Another Blow to the Perpetual Student!

The Tax Court held that a taxpayer could not deduct the $33,000 cost of obtaining a Harvard M.B.A. as an educational expense under Reg. § 1.162-5. Foster v. Commissioner, T.C. Summ. Op. 2008-22 (2/28/08). The court concluded that her Harvard M.B.A. both (1) met the minimum education requirements of her position as Vice- President of Marketing at Reshreshment Brands (at an $117,500 annual salary) within the meaning of Reg. § 1.162-5(b)(2), and (2) qualified her for a new trade or business within the meaning of Reg. § 1.162-5(b)(3).

The court distinguished two cases in which taxpayers had been allowed to deduct M.B.A. expenses (Sherman v. Commissioner, T.C. Memo. 1977-301; Allemeier v. Commissioner, T.C. Memo. 2005-207) because Ms. Foster had an engineering background and the Harvard M.B.A. qualified her for marketing positions. The court also approved a § 6662(a) accuracy-related penalty.

The Tax Court suggested that Ms. Foster's decision to remain in California and not attend the trial in Boston may have contributed to her defeat on both issues:
This case was tried in Boston, Mass., pursuant to petitioner's designation. Petitioner's counsel presented the case at trial without petitioner's testimony and attempted to prove the case through various documents. The Court sustained respondent's authenticity and hearsay objections to most of the documents petitioner's counsel sought to introduce. As a result of her failure to testify, the Court is left with a limited record. It would have been most helpful if petitioner had provided an explanation of her duties before and after receiving the M.B.A.

More Unrelated Business Income for Charities in Economic Downturn

When the economy starts to hit the skids, as is currently happening, people tightent their belt, and superfluous spending such as charitable donations is heavily reduced. As a result, charities engage in more business activity to hold them over until donations flow again. That speculation seems to have been concerned by a recent article in the 2008 Winter Statistics of Income Bulletin. The article states that unrelated business income tax liability rose a whopping 66% from 2003 to 2004. The SOI articles are always very well written, by the way. Wouldn't it be nice if we all just flooded the EO Division with emails thanking them for their work. The abstract of the report indicats:

Tax-exempt organizations produced a total of $9.5 billion of gross unrelated business income (UBI) for 2004, nearly 13 percent more than the 2003 amount. After offsetting total gross UBI with $9.0 billion of total deductions, the resulting UBTI (less deficit) for 2004 was $0.5 billion. Positive UBTI amounted to $1.3 billion for 2004, a 65-percent increase over 2003, and the associated UBIT was $364.6 million. After adjusting UBIT with certain credits and other taxes, the total tax reported on Form 990‑T was $367.7 million.

Guidance on the 990 Postcard

On February 25, 2008, the IRS issued guidance on the Form 990-N, the "e-Postcard," filing requirement of small tax-exempt organizations (i.e., those with gross receipts annually of $25,000 or less). The Pension Protection Act of 2006 requires such organizations to file the e-Postcard starting in 2008 for tax years beginning with 2007. Small tax-exempt organizations are now required to make e-Postcard filings by the 15th day of the fifth month following the close of their tax year. The filing is made electronically only, and the public can view the e-filings on the IRS website. Prior to the new e-Postcard requirement, small tax-exempts were not required to file either Form 990 or 990-EZ. Small tax-exempts still do not have to file these forms. Also, while there is no immediate penalty for failing to file the e-Postcard, those nonprofits that fail to file the e-Postcard for three consecutive years will lose their tax-exempt status. The IRS will send a notice reminding organizations of the obligation to file but the ultimate responsibility rest with the tax-exempt organization. As a result, the IRS is urging everyone -- individuals, accountants, lawyers and volunteers -- to spread the word to local charities. Tax-exempts included on a group return and churches are not required to make this filing. On the other hand, larger tax-exempts with receipts of more than $25,000, private foundations and 509(a)(3) organizations are required to continue filing Form 990 or 990-EZ but are not required to also file the e-Postcard.

As a practical matter, tax-exempt organizations whose volunteers, staffs and directors change more frequently than other types of organizations must be vigilant. That would include updating the IRS on address changes as a matter of practice or protocol. The law requiring the e-Postcard balances the purposes of the act (i.e., giving potential donors more information and informing the public) with the fragile administrative realities of many small tax-exempt organizations. This balance was struck under the law in the following way -- the law does not impose late filing fees for filing late, and an organization's tax-exempt status will not be revoked for failing to file until after three consecutive years of failing to file the e-Postcard.

Additional information is available on the IRS Website

And we're Back!

