Nonprofit Law Prof Blog

Exempt from Property Tax? Prove It!

The Pittsburgh Post-Gazette reports that Allegheny County (Pennsylvania) Executive Rich Fitzgerald recently announced plans to send letters to of all 9,000 properties currently identified as non-government, tax-exempt to demand proof that those properties meet the current five-part test for property tax exemption.  Ironically, county legislation passed in 2007 required a systematic review of such exemptions every three years, so the letters are actually three years late.  This systematic review is only one more avenue being pursued by the county and Pittsburgh to collect revenues from nonprofit organizations, as we have previously blogged about a "voluntary" payment agreement with colleges and universities (2009) and a payments-in-lieu-of-taxes (PILOT) agreement with a coalition of nonprofits (in place from at least 2010 through 2012).

LHM

Proposed Electronic Donations Only Rule for Combined Federal Campaign

The Office of Personal Management is proposing a rule that would require all donations made through the Combined Federal Campaign by federal employees to be made electronically, according to a Washington Post article.  The article highlights concerns raised by the proposed rule among the charities that benefit from the CFC because the vast majority of CFC donors and donations are not currently made electronically.  There is therefore a risk that a switch to an electronic-only system will significantly reduce overall donations.  Additional information regarding the proposed rules, which also involve consolidating the 184 existing local federal coordinating committees, shifting the campaign dates to Oct. 1-Jan. 15 instead of Sept. 1-Dec. 15, and other changes, can be found in a Government Executive article, a Federal Times article, the CFC-50 Commission Report that led to the proposed rules, and the proposed rules themselves.

LHM

NYT: "US Withdraws From Project With Russia on Civil Society"

The New York Times reports that in the wake of various measures deemed hostile to nonprofit groups working in Russia, Deputy Assistant Secretary of State Thomas Melia announced that the United States would no longer be part of a "civil society working group" created in 2009.  The article reports the group, which the US and Russia created under the US-Russia Bilateral Presidential Commission, has not met in plenary session for many than a year. We have previously blogged about some of the actions that apparently contributed to the withdrawal, including requiring nonprofits receiving funding from outside of Russia to identify themsevles as foreign agents.

Additional coverage:  Reuters; Washington Post.

LHM

Mirkay on U.S. Tax Exempt Organizations and U.S. Foreign Policy

  Nicholas Mirkay, III has recently published what promises to be an interesting read in the North Carolina Law Review regarding the extent to which domestic tax exempt organizations must or should operate consistently with U.S. Foreign policy.  The answer seems rather obvious to me.  Which is not to say the question is not worth asking.  I think exempt organizations have no more obligation to support foreign policy, even "clearly defined foreign policy," whatever that may be, than they do domestic policy.  I distinguish legal from illegal acts, of course.  My interest is piqued, though, because from the sounds of his abstract below, Mirkay seems to think U.S. exempt organizations are beholding, at least to some extent, to U.S. official foreign policy.   Maybe he only means to say that U.S. exempt organizations may not violate law in their international dealings.  Somehow, though, I think he means more than that.  But what if the United States has a "we don't recognize the legal authority of country X to imprison a U.S. citizen" policy.  Or "we don't negotiate with terrorists" policy.  In either case, does that preclude a domestic nonprofit from funding a famous ex-politician's trip to that country in an attempt to win the release of the poor victim.  It's not called the "independent Sector" for nothing.  It's just my opinion, but even tax subsidized organizations ought not to be confined to the political mainstream in their dealings outside the country.  The whole purpose of the Independent Sector, it seems to me, is to offer alternatives to orthodoxy, whether in business or government.  Too often, perfectly innocent groups that happen to support the collateral victims of unpopular causes find themselves portrayed as a protagonist, one way or the other, and then dragged into whatever conflict is raging around those victims.  And inevitably, it seems, the farther an exempt group strays from the proverbial "party line" the more likely it is to be accused of being "un-American" or have its tax exemption challenged.  From the abstract below, I gather Professor Mirkay might differ with me to some extent.  And I acknowledge a nagging concern in my own intuitive response.  If exempt organizations need not adhere to or support clearly defined foreign policy, why should they be required to support clearly defined domestic public policy?  Somehow I think there is a qualitative difference in domestic and foreign policy that would justify my differing approaches.  I know Mirkay to be a very thoughtful scholar by the way so this is a purely and intentionally provocative, admittedly speculative (since I have not read the article yet) theoretical comment not a "dissing" of his very useful scholarship. I will certainly enjoy reading the article, I'm sure.  In the meantime, here is the abstract to Globalism, Public Policy, and Tax Exempt Status:  Are U.S. Charities Adrift at Sea?

