Friday, October 28, 2022

S Corporations and Charitable Contributions

In light of the recent changes to the AGI limitations for charitable contributions, it is interesting to explore charitable giving in the S Corporation context.  In 2019, a CPA Journal article noted that unique planning opportunities exist for charitably minded S corporation shareholders.  For example, the rule that limits the pass-through deduction to the shareholder’s basis in S corporation stock and debt is not applicable when the S corporation donates appreciated property to a charity.  Thus, even if a shareholder has a zero basis in his/her S corporation stock, appreciated property donated to a charity would pass through as a charitable contribution.  In effect, the deduction becomes the portion limited by (and reducing) basis, plus the appreciation in the donated property. This interesting article addresses the incentives Congress has provided since 2006, which are still applicable under the TCJA.


Khrista McCarden

Hoffman Fuller Associate Professor of Tax Law

Tulane Law School 

October 28, 2022 in Current Affairs, Federal – Legislative, In the News | Permalink | Comments (0)

Thursday, October 27, 2022

Millennials and Impact Investing

According to an impact investing article from earlier this year, millennials are driving an increasing trend toward impact investment and away from traditional charitable giving.  The article addressees a 2021 study by Fidelity Charitable that revealed millennials are much more likely to engage in impact investing than older investors.  The study examined impact investing and charitable giving among 1,216 US investors, who have at least 25,000 in investable assets from sources other than an employer retirement plan.  Approximately 61% of millennials reported that they had participated in impact investing.  Tellingly, 62% of millennials reported that they believed impact investing has a greater potential than traditional philanthropy to “create long-term positive change.”  In sharp contrast, 72% of baby boomers reported that charitable giving rather than impact investing was the better course to create meaningful change.

Scott Nance, Vice President of Impact Investing at Fidelity Charitable, has remarked, “The trend toward values-based investing will only grow as millennials come to control a larger share of wealth.”  Millennials are focused on having their broader values and social good align with their investments.    The study also revealed that only one third of all investors engage in impact investing.  However, 40% of those surveyed responded that they would consider making their first impact investment in 2022. Of those investors who already participate in impact investing, 41% plan to dedicate an even greater amount to impact investments.

Among the participants, the most cited barrier to participation in impact investing is a lack of knowledge.  Interestingly, of those already participating in impact investing, 42% learned about it from a financial advisor and 30% from an investment firm. The most common vehicles for investment among those surveyed are mutual funds or individual publicly traded companies that meet criteria along environmental, social, or governance themes.  Of these three themes, environmental was at the top with half of impact investors polled citing it as their top concern.   Social themes garnered the second spot with 27% whereas governance themes came in last with 16%.

As discussed in yesterday’s post, it is interesting to note the ways that impact investing may work in tandem with traditional philanthropy.  Fidelity commented upon its Giving Accounts, which allows donors to combine philanthropy with impact investing.  Its Giving Accounts saw a 67% increase in assets allocated to impact investments, raising the total to $3 billion in 2021.  


Khrista McCarden

Hoffman Fuller Associate Professor of Tax Law

Tulane Law School

October 27, 2022 in Current Affairs, Studies and Reports | Permalink | Comments (0)

Wednesday, October 26, 2022

Private Foundations and Impact Investing - Social Issuance Bonds

The U.S. Impact Investing Alliance is an organization dedicated to raising awareness of impact investing in the United States, increasing deployment of impact capital, and collaborating with stakeholders to help build the impact investing ecosystem.  Recently, the Alliance released a study regarding impact investing tools and private foundations.

The authors conclude that foundations can and should more effectively use their balance sheets, even if the tools they are using have different degrees of mission alignment.

For example, the authors argue for greater use of guarantees by foundations.  At the same time, they note that a recent innovation is to combine an investment grade credit rating with a guarantee project. RWJF is one example of a foundation securing a AAA credit rating from S&P and Moody’s in 2021 that in turn allowed it to provide investment grade guarantees.