After an excruciatingly long wait, the tax exempt entity law student blog is back and is moving forward. The hope for this blog in moving forward is that it will grow and encourage an open dialogue with the reader (hopefully readers … but lets not get ahead of ourselves here!) about the practice of law in the field of tax exempt entities, and how to move that practice into an area where there can be an influx of money to the tax exempt world, as well as an increase in corporate good will for those socially conscious entities that are interested in moving in that direction. So … welcome back!

Thank you to Tiffany

Today, I would like to take a minute to express my warmest wishes and sincerest thank you to my wife, Tiffany. Today marks our first anniversary. I think that if you expand that out, it rally means first of many. Tiffany is the love of my life, the drive that keeps me going forward, and the fire in my belly that keeps me warm at night. I could never thank her for all of the things that she does, for all of the sacrifices that she makes, and for all of the love and support that she showers me with. Thank you Tiffany (sposa!) I love you with all of my heart, and I look forward to many more years of marital bliss!

IRS releases several publications relating to Exempt Organizations

Generally, Publication 4630 provides for general guidance for non-profits, and provides you with a “how to” and “where to” for the information that you may be in search of.

IRS Publication 1771 , Charitable Contributions-Substantiation and Disclosure Requirements, explains the federal tax law for organizations such as charities and churches that receive tax-deductible charitable contributions and for taxpayers who make contributions.

IRS Publication 4221 - PC addresses public charities and their activities that may jeopardize a charity's exempt status; Federal information returns, tax returns or notices that must be filed; Recordkeeping -- why, what, when; Changes to be reported to the IRS; Required public disclosures; Resources for public charities. IRS Publication 4221 - PF addresses these same issues with regard to private foundations.

In Local Tax News …

The Chicago Tribune has an interesting article today about taxes levied by the city of Chicago against its residents and non-residents alike. The focus of the story are what the tribune considers those many “nagging little” taxes that seemingly go unnoticed, but are there. The article focuses on what it considers the most egregious, the proposed tax on bottled water. Why not tax bottled water? Place a tax on externalities in order to attempt to prohibit waste and wasteful behavior.

Read the full article here

New Non-Profit Law Podcast

Our friend over at the Non-Profit Law Podcast, Tim Mooney, has released another in his fine series of non-profit law podcasts. I suggest that you get over there and check it out, it can be found here

If a President Falls at the Nature Conservancy will Anyone Hear It?

Long time staffer and president of the Nature Conservancy, Steven J. McCormick, who has served as president of the Nature Conservancy since 2001, abruptly stepped down from his post today after a controversial tenure in which the organization came under fire for land transactions and its relationships with for-profit businesses.

Mr. McCormick said in a written statement that he believes it is time for him to move on. “I’ve reached a personal and professional crossroads and concluded that my work at the conservancy is done,” Mr. McCormick said.

The Nature Conservancy is one of the largest environmental groups and ranked No. 20 on The Chronicle’s most recent list of the charities that raise the most from private sources. The Arlington, Va., nonprofit group raised $475-million from private sources in 2005.

Read the full article at the Chronicle of Philanthropy here

YouTube and Non-Profits, quite the grouping!

YouTube has launched the “YouTube Nonprofit Program YouTube Nonprofit Program. After filling out a basic application, your nonprofit organization may be a featured on the forthcoming YouTube nonprofit channel. This seems like a great way to get a message out across one of the most popular mediums currently. YouTube Nonprofit Program

News Bites Today:

Fair Trade Coffee … all the buzz, ½ the guilt

The New York Times has an interesting article on fair trade coffee today, and about how the industry is outpacing those regular coffee suppliers of the world. Take that Juan Valdez!

Read the full article here


Tribune Gets Tax Windfall

A court yesterday granted the Chicago Tribune a substantial refund after the restructuring of their former subsidiary, Matthew Bender.

Read the tribune article here

Congress Attempts to Convene Philanthropy Group

A Congressional caucus that was formed to discuss issues that affect the charitable world now has 25 members and will start meeting this fall. The issues that the new caucus will discuss are a tax bill that Congress is expected to adopt this fall and the proposed extension of legislation allowing some people to donate money from their individual retirement accounts to charity tax-free.

The caucus is intent on focusing on “increasing communication and dialogue between government and the foundation community with a common goal of increasing philanthropy and opportunities for all of our citizens.”

The chairs of the committee are Robin Hayes, Republican from North Carolina, and Stephanie Tubbs Jones, Democrat from Ohio.