 

This article wrestles with whether charitable organizations’ international activities can or should impact such organizations’ domestic tax exemption. It addresses the issues raised by such international activities — if those activities contravene current U.S. foreign policy or international law is a charity’s tax-exempt status adversely affected? Does such contravention implicate the public policy doctrine? On one hand, this article agrees with other legal scholars that the public policy doctrine needs congressional attention, including some codification of the doctrine to provide legislative boundaries and ensure against arbitrary and capricious application by the Internal Revenue Service (“IRS”). On the other hand, this article contends that the automatic inclusion of U.S. foreign policy and international law as components of “established public policy” would be administratively impracticable and onerous and would result in significant compliance difficulties for charitable organizations. Considering all these challenges, this article nevertheless proposes that some codification of the public policy doctrine accompanied by a listed transaction scheme, similar to those employed in other areas of the Internal Revenue Code (“Code”), could provide Congress and ultimately the IRS with the ability to target certain international activities as inherently in conflict with tax-exempt status. In addition, this article proposes that the codification of the public policy doctrine should include an excise tax regime, as an alternative to revocation, to address isolated or small violations of the public policy doctrine in relation to a charitable organization’s overall tax-exempt activities. Although these proposals are not without pitfalls and criticisms, they will nevertheless provide practical guidance to charitable organizations, thereby aiding compliance and ensuring uniform treatment of charitable organizations with international activities or operations.

 

dkj

Joint Committee Issues Report on Charitable Contributions In Anticipation of House Hearing

The Joint Committee on Taxation yesterday issued a report titled Present Law and Background Relating to the Federal Tax Treatment of Charitable Contributions in preparation for the House Committee on Ways and Means hearing scheduled for this Thursday on this topic.  The report describes the history and current tax rules in this area, the economic rationales for, the economic effects of, and the tax cost of the charitable contribution deduction in its current form, and various recent proposals for reform.  The report does not endorse any specific proposals, although it notes the possible effects of the proposals discussed.

LHM

University Endowments and Conflicts of Interest

Last month the New York Times reported on potential conflicts of interest at Dartmouth College relating to connections between its endowment investments and university trustees.  The article states that last year an anonymous letter to state officials in New Hampshire, where Dartmouth is located, alleged that such conflicts existed because the endowment has invested in at least six investment funds in which past or current trustees have an interest.  It also notes that such apparent conflicts are not unique to Dartmouth, although the number of such conflicts there appeared to be on the higher end for at least Ivy League institutions.  The New Hampshire Attorney General's office ultimately determined that an official investigation was not warranted into the allegations.

The articles fails to consider, however, whether these investments were chosen in a manner that complied with Dartmouth's Conflict of Interest Policy or otherwise were adequately vetted.  It therefore risks creating the impression that a conflict of interest is always a situation to be avoided regardless of whether the transaction at issue will ultimately benefit the university or other institution, as determined by disinterested parties.  While a charity may choose to take that position out of an abundance of caution, such a position is generally not required under the fiduciary duties owed by a charity's leaders to the organization.

Additional Coverage:  Reuters; Union Leader.

LHM

A For-Profit to Nonprofit Hospital Conversion

Last month the Orange County Register reported that the for-profit Prime Healthcare Services had donated its 131-bed facility in Huntington Beach to its nonprofit arm, the Prime Healthcare Services Foundation.  While the article highlighted the benefits to the local community that would come from the change in ownership, it did not go into much depth regarding why a for-profit entity would choose to transfer one of its facilities to nonprofit control other than to note unspecified financial advantages and tax breaks that would come with nonprofit (and presumably 501(c)(3)) status.  Nor did the article provide many details regarding the relationship between the for-profit entity and its related Foundation.

