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IRS Confirms Timing of Deductibility of Donations by Credit Card

July 22, 2010

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Each year, sometime in early December, my spouse and I discuss our charitable donations to be made prior to year-end. We look at what donations we made up to that point, and then together decide what we’re going to donate prior to December 31 so that we can deduct these donations on that year’s income tax return. Once we decide our charities and amounts, we set about to implement our plan. Frequently, that means going online and giving via credit card payment through the organization’s website.

Frankly, it never occurred to me that because I actually pay these credit card bills in January of the following year that there could be an argument that because I actually paid the amount the following year I couldn’t deduct it the year in which I clicked “confirm donation” on the website.

I’m in luck. The IRS recently confirmed that you can

Non-Profit Mergers

Non-Profit Mergers

July 22, 2010

Authored by: Nathan Boyce

For a variety of reasons, several nonprofits have undergone mergers or consolidations over the last year or so.  At the same time, both the IRS and Financial Accounting Standards Board (“FASB”) have issued guidance on mergers of non-profit organizations.  So, although these rules are not brand new, they are relatively new and relevant for many exempt organizations.  IRS Publication 4779  describes the IRS rules and FASB Statement No. 164 (which you can access here after free registration) details the accounting rules.  A thoroughly-researched summary of each is located here.  For those of you with little time, I hereby summarize the requirements with brevity: (1) notify the IRS of any merger by filing a final Form 990, (2) have someone smart–preferably an accountant–explain FASB Statement No. 164 and (3) try to say “Financial Accounting Standards Board” 5 times fast.

An Overview of Commercial Co-Venture Laws

July 21, 2010

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A “co-venturer” is a for-profit entity which promotes its products or services by representing that the purchase or use of such products or services will benefit a charitable cause (e.g., a for-profit makes a statement advertising that a portion of the proceeds from the sale of this product will be donated to charity). Since consumers are not given an option of whether or not to donate to the charity,  Approximately twenty-five (25) states have enacted specific laws which govern these so-called “commercial co-ventures” (or “cause-related marketing” programs). While the laws governing commercial co-ventures vary by state, in general, the state regulatory authorities are concerned with protecting consumers from fraudulent or deceptive advertising.

Thus, state laws generally require that the co-venturer (1) enter into written contracts with the charitable organization that will benefit from the promotion; (2) keep accurate records during the promotion; (3) include certain disclosures in all advertisements

501(c)(3) Hospitals – It is Time to Prepare for § 501(r)

IRC § 501(r) was enacted during 2010 to tighten the requirements that hospitals must satisfy to maintain IRC § 501(c)(3) status.  IRC § 501(r) also complements steps taken by the IRS in the last couple of years to increase hospital transparency and supplement the”community benefit” standard set out in IRS Rev. Rul. 69-545, including more detailed requirements for reporting charity care and community benefits in the redesigned annual federal information return form (Form 990, particularly Schedule H).  Under IRC § 501(r) a hospital organization that wants to retain its IRC § 501(c)(3) status must: (1) at least every three years conduct a community health needs analysis and develop a plan to meet these needs; (2) adopt, implement, and widely publicize written financial assistance and emergency care policies that must cover specified topics; (3) limit charges to persons qualifying for financial assistance to amounts charged to persons with

Company Foundation Scholarship Programs

July 17, 2010

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A corporate sponsored charitable organization may conduct a scholarship program for the benefit of its sponsoring corporation’s employees and/or children of such employees. Scholarships must be awarded on an objective and non-discriminatory basis. The scholarship program may not be used to induce employment or represent compensation for services, and availability must be limited by non-employment related factors. With respect to a corporate sponsored private foundation, the scholarship selection committee must also be independent from the private foundation and sponsoring corporation, and the scholarship program must be approved in advance by the IRS.  See IRS Rev. Proc. 76-47 for additional requirements. If the requirements are satisfied, donors who contribute to the charitable organization are entitled to an income tax deduction and the scholarship payment is not treated as taxable compensation to the employee.

Disaster Relief Programs for Company Foundations

A corporate sponsored charitable organization may conduct disaster relief and emergency hardship assistance programs for the benefit of its sponsoring corporation’s employees. With respect to a corporate sponsored “private foundation” (e.g., where the charitable organization receives substantially all of its support from the corporation), relief may be provided to employees who are victims of any Presidentially declared disaster, which may include an earthquake, flood, hurricane, or tornado. With respect to a corporate sponsored “public charity” (e.g., where the charitable organization receives support from the corporation and employees), relief may be provided to employees who are victims of any Presidentially declared disaster or any emergency hardship resulting from a severe personal crisis, such as a fire, accident, illness, death, or crime.

Relief must be provided based on an objective determination of need and the selection committee should be comprised of individuals who are not in a position to exercise substantial

Artists Seeking Grants – The Laws That Govern Givers

As government funding of private arts and education shrinks, grants from private foundations become more competitive.  There are many legal factors that affect foundations’ decisions to give away money. The laws can be very complex, but the following primer can help artists direct their energies when choosing foundations and crafting their applications:  Team Publication (Artists Seeking Grants – The Laws that Govern the Givers of the Grant).

Credit Card Rebates (aka Points) Eligible for Charitable Deduction

July 13, 2010

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The IRS recently decided, in PLR 201027015, that a taxpayer who directs her credit card “rebates” to a charitable organization is not required to include the amount in gross income and is entitled to a charitable deduction.

The facts are simple: taxpayers make purchases using their credit cards and as a result of the purchases, they earn “rebates.”  These rebates equal 1% of the taxpayer’s purchases, and the taxpayer can either receive cash back or direct the cash to a charitable organization.  The IRS holds that these rebates are not includable in the taxpayer’s gross income becase these “rebates” are adjustments to the purchase price paid for the item.  The problem is: what item??  Presumably the taxpayer purchased several items from several different retailers.  These facts are clearly different from the cell phone company who charges “$50” for my phone by making me pay $200 up front and requiring me to

Overview of Form 990 Governance Policies

The Form 990 includes numerous governance and management questions.   A brief summary of the more significant governance and management questions are provided below. The IRS has indicated that, although a negative response to a question on the Form 990 will not necessarily result in an audit, the IRS will use such negative responses in conjunction with other information on the Form 990 to determine whether further inquiry is necessary.  It is important for the leadership of public charities to become familiar with these provisions and should analyze each of the following:

  • Records Management Program – Form 990 asks whether the organization has a written document retention and destruction policy. Nonprofit corporations should adopt a document retention and destruction policy, along with a records retention schedule, utilizing the standards under Sarbanes-Oxley, 18 U.S.C. 1512(c), and the new Federal Rules of Civil Procedure regarding e-Discovery, Fed. R.

Here’s the Cheese, but Forget the Wine

July 11, 2010

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The IRS, in PLR 201025078, denied exemption under section 501(c)(7) to a winemaking club.   The club was formed for the specific purpose “to encourage the appreciation of winemaking, promote the responsible use of wine, educate wine tasters and home wine makers, and to promote and support the healthful creation of wine made without sulfites.”  Although the club, had it been properly managed, could have qualified under section 501(c)(3) as an educational organization, the club failed to qualify as exempt under any section due to its commercial nature.  Specifically, the club allowed anyone to become a “member” for a fee, didn’t allow its “members” any actual rights, and didn’t allow its “members” enough socializing amongst each other.  Perhaps if the wine club had been more exclusive in its membership and hosted more parties among its members, the IRS would have granted exemption.  Of course, the club should have also considered adding a few more disinterested board members and

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