The Democratic members of the caucus are: Neil Abercrombie, Hawaii; Yvette Clarke, New York; Susan Davis, California; Bob Filner, California; Rush Holt, New Jersey; Carolyn Maloney, New York; Kendrick Meek, Florida; Bobby Rush, Illinois; Jose Serrano, New York; Louise Slaughter, New York; Ellen Tauscher, California; Tim Walz, Minnesota; and Henry Waxman, California. The Republican members are: Vern Buchanan, Florida; Dan Burton, Indiana; Mike Conaway, Texas; Thelma Drake, Virginia; Phil English, Pennsylvania; Ron Paul, Texas; Jim Ramstad, Minnesota; Mark Souder, Indiana; Patrick Tiberi, Ohio; Fred Upton, Michigan.

Read the full article here

All rise … today is First Monday

Seeing as today is the first Monday of October, I thought that I would list out the Supreme Court cases with a tax relevance to be heard during this term.

Kentucky Department of Revenue v. Davis, No. 06-666
Date of Oral Argument: Nov. 7, 2007
Issue: Whether a state violates the dormant Commerce Clause by providing an exemption from its income tax for interest income derived from bonds issued by the state and its political subdivisions, while treating interest income realized from bonds issued by other states and their political subdivisions as taxable to the same extent, and in the same manner, as interest earned on bonds issued by commercial entities, whether domestic or foreign.

Knight v. Commissioner, No. 06-1286
Date of Oral Argument: Not Yet Scheduled
Issue: There is a deep, irreconcilable and widely noted conflict among the Second, Fourth, Sixth and Federal Circuits about the meaning of § 67(e) — which permits trusts and estates to deduct on their income tax returns certain administrative expenses — and whether the statute permits fees for investment management and advisory services to be fully deducted on trust’s and estate’s income tax returns. This is an important and recurring question of federal tax law that involves deductions by trusts and estates that total in the billions of dollars annually. The Question Presented is: Whether § 67(e) permits a full deduction for costs and fees for investment management and advisory services provided to trusts and estates.

CSX Transportation Inc. v. Georgia State Board of Equalization, No. 06-1287
Date of Oral Argument: Nov. 5, 2007
Issue: Whether, under the federal statute prohibiting state tax discrimination against railroads, 49 U.S.C. § 11501(b)(1), a federal district court determining the “true market value” of railroad property must accept the valuation method chosen by the State.

MeadWestvaco Corp. v. Illinois, No. 06-1413
Date of Oral Argument: Not Yet Scheduled
Issue: Is the attempt by Illinois to tax the approximately $1 billion gain realized by Petitioner when it sold its investment in Lexis/Nexis in 1994 (which it acquired in 1968 for $6 million and which functioned for 26 years as an independent, nonunitary business) in direct conflict with the decisions of the Court in Allied-Signal, Inc. v. Director, Division of Taxation, 504 U.S. 768 (1992), FW. Woolworth Co. v. Taxation & Revenue Department of New Mexico, 458 U.S. 354 (1982), and ASARCO Inc. v. Idaho State Tax Commission, 458 U.S. 307 (1982) and the Due Process and Commerce Clauses of the United States Constitution?

Boulware v. United States, No. 06-1509
Date of Oral Argument: Not Yet Scheduled
Issue: Whether the diversion of corporate funds to a shareholder of a corporation without earnings and profits automatically qualifies as a non-taxable return of capital up to the shareholder's stock basis, see § 301(c)(2), even if the diversion was not intended as a return of capital."

IRS Notes

The IRS will eliminate from the summary page of a redesigned Form 990 information return for tax-exempt organizations questions on compensation percentages, fundraising percentages, and comparisons of an organization's net assets to total expenses, an IRS official said on September 28. The IRS, which last summer released a draft form of a redesigned Form 990 information return for tax-exempt organizations that includes a summary page designed to provide a concise look at an organization's mission, will eliminate from that page questions on compensation percentages, fundraising percentages, and comparisons of an organization's net assets to total expenses. Read more at Tax Analysts


IRS releases its list of organizations that either did not meet, or no longer qualify for tax exempt status as public charities, and are not considered private foundations. See the full list here


In private letter ruling LTR 200739012, the Service has ruled that an organization hired by the state to provide behavioral healthcare services to state residents will not lose its exempt status when it contracts to provide medication services to another organization nor will the provision of services to the other organization constitute an unrelated trade or business. Read the full private letter ruling here


In private letter ruling LTR 200739014, the Service has ruled that an organization managing a down payment assistance program does not qualify for tax-exempt status as an organization described in section 501(c)(3) because it failed to maintain the documents required to justify its existence. Read the full private letter ruling here

I coulda been a contender … I coulda been somebody.