They also the address social bond issuances. This tool was used to increase several foundations’ programmatic activity in the face of COVID-19, the economic crisis, and increasing racial unrest in the United States. While use of a bond is not new, use of bonds by foundations is new, especially in terms of grantmaking activity.  For example, the Ford Foundation was an early user of bonds, having a $273 million bond issuance in 2017 that was used to finance renovations of its New York City headquarters.  Since 2020, even more foundations have issued social bonds, which include some of the most notable ones, such as the MacArthur Foundation, the W. K. Kellogg Foundation, the Andrew W. Mellon Foundation and others.

The set of three crises--- COVID-19 pandemic, economic downturn, and racial injustice--- was a catalyst for many foundations to utilize social bonds in order to quickly provide a response. However, some foundations specifically issued longer-term bonds, such as the Ford Foundation, and acknowledged this was a “once in a lifetime” event. Others, such as the MacArthur Foundation, issued only ten-year bonds, which suggests they may use bonds as a funding source again in the near future.

Also, the authors note the effect of stock market performance on endowment annual giving. They note that during troubling times, endowments decrease in value as the stock market plummets, which in turn decreases payouts at a time of crisis when they are needed most. This was apparent in early 2020 even though the stock market rebounded relatively soon. Foundation executives anticipated a tightening of their grant budgets in early 2020, so they searched for other ways to increase giving while leaving their endowments untouched.

Finally, the authors address the importance of a strong credit rating. They note that a precondition to fully utilizing the capital market is a strong credit rating which allows an issuer to attract low-cost debt. Notably, the Ford Foundation, Rockefeller Foundation, and W. K. Kellogg Foundation all received AAA ratings from S&P and Moody’s. Because their balance sheets were so strong and given the low levels of leverage and social bond designation, their bond issuances were oversubscribed by both impact and traditional investors. As of now, foundations ranging from 1.6 billion to 17.8 billion have been have issued investment-grade bonds.

Also, interestingly social bond issuance was combined with a decision to hire minority-led underwriting firms in addition to more traditional actors. Some foundations, such as the MacArthur Foundation, engaged minority-led firms like Loop Capital and Seibert Williams Shank. This was an outstanding example of extending the impact of social bond issuance from serving as a mere tool to the social processes as well.

The authors urge foundations to do more with more. By this, they mean to implement new strategies that increase the use of balance sheets for mission as well as to modify existing tools to promote risk-taking, innovation, and field building. They provide examples of many foundations that are already engaging in these steps as a way of encouraging other foundations to expand their breath and for foundations as a whole to more greatly utilize these tools on a regular basis and on a greater scale in the future.


Khrista McCarden

Hoffman Fuller Associate Professor of Tax

Tulane Law School

October 26, 2022 in Current Affairs | Permalink | Comments (0)

Saturday, October 15, 2022

Newman’s Own Billboard

B301B6CE-703C-4B55-A419-98C3CE9306B9This morning, driving back from taking my daughter to school for a cross-country meet, I passed this billboard. And, while it doesn't have any particular legal significance, it struck me as an apropos way to follow up Wednesday's post and my general interest in the interfamilial drama arising out of the Newman's Own Foundation.

The billboard's a little hard to read--the sun was rising in a terrible place for the picture, but it says: "We're not in the food business to get rich. We're in it to enrich kids' lives. Newman's Own: Radically good. 100% Profits to Help Kids."

Have a happy weekend!

Samuel D. Brunson

October 15, 2022 in Current Affairs | Permalink | Comments (0)

Friday, October 14, 2022

Nonprofit News and New Streams of Revenue

Bank-phrom-Tzm3Oyu_6sk-unsplashSomething I've been following for a while is the shift of news reporting from for- to nonprofit. I've even blogged here about it, most recently last October when WBEZ acquired the Chicago Sun-Times.

The deal closed in January, making the Sun-Times the newest entrant in Chicago's nonprofit news constellation. And just last week, the Sun-Times made another announcement: given the critical nature of local journalism, it was dropping its paywall and making all of its online content entirely free.

Since the advent of the internet, newspapers have gone between paywalled and non-paywalled content. Could advertising alone fund journalism?

Continue reading

October 14, 2022 in Current Affairs, In the News | Permalink | Comments (0)

Wednesday, October 12, 2022

F̶a̶m̶i̶l̶y̶ Radio Drama Network

Service-pnp-anrc-15200-15260vLast time I blogged here, I spent several days talking about the family drama surrounding the Newman's Own Foundation. (Here, here, here, and here to be precise.)

