRS List of Top Tax Scams for 2017

March 28, 2017

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Every year, the IRS issues its “Dirty Dozen” Tax Scams list, a compilation of tactics and devices used by scam artists against taxpayers.  While the threat exists year-round, the IRS promulgates the list ahead of filing season. As susceptible taxpayers prepare their returns, they face a higher risk of being targeted.

Included in the 2017 “Dirty Dozen” list are fake charities; however, this is hardly a new occurrence. Fraudulent charities and organizations have a long-standing history of soliciting donations from unsuspecting individuals. In its 2017 report, the IRS notes three steps taxpayers should take in making charitable contributions.

One: Keep your information private. Individuals are advised against sharing their personal information, such as a Social Security Number or passwords, as this is commonly used in identity theft. The IRS reminds individuals that a legitimate charity will never ask for such information in soliciting or

IRS Notice: Conservation Easements for Charitable Giving

March 21, 2017

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In Notice 2017-10, the Internal Revenue Service recently issued guidance on syndicated conservation easement transactions presumed to be used as tax shelters. This addition to the “listed transactions” under Section 1.6011-4(b)(2) requires both participants and material advisors involved in such transactions to report their activity to the IRS. Failure to report involvement in such a transaction, or to correct previously filed returns, will subject individuals to penalty under Section 6707.

Conservation easements provide a tax deduction aimed at furthering the public good. Most often, conservation easements involve historical, endangered, or otherwise valuable property. The property is contributed to a charitable organization, encumbered by a right or restriction in the form of an easement. The easement guarantees to maintain or change the current use of the land, so that it is properly conserved.  However, like many tax deductions, conservation easements are susceptible to abuse by individuals seeking to shelter large investments

What a Difference an “H” Makes

March 13, 2017

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Late on Monday, House Republicans revealed, in two parts (here and here, with summaries here and here) the American Health Care Act (“AHCA”) that is designed to meet the Republicans’ promise to “repeal and replace” the ACA.  In many respects, the AHCA is less “repeal and replace” and more “retool and repurpose,” but there are some significant changes that could affect employers, if this bill becomes law as-is.  Below is a brief summary of the most important points:

  • Employer Mandate, We Hardly Knew You. The ACA employer play or pay mandate is repealed retroactive to January 1, 2016, so if you didn’t offer coverage to your full-time employees, then this is the equivalent of the Monopoly “Get out of Jail Free” card.
  • OTC Reimbursements Allowed from HSAs and FSAs, Without a Prescription. This goes back to the old rules that allowed these reimbursements.

EO Update: e-News for Charities & Nonprofits

February 27, 2017

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Two new Issue Podcasts available for viewing Go to the Stay Exempt Issue Podcast page on irs.gov to see Issue Podcasts on:

  • When are Commercial-Type Activities a Substantial Nonexempt Purpose for an IRC 501(c)(3) Organization? Learn about determining when commercial-type activities further a substantial nonexempt purpose for an IRC 501(c)(3) organization
  • IRC 501(c)(3) Proposing Denial Learn about the five-step roadmap the IRS uses to determine whether proposing denial is appropriate for an organization requesting recognition of tax exemption under IRC 501(c)(3)

What is an Issue Podcast?

An Issue Podcast is a resource the IRS uses for sharing technical knowledge.

An Issue Podcast is a short (approximately 15 minute), on-demand audio and visual presentation that includes:

  • A brief summary and analysis of an issue
  • References to key resource materials

EO Update: e-News for Charities & Nonprofits

February 22, 2017

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IRS makes approved Form 1023-EZ data available online

The IRS announced today that publicly available information from approved applications for tax-exemption using Form 1023-EZ, Streamlined Application for Recognition of Exemption, is now available electronically for the first time.

Read news release.

Resources for 403(b) retirement plans

Review the following information.

IRS summarizes “Dirty Dozen” list of tax scams for 2017

The IRS recently announced the conclusion of its annual “Dirty Dozen” list of tax scams. The annual list highlights various schemes that taxpayers may encounter throughout the year, many of which peak during tax-filing season.

Just Push Pause: Revisiting Proposed Regulations

February 21, 2017

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On January 20, 2017, President Trump signed an executive order entitled “Regulatory Freeze Pending Review” (the “Freeze Memo“).  The Freeze Memo was anticipated, and mirrors similar memos issued by Presidents Barack Obama and George W. Bush during their first few days in office.  In light of the Freeze Memo, we have reviewed some of our recent posts discussing new regulations to determine the extent to which the Freeze Memo might affect such regulations.

TimeoutThe Regulatory Freeze

The two-page Freeze Memo requires that:

  • Agencies not send for publication in the Federal Regulation any regulations that had not yet been so sent as of January 20, 2017, pending review by a department or agency head appointed by the President.
  • Regulations that have been sent for publication in the Federal Register but not yet published be withdrawn, pending review by a department or agency head appointed
  • Reminder: Filing Requirements for New 501(c)(4) Organizations

    February 15, 2017

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    With lobbying efforts on the rise, the IRS has issued notice requirements for new 501(c)(4) social welfare organizations. These requirements follow the addition of Section 506 to the Code, where notification requirements for new 501(c)(4) organizations were outlined by the legislature.

    A newly formed 501(c)(4) is required to notify the IRS within 60 days from the date it becomes a new legal entity. In providing notice, the organization must include the following information:

    (1) the organization’s name, address, and taxpayer identification number;

    (2) the date and state law under which the organization was formed; and

    (3) a statement of the organization’s social welfare purpose.

    The IRS has developed a new form – Form 8976 – that organizations should use to provide this notification. Note that continuing to file a Form 1024 is optional, and does not waive the requirement to provide notice. A Form 8976 can only be completed electronically

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