“You don't understand. I coulda had class. I coulda been a contender. I coulda been somebody, instead of a bum, which is what I am, let's face it.” Much like when it was first uttered in On the Waterfront, the audience response to Newt Gingrich’s similar statement is, “yeah … right.” But, that’s what’s happening with Newt Right now, he’s pulling out of his bid for the Republican nod for the presidential campaign, as he would rather stay as the head of his §527 Political Action Organization. If you have any interest, you can read more here

News Notes

Intuit/Quickbooks has put out a new “non-profit” version – QuickBooks: Premier Nonprofit Edition 2007. This version combines the convenience of QuickBooks with basic nonprofit functionality to provide smaller nonprofit organizations with an easy way to track expenses, record donations and monitor pledges, as well as provide users with a solid financial product that can be up and running in hours, not days. Learn more here

Yale Endowment Just Keeps Growing!

The Yale Endowment, which is the largest academic endowment in the U.S. just keeps getting bigger and bigger. The Endowment grew an impressive 28% this past year, and has topped the $22B (yeah, that’s “B” as in Billion) mark. The New York Times profiled the endowment and its growth in todays business section. Read the article here

From the world of Tax Exempt entities and the government partnering together

An Ohio nonprofit is taking its first-ever federal funding to jump-start a recycling awareness program in four area schools. Communities in Schools, the Columbus arm of the national dropout-prevention organization, has received $18,943 from the U.S. Environmental Protection Agency for its Recycling Awareness program that will take place in four elementary and middle schools in Whitehall City Schools. The grant is one of four distributed nationwide that total nearly $100,000.

Beth Urban, the organization's director of research and evaluation, said the funding will go to after-school programs in the school where students will begin recycling in environmental clubs, go on field trips to landfills and wastewater treatment plants and help initiate a school-wide effort to recycle more and trash less.

"At lot of times recycling isn't ingrained in people's mentality and they automatically throw everything away," Urban said, adding that part of the reason the program is reaching younger kids is because of a generational gap with parents. "A lot of time, parents don't think about (recycling)."

While the recycling program will take place in just four schools during the academic year, Communities in Schools has employees and programs in about 50 schools through partnerships with Whitehall and Columbus City Schools. The organization, opened in Columbus in 1993, is working with a 50-employee base and a $1.9 million budget that is funded through state and city grants along with United Way and corporate funding. Communities in Schools' Columbus branch received $2.38 million in public support during its 2006 fiscal year.

Carl’s Junior Partners with … PETA?

Yes, in the interest of social good, and social awareness, the fast food chain Carl’s Junior (and its affiliated Hardees) have agreed to immediately begin purchasing 15 percent of its pork from suppliers that do not use metal "gestation crates" to confine sows, and increase that to 25 percent by 2009; purchase 2 percent of its eggs from suppliers whose hens are not kept in wire cages by July 2008; and to issue a statement to poultry suppliers stating it will "give consideration to approved suppliers who actively explore and test controlled-atmosphere stunning systems," which animal rights groups consider the most humane way to slaughter chickens.

The agreement is aimed at the improvement of the welfare of animals that provide food for the 1,905 Hardee's restaurants and 1,101 Carl's Jr. restaurants. In a statement made by Jeff Mochal, a spokesman for Hardee's, he indicated, "We take the animal welfare concerns very seriously," Mochal said. "When you meet with PETA they make a pretty good case. We want to stay consistent with where the industry is at now and where it's heading." Carl’s Junior is the second major fast-food restaurant company this year to begin moving toward cage-free chickens and pigs, as Burger King announced similar changes in March.

This is yet another example of how the partnership of corporate America and organizations providing a social or philanthropic good benefits us all. Kudos to you Carl’s Junior and Hardees, you have just earned yourself another socially conscious customer!

Read the Chicago Tribune Article on this Story here.

Genius Awards … missed me again!

So, the John D. and Catherine T. MacArthur Foundation has named the 24 recipients of its 2007 MacArthur Fellowships, and sadly, once again, I was not named. The MacArthur foundation gives the fellowships, commonly referred to as the “genius awards” which recognize individuals from wide-ranging disciplines who show creativity, originality, and a commitment to continued innovative work. 16 of the fellows work at academic or other nonprofit organizations. So, clearly, the intelligence level of the nonprofit world is “keepin’ it real”

Read the article here

House Ways and Means Oversight Subcommittee Hearings

In a related story to the previous post of “How Much Should Charities Give to the Needy,” the House Ways and Means Oversight Subcommittee held hearings yesterday on whether charitable organizations are adequately meeting the needs and requirements of diverse communities. Princeton Researcher Julian Wolpert indicated that his research has shown that charity and volunteer work mostly stays within social, ethnic, racial, religious, and local communities, with little going to the "stranger" (outside a person's social group and locality). "The needs of diverse urban and rural majority and minority communities are largely invisible to donors," he said. Wolpert also said the deduction for charitable contributions does not adequately help the poor. "Our systems of charitable institutions and tax deductibility for contributions are highly cost ineffective as mechanisms for redistribution of household income or social welfare," he said. "The losses in federal and state revenues from charitable deductions far exceed donor transfers to the needy. Redistribution has been demonstrated to be far better achieved through government appropriations than through tax remission or deduction measures." You can read all of Mr. Wolpert’s testimony here.

