Private Foundations

Tax Law and Compliance, Fourth Edition 2017 Cumulative Supplement
 
 
Wiley (Verlag)
  • erschienen am 27. Oktober 2017
  • |
  • 256 Seiten
 
E-Book | ePUB mit Adobe DRM | Systemvoraussetzungen
978-1-119-39252-1 (ISBN)
 
The must-have tax law reference for private foundations, updated for 2017
Private Foundations provides an authoritative reference and extensive analysis of tax law and compliance in the private foundations arena, with a wealth of practical tools to streamline applications, filing, and reporting. This 2017 Cumulative Supplement captures the latest regulatory developments for easy reference, with coverage of tax-exempt status, the self-dealing rules, mandatory distribution, jeaopardizing investments, taxable expnditures, annual reporting to the IRS, winding up a foundation's affairs, and much more. Comprehensive line-by-line instructions are included for a variety of exemption applications and tax forms, and easy-to-use checklists highlight areas of critical concern to help you avoid oversights. Sample documents are provided to guide the composition of organizational bylaws and various letters, and completed IRS forms provide practical reference for side-by-side comparison. With comprehensive, up-to-date coverage of the private foundations space alongside helpful tools and visual reference, this book is a resource every foundation's needs.
Written by two of the nation's leading authorities on private foundations, this supplement provides essential guidance you can trust. Clear, concise instructions focused on real-world use makes this reference a critical companion for those tasked with the responsibility of maintaining a foundation's tax-exempt status and staying out of regulatory difficulties.
* Learn the latest guidelines for compliance, reporting, and eligibility
* Access the latest regulatory changes quickly and easily
* Organize reporting and applications with checklists and sample forms
* Find valuable tools and reference for all aspects of private foundation compliance
Increasing IRS scrutiny makes compliance a more critical issue than ever before. An organization's tax-exempt status is generally vital to its continued operation, and a single oversight can put the future in jeopardy and staying out of regulatory difficulties. Private Foundations provides detailed instructions, examples, and much-needed answers on all aspects of private foundation tax law and compliance.
1. Auflage
  • Englisch
  • Newark
  • |
  • USA
John Wiley & Sons
  • 6,57 MB
978-1-119-39252-1 (9781119392521)
1119392527 (1119392527)
weitere Ausgaben werden ermittelt
  • Intro
  • Title Page
  • Table of Contents
  • Preface
  • Book Citations
  • CHAPTER ONE: Introduction to Private Foundations
  • § 1.6 FOUNDATIONS IN OVERALL EXEMPT ORGANIZATIONS CONTEXT
  • *§ 1.10 PRIVATE FOUNDATIONS SANCTIONS
  • CHAPTER TWO: Starting and Funding a Private Foundation
  • § 2.5 ACQUIRING RECOGNITION OF TAX-EXEMPT STATUS
  • § 2.7 WHEN TO REPORT BACK TO THE IRS
  • NOTES
  • CHAPTER THREE: Types of Private Foundations
  • § 3.1 PRIVATE OPERATING FOUNDATIONS
  • *§ 3.1A EXEMPT OPERATING FOUNDATIONS
  • CHAPTER FOUR: Disqualified Persons
  • § 4.4 FAMILY MEMBERS
  • NOTES
  • CHAPTER FIVE: Self-Dealing
  • *§ 5.1 PRIVATE INUREMENT DOCTRINE
  • *§ 5.3 DEFINITION OF SELF-DEALING
  • § 5.4 SALE, EXCHANGE, LEASE, OR FURNISHING OF PROPERTY
