WHD Taxation Blog

Foreign bank accounts and assets are increasingly common in today’s world. Such accounts may be legally opened and used by persons who live, work, conduct business, own real estate, study or play abroad (not just alleged “tax cheats”). However, law imposes a number of reporting requirements (some new and some old) on persons who have an interest in or authority over such accounts as well as significant criminal and/or civil penalties for noncompliance. The Internal Revenue Service (IRS) continues to make compliance with those reporting requirements a high priority enforcement item and, within the next two years, expects to receive information directly from foreign financial institutions on accounts owned by persons. The information provided by those institutions will be cross-checked with IRS records to determine whether the accounts were properly reported. This article identifies two of those reporting requirements and explains how noncompliance can be corrected. To view the full article, click here.

Nearly all tax exempt or nonprofit organizations (other than churches) are now required to file an annual information return or notice with the Internal Revenue Service (IRS)—even small organizations (those with annual gross receipts of $25,000 or less) that have not traditionally been required to file Forms 990 or 990-EZ and even non-charitable organizations. If any type of nonprofit organization does not file as required for three consecutive years (beginning with taxable years that began on or after January 1, 2007), then a provision that was tucked away in the Pension Protection Act of 2006 provides that the organization’s exempt status is automatically revoked by operation of law. To view the full article, click here.

As we have reported, the American Recovery and Reinvestment Act of 2009 (ARRA) provides that certain assistance eligible individuals (AEIs) who lost group health coverage as a result of an involuntary termination of employment through February 28, 2010 (previously extended from December 31, 2009) pay only 35% of their COBRA premiums for up to 15 months (originally 9 months). The remaining 65% is reimbursed to the employer/health insurance provider through an employment tax credit. On March 2, 2010, the ARRA was amended by the Temporary Extension Act of 2010. To qualify under this extension act, individuals must experience a COBRA qualifying event between September 1, 2008 and March 31, 2010. To view the full Special Report, click here.

In a case that spanned eight years and was closely watched by hospitals and tax practitioners throughout the country, the Illinois Supreme Court ruled on March 18, 2010 in Provena Covenant Medical Center v. Illinois Department of Revenue, No. 107328, that the hospital in Urbana, Illinois was not entitled to an exemption from property taxes. As nonprofit organizations (and nonprofit hospitals in particular) come under greater scrutiny and pressure to justify their tax exemptions, the Provena decision sounds yet another alarm.To view the full article, click here.

On March 18, 2010, President Obama signed into law H.R. 2847 as the Hiring Incentives to Restore Employment Act (HIRE Act). The HIRE Act contains hiring and business stimulus provisions that are intended to encourage businesses to hire and retain unemployed workers, and anti-abuse provisions that are intended to improve tax compliance by deterring individuals from hiding assets oversees. This article summarizes four of those provisions: (1) payroll tax holiday; (2) tax credit for retained workers; (3) increased Code Section 179 expense limits; and (4) disclosure of specified foreign financial assets.To view the full article, click here.

In today's global economy, charitable activities, like business activities, often go international. The recent earthquake in Haiti serves as just one example. However, there are unique issues that arise in the context of international charitable giving and grant making for the donor and the organizations the donors choose to support.Charitable contributions that are made directly to a foreign organization by a U.S. individual are generally not deductible for U.S. federal income tax purposes. The same rule of non-deductibility applies to charitable contributions that are earmarked (or solicited by a U.S. organization) specifically for the use of a foreign organization. Some exceptions exist for contributions made to certain charities in Canada, Israel and Mexico. However, a U.S. organization may solicit charitable contributions for its own exempt purposes and, in turn, choose to make gifts or grants to foreign organizations (e.g., Haitian relief). The U.S. tax treatment of those gifts and grants will generally turn on whether the U.S. organization has discretion and control over the contributions it received—in other words, in receiving or soliciting the funds, the U.S. organization cannot be legally bound to use the funds abroad if the donor is to be entitled to a charitable deduction; whether the foreign organization has a determination letter from the Internal Revenue Service (recognizing the organization’s tax exempt status); how the foreign organization intends to use the grant; and/or whether the U.S. organization is a public charity or a private foundation.To view the full article, click here.