Read the Tax Analysts report on the hearings here, and get the written testimony here.

How Much Charities Should give to the Needy

An article by Peter Panepento in the Chronicle of Philanthropy notes how large nonprofit groups are not giving an adequate amount of funding to areas with large concentrations of poor and minority residents. This was addressed at a hearing at the House Ways and Means Subcommittee on Oversight, which has some jurisdiction over tax policy. Congress has apparently taken up the mantel of trying to determine what the best tax exempt entity policies for distribution are.

Read the full article here

Criticism for Clinton’s “Giving”

As many of you probably know, President Bill Clinton has released a book entitled “Giving.” The book (unfortunately I’m only half way through it) deals with the impact that the simple act of giving can create, and how much good people in all walks of life can do. The book however, has not been entirely well received. In fact, there are a number of outlets that have actually kind of panned the book. (see
Chris Hedges Review where he analogizes the Clinton Book to the “political equivalent of ‘Marley & Me’”)

The L.A. Times Book Review says, “Clinton doesn't quite come to grips with the hard questions. He prefers cheerleading to analysis, lavishing indiscriminate praise on everyone from the plucky little girl who picks up litter on the beach to the friendly billionaires who finance scholarships and microcredit loans in poor countries. Although the book is nominally divided into chapters highlighting different kinds of giving, the dozens of philanthropic stories that Clinton recounts in these pages swiftly blend into a fuzzy, feel-good blur. Most conclude with the same homily: If only everybody gave their money or time, we'd be living in a different world.”

Another topic is that the book overlooks what is considered by some to be government blame in the area of philanthropy. Jeffrey Sachs of Fortune Magazine says “We wince, for example, at Clinton's description of the "historic Israeli-Palestinian peace accord" of September 1993 and the many good works in its wake. Since the accord actually collapsed, what are the lessons? We are not told. We wince again at Clinton's praise for the outpouring of volunteer efforts in New Orleans after Hurricane Katrina, since we also know that New Orleans has not, in fact, been rebuilt. The problem is that the great policy-wonk President has gone private. Government is a side note, mentioned in passing in the penultimate chapter.”

Having not yet finished the book, even if it is lighthearted, and doesn’t tackle the true underlying issues of the day, I applaud the former president for trying to increase the awareness and the contributions of all Americans. As my grandmother used to say, you catch more flies with honey than with vinegar.

Supreme Court Grants Cert in Two Tax Cases

Boulware v. United States (No. 06-1509): What effect must a federal court give a final, non-collusive state court judgment adjudicating ownership of property in determining a taxpayer’s federal income tax liability arising from that property?
Whether a taxpayer who seeks to invoke the return of capital rule in a criminal tax case must show a contemporaneous intent to treat the corporate distribution as a return of capital?

Meadwestvaco v. Illinois Dept. of Revenue (No. 06-1413): Is the attempt by Illinois to tax the approximately $1 billion gain realized by Petitioner when it sold its investment in Lexis/Nexis in 1994 (which it acquired in 1968 for $6 million and which functioned for 26 years as an independent, nonunitary business) in direct conflict with the decisions of the Court in Allied-Signal, Inc. v. Director, Division of Taxation, 504 U.S. 768 (1992), F.W. Woolworth Co. v. Taxation & Revenue Department of New Mexico, 458 U.S. 354 (1982) and ASARCO Inc. v. Idaho State Tax Commission, 458 U.S. 307 (1982) and the Due Process and Commerce Clauses of the United States Constitution?

Non-Profit Law Podcast

So, for all of you out there who are interested, and I hope many of you are, there is a great podcast being put out by Tim Mooney. nonprofit law podcast is a wealth of information, and provides grea tips, insights, and information regarding the law of nonprofit entities. If you get a chance, check it out here

Newt Gingrich saves a 501(c)(3)’s skin … yeah, Newt.

American Solutions Returned a $50,000 contribution from a 501(c)(3) in August, which upon further review saved that organizations’ exemption. American Solutions is Newt Gingrich's 527, and in what can only be described as an amazing twist of fate, American Solutions return of the money saved the 501(c)(3) from violating the prohibition against lobbying activities.