  • § 5.6 PAYMENT OF COMPENSATION
  • § 5.8 USES OF INCOME OR ASSETS BY DISQUALIFIED PERSONS
  • *§ 5.10 PAYMENTS TO GOVERNMENT OFFICIALS
  • § 5.11 INDIRECT SELF-DEALING
  • § 5.12 PROPERTY HELD BY FIDUCIARY
  • *§ 5.15 ISSUES ONCE SELF-DEALING OCCURS
  • NOTES
  • CHAPTER SIX: Mandatory Distributions
  • § 6.2 ASSETS USED TO CALCULATE MINIMUM INVESTMENT RETURN
  • § 6.5 QUALIFYING DISTRIBUTIONS
  • § 6.7 SATISFYING THE DISTRIBUTION TEST
  • NOTES
  • CHAPTER SEVEN: Excess Business Holdings
  • § 7.1 GENERAL RULES
  • § 7.2 PERMITTED AND EXCESS HOLDINGS
  • § 7.3 FUNCTIONALLY RELATED BUSINESSES
  • *§ 7.4 RULES APPLICABLE TO CERTAIN SUPPORTING ORGANIZATIONS
  • § 7.6 EXCISE TAXES ON EXCESS HOLDINGS
  • NOTES
  • CHAPTER EIGHT: Jeopardizing Investments
  • § 8.1 GENERAL RULES
  • § 8.2 PRUDENT INVESTMENTS
  • § 8.3 PROGRAM-RELATED INVESTMENTS
  • NOTES
  • CHAPTER NINE: Taxable Expenditures
  • § 9.1 LEGISLATIVE ACTIVITIES
  • § 9.2 POLITICAL CAMPAIGN ACTIVITIES
  • § 9.3 GRANTS TO INDIVIDUALS
  • § 9.4 GRANTS TO PUBLIC CHARITIES
  • *§ 9.4A GRANTS TO EXEMPT OPERATING FOUNDATIONS
  • § 9.5 GRANTS TO FOREIGN ORGANIZATIONS
  • *§ 9.6 EXPENDITURE RESPONSIBILITY
  • *§ 9.9 DISTRIBUTIONS TO CERTAIN SUPPORTING ORGANIZATIONS
  • § 9.10 EXCISE TAX FOR TAXABLE EXPENDITURES
  • NOTES
  • CHAPTER TEN: Tax on Investment Income
  • § 10.3 FORMULA FOR TAXABLE INCOME
  • NOTES
  • CHAPTER ELEVEN: Unrelated Business Income
  • § 11.1 GENERAL RULES
  • *§ 11.2 EXCEPTIONS
  • § 11.3 RULES SPECIFICALLY APPLICABLE TO PRIVATE FOUNDATIONS
  • § 11.5 CALCULATING AND REPORTING THE TAX
  • NOTES
  • CHAPTER TWELE: Tax Compliance and Administrative Issues
  • § 12.1 SUCCESSFUL PREPARATION OF FORM 990-PF
  • § 12.2 REPORTS UNIQUE TO PRIVATE FOUNDATIONS
  • § 12.3 COMPLIANCE ISSUES
  • NOTES
  • CHAPTER THIRTEEN: Termination of Foundation Status
  • § 13.4 OPERATION AS A PUBLIC CHARITY
  • § 13.5 MERGERS, SPLIT-UPS, AND TRANSFERS BETWEEN FOUNDATIONS
  • NOTES
  • CHAPTER FIFTEEN: Private Foundations and Public Charities
  • *§ 15.4 PUBLICLY SUPPORTED ORGANIZATIONS DONATIVE ENTITIES
  • § 15.5 SERVICE PROVIDER ORGANIZATIONS
  • § 15.7 SUPPORTING ORGANIZATIONS
  • § 15.8 CHANGE OF PUBLIC CHARITY CATEGORY
  • NOTES
  • CHAPTER SEVENTEEN: Corporate Foundations
  • § 17.3 PRIVATE INUREMENT DOCTRINE
  • § 17.5 SELF-DEALING RULES
  • NOTES
  • CHAPTER EIGHTEEN: Nonprofit Governance and Private Foundations (New)
  • § 18.1 STATE LAW OVERVIEW
  • § 18.2 BOARD OF DIRECTORS BASICS
  • § 18.3 PRINCIPLES OF FIDUCIARY RESPONSIBILITY
  • § 18.4 DUTIES OF DIRECTORS
  • § 18.5 BOARD COMPOSITION AND FEDERAL TAX LAW
  • § 18.6 SOURCES OF NONPROFIT GOVERNANCE PRINCIPLES
  • § 18.7 RELEVANT NONPROFIT GOVERNANCE ISSUES
  • § 18.8 NONPROFIT GOVERNANCE POLICIES
  • § 18.9 ROLE OF IRS IN NONPROFIT GOVERNANCE
  • § 18.10 GOVERNANCE PRINCIPLES AND PRIVATE FOUNDATIONS
  • NOTES
  • Cumulative Table of Cases
  • Cumulative Table of IRS Revenue Rulings and Revenue Procedures
  • Cumulative Table of IRS Private Determinations Cited in Text
  • Cumulative Table of IRS Private Determinations Discussed in Bruce R. Hopkins' Nonprofit Counsel
  • Cumulative Table of IRS Private Letter Rulings, Technical Advice Memoranda, and General Counsel Memoranda
  • Table of Private Foundation Law Tax Reform Proposals
  • About the Authors
  • About the Online Resources
  • Cumulative Index
  • End User License Agreement

