Superhero of the Week Contest

I placed this in my profile initially, but I think that I should post it for you all as well. The Tax Exempt Law Student Blog is holding a weekly competition for the best answers to the interview question "if you had to equate yourself to a superhero, who would you equate yourself to, and why." Email me your submissions, and I’ll pick the winner every Wednesday and post the answer on the blog. Creativity counts, and I can’t wait to read your submissions!

Harvard Loses Manager of Endowment

In the news today, the manager of the Harvard Management Co. will leave after only two years with the endowment.

Read the full article Here

Congress Believes Charitable Work Does Good!

An article by Suzanne Perry notes that house bill 2669 has been proposed to provide student loan forgiveness for persons who work in a “public service” job. The proposed bill would allow a person to erase their loan balances after ten years of consistent payments if they have worked during that time in “public service.”

The bill is a victory for non-profit groups and associations that were lobbying Congress to include non-profit workers in the loan-forgiveness program, as the original Senate version of the bill did not include them.

It is unclear whether the requirements are that the person be enlisted in a job that meets the “public service” criteria for the entire ten-year period. Also, the bill would not apply to any periods of public service occurring prior to October 2007, as the calculation for loan forgiveness is based on payments made for ten years, starting October 2007.

Senate Bill 1952

Patty Murray, D-Wash., has introduced S. 1952, the Community Forestry Conservation Act of 2007, which would provide a federal tax exemption for forest conservation bonds, treating any qualified bond as an exempt facility bond under section 142.

Senate Bill 1952 may be read in its entirety here.

The Great State of Nevada

This may be a little late, but I was looking into the legal news of the sate of Nevada, and this one ignited a little smile for me.

Many of you who read this may not know of the seedy details of the Nevada Justice System, but I promise you that it is typically filled with stories that would be front page material at the Weekly World News. Well, one of the more recent pieces of news, was that in the spring of 2007, Judge Kathy Hardcastle, who is the Chief Judge of the 9th Judicial District, for the County of Clark, State of Nevada (i.e. the Las Vegas District Court) prohibited newly elected judge Halverson from the courthouse. In fact, Judge Hardcastle issued an order saying as much. Chief Judge Hardcastle was concerned about the fact that Judge Halverson had brought two separate bodyguards into the courthouse, and the fact that she had also brought a weapon into the courthouse, citing her safety as the precipitating factor.

Well, the Nevada Supreme Court has issued a decision on Judge Halverson’s petition for a writ of quo waranto, indicating that the “ousting” of Judge Halverson was improper.

You can read the decision from the Nevada Supreme Court Here.

You can also find the current events and the briefs in this matter on the blog-o-sphere, including the oral arguments here.

You may also be somewhat interested to know that the above link is from a former colleague of mine’s blog. An excellent blog entitled Appealing in Nevada. The blog is udated and kept by a wonderful appellate attorney at Kummer Kaempfer in Las Vegas, named Tami Cowden. Tami is a wonderful author having penned several books, and authoring a number of briefs that have been successful in persuading the Nevada Supreme Court that her reasoning and stand is the one that they should adopt. If you get a chance, go check out Appealing in Nevada, it will definitely keep you up to date on the issues of Nevada Appellate Law.

Harrah’s Donates $30M to UNLV

Harrah's Entertainment Inc. has indicated its intentions to donate $30 million to the University of Nevada Las Vegas. The donation will be made through the casino group’s foundation, which will be the largest corporate gift in the University’s history.

UNLV will put the money to good use by paying for half of the cost of an academic building that will anchor the proposed INNovation Village facility, and the remaining funds will go towards research, recruitment, training, and education.

Read the full article here.

The interesting backdrop to this donation is the current donation is that Harrah’s and Caesar’s merged in 2005, creating a mega-gaming entity. The foundation remained a subsidiary of the Harrah’s side (although I believe that Caesar’s has a foundation as well) and thus, the donation will come from Harrah’s, and not the merged entity.

Strangely enough, the donation is going to the University of Nevada Las Vegas, and not the University of Nevada Reno. The reason that this is interesting is because William F. Harrah was a businessman who made his fortune in Northern Nevada, specifically in Reno and Lake Tahoe. You can still drive down busy streets of Reno, Nevada, and see the acres of pasture land that “Bill” Harrah once called home, and which is still referred to as the Harrah Ranch today. I believe that it is a wonderful gesture for the Harrah Foundation to being to distribute the Foundation’s assets, and more so to keep those assets in Nevada; however, I believe that those assets would have been better spent in Bill Harrah’s backyard at the University of Nevada. Additionally, I would like to commend the Harrah foundation, and offer my sincere hope that such donative actions will inspire other gaming entities to reposition some of their earnings back into the community through foundations or other charitable entities.