A 501(c)(3) public charity is prohibited by tax law from giving money to any entity in a manner which supports or opposes candidates for office. A 527, typically, exists solely for political purposes. That is, usually solely for the purposes of supporting or opposing political candidates. American Solutions is incredibly polarized and politicized, so they couldn’t argue that the $50,000 would be put towards non-partisan uses, so they returned the money to the 501(c)(3) to save them from themselves from a sure-to-come complaint. In response, the Hasan Family Foundation, the 501(c)(3), stated: “American Solutions is a nonpartisan effort that is focused upon educating Americans. None of the funds contributed to the organization are going towards politicians or a political party. We would never contribute foundation funds to a political party and/or candidate.”

The reality is that tax law is a lot stricter than that. The Hasan Family Foundation can do nothing at all that supports or opposes candidates. Giving money to an obviously partisan 527 that will use that money to fund things that support or oppose candidacies crosses the line. The folks at Hasan Family Foundation should count their lucky stars as the typically not charitable minded American Solutions were savvy enough to notice that such donation would put them both in the lobster pot!

Superhero of the Week – Patrick S. as Spider-Man

Congratulations to Patrick S., this week’s winner for the Superhero of the week contest. Patrick Compared himself to Spider-Man, and did a very thorough job in said comparison. This week’s submission for superhero of the week pretty much sets the bar for the A+ answer. I encourage all of you to read it in its entirety as it is a great answer. We had tons of great submissions this week. If yours didn’t get picked, continue to send them in, maybe next week will be your week!

I've always related best to Spider-Man, and have felt that way long before his late-90's movie-fueled revival. It's sort of a cliché to say that Marvel Comics' characters seem a lot more "real" than DC's Golden Age icons--Superman, Wonder Woman, etc. – because they are flawed and conflicted and deal with more real-life issues. Well cliché or not it's true, and it's more true for Spider-Man than any other character. Batman may be cool, but he's also a borderline-psychotic billionaire who just happens to be a genius and apparently the world's greatest athlete, and that's just not easy for me to relate to. Wonder Woman is literally a goddess. Superman is an alien who is practically omnipotent, and sheesh, how boring is that? What I like best about Spider-Man is that he's not all that 'super' when you really think about it. Thanks to a radioactive spider bite (I know, I know; it's really not that much more realistic than being the Last Son of Krypton, but stick with me) he's stronger and faster and more agile than a normal person, and he can cling to walls. That, plus the fact that his Spider-Sense warns him of danger ahead of time – but often not soon enough to actually allow him to do anything about it – is pretty much the extent of his powers. In the movies he also gains the ability to sling webs from his wrists organically, but in the original comics he actually had to build web-shooters from scratch (a fact that resulted in an oft-repeated crisis wherein Spider-Man would run out of "web fluid" at crucial moments). Spider-Man's enemies are often much stronger and more powerful than he is, and as a result he is often forced to fall back on his wits or just plain old dumb luck to get by. He doesn't win every battle he fights. And rarely is he out to save the world; usually he's just trying to make his hometown a little safer. At heart, all superhero comics are really about wish fulfillment, usually adolescent male wish fulfillment. Spider-Man accomplishes that, but it also hits almost every note perfectly in telling the relatable story of an imperfect guy who's just trying to figure out the right thing to do, and much of the time getting it wrong. When you get down to it, Peter Parker is just a poor kid from Queens. For most of his life he's been painfully awkward with girls, and often through no fault of his own has to endure public humiliation from knuckle-draggers with idiotic names like "Flash." His sense of responsibility makes it difficult for him to carry on a normal life and strains relationships with people he cares about. Sometimes his hard work and good intentions still blow up in his face. And to top it all off, about half of the population often seems to resent and suspect the worst of him (usually thanks to disinformation supplied by newspaper magnate J. Johah Jamison). In the end his reward is usually not the key to the city or statues in his honor, but only the knowledge that his anonymous sacrifice has hopefully made the world a slightly better place. I doubt there's a human being out there who can't relate to at least parts of his story, and I personally relate to pretty much all of it.

The Work of Tax Exempt Entities is Far from Just Tax Based

The American Red Cross, one of the largest public charities in the United States, has fired another shot in their trademark infringement case against Johnson & Johnson. Johnson & Johnson is suing the Red Cross claiming that the Red Cross has infringed on J&J’s trademark. The Red Cross disputes these claims, and on Thursday, the Red Cross asked that the claims be thrown out.

The Chronicle of Philanthropy has an article about the matter available here. The article contains a link to the statement released by the Red Cross setting forth their position.

New FAQ's on Form 990-N, the "e-postcard"

The IRS has posted an update as to the frequently asked questions that surround the redesign and the changes surrounding the new Form 990-N. Form 990-N is an information return that small tax-exempt organizations must file with the Service.