According to the Foundation's Forms 990-PF (available on Guidestar), Dr. Prem Reddy, who is the Board Chairman and CEO for Prime Healthcare Services, formed the Foundation in December 2006.  Since that time Prime Healthcare Services has donated five hospitals to the Foundation, including the Huntington Beach Hospital, and as of October 1, 2009 began the 60-month termination period required for it to convert to public charity (as opposed to private foundation) status.  Based on the Foundation's website, Dr. Reddy currently serves as the Chairman of the Foundation's Board, as well as leading his Family Foundation to which he has donated more than $20 million since its founding in 1989. 

The audited financial statements attached to the Foundation's 2011 Form 990-PF note that some of the Foundation's subsidiaries (which own specific hospital facilities) have management agreements with related, for-profit entities that also bear the Prime Healthcare name, but on their face the fees paid under those agreements appear reasonable.  While the Prime Healthcare system has apparently been the subject of various investigations over its long history, including two current federal investigations relating to Medicare billings and patient confidentiality, none of the investigations appear unusual for a large healthcare system.  Overall, these entities may provide an interesting case study of interactions between related for-profit and nonprofit entities in the healthcare area.

LHM

Fiscal Cliff Agreement Likely Helps Charities

We previously blogged that while the charitable contribution deduction dodged a bullet (for the most part) in the fiscal cliff agreement, charities remain concerned that the deduction may be vulnerable in future budget and debt ceiling negotiations.  What is worth also highlighting, however, is the extent to which charities benefited from the American Taxpayer Relief Act of 2012.  While the Act reinstated the overall limitation on itemized deductions, it also extended several charitable giving incentives that had expired, specifically:

• The charitable IRA rollover provision;

• The enhanced charitable deduction for contributions of food inventory; and

• The basis adjustment to stock of S corporations making charitable contributions of property.

For more details about these provisions and the likely effect of other aspects of the Act on charitable giving see the report by the Tax Policy and Charities project of the Urban Institute.

LHM

IRS States Exemption Not Automatically Retroactive for Slow Filing 501(c)s

In its annual Revenue Procedure covering determiniation letters and rulings for tax-exempt organizations (Rev. Proc. 2013-9), the IRS made an interesting change this year relating to applications for recognition of exemption by most entities not required to file such applications.  Here is the IRS' explanation of the change:

The provisions in section 11.01 regarding the effect of determination letters or rulings recognizing exempt status of organizations described in § 501(c), other than §§ 501(c)(3), (9), (17), and (29), have been revised. Prior to this year, and back to 1962, when such organizations applied for recognition, the IRS would usually recognize such organizations as tax-exempt from the date of formation, no matter how long the interval between the date of formation and the date of application. In addition to the practical difficulties of ascertaining an organization’s purposes and activities for this period, such recognition is now potentially inconsistent with the provisions of § 6033(j), which automatically revokes the exempt status of an organization that fails to file required Form 990 series returns or notices for three consecutive years. The new procedure adopts a practice similar to the rule for § 501(c)(3) organizations for these organizations, generally permitting recognition from the date of formation if the organization has always met the requirements for exemption, has applied within 27 months from the end of the month in which it was organized, and has not failed to file required Form 990 series returns or notices for three consecutive years.

The effect of this change is to encourage such entities to file their application for recognition of exemption (IRS Form 1024) within 27 months of formation or face the risk that the IRS will not grant such recognition retroactively and may seek to collect taxes owed for the period before the application is filed.  This change therefore represents a possible tightening up of the rules relating to non-501(c)(3) tax-exempt organizations, although a relatively mild one.

LHM

IRS EO Division Annual Report & Workplan

IRS Exempt Organizations Division has issued the its annual report for Fiscal Year 2012 and its workplan for Fiscal Year 2013.  Highlights include:

• Staffing declined slightly from FY2010 (900) to FY 2012 (876).

• Examinations also declined slightly during the same period from 11,449 returns to 10,743 returns (not including compliance checks).