On a personal note …

I mean, it can’t all be the fun and exciting world of tax code, and tax studies … right? I mean even when buried in work and tax code, you have to be able to get outside, enjoy the fresh air and live the way you want to live. You only get so many days on this little blue marble, and even though many of them are going to be hard and long, you have to make as many of them count as you can.

So, in order to make my days count, I spent the weekend with my wife and her family, as well as with once of my closest and dearest friends, my old roommate from law school. Friday night, we went to the white sox game, great game, white sox down six runs in the bottom of the 9th came back and tied it up to take it to extra innings, and eventually won it 11-10 in the 13th inning.

The next day, we all went to the Northwestern vs. Nevada football game. My wife, and all of her family came out from Nevada (as did I) and they were all cheering for the Nevada Wolf Pack, while I, as a true rebel (as well as a student at Northwestern) rooted for the Wildcats of Northwestern. It was great to see such a great continent of Wolf Pack fans, many of whom I have known either professionally or personally for quite some time. The game was wild, and ended with a Northwestern Victory in the last minute of the game.

After the game, we headed to a “traditional” Chicago pizza place, pizzeria Due, one of the famous Chicago deep dish pizza joints. Great food, fun servers, and a good time had by all.

The next day we embarked on the architecture tour of the city of Chicago along the east, north, and south forks of the Chicago river. Very informative, very fun highly suggested to all.

All in all, it was a wonderful weekend, one of those weekend that truly makes you realize that you can’t work all of the time, otherwise you are going to miss the things that make life worth living. On that note, I’d love to thank my inlaws for coming out, I can’t wait for them to come out again. Likewise for my old roommate, I always love seeing her. And finaly thanks to my wife, because she is so amazing, and so much fun all of the time, I don’t know how I would get through anything without her making sure that I stop and smell the roses!

(pictures are from the Northwestern Nevada Football Game – more to follow if I can figure out how to get them in!)

Entertainers Not So Charitable?

On the lighter side of charity, Cate Doty had an article published today in the New York Times on who among us may be considered the most charitable, and that surprisingly, even with all of the pouring of money and effort into “fashionable” charities that we see celebrities engaging in, they may not rate as the most charitable. The article notes that the donation or the effort is good at drawing attention, but when it comes to whether they are donating for the actual cause, or whether they are donating their time and effort as a publicity stunt, people should be more critical, and should evaluate the donations a little more carefully.

Read the full article here

Transfers of Assets Between Foundations Deemed Acceptable

The Service today also announced two letter rulings that held that the transfer of assets from one private foundation to another won't result in a section 507(c) termination tax, won't be subject to tax under section 4940, won't constitute section 4941 self-dealing, won't be subject to the section 4944 tax on jeopardizing investments, and won't be a section 4945 taxable expenditure.

Read the full revenue rulings here and here

Development Trust Income is Excludable

Today the IRS released private letter ruling LTR 200736022, which in pertinent part holds that the income of a trust that was created to promote economic development is excludable from gross income under section 115(1) and that the trust will be considered an instrumentality of the city under section 170(c)(1) if certain changes are made to its by-laws. Specifically, the article states that

the trust is used for a governmental purpose and performs a governmental function by supporting and furthering the purposes and functions of tax exempt governmental function. The governmental corporation’s function is to promote industry, develop trade, and further the use of the agricultural products and natural and human resources of City and State.

Assets of trust are to be used only to induce new businesses to locate in the City and to foster the prosperity of existing businesses. Such uses are declared to be for a public purpose by the Internal Revenue Code. The Express authority for the establishment of trust is found within the Internal Revenue Code, and though the governmental non-profit entity is financially autonomous, the City will retain substantial control and supervision.

Thus, in conclusion, pursuant to the letter ruling, “Accordingly, (1) Corporation will be an instrumentality of City, provided that Corporation amends its by-laws so as to provide that City may remove, with or without cause, at any time any member of Corporation's governing body, and (2) Fund will be an instrumentality of City by virtue of it being controlled by Corporation, and indirectly controlled by City, provided that Corporation amends Fund's trust agreement so as to provide that Corporation may remove, with or without cause, at any time any member of the Fund's investment committee, as of the effective date of such duly adopted amendments.”

Read the full letter ruling here.

Will Market Woes Effect Charitable Contributions?

An article from the Chronicle of Philanthropy indicates that the current fluctutations in the market, and the perceived impending downturn of the stock market could substantially effect the fund-raising abilities for tax exempt entities, the heart and soul of charitable entities.

“A big market downturn would certainly pose problems for both capital campaigns and big grant requests,” says Melissa A. Berman, president of Rockefeller Philanthropy Advisers, a New York nonprofit group that helps foundations and wealthy donors manage their giving.
What’s more, she says, “there could be trouble ahead for charities even without a sharp dip in stock values. The real challenge is intense market volatility, which creates a lot of uncertainty. Uncertainty makes many people hesitate to make a commitment.”