Following the enactment of the Pension Protection Act of 2006, exempt organizations whose gross receipts are usually $25,000 or less are required to file with the IRS a Form 990-N information return, also referred to as an "e-postcard." The e-postcard, according to one of the questions posted to the IRS site, asks for basic identifying information such as the organization's legal name, address, and employee identification number, as well as the name and address of its principal officer.

The IRS directs small exempt organizations to file an e-postcard "every year by the 15th day of the fifth month after the close of [their] tax period." The IRS has indicated that it is working on developing a "simple," Internet-based filing system for the e-postcards so organizations that do not own a computer can complete their e-postcards off-site. Also, because the system will be Internet-based, organizations will not need to acquire software to file the form, according to the IRS. (You can see all 14 frequently asked questions here.

IRS Bulletin Provides Change in Place of Filing Forms 1096 and 1098-C

Tax Analysts reports today of the IRS’ changes in filing instructions for organizations receiving motor vehicle, boat, or airplane deductions which are sued by the donee organization to report contribution of qualified vehicles with a claimed value exceeding $500 for calendar years ending after December 30, 2008. The IRS Bulletin provides guidance on the reporting requirements under § 170(f)(12)(D) of the Internal Revenue Code. All Forms 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, along with Form 1096, Annual Summary and Transmittal of U.S. Information Returns, filed after December 31, 2007, must be filed with the Internal Revenue Service Center in Kansas City, Missouri, instead of the afore proper place, Ogden, Utah. The Internal Revenue Service Center at Ogden remains the location for Form 1098-C filed on or before December 31, 2007.

Comments on the Redesigned Form 990

In response to the request by the IRS for comments on the resdesigned Form 990, The National Assocaiton of College and University Business Offices (“NACUBO”) submitted comments indicating that the redesigned Form 990 information return filed by tax-exempt organizations would place additional reporting burdens on colleges and universities. Additionally, Professor Evelyn Brody of the Chicago-Kent College of Law offered recommendations for redesigning the Form 990 information return filed by tax-exempt organizations. Also, the American Institute of CPA’s (“AICPA”) provided suggestions for successful implementation of the new draft Form 990, ways to mitigate increased taxpayer burden resulting from the redesigned form, and comments on the need for clarity and consistency in compensation reporting. And Eve Borenstein of the Borenstein and McVeigh Law Office LLC provided additional comments to the IRS on the redesign of the Form 990 information return filed by tax-exempt organizations.

Google Gives $30M for Space Exploration

Google gives to X Prize Foundation. Google, should be in contention for the most socially conscious company of the year award. They have done great things in their creation of Google.org, and the donation of their own funds to Googl.org in order to pursue social entrepreneurship; however, Google has also recently pledged $30M to the X-Prize Foundation. The grant is for a new effort to encourage private organizations to develop a robotic spacecraft that can successfully land on the moon.

The Google Lunar X Prize is open to nongovernmental teams of scientists and inventors around the world. A grand prize of $20-million will be awarded to the first team to land a vehicle on the moon by 2012. The craft must successfully roam the lunar surface for a distance of 500 meters and transmit back a specified “mooncast,” which would include high-definition video and other data.

An additional prize of $5-million will go to a second team that completes this task by 2014. As much as $5-million in bonus prize money will be awarded to teams whose vehicles complete additional tasks, such as roaming beyond 500 meters or discovering water or ice.

Google is providing all of the prize money, while the foundation will oversee the contest. The X Prize Foundation develops cash-award programs designed to spur scientific and technological innovation.

Go Google! Keep up the good work. The chronicle of Philanthropy has published an article on the gift, which is available here.

Social Entrepreneurship: Should it Receive Tax Exemption Benefits?

Google founders Larry Page and Sergey Brin have established a foundation which intends to devote employee time and one percent of Google’s profits and equity towards philanthropy with the hope that one day Google.org will have a greater impact globally than Google itself. Google.org is the philanthropic arm of Google and is the umbrella which includes the work of the Google Foundation, some of Google's own projects, as well as partnerships and contributions to for-profit and non-profit entities.

The difference between Google.org and other typically philanthropic entities is that Google.org will not receive a tax exemption as a charitable entity, and will conduct its operations for profit.

By choosing for-profit status, Google will have to pay taxes if company shares are sold at a profit — or if corporate earnings are used — to finance Google.org. Any resulting venture that shows a profit will also have to pay taxes. Shareholders may not like the fact that the Google.org tax forms will not be made public, but kept private as part of the tax filings of the parent, Google Inc. However, Larry Page and Sergey Brin, believe for-profit status will greatly increase their philanthropy’s range and flexibility. It could, for example, form a company to sell the converted cars, finance that company in partnership with venture capitalists, and even hire a lobbyist to pressure Congress to pass legislation granting a tax credit to consumers who buy the cars, as charitable entities are not permitted to lobby congress, except to a very limited extent.