CHAPTER TWO
Starting and Funding a Private Foundation


  1. § 2.5 Acquiring Recognition of Tax-Exempt Status
    1. (a) Preparing Form 1023
    2. *(b) Understanding Impact of Recognition Based on Form 1023-EZ
    3. (c) The Substantially Completed Application
    4. (d) Recognition Application Procedure and Issuance of Determination Letters and Rulings
    5. (e) Application Processing Timeline
    6. (h) Applications Processing Controversy
  2. § 2.7 When to Report Back to the IRS
    1. (a) When Should a Ruling Be Requested

§ 2.5 ACQUIRING RECOGNITION OF TAX-EXEMPT STATUS


(a) Preparing Form 1023


p. 45. Add after third paragraph:

Extraordinary turmoil racked the IRS determination process in the recent past, though several changes have improved the work flow. Because the tax code provision that provides an organization's tax exemption is automatically revoked if the entity fails to file a required Form 990 for three consecutive years effective as of the filing due date of the third year,67.1 more than 500,000 organizations were revoked, including many private foundations. The Cincinnati office that processes applications for recognition of tax exemption was inundated with applications for reinstatement beginning in 2010 as the number of applications significantly increased. Concurrently, that office enhanced their scrutiny of applicants for exemption as social welfare organizations to look for potential participation in promoting the election of persons to public office. They developed a "BOLO" (be on the lookout list) to identify applicants that could not satisfy the "exclusively operated for social welfare purposes standard" needed to qualify for exemption.67.2 The standard applied was that the activity aimed at influencing an election could not be the entity's primary activity, though there was no numerical definition of the word primary. Applicants with names that implied political involvement, including Tea Party or Democrat, were given enhanced scrutiny. As a result of pressure from Congress, the media, and the organizations themselves, the system was abandoned and officials in the exempt organization division were relieved of their duties. Regulations were proposed to clarify the rules, but they have been withdrawn.

As a consequence of the turmoil, applications took a significant time to be reviewed and a streamlined procedure to reduce the time required was implemented.67.3 Modest organizations eligible to file either Form 990-EZ or 990-N which filed an application for reinstatement within 15 months of revocation were retroactively reinstated and penalties for failure to file not imposed if they demonstrated reasonable cause by attesting that the organization's failure to file was not intentional and that it has put in place procedures to file in the future. Resubmission after 15 months requires demonstration of reasonable cause. Those entities that were required to and did not file Form 990 or 990-PF must submit the application with a reasonable cause description and complete and submit the returns they failed to file. For these entities, penalties will not be imposed.

The next step to address the turmoil came in June 2014, when the IRS released a new Form 1023-EZ. Prospective exempts with revenue of $50,000 or less and assets of $250,000 or less are eligible to use this abbreviated 4-page application subject to completion of a 7-page eligibility checklist that excludes foreign successors, LLC, churches, schools, hospitals, and many other types of applicants.67.4

Applicants are asked to attest that the organizational documents:

  • Limit purposes to one or more exempt purposes, namely, religious, charitable, scientific, testing for public safety, literary, educational, fostering national or international amateur sports competition, or preventing cruelty to children or animals;
  • Not expressly empower the entity to engage, otherwise than as an insubstantial part of your activities, in activities that in themselves are not in furtherance of one or more exempt purposes; and
  • Provide that, upon dissolution, remaining assets will be used exclusively for charitable purposes.