Yesterday, the New York Times dropped a story about another family nonprofit drama, this one concerning the Himan Brown Charitable Trust and the aptly named Radio Drama Network (which is also a tax-exempt organization).

Himan Brown created, produced, wrote, and directed radio dramas, starting in roughly the golden age of radio dramas and continuing throughout his long life. While he passed away in 2010 (just shy of his 100th birthday), he, like many, established a legacy: a charitable foundation. That foundation, organized as a trust, provides funds to charitable organizations that further Mr. Brown's legacy.

Continue reading

October 12, 2022 in Current Affairs, State – Judicial | Permalink | Comments (0)

Tuesday, October 11, 2022

Lott, Shelly, Dietz, and Mitchell, The Regulatory Breadth Index: A New Tool for the Measurement and Comparison of State-Level Charity Regulation in the United States

Cindy M. Lott (Indiana), Mary L. Shelly (Penn), Nathan Dietz (Independent), and George E. Mitchell (Baruch) have published The Regulatory Breadth Index: A New Tool for the Measurement and Comparison of State-Level Charity Regulation in the United States in Nonprofit Management & Leadership. Here is their abstract:

The bulk of charity regulation in the United States occurs at the state level, yet state-level charity regulation remains relatively under-researched within nonprofit scholarship, particularly from a comparative perspective. The complexity and variation in statutory regulation, coupled with the large volume of legal research required to study state-level charity regulation systematically, has impeded scholarly progress toward a better understanding of the US charitable sector. We address this problem by deriving a state-level charity regulatory breadth index (RBI) that will enable nonprofit researchers to contextualize state-level charity research within a broader framework and to incorporate state-level regulation into analyses across states. Policymakers can also benefit from the ability to benchmark their regulatory regimes against their peers.

Samuel D. Brunson

October 11, 2022 in Publications – Articles | Permalink | Comments (0)

Monday, October 10, 2022

Hackney, Public Good Through Charter Schools?

Professor Philip Hackney (University of Pittsburgh School of Law) has posted Public Good Through Charter Schools? 39 Ga. State. L. Rev. (forthcoming 2023). Here is the abstract:

Should nonprofit charter schools be considered "charitable" under section 501(c)(3) of the Internal Revenue Code and be entitled to the benefits that go with that designation (income tax exemption, charitable contribution deduction, etc.)? Current tax law treats them as such; the question is whether there is a good rationale for this treatment. In addition to efficiency and equity, I consider political justice as a value in evaluating tax policy. By political justice I mean a democratic system that prioritizes the opportunity for more people to have a voice in collective decisions (political voice equality or PVE). Thus, a tax policy that decreases PVE violates the value of political justice. Efficiency theory and equity provide modest help in evaluating the charter question, but the tool of political justice provides important value. When viewed in its entirety the granting of tax exemption to charter organizations violates the norm of political justice. The charter movement takes decision-making regarding community education away from a community and gives it to private parties. Instead of the community controlling major educational decisions, charter management organizations control those decisions. Still, allowing parents to seek the form of education they deem right for their children may increase voice in part. Additionally, valid democratic authorities across the country have chosen to provide some education through charter vehicles. Given the strong interest in keeping tax policy in harmony with democratically chosen policies, most ideal in this conflict would be to maintain tax-exemption. However, to be charitable, a charter school and its management organization ought to be democratically operated in some broad sense. The Article thus suggests some ways to increase the democratic accountability of charters.

Samuel D. Brunson

October 10, 2022 in Publications – Articles | Permalink | Comments (0)

Latest on Ukraine Crowdfunding: Tomas the Tank; United24 Approaches $200 Million

Ukraine-Flags_385_FThe BBC reports the latest successful fundraising effort to support Ukraine, with a Czech crowdfunding campaign raising more than $1.3 million to pay for a modernized Soviet-era T-72 tank named, appropriately, Tomas. The Czech defense ministry and Ukraine's embassy in Prague supported the campaign, which the Czech Defense Minister called "a proper present" for Russian President Vladimir Putin's 70th birthday. Organizers of the campaign say it will continue, in order to pay for more military equipment for Ukraine.