• Disclosures from the IRS to the states remain limited, with only eight agencies in seven states apparently able to meet the disclosure eligibility requirements for such disclosures, although those eight agencies received approximately 27,000 disclosures (which includes 501(c)(3) exemption application approvals).

• Seventy percent of the approximately 60,000 applications were reviewed and closed within 120 days.

• Among its projects for FY2013 is sending a questionnaire to "self-declared" section 501(c)(4), (5), and (6) organizations that filed Form 990 in 2010 or 2011, presumably to determine to what extent there may be questions regarding their claimed tax-exempt status among these groups.

LHM

Maine Supreme Court preserves private school’s tax-exempt status and rental activity

Earlier this week, the Maine Supreme Court addressed whether a private boarding school’s practice of renting some of its facilities for private use jeopardized the school’s tax-exempt status. The court held that it did not.

Maine law offers a property tax exemption for property "owned and occupied" or used by literary and scientific institutions "solely for their own purposes." The trial court believed the problem with the school in question was that, because the school rented the property out for private use, the property for which it was seeking tax exemption was not occupied solely for the school’s own purpose.

In upholding the school’s tax-exempt status, however, the court held that the school’s practice of renting the facilities for private use amounted to a "de minimis incidental use." Further, this use of the school’s facilities accounted only for about one percent of the school's operation budget and therefore did not interfere with its tax-exempt purpose.

This decision seems favorable to nonprofit organizations and educational instructions, but its opponents believe the court’s decision is at tension with the statute’s requirement that the property be used “solely” for the organizations own purpose.

http://www.mpbn.net/Home/tabid/36/ctl/ViewItem/mid/5347/ItemId/26068/Default.aspx

dab

Nonprofits challenge the constitutionality of IRS Form 990

The IRS Form 990 is a twelve-page document that requires most federally tax-exempt organizations to disclose their mission, programs, and financial information. If an organization required to complete a Form 990 fails to do so, the organization is at risk of losing their tax-exempt status.

Additionally, the list of organizations required to complete the form includes all private 501(c)(3) organizations. Recently, many nonprofit organizations have lost their tax-exempt status for failure to complete the form. However, absent on the lists of organizations required to complete the form are faith-based organizations such as churches.

The fact that the IRS excludes churches from completing the Form 990 has caused some of the required organizations to bring suit alleging the IRS is wrongfully engaging in preferential treatment of churches. Further, these organizations are asking that the court declare the exemptions void as a violation against the Establishment Clause of the United States Constitution.

Exempting churches from completing the Form 990 raises not only interesting constitutional questions, but also more basic fundamental questions as to the justification for exempting faith-based organizations in the first place.

http://christiannews.net/2013/01/01/atheist-activist-group-sues-irs-over-preferential-treatment-of-churches/

dab

Should the law require nonprofits and charities to bond officers who handle money?

In the past few weeks, two individuals plead guilty to embezzling money from nonprofit organizations. One woman, the former treasurer of the Institute Volunteer Fire Department in West Virginia, plead guilty to embezzling $25,000 from the fire department, and an additional $33,000 from the West Virginia State University Alumni Association, for which she also served as treasurer. Similarly, the wife of the former executive director of Charleston’s Multicultural festival plead guilty in U.S. District Court to federal tax fraud after she admitted to embezzling over $300,000 from the organization. Both of these organizations rely heavily on public funding.

The misappropriation of public funds raises significant questions regarding whether nonprofit organizations and charities should be required by law to bond officers who handle public money. Advocates in favor of legally imposed bond requirements argue this sort of law would help the organizations get their money back when funds have been mishandled.

However, in many states, nonprofit organizations and charities are not required by law to bond officers who handle money. Still, some nonprofit organizations are taking a more proactive, preventative approach by including bond requirements in the organization’s bylaws.

http://wvgazette.com/News/201302060122

 dab

Nonprofits worry new federal tax law will impede charitable giving

On January 1st of this year, Congress passed a new tax law that places limitations on tax deductions for high earners. Under the new law, the limits on deductions reduce the value of all itemized deductions for individuals earning more than $250,000 and married couples earning more than $300,000.