Form 1023-EZ must be filed electronically, as shown in the form below.

The version of Form 1023 with a box at the top directing one to the Internet at StayExempt.irs.gov, allows submission of the form electronically. This online version contains prompts to technical information contained on the IRS/EO Division and can be very useful.

*(b) Understanding Impact of Recognition Based on Form 1023-EZ


p. 46. Add at end of subsection:

A private foundation, but not a private operating foundation,1 with anticipated revenue below $50,000 during any of its next three years or with total assets the fair market value of which is in excess of $250,000 can submit this form to determine its qualification for tax exemption. Instructions to the form and the Eligibility Worksheet must be studied in considering whether to use the form.

A revised Form 1023-EZ is expected in the future to address what some consider its deficiencies. The form as originally issued requires no financial information, descriptions of proposed activities, disclosure of the organization's history, relationships of persons involved, or description of anticipated sources of revenue distinguishing between money voluntarily contributed and revenue earned from providing services and goods.

Since its original release, many commentators have felt the "self-assertion" of qualification should not be trusted. The instructions to the form2 provide a "donor" (note no mention of a private foundation) can rely on a Form 1023-EZ for deductibility purposes "until the IRS publishes notice of a change in status, unless the donor or contributor was responsible for or aware of the act or failure to act that results in the revocation of the organization's Determination Letter."

Additionally, doubts prevail despite guidance issues by the IRS that states:3

A determination letter recognizing exemption may not be relied upon if there is a material change, inconsistent with exemption, in the character, the purpose, or the method of operation of the organization, or a change in the applicable law. Also, a determination letter issued to an organization that submitted a Form 1023-EZ in accordance with this revenue procedure may not be relied upon if it was based on any inaccurate material information submitted by the July 21, 2014 Bulletin No. 2014-30 236 organization. Inaccurate material information includes an incorrect attestation as to the organization's organizational documents, the organization's exempt purposes, the organization's conduct of prohibited and restricted activities, or the organization's eligibility to file Form 1023-EZ.

IRS Exempt Organization Select Check4 does not disclose whether an entity requested recognition of tax exemption by filing Form 1023 or 1023-EZ.5 It lists organizations eligible to receive tax-deductible charitable contributions. The listings are updated monthly and are divided into three groupings: those that (1) are eligible to receive tax-deductible charitable contributions, (2) were automatically revoked, and (3) have filed Form 990-N (Postcard). Private foundations cannot necessarily use this list. Qualifying entities on the list are identified as PC (public charity), PF (private foundation), or SOUNK (supporting organization, unspecified type).

Private foundations are not customarily in a position, other than by asking questions of a grantee's personnel, to be aware of fact that an application was "based on any inaccurate material information." For this reason and the fact that Select Check contains insufficient information, PF advisors advise against making a grant to an entity with a determination based on the Form 1023-EZ or recommend that Expenditure Responsibility be exercised.6

p. 85, note 82. Delete 2014-9, 2014-2 I.R.B. 281 and insert 2017-5, 2017-1 I.R.B. 230.

(c) The Substantially Completed Application


p. 94, note 105. Delete 2014-2 I.R.B. 281 § 3.08 and insert 2017-5, 2017-1 I.R.B. 230.

(d) Recognition Application Procedure and Issuance of Determination Letters and Rulings


p. 99, heading. Delete and Rulings

p. 99, note 118. Delete 2014-9, 2014-2 I.R.B. 281 and insert 2017-5, 2017-1 I.R.B. 230.

p. 99, note 119. Delete 1.01(6) and insert _______.

p. 100, note 120. first line. Delete 1.01(6) and insert _____.

p. 100, note 122. Delete 2014-9, 2014-2 I.R. 281 § 4.03 and insert 2017-5, 2017-1 I.R.B. 230 § _____.

p. 101, note 129. Delete 2014-9, 2014-2 I.R.B. 281 § 7.02 and insert 2017-5, 2017-1 I.R.B. 230 § _____.

p. 101, note 130. Delete 2014-9, 2014-2 I.R.B. 281 § 4.04 and insert Id. § _____.

p. 101, note 131. Delete 6.01(1) and...

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