The first project that Google.org has authorized is the production of an efficient hybrid car that utilized efficient gasoline consumption, ethanol consumption, and plug in electric use. This incentive program, known as RechargeIT, was launched in June, and provides $10M in research funding for the winners.

The question that I pose is whether these entities that are operating for a social good at a reduced profit margin should be allowed to benefit from the stated social goal of providing charitable services to the public, which typically receive charitable status und the Internal Revenue Code? If you think about it, these social entrepreneurship are arguably creating more social good, than say a large donation to a University or a Church, and could be considered to be bringing more quality back to the lives of all people; however, because they are operating for a minimal profit, they are not entitled to any tax relief. While I don’t know what the answer should be, I think that it is an interesting piece, and should be embraced by all, whether it receives for tax exemption or not. Way to go Google! Continue to show the captains of industry how to properly steer their ship in order to effect the greatest good for the world as a whole, and not just for their own pocketbooks. And, as I’m sure that Google will see, the combination of good work with an industrial backing will in fact increase their utility in both a financial and personal happiness sense.

The New York Times has also written an article on the formation of Google.org, and the philanthropy being asserted by Google. Read the full New York Times article here.

Hail to the Victors!

Well, you can’t spend all day everyday enjoying the ever-changing world of tax. So to fully experience the Midwest, my wife and I traveled to Ann Arbor Michigan this weekend to watch two of the most storied college football programs in history, the University of Michigan Wolverines and the Notre Dame Fighting Irish do battle in the historic confines of the Big House. While neither program appears to be that storied this year (both were 0-2 coming into the game on Saturday), it was still fun to be in such a memorable venue, and to see the wolverines get their first win of the year.

We went to Ann Arbor to visit a good friend from Reno who is finishing up dental school at the University of Michigan. We stayed with her, and went out in Ann Arbor, enjoying the town, taking the dog out to breakfasts with us, and generally enjoying life outside of the Northwestern Law Library. Thanks to Katy for being a tremendous host, thanks to the Two for being a good traveling companion and being well behaved all weekend, and thanks to Tiffany for being a wonderful wife and traveling companion, and making even the simplest little road trip a cause for celebration. Ok, back to studying, thanks for a great weekend, and now I'll gat back to topical posts for tax exempt entities.

More on the departure of the Harvard endowment chief …

An article in the New York Times business section addresses the subject blogged here on September 12th, 2007. In particular, the inability of large university endowments to be able to keep top level talent for the adminstration of the foundation. The problem, as addressed by the article, “A dropout problem for Colleges,” by Jenny Anderson, is that “Being the chief investment officer of an endowment is one of the hardest jobs in the investment business because there are so many constituencies involved,” said Verne O. Sedlacek, president and chief executive of Commonfund and a former chief financial officer at Harvard Management Company. “In my job, I have 1,800 clients with one objective — investment performance. An endowment has one client with 1,800 objectives.”

Consider the constituencies: students who may want you to shed your holdings in companies that do business in Sudan because of the genocide in Darfur, or professors who do not make a lot of money and happen to have very specific expertise in just about everything. It is a clash of civilizations; liberal academia meets cold, crass capitalism.

“I’ve never been called names worse than those I was called by professors and others on campus,” one former endowment head said. “It gets personal very quickly.”

Thus, with all the economic world turmoil, and the different objectives for endowments, the job is at once coveted as prestigious, and unwanted as it is frightfully hard to keep everyone content.

Read the full article Here

Superhero of the Week!

So, you may or may not have seen in my profile that there is a contest for the best weekly superhero answer. The superhero answer is the answer to the interview question "if you had to equate yourself to a superhero, who would you equate yourself to, and why." Creativity counts in this one.

The best submissions of the week will be posted every Wednesday.

This weeks winner comes from an attorney in Nevada, Mike L., who has said that if he were a superhero, he would be “Zan from Wonder Twins. Zan was the twin brother of Jayna, his much cooler and hotter sister. His sister had the awesome power to be able to turn into any animal. Unfortunately for Zan, he could only turn into the various forms of water, including mist, liquid, steam, and ice. Truth be told, this is the most inadequate superpower ever, unless you are fighting Wicked Witch of the West. I closely identify with Zan because my sister is a superior human being in all ways to me, but I still know how to get a little steamy, or give the cold shoulder when necessary (ice cold!).”

Great answer Mike L.

Check back next week for the “superhero of the week”

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.