Consequently, charities and nonprofit organizations fear the new limits will frustrate the charitable giving/donations on which they rely. However, experts do not believe the new limits will reduce charitable giving. Instead, experts believe the new law offers incentives for high earners facing the increase in tax rates to search for deductions. Sandra Swirski, executive director of the Alliance for Charitable Reform, explains the “charitable deduction incentive is different than any other deduction or credit in the tax code.” This is because charitable deductions encourage people to give away some of their income unlike other deductions and credits that encourage people to purchase things and write them off.

That the fears of the nonprofit organizations are at variance with the optimism of the experts poses interesting questions concerning the factors that may influence incentives for charitable giving. Do individuals donate for the tax benefits? Are individuals motivated by their own sense of altruism?

http://news.yahoo.com/charities-worry-tax-law-reduce-donations-183701251.html

dab

Pollard v. Commissioner – Conservation Easement Conveyed For Quid Pro Quo Not Deductible

In Pollard v. Comm’r, T.C. Memo. 2013-38, the Tax Court sustained the IRS’s disallowance of a charitable income tax deduction claimed with respect to a conservation easement conveyed to Boulder County, Colorado in 2003. The court found that the grant of the easement had been part of a quid pro quo exchange and, thus, was not a charitable gift eligible for a deduction.

The taxpayer had purchased the 67.51-acre parcel in 1998 and, because it consisted of less than 70 acres, had to obtain approval from the county to increase the property’s building density. After public hearings, the Board of County Commissioners agreed to grant the taxpayer’s subdivision exemption request, which allowed the property to be split into two lots, in exchange for the taxpayer’s grant of a conservation easement with regard to the property to the county.

The Tax Court explained that, in ascertaining whether a conveyance was made with the expectation of any quid pro quo, courts examine the external features of the transaction, thus avoiding the need to conduct an imprecise inquiry into the motivations of individual taxpayers. If it is understood that the taxpayer would not have made the conveyance unless the taxpayer received a specific benefit in return, and if the taxpayer could not have received such benefit unless he made the conveyance, the transaction does not qualify for the § 170 charitable contribution deduction.

The taxpayer maintained that no quid pro quo arrangement existed, arguing, inter alia, that approval of his subdivision exemption request had been “virtually guaranteed,” that the Land Use Code sections governing his exemption request did not require the grant of a conservation easement, and that all documents relating to the grant of the easement referred to it as a “gift.” One of the county commissioners even wrote a letter to the taxpayer in 2008 (presumably because of the IRS audit) stating that, to the best of his recollection, he did not require the taxpayer to grant the easement in exchange for the subdivision exemption.

The Tax Court was unpersuaded. Based on its examination of the external features of the transaction the court found that the subdivision exemption request was far from being “virtually guaranteed” and, in fact, had little chance of being granted without the taxpayer’s promise to grant the easement. The evidence indicated, inter alia, that:

• the Board of County Commissioners had insisted at public hearings that the taxpayer grant a conservation easement to the county before they would grant the subdivision exemption;
• two of the commissioners acknowledged at one public hearing that the taxpayer would not be granting the easement gratuitously since he would be receiving an increase in building density beyond that allowed by the Land Use Code;
• the commissioners adopted a resolution approving the taxpayer’s subdivision exemption request, subject to certain conditions, one of which was the grant of the easement to the county;
• the Land Use Department wrote a letter to the taxpayer reminding him that he was required to grant the easement to the county; and
• no representative from the county signed the donee portion of the IRS Form 8283 (appraisal summary) that the taxpayer filed with his income tax return, nor did the taxpayer attached an explanation to that form explaining why it was impossible to obtain a signature from the donee.

The Tax Court also sustained the IRS’s imposition of a § 6662(a) accuracy-related penalty, finding that the taxpayer did not act with reasonable cause and in good faith in claiming a charitable deduction with regard to the easement conveyance. The evidence produced at trial, said the court, demonstrated that all of the parties involved understood that the easement was contributed for the express purpose of encouraging the county to grant the taxpayer a subdivision exemption, and it would be unreasonable for the court to believe that anyone involved in the transaction (i.e., the taxpayer, his advisers, or the county commissioners) believed that there was an unrequited contribution.