Continue reading the rest of the article here

New College Tax Credits: Emanuel-Camp-Bayh Bill Comes with Good and Bad Tax Policy

New bills in Congress would expand federal subsidies to higher education in a way that would likely help students little financially but would straighten out the current maze of federal subsidies, according to a new legislative analysis by the Tax Foundation.

The new legislation is designedto simplify the college tax credits; however, disagreement arises as to how much simpler the change makes the law, and it is even less clear how much actual assistance is provide to the students and their tax paying parents.

In a new study released by the Tax Foundation, author Gerald Prante argues that the Emanuel-Camp-Bayh Legislation (H.R. 2458 and S. 1501) does the most good by consolidating the three current provisions students and families can qualify for into one unified credit. The legislation would also bump the yearly tax relief cap up to $3,000 from the present $2,000 level. Prante notes, however, that this increase could be whittled away by colleges that choose to simply increase tuition in response to the increased tax relief offered to families.

The study also raises concerns about the expansion of the credit to include so-called "education related" costs. While such expenses, such as laptops, housing, transportation or supplies, could be properly utilized for school-related work, these credits could also easily be abused. In addition, receiving these credits would require additional paperwork and documentation, adding more complexity to the process instead of less, the bill's intended goal.

See Fiscal Fact No. 100, titled "Expand But Simplify? Education Credits Under Emanuel-Camp-Bayh," online at http://www.taxfoundation.org/publications/show/22583.html.

Are Big Charitable Deductions a Bad Deal?

A fantastic article in the New York Times Business Section discusses the tax implications on large charitable gifts, which have become the fashion lately.

A number of people are complaining that the charitable work being done by America’s wealthy by and through their charitable donations is not as effective as that money would be if it were taxed and collected by the U.S. Government.

Typically, for every three dollars that a high net worth individual donates to charity, the U.S. loses one dollar in estate tax revenue, which some say would be better spent by the Government.

Personally, I agree with a number of America’s wealthy (and hope to one day be so wealthy), that while you have taken away coin from the government’s coffers, you have placed into the world more than the government could have by way of tax collection. Simply stated, those three dollars that you spent on a public good, are three times more than the money the government could have collected. Additionally, that money is guaranteed to go towards a public good, as the tax code and regulations will not permit the deduction of charitable donations unless the gift is actually charitable in nature. Whereas, the government may use the collected revenue in any manner it sees fit, non of which may be charitable, or beneficial to disenfranchised or underrepresented persons.

To the high net worth individuals who continue to donate their capital to the betterment of our nation through charitable works, I say kudos to you, and may you not stop such donations any time soon, as they provide far better good to the country than your lessened tax dollars ever could.

In local news: Ann Lurie, president of Lurie Investments, in Chicago, and a former pediatric nurse, has pledged $100-million to Children’s Memorial Hospital. Her gift will help build a new facility in Chicago’s Streeterville neighborhood and will support pediatric-health research.
The new hospital, which will be named for Ms. Lurie and her late husband, Robert, will likely cost $850-million in all. Construction will begin in the spring, and the facility is scheduled to open in 2012.

Increasing Scrutiny of Non-Profits causing some problems

An interesting article was published this week regarding the scrutiny of non-profits. The gist of the Article is that Congressional committees, state attorneys general and now the Internal Revenue Service (IRS) are placing nonprofit organizations under scrutiny and sending them scrambling for legal advice on sound governance practices.

Excerpt:
The IRS jumped into the governance fray with a good governance practices "discussion draft" earlier this year and proposals for changes to Form 990, an annual financial document that many tax-exempt organizations must file with the IRS. The changes include a new governance section requiring information about an organization's board, governance practices and financial statement practices. The IRS is seeking comment on the proposed changes — which it hopes to roll out for the 2008 tax-reporting season — through Sept. 14.
There's a growing concern about practices in the tax-exempt area and an increased emphasis on how those organizations report activity to the IRS and comply with the law, said IRS spokesman Eric Smith. "The IRS isn't the only player, others have a role too, but we're part of the mix and the 990 filings is a part of it," Smith said. "Our real interest is helping organizations stay within the law." The IRS reporting changes will force nonprofit organizations to become more transparent and even more sensitive to governance issues, Rieman said. "It will compel organizations to be more aware of and more attentive to those new topics that the IRS is forcing organizations to address in more detail on their 990," Rieman said. "It's going to be more work for the organizations and more work for accountants and lawyers." In a June 28 letter to the Senate Finance Committee, the IRS Acting Commissioner Kevin Brown said that the agency is requesting a higher enforcement budget in 2008 to study reporting compliance by the tax-exempt sector and to add 109 staffers to its tax-exempt and government entities division to increase examinations. Smith said the tax-exempt sector's growth is prompting the increased compliance and enforcement efforts. "Any efforts we have in that area are tied toward matching our monitoring efforts with the importance and reach of that important sector," Smith said.