The article notes that the main charitable donations programs to support Ukraine is United24, which to date has raised almost $200 million for military equipment, humanitarian and medical aid, and for rebuilding Ukraine. It also reports that Russia is trying to raise funds through crowdfunding as well, although some of those campaigns are reported to be less than voluntary.

Lloyd Mayer

October 10, 2022 in In the News, International | Permalink | Comments (0)

Nonprofits In the News (Not in a Good Way): Brett Favre; J.D. Vance; Hershel Walker; Indictments in Minnesota

6a00d8341bfae553ef0278806cd3f2200d-320wiSometimes it seems every scandal has a nonprofit involved, and every politician has a questionable nonprofit connection.

For example, the continuing revelations about Brett Favre and alleged misuse of government welfare funds include both a nonprofit that was in the middle of that misuse and also new allegations about Favre's own foundation and its grants to support college athletes (and possibly the volleyball facility at the heart of the welfare funds scandal), even given the foundation's purported purposes being limited to helping children and cancer patients. (Favre's foundation is, despite the name, a public charity that appears to receive much of its contributions from people other than the former NFL football player.)

As for politicians, the N.Y. Times published an article over the weekend titled "J.D. Vance’s First Attempt to Renew Ohio Crumbled Quickly. In 2017, the Republican candidate for Senate started a nonprofit group to tackle the social ills he had written about in his 'Hillbilly Elegy' memoir. It fell apart within two years." And it earlier published an article titled "Herschel Walker’s Company Said It Donated Profits, but Evidence Is Scant," reporting that of the four charities that supposedly received 15 percent of the profits from Walker's company, "one declined to comment and the other three said they had no record or recollection of any gifts from the company in the last decade."

And in Minnesota, the other shoe dropped for the Feeding Our Future scandal, with a U.S. Department of Justice press release stating "U.S. Attorney Announces Federal Charges Against 47 Defendants in $250 Million Feeding Our Future Fraud Scheme." In addition, a federal court has denied the request of another nonprofit, Partners in Nutrition, to be reinstated to the child nutrition program given its ties to some of the alleged participants in the fraud.

Lloyd Mayer

October 10, 2022 in Federal – Executive, Federal – Judicial, In the News | Permalink | Comments (0)

University Endowments in the Spotlight: Endowment Tax; Continuing Criticisms

Download (1)The Wall Street Journal reported last week that "Endowment Tax on Wealthiest Universities Netted a Fraction of Predictions in 2021" (subscription required). The story came in the wake of continuing criticisms of university endowments from the across the political spectrum. For example, Turning Point USA recently called Harvard's endowment a "$54 billion hedge fund," a characterization disputed by USA Today in "Fact check: Harvard's endowment is taxed, has limitations on spending". And an opinion piece in the Boston Globe was titled "How the richest university endowments exacerbate inequality", while another opinion piece in Politico was titled "What Trump Gets Right about Harvard. Rich schools don’t pay taxes. What has America gotten in return?"

Lloyd Mayer

October 10, 2022 in In the News | Permalink | Comments (0)

Hospital Charity Care in the Spotlight: Aggressive Bill Collection; Criticisms of Policies

DownloadThere is continuing fallout for hospitals in the wake of N.Y. Times articles about a hospital chain's aggressive billing practices and another hospital's reliance on its poor patients to access a lucrative federal program. The hospital chain covered in the first article - Providence - has in response announced it will refund payments made by more than 700 low-income patients, according to a follow-up article by the N.Y. Times.  The Post Bulletin published an article titled "Medical bills can be crippling. Mayo Clinic's charity care? Arguably lacking." And Axios reported on a study that found pandemic-drive revamping of charity care policies often have vague criteria and sometimes increased restrictions on access.