NAMcL

Private country club earning $1.2 million in profits is tax-exempt

The Carolina Country Club is one of the most prestigious clubs in Raleigh, North Carolina. The club has been around for over 100 years and membership to join is by invitation only. While the Carolina Country Club’s most recent tax forms shows it generated nearly $13 million from dues and other resources, the club’s nonprofit status insulates it from paying corporate income tax.

The Internal Revenue Service tax code allows social clubs, including those that charge members thousands of dollars to join such as Carolina Country Club, to apply for tax-exempt status.  Unlike traditional nonprofits, such as churches or charities, country clubs are not required to have a charitable purpose. However, the clubs still have to pay property and sales tax and tax on investment and nonmember income. Moreover, nonprofit status for organizations like Carolina Country Club imposes restrictions on advertising, paying dividends, and bookkeeping privacy.  The real benefit these clubs receive is avoiding the corporate income tax.

http://www.wral.com/wral-investigates-private-country-clubs-can-claim-nonprofit-status/12068405/

dab

Ways and Means Schedules Hearing on Charitable Contribution Deduction -- Get on the Schedule!

Naturally, testifying before Congress is a good way to make your scholarship relevant.  I have done it once or twice.  And while it may seem as though the legislators have their own agenda and are interested in your testimony only if it fits within that agenda, the experience is actually very enlightening and even fun.  It is also pretty easy to get on the schedule if you persistently call soon enough.  Just contact the Congressional staff person responsible for scheduling witnesses via phone (there is a phone number in the press release below and most Universities have a Washington DC lobbyist contact who can also assist you to get on the schedule, you should really find out who that person is and use him or her) and then send them a copy of your scholarship by overnight or, better yet, courier service.  If you are a law school professor, your Dean will usually jump at the chance to have one of his or her faculty members testify before Congress.  Deans love to report that "one of my faculty members has been called to testify before Congress."  They love it, take my word for it.  It is not such a big deal but in a way it really is a big deal -- sort of like getting your work published in a top journal is not really such a big deal but at the same time its a big deal in the insular academic world.  Anyway, below is the press release announcing a hearing next week.  If you have written on the topic recently and want to testify, you gotta move on this quickly and be persistent.   (If the links in the press release do not work you can get to the links by going to the original by clicking on "press release" above). 

 

Camp Announces Hearing on Tax Reform and Charitable Contributions

Tuesday, February 5, 2013

Congressman Dave Camp (R-MI), Chairman of the Committee on Ways and Means, today announced that the Committee will hold a hearing to examine the itemized deduction for charitable contributions as part of the Committee’s work on comprehensive tax reform.  The hearing will take place on Thursday, February 14, 2013, in Room 1100 of the Longworth House Office Building, beginning at 9:30 A.M.

Any individual or organization interested in providing oral testimony at this hearing with respect to the charitable contribution deduction should contact the Committee’s tax office to discuss the possibility of receiving an invitation, pursuant to the procedures set forth below.  (See “Details for Submission of Request to Be Heard.”)  In addition, anyone not scheduled to give oral testimony may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.  A list of invited witnesses will follow.

BACKGROUND:

Section 170 of the Internal Revenue Code provides a deduction to the roughly one-third of taxpayers who itemize their deductions for charitable contributions.  Taxpayers may contribute on a deductible basis to institutions such as churches, universities, hospitals, museums, and certain other tax-exempt organizations.  Certain limits apply to the deduction, such as percentage-of-income limits and purposes for which contributions may be made, and the recently reinstated overall limitation on itemized deductions for taxpayers above certain income thresholds.

Proposals to limit the deduction for charitable contributions have appeared in recent years, in some cases as part of broader tax reform proposals that lower rates and in other cases for the purpose of raising taxes to fund specified levels of government spending.  Examples of some of these restrictions include: limiting the tax rate against which contributions may be deducted; a dollar cap on total itemized deductions; a floor below which contributions may not be deducted; and the replacement of the deduction with a tax credit available regardless of whether the taxpayer itemizes.  Different types of limitations could have varying effects on giving. 