Charitable contributions of money made on or after January 12, 2010 and before March 1, 2010, for the relief of victims in areas affected by the earthquake in Haiti, are deductible on taxpayers’ 2009 federal income tax return, thanks to a change in federal law. Contributions of money include contributions made by cash, check, money order, credit card, charge card, debit card or by a cell phone text message (as long as the taxpayer retains a copy of the telephone bill showing the name of the donee organization, and date and amount of the contribution). The contribution must be made to a qualified organization and meet all other requirements for charitable contribution deductions.For more information, visit the Internal Revenue Service website, at which you may also search for qualified charitable organizations. The state income tax treatment of charitable contributions may differ from the federal income tax treatment. In fact, the Wisconsin Department of Revenue announced that taxpayers are not entitled to claim on their 2009 state income tax returns a deduction for charitable contribution made in 2010, regardless of the change in federal law.

The Internal Revenue Service (IRS) recently released a “check sheet” for use by its exempt (or nonprofit) organization auditors to “capture data” about nonprofit organizations’ governance practices and internal controls as part of a long-term study into the relationship between nonprofit governance and tax compliance. A copy of the check sheet may be viewed at http://www.irs.gov/pub/irs-tege/governance_check_sheet.pdf. While the stated goal of the check sheet is to capture data for a study, the check sheet will likely serve as a road map or guide by auditors to probe deeper into an organization’s governance and management in an effort to ensure that the organization is organized and operated exclusively for its exempt purpose, that the organization serves a public purpose, that the organization’s assets are not inuring or benefiting private interests, and that the organization has not engaged in excess benefit transactions during the period(s) under audit. This article identifies the areas covered by the check sheet and concludes with recommendations to help ensure that your organization receives a passing grade.

The check sheet focuses on six areas.  To view the full article click here.

In recent years as a part of fund development efforts, many charities, particularly churches and private schools, have taken to participating in Scrip sales programs. Scrip programs involve the sale of certificates by or on behalf of the charity which may be redeemed at various commercial vendors for goods or services. Scrip brokers arrange with commercial vendors for the purchase or issuance of certificates whereby the merchants receive a payment below the face value of the certificates either directly from the charity or the broker. The charity then undertakes to sell the certificates to supporters for the face value. This generates a rebated benefit, often approximately ten percent (10%) of the face value. The programs have come into question in that a series of tax concerns are posed by the process.To view the full article, click here.

Effective January 1, 2010, Illinois will begin allowing the organization of low-profit limited liability companies or L3Cs.  An L3C is a hybrid business structure that offers an alternative to for-profit and nonprofit companies by combining the pass-through tax advantages of a traditional limited liability company with the social advantages of a nonprofit. Michigan, Vermont, Wyoming, Utah and North Dakota have also adopted statutes allowing the organization of L3Cs.

 

The L3C structure also provides a vehicle for attracting investment in companies founded by social entrepreneurs who may be more interested in promoting social, cultural or environmental changes than making a profit.  Moreover, the L3C structure is intended to facilitate program-related investments (PRIs) by private foundations in for profit companies. 

 

To view the full article, click here.

Many larger nonprofit research institutions have offices that are devoted to the transfer, development and commercialization of intellectual property, such as patents and copyrights. In today’s regulatory environment, however, the activities of nonprofit organizations (in particular, colleges and universities) are being closely scrutinized by the Internal Revenue Service (IRS) and other state and federal government agencies. For example, in 2008, the IRS mailed compliance questionnaires to more than 400 colleges and universities to identify the types and amount of revenue generated by various activities, management and governance practices, and other areas that may be ripe for future compliance efforts. The survey of colleges and universities serves as one additional example of the growing emphasis on nonprofit governance.

 

Against this backdrop, nonprofit organizations that are engaged in technology transfer activities (and their commercial partners) should keep in mind some of the special tax considerations that may arise in connection with incoming and outgoing transfers of intellectual property.

 

To view the full article, click here.