Lloyd Mayer

October 10, 2022 in In the News, Studies and Reports | Permalink | Comments (0)

Thursday, October 6, 2022

Billions Transferred to 501(c)(4)s Triggers Criticism of Philanthropy Funding Politics

Download (1)Two recent stories involving billionaires, 501(c)(4)s, and politics appear to have triggered criticism of philanthropy funding politics from across the political spectrum. The first story involved a $1.6 billion donation (in the form of stock in the Tripp Lite company that was then sold for cash) to a section 501(c)(4) nonprofit (Marble Freedom Trust) controlled by Leonard A. Leo, probably best known for his leadership role with the Federalist Society. The second story involved the transfer of almost all of the stock of billion-dollar company Patagonia to a different section 501(c)(4) nonprofit (Holdfast Collective) while the remaining stock (the only voting stock) went to a trust (Patagonia Purpose Trust) controlled by the founding family. In both situations experts agreed that the donations were almost certainly completely legal, and in both situations the donors benefitted from avoiding income tax on the gains built up in the donated stock and from avoiding gift tax, which does not apply to gifts to 501(c)(4)s.

In the wake of these gifts, several commentators penned columns critical of philanthropy funding politics, especially given these tax benefits, including:

Lloyd Mayer

October 6, 2022 in In the News | Permalink | Comments (0)

California Governor Vetoes Tax Exemption & Insurrection Bill

DownloadLate last month, California Governor Gavin Newsom vetoed a bill (SB 834) that would have revoked the tax-exempt status of nonprofit in California that the state Attorney General determined engaged in treason, insurrection, conspiracy, government overthrow, or mutiny by members of the military as defined under federal law. Here is the governor's explanation for the veto:

Without question, extremist groups that participate in anti-government acts such as those that took place during the insurrection on January 6, 2021 should be renounced and investigated for their participation. However, these are issues that should be evaluated through the judicial system with due process and a right to a hearing.

The legislature has 60 days (excluding joint recess days) to override the veto by a two-thirds vote in both houses. And in the unlikely event that occurs (the best information I could find states there has not been an override for over 40 years), the law would almost certainly face constitutional challenge.

Coverage: CBS News/Bay City News Service; California GlobeLaw360.

October 6, 2022 in Federal – Executive, Federal – Legislative, In the News | Permalink | Comments (0)

TIGTA: More Information Is Needed to Make Informed Decisions on Streamlined Applications for Tax Exemption

DownloadThe Treasury Inspector General for Tax Administration (TIGTA) this week issued a report titled More Information Is Needed to Make Informed Decisions on Streamlined Applications for Tax Exemption. Here are the highlights (emphasis added):

What TIGTA Found

On July 1, 2014, the IRS released Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, a simplified electronic application for smaller organizations to request and obtain exemption from Federal income tax as an organization described in I.R.C. § 501(c)(3) tax-exempt status. Form 1023-EZ requires applicants to attest, rather than demonstrate, that they meet the requirements for I.R.C. § 501(c)(3) status. For example, Form 1023-EZ applicants are not required to submit their organizing documents to the IRS; they instead attest that they meet organizational requirements.

Based on our assessment of internal and external stakeholder opinions, States’ reporting requirements, comparison with the information required on the long application form, our testing of the application process, and limited examination compliance efforts, we determined that the information provided on the Form 1023-EZ is insufficient to make an informed determination about tax-exempt status and does not educate applicants about eligibility requirements for tax exemption. TIGTA obtained I.R.C. § 501(c)(3) status for four of five nonexistent organizations. The IRS correctly identified one of our fictitious applications as potentially ineligible and sent a request for additional documentation. Our undercover testing illustrates vulnerabilities in the IRS’s tax-exempt status determination process.

The IRS relies on a Form 1023-EZ examination strategy to detect noncompliance after organizations are approved; however, less than 1 percent of tax-exempt organizations are examined each year. In addition, online guidance for the Form 1023-EZ is inaccurate. The online web page used to apply for tax-exempt status includes educational links to assist Form 1023-EZ applicants. However, one of the educational links takes the applicant to a web page containing inaccurate information for applicants using the Form 1023-EZ.

What TIGTA Recommended

TIGTA recommended that the IRS: 1) revise the activities description narrative on Form 1023-EZ, 2) assess the feasibility of requiring applicants to submit their organizing documents as an attachment to Form 1023-EZ, 3) notify applicants when additional time is needed to process their Form 1023-EZ applications, and 4) update online guidance with accurate information on the application process for Form 1023-EZ filers.