As part of the Committee’s ongoing commitment to pursue comprehensive tax reform in an open and transparent manner, the Committee is holding this hearing to allow stakeholders and members of the public the opportunity to share their perspectives on the deduction and on various proposals to modify it. 

In announcing this hearing, Chairman Camp said, “Public charities and private foundations perform invaluable services for our society, especially during this time of economic slowdown and high unemployment.  These organizations depend upon the goodwill of the American people – the most giving and charitable people in the world.  Because of the critical role that charities play, the Committee must hear directly from the charitable community before considering any proposals as part of comprehensive tax reform that might impact their ability to obtain the resources they need to fulfill their missions.”

FOCUS OF THE HEARING:

The hearing will examine the itemized deduction for charitable contributions as part of the Committee’s work on comprehensive tax reform.  It also will receive testimony from witnesses on previous proposals to modify the deduction and its value.

DETAILS FOR SUBMISSION OF REQUEST TO BE HEARD:

Requests to be heard at the hearing must be made to the Committee on Ways and Means either by telephone at (202) 225-5522 or by e-mail at [email protected].  Please include the phrase “charitable deduction” in the subject line of the message and submit the request no later than the close of business, Thursday, February 7, 2013.  The request should include a brief summary or outline of the proposed testimony.

In view of the limited time available to hear witnesses, the Committee may not be able to accommodate all requests to be heard.  Those persons and organizations not scheduled to give oral testimony are encouraged to submit written statements for the record of the hearing.  All persons requesting to be heard, whether they are scheduled for oral testimony or not, will be notified as soon as possible after the deadline for submitting requests.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select “Hearings.”  Select the hearing for which you would like to submit, and click on the link entitled, “Click here to provide a submission for the record.”  Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance with the formatting requirements listed below, by the close of business on Thursday, February 28, 2013.  Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical problems, please call (202) 225-3625 or (202) 225-2610.

FORMATTING REQUIREMENTS:

The Committee relies on electronic submissions for printing the official hearing record.  As always, submissions will be included in the record according to the discretion of the Committee.  The Committee will not alter the content of your submission, but we reserve the right to format it according to our guidelines.  Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response to a request for written comments must conform to the guidelines listed below.  Any submission or supplementary item not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.

1. All submissions and supplementary materials must be provided in Word format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official hearing record.

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased.  All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.

3. All submissions must include a list of all clients, persons and/or organizations on whose behalf the witness appears.  A supplemental sheet must accompany each submission listing the name, company, address, telephone, and fax numbers of each witness.

dkj

Pennsylvania tax credits offer students opportunity scholarships

Pennsylvania recently released a list of the lowest rated public schools in the state. Based on this list, eligible students across the state may now have the opportunity to attend a higher-achieving public or nonpublic school pursuant to Pennsylvania’s Opportunity Scholarship Tax Program. Eligible students are those enrolled in the lowest performing schools, or those living within the attendance boundary of a low-achieving school, and students belonging to families with incomes no more than $75,000 plus $12,000 for every dependant household member.

Pennsylvania law requires the Pennsylvania Department of Education to notify school districts of their low-achieving status by February 1. After the schools have been notified, the parents of the children attending those schools must also be notified of the school’s low-achieving status and must additionally be provided with information on how to apply for the opportunity scholarships.

Over $50 million in tax credits across Pennsylvania have enabled the Opportunity Scholarship Tax Program to fund scholarships capped at $8,500 for a student without a disability, and $15,000 for a student with a disability. However, because funding for the scholarships is contingent on businesses making contributions in exchange for tax credits, the available amount of local scholarship money is uncertain.

 http://www.post-gazette.com/stories/news/education/pa-dept-of-education-lists-lowest-rated-public-schools-673060/

 http://www.portal.state.pa.us/portal/server.pt/community/school_services_office/9153/p/1202312

dab

Tax-exempt religious employers also exempt from contraception mandate

This story comes from a recent piece in the Los Angeles Times discussing the Obama administration’s proposal that employees of religiously affiliated employers get coverage for contraception through a separate, private insurance company free of cost.