Form 990 Comments Due

The big news currently in the world of tax exempt entities is the proposed revisions to Form 990. As you may or may not know, Form 990 is the form which entities that are exempt from federal income tax are required to fill out on an annual basis in order to retain their tax exemption.



As noted in previous posts, the changes to Form 990 are going to move forward quickly, and thus the desire to influence the changes must be taken seriously, and non-profits and other exempt entities must submit their proposals and concerns to the Service fairly immediately, as the comment period ends September 14th, and the Service has indicated that it will not provide any extension on this period. As noted inWorchester Business Journal,
"The Form 990 will consist of a 10-page "core" that all filers must complete. This core form is supplemented by 15 schedules, identified alphabetically as Schedules A through R, that must be completed only if the filing entity engages in the activities covered by a particular schedule or must report information in addition to that required in the core form.

The first page of the core form will detail the organization's identifying information and summarize its key financial, compensation, governance, and operational information. The summary page will make the return more user-friendly.

The primary changes are in the areas of compensation, governance, activities outside the U.S. and fundraising/gaming. These have been IRS hot buttons for some time.

All in all, the timeline for Form 990 Comments is dwindling. The treatment of tax-exempt entities is similarly getting the short shrift in the commenting process, while when there are larger entities, or rather, entities with the lobbying ability, the comment period may be (and frequently is) extended to meet the deadlines of the entities regulated, not those of the IRS. Here however, because the IRS wants to have this issue tied up with a little bow and neatly and as quickly as possible, the deadline stands at the 14th of September, and the Service appears unwilling to extend such. Oh well. Tax exempt entities have been able to thrive in the systems in place by the Service since their inception, and no matter what the revisions to Form 990 provides, tax exempt entities shall so continue.

New IRS Exemptions (9/5/07)

Under the procedures announced in Notice 92-28, 1992-1 C.B. 515, the IRS on September 4 released six exemption rulings issued by the National Office's Exempt Organizations Division.
The rulings are primarily form letters recognizing exemption under section 501. (The rulings can be retrieved from Tax Analysts' customer service department under the document numbers listed. Call (800) 955-3444.)
The following organizations received exemption as organizations described under section 501(c)(3):
-1. Community Foundation of Charles County Inc., Waldorf, Md. Doc 2007-20300
-1. Miami Valley Academies, Moraine, Ohio. Doc 2007-20301

The following organization received exemption as an organization described under section 501(c)(15):
-1. Topper Reinsurance Ltd., Southfield, Mich. Doc 2007-20302

The following organizations received exemption as organizations described under section 501(c)(25):
-1. TR Continental Plaza Corp., Newport Beach, Calif. Doc 2007-20303
-1. TR Seaway Corp., Chicago. Doc 2007-20304
TR Turnpike Corp., Newport Beach, Calif. Doc 2007-20305 [

How to Evaluate Which Non-Profit is Right for You

The Seattle Times published an article on how to determine the effectiveness of an athlete’s non-profit or charitable entity. While there is a specific focus, there is a good deal of information about choosing the tax exempt entity that is right for you. The Article provides useful guidance and guidelines for the novice, and even the skilled as to the differences between foundations and charities, how to determine what size of charity you would like to donate to, and what good examples are in the industry of spending or donating money to raise money are. All in all it’s a great article for anyone who is interested in how non-profits operate, and how they work within the current tax exempt system.

And They're Off!

And we’re off. Classes started today at the Northwestern University School of Law, and the first of many long tax law orientated classes started the day, while studying the subject, and a night of sugar plum tax fairies are sure to the course de jour for the evening, and the next nine months. While today’s topic, International Tax, is not the subject of this blog, nor the purpose behind my re-enrollment into the world of academia, it did get the ball started, and as we all know, even the longest journey’s start with the first step. And they’re off!

Gov't Not So Tax Exempt Anymore

In an interesting story of biting the hand that feeds you, the government has decided to go after ... itself for unpaid taxes. So, it becomes clear to all of us, that the government is not the world's largest tax exempt entity, but rather is a good tax paying citizen, much like the rest of us.

A number of federal entities have been failing to withhold taxes from individuals, and all of these little failures have resulted in a staggering tax deficit for the United States. All in all, the current deficit for failure to properly withhold taxes by federal agencies totals greater than $45 Million. Amazingly, this amount is still paltry compared to the more than $6 billion that is not properly withheld from corporations in the United States.