IRS management agreed with the second and fourth recommendations. In addition, the IRS will consider notifying applicants when their submissions need additional time to process. However, the IRS believes that requiring detailed activity descriptions is unnecessary to make determination decisions.

Lloyd Mayer

October 6, 2022 in Federal – Executive | Permalink | Comments (0)

TIGTA, Review of the IRS’s Enforcement Program for Tax-Exempt Organizations That Participate in Illegal or Nonexempt Activities

DownloadThe Treasury Inspector General for Tax Administration (TIGTA) last week issued a report titled Review of the IRS’s Enforcement Program for Tax-Exempt Organizations That Participate in Illegal or Nonexempt Activities. Here are the highlights:

What TIGTA Found

TIGTA found that both the IRS and State charity regulators are limited by their respective laws and procedures for coordinating with each other as a means to identity tax-exempt organizations potentially engaging in illegal or other nonexempt activities. Currently, no State Attorneys General Offices have formal disclosure agreements with the IRS.

TIGTA identified 3,726 closed EO function referrals alleging potential fraudulent or illegal activities during Fiscal Years 2018 through 2020. For these referrals, classifiers inaccurately recorded the results for 42 cases on the referral database. In addition, for the 15,522 unique referral cases closed during Fiscal Years 2018 through 2020, our analysis identified 980 closed cases for which two referral database fields included conflicting information about the final dispositions of the referrals. TIGTA also determined that 2,934 data fields were missing required information because referral database system controls do not require these fields to be completed prior to the case closing.

TIGTA reviewed two judgmental samples consisting of 46 referral cases closed between Fiscal Years 2018 and 2020 that alleged potentially fraudulent or illegal activities to determine whether the IRS’s assessments of the referrals were sufficiently researched and properly documented. All 46 referral cases sampled were sufficiently researched. However, five of the 46 referrals did not have sufficient documentation to justify the decision to not pursue an examination.

Finally, during this review and as in prior reviews, TIGTA found that the IRS has processes in place to identify whether a tax-exempt organization engages in substantial activities that do not further their tax-exempt purpose.

What TIGTA Recommended

TIGTA recommended that the IRS should: 1) ensure that Classification managers periodically emphasize to classifiers the importance of including supporting documentation in the case files for selecting or not selecting referrals for examination; 2) implement referral database system controls to ensure that complete and accurate data is input into the database; and 3) review the fields on the referral database and determine if any may be eliminated to avoid confusion, conflicting information in similar fields, and redundancy.

The IRS agreed with our recommendations and plans to take corrective actions.

Lloyd Mayer



October 6, 2022 in Federal – Executive | Permalink | Comments (0)

Tuesday, October 4, 2022

Bankruptcy Court Grants Final Approval to Boy Scouts Reorganization Plan; Appeals Now Filed

Download (1)Reuters reports that after several changes to the reorganization plan for the Boy Scouts of America (BSA), the U.S. Bankruptcy Court for the District of Delaware last month issued a final approval of that plan. The changes included removing a $250 million settlement payment from the Church of Jesus Christ of Latter-Day saints from the plan, which the judge in the case refused to approve because the claims against the Church were only loosely connected to scouting activities. The plan had received support from 86% of claimants who voted on it and from the two largest insurers for the BSA. It provides $2.46 billion to settle sex abuse claims against BSA. Reuters later reported that other insurers and sexual abuse victims have filed appeals challenging the plan. 

Additional coverage: CNN; Insurance Journal; Law360.

