Tuesday, December 4, 2007
Fall 2007 Statistics of Income Bulletin Provides New Information on Tax-Exempt Bonds, Private Foundations and Charities
On November 30, 2007, the IRS issues its "Fall 2007 Statistics of Income Bulletin," IR-2007-195, which outlines data from 134.4 million individual income tax returns filed for tax year 2005. Included in the Bulletin are articles on statistics of tax-exempt municipal bond issuances, the number of private foundations that filed IRS Form 990-PF, and data on information returns filed by charities for tax year 2004.
Should Attorneys Be Able to Take a Charitable Deduction for Donating Client Documents? Jonathan Forman and the U.S. Tax Court Say "No"
On December 3, 2007, Professor Jonathan Forman (Oklahoma) published an opinion piece about the Tax Court's recent denial of a charitable tax deduction to an attorney who contributed his client's records to charity. The attorney, Stephen Jones, represented Timothy McVeigh in his defense on criminal charges in connection with the 1995 bombing of the Alfred P. Murrah Federal Building in Oklahoma City. Here is an execrpt from the article:
In [Jones v. Commissioner, 129 TC 16 (Nov. 1, 2007), the] Tax Court held that under Oklahoma law, an attorney does not own his client’s case file.“Due to the fiduciary nature of an attorney’s relationship to his client, we cannot treat [Jones’] possession of the materials as prima facie evidence of ownership” the court said.Consequently, Jones could not make a valid gift of those materials, and he could not claim a charitable contribution deduction for them. The Tax Court also noted that it had “serious doubts” about the value that Jones had claimed for the McVeigh materials.
Monday, December 3, 2007
Professor Donald Tobin (Ohio State) and Professor Johnny Rex Buckles (Houston) posted abstracts of dueling articles about political campaigning by charities on SSRN's Nonprofit and Philanthropy Law Abstracting Journal. Professor Tobin's abstract of his Georgetown Law Journal article, "Political Campaigning by Churches and Charities: Hazardous for 501(c)(3)s, Dangerous for Democracy," states that "[t]his article argues that the ban [on political campaigning by charities] is both meritorious and constitutional[,] that [charities] should not be permitted to intervene in political campaigns and that allowing them to do so will pose significant risks for the democratic system in the United States." Professor Tobin's abstract continues by calling for the "enforcement efforts with regard to the political campaign ban [to] be made public and delegated to an independent commission, outside the IRS, charged with enforcing campaign related prohibitions in the Internal Revenue Code." In response, Professor Buckles' abstract of his University of Richmond Law Review article, "Is the Ban on Participation in Political Campaigns by Charities Essential to Their Vitality and Democracy? A Reply to Professor Tobin" states that Professor Tobin's "arguments do not establish that the ban on political campaign participation by charitable organizations is essential (1) to protect the vitality of the charitable sector in general, and churches in particular, or (2) to maintain a properly functioning democracy in the United States." Buckles' abstract continues by concluding that "some electioneering by charities is proper, and that alternatives to the ban would better address the most compelling concerns raised by Professor Tobin."
The Washington Post reported on November 26, 2007, about a recent study showing that charitable donations are worthwhile investments. The study, according to the Post, demonstrates that "nonprofit organizations contribute at least $9.6 billion to the Washington region's economy and often deliver services in more fiscally prudent ways than the government." The Nonprofit Roundtable of Greater Washington conducted the study of over 7,500 nonprofits in the Washington metropolitan area and published its results in "Beyond Charity: Recognizing Return on Investment." The study, sponsored by the World Bank and Nonprofit Roundtable, is believed to be the "first attempt in the nation to measure the economic and social impact of nonprofits."
The IRS recently issued a public reminder to charities and churches about the ban on political campaigning. The ban on political campaigning has been in existence for more than 50 years. However, the IRS reminds charities that political campaign ban does not prohibit "advocating for or against issues and, to a limited extent, ballot initiatives or other legislative activities." The IRS points out that Revenue Ruling 2007-41 outlines a number of scenarios to help charities and churches understand the ban on political campaign activity and actions that may arise.
Sunday, December 2, 2007
Between June 14 and September 14, 2007, the IRS received public comment on its proposed redesigned IRS Form 990, Return of Organizations Exempt from Income Tax, which is filed by many public charities and other exempt organizations. This redesign effort is the first major redseign of the Form 990 in nearly 30 years. The IRS website indicates that the newly designed form will be available for the 2008 tax year; that is, for returns filed in 2009.
Professor Dana Brakman Reiser posted an abstract of her Fordham Law Review article on independence of nonprofit directors on SSRN's Nonprofit and Philanthropy Law Abstracting Journal. The article is entitled "Director Independence in the Independent Sector" Here is the abstract:
Many corporate governance reforms currently in vogue in the for-profit sector rely on the value of independent directors. It is not hard to imagine state or federal regulators applying the concept to cure perceived accountability and other failures in nonprofit corporations. Indeed, a few such calls have already been heard and some states already have limited experience with independence requirements. Such adaptations, however, raise important questions regarding the useful meaning of “independence” in the context of nonprofit directors. The concerns that independent director reforms seek to counterbalance – financial interestedness, lack of objectivity, and domination – have different dimensions in the nonprofit sphere than in its for-profit counterpart. This Article explores how a notion of independence would deal with these issues in the particular context of nonprofit corporations. With these issues thus delineated, it then asks whether and how reforms calling for more use of independent directors might be of benefit to the nonprofit sector and nonprofit law.
On December 1, 2007, the New York Times reported that that the IRS has cleared the way for two charities involved in a long-running disagreement over assets and location to settle their dispute by splitting their assets. Under the agreement, the Maddox Foundation of Mississippi will transfer $54 million to the Dan and Margaret Maddox Charitable Trust of Tennessee. After the transfer, the two charities can go their separate ways. The legal dispute arose when
Tennessee went to court in an effort to bring the foundation's assets back to the state after its directors moved it to Mississippi without seeking court approval. It argued that Dan Maddox, who left more than $100 million when he and his wife died in a freakish boating accident in 1998, had little connection to Mississippi and had intended that the bulk of the money be used for charities in Tennessee.
For the full story, see "In Settlement, Charity Will Split Its Assets" in the December 1, 2007, New York Times.