The Affordable Care Act’s contraception mandate is the center of many lawsuits that challenge the law for imposing on religious freedom. Advocates of reproductive rights and religiously affiliated employers vehemently disagree on the appropriateness of the contraception mandate and the administration’s most recent proposal attempts to reconcile the concerns of both groups.

Under this new proposal, churches and other houses of worship are exempt from the contraception mandate as long as the institutions qualify as a tax-exempt religious employer. Hospitals, charities, and universities having religious affiliations primarily providing nonreligious services, on the other hand, do not receive exemption from the contraception mandate in the same way as churches and houses of worship. However, the proposal offers a system by which employers are sheltered from having to pay for the contraception coverage and from having to arrange contraception coverage for their employees.

http://articles.latimes.com/2013/feb/01/nation/la-na-insurance-contraceptives-20130202

dab

United States Files Complaint Against Facade Easement Appraiser

On January 30, 2013, the United States filed a complaint in the United States District Court for the Northern District of Ohio against Michael Ehrmann and the company he owns with his wife, Jefferson & Lee Appraisals, Inc. Accoding to the complaint, Mr. Ehrmann has appraised more than 90 conservation easements for purposes of the deduction under IRC § 170(h) and earned substantial fees for his appraisals, ranging up to $40,000 for a single appraisal.

The government's complaint alleges that, continually and repeatedly, Mr. Ehrmann’s appraisals, inter alia,

• are unreliable due to material and substantive errors and omissions, unsupported assumptions, and his failure to comply with generally accepted professional appraisal standards;
• substantially overstate the fair market value of the easements by hundreds of thousands, if not millions, of dollars;
• distort data and provide misinformation or unsupported personal opinions to achieve artificially high values that are often completely out of line with actual property values in the market area; and
• are riddled with problematic methodology and conclusions that lead to substantial valuation misstatements of the resulting charitable contribution deductions taken by his clients.

As one example, the complaint alleges that Mr. Ehrmann appraised a building in Grand Rapids, Michigan; acknowledged that the building had been purchased in 2006 for just over $3.5 million; stated that the relevant real estate market had not “exhibited a net change over the past several years;” but then determined that the property’s “before” value in 2009 was just over $26 million. The complaint further alleges that Mr. Ehrmann has attempted to obstruct IRS enforcement efforts by claiming not to have any work files for his appraisal reports, while professional standards require that an appraiser maintain such files. “This sort of abuse of a high-dollar charitable contribution deduction,” states the complaint, “inspires contempt for the system of honest, voluntary income tax reporting.”

The government has requested that Mr. Ehrmann and Jefferson & Lee Appraisals be permanently enjoined from preparing appraisal reports for any purpose relating to federal taxes and from providing expert testimony or any other appraisal support for taxpayers challenging a disallowed deduction of a donated conservation easement. The government has further requested that the defendants provide to counsel for the United States a list of clients (including each client’s address, phone number, e-mail address, and federal tax identification number) for whom they have prepared appraisal reports for tax purposes on or since November 1, 2009.

In their Answer, Mr. Ehrmann and Jefferson & Lee Appraisals state that Mr. Ehrmann, who is 70 years old and has now retired, has, throughout his long career:

• routinely drafted extremely lengthy and detailed reports to support his work in hundreds of appraisals;
• declined to perform appraisals for many prospective clients who have approached him because he concluded that they (1) had unrealistic expectations of benefits, (2) were unwilling to incur costs for proper architectural and cost documentation necessary to determine the true value of the easement, (3) appeared unwilling to agree to a permanent donation of the easement, or (4) could not identify an appropriate donee of the easement; and
• always acted with the utmost good faith and professionalism.

The defendant’s answer further alleges, inter alia, that:

• Mr. Ehrmann’s work has been an invaluable part of historic preservation efforts, in that numerous preservation projects would not have been financially viable without his accurate and well-documented appraisals; and
• his façade easement appraisals have been entirely reasonable, estimating losses for the donation of the easements highlighted in the Government’s complaint of approximately 25% of the values that would otherwise have been achievable if the buildings had been built out without preservation of the historic facades.

NAMcL