October 4, 2022 in Federal – Judicial, In the News | Permalink | Comments (2)

Ninth Circuit Finds That DAF Donor Lacked Standing to Pursue Alleged Fiduciary Duties Breach

DownloadIn Pinkert v. Schwab Charitable Fund, the U.S. Court of Appeals for the Ninth Circuit found that the contributor to a donor advised fund (DAF) lacked standing to sue the DAF sponsoring organization, Schwab Charitable Fund, for allegedly breaching its fiduciary duties, including by deducting excessive fees from the contributor's DAF. The contributor alleged that the excessive fees arose because of the Fund partnering with Schwab & Co. for brokerage, custodial, and administrative services. The contributor, who sought to pursue his claims individually, on behalf of a class of similarly situated individuals, and on behalf of the general public, asserted that "although he donated the funds to Schwab Charitable for some purposes, he retained a property right to direct the funds to charities, and the excessive fees and Schwab Charitable’s related mismanagement of the funds impair his ability to exercise that property right." The contributor also asserted claims based on reputational and expressive harm, as well as having to make additional contributions to the DAF to compensate for the alleged excessive fees.

With respect to his property-rights argument, the court found that the documents relating to the contribution established that he did not retain any right to direct where the funds would be invested or donated, but only retained the ability to provide non-binding advice regarding investing and donating. As for whether that ability constituted a property right, the court concluded:

Pinkert does not cite any authority establishing that his right to provide non-binding recommendations to Schwab Charitable is a property right. But whether that right is properly characterized as a property right, a contractual right, or something else does not matter for present purposes because Pinkert has not alleged that Schwab Charitable refused to listen to his advice. In fact, he acknowledges that Schwab Charitable has followed his advice in the past by donating funds from his DAF to charities he supports. 

The court also noted that the written documents disclosed that the DAF would be subject to various fees. 

As for the reputational, expressive, and additional contribution claims, the court disposed of them based on its conclusion that the contributor had failed to allege he had actually experienced or would experiences any of these specific injuries. A concurring judge would have concluded that the contributor also lacked standing to pursue those claims given that he had irrevocably relinquished the contributed amounts.

Lloyd Mayer

October 4, 2022 in Federal – Judicial | Permalink | Comments (0)

Tax Court Denies Charitable Contribution Deductions for Crops Donated to CRATs, After Initial Grant By IRS Examining Agent

DownloadIn Furrer v. Commissioner, the U.S. Tax Court denied an attempt by taxpayers to partially deduct as charitable contributions the value of crops donated to charitable remainder annuity trusts (CRATs). Interestingly, the taxpayers only asserted the deductions during examination but the examining agent had granted them. The IRS, which changed its position with the court's position in an amended answer, therefore had the burden of proof.

The court found that the claimed deductions failed for two reasons. First, the taxpayers had not satisfied the substantiation requirements for noncash charitable contributions with a value in excess of $5,000, having neither sought a qualified appraisal nor attached a Form 8283 substantiating the gifts to their returns nor maintaining the required written records. Second, the donated crops were ordinary income property of the taxpayers, who were engaged in the farming business, and the conceded basis in the crops was zero as the taxpayers had fully expensed all the costs of growing the crops.

The result is not a surprise given these well known requirements, but it is surprising the examining agent initially allowed the deductions.

Lloyd Mayer

October 4, 2022 in Federal – Judicial | Permalink | Comments (0)

IRS Reports Inadvertently Releasing Private Form 990-T Data

DownloadThe IRS recently reported to Congress that it had inadvertently made public confidential information from some Form 990-Ts. The IRS letter to Chairman Bennie G. Thompson of the House Committee on Homeland Security states in part:

This notification follows the IRS discovery that some machine-readable (XML) Form 990-T data made available for bulk download section on the Tax Exempt Organization Search (TEOS) should not have been made public. This section is primarily used by those with the ability to use machine-readable data; other more widely used sections of TEOS are unaffected.

The IRS took immediate steps to address this issue. The agency removed the errant files from, and the IRS will replace them with updated files in next few weeks. The IRS also will be working with groups that routinely use the files to update remove the erroneous files and replace them with the correct versions as they become available. The IRS will contact all impacted filers in the coming weeks.

 * * *  

Based on the IRS’s review, the inadvertent disclosure included limited information for approximately 120,000 individuals. However, the data did not include Social Security numbers, individual income information, detailed financial account data, or other sensitive information that could impact a taxpayer’s credit. In some instances, the data did include individual names or business contact information.

Coverage: NPR; Politico; Wall Street Journal (subscription required).

Lloyd Mayer 

October 4, 2022 in Federal – Executive, In the News | Permalink | Comments (0)