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Friday, April 27, 2012

Highlights from the Georgetown Law “Representing & Managing Tax-Exempt Organizations Conference

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 On April 19th and 20th, Georgetown Law hosted its annual conference, “Representing & Managing Tax-Exempt Organizations.” The conference is regularly attended by leading attorneys, accountants and managers of nonprofits. The speakers at this year’s conference included representatives from the IRS and Capitol Hill, as well as leading law firms and nonprofit organizations. Below are a few highlights from sessions that I attended.

Message from the IRS Director of Exempt Organizations
Presented by: Lois Lerner, Director of IRS Exempt Organizations Divisions
Lerner opened the conference with a thorough overview of things to come. Topics covered were the correlation between governance practices and tax compliance, and upcoming audit program related to diversion of assets, and the pitfalls of including social security numbers on Form 990. For a more detailed overview of this presentation, see previous blog entry “Insight from the Director of the IRS Exempt Organizations Division.”

Update from IRS and Treasury
Presented by: Ruth M. Madrigal of the U.S. Dept. of Treasury and Vicki Judson and Holly O. Paz of the Internal Revenue Service
This presentation provided an overview of the 2011-2012 Priority Guidance Plan and highlighted recent notable regulations (REG-144267-11, program-related investments) and cases (Comr. v. Driscoll, 2012 U.S. App. LEXIS 2403 (2/8/12), parsonage). Representatives from the IRS also noted that approximately 435,000 nonprofits lost their tax-exempt status through the automatic revocation process for failure to file Form 990. Additionally, only 16,000 of those organizations have applied for reinstatement. Therefore, the IRS believes that many of the organizations whose status was revoked were defunct, and accordingly, the IRS will have a more accurate database or currently operating nonprofit organizations. Also, in response to an audience question related to church audits, representatives from the IRS and Treasury Dept. stated that §7611 regulations will soon be issued, and that church audits are expected to resume thereafter.

Capitol Hill Update
Presented by: Gordon M. Clay of the Joint Committee on Taxation and Preston Rutledge and Tiffany Smith of the Senate Finance Committee
These representatives noted that the Senate Finance Committee has held 14 hearings on tax reform and expect to hold more in the near future. In January, a roundtable was held with nonprofit leaders, one of the issues discussed was whether charitable purposes should be prioritized in determining deductibility. Further, there have been multiple proposals to limit the charitable deduction (either by cutting the deduction or creating a ceiling or floor). However, members of Congress do recognize the benefit the charitable deduction provides not just to the charity directly, but the ultimate benefit to the government in being able to redirect its revenue. For example, for a taxpayer in the highest tax bracket (35%), a $100 donation to charity gives the charity $100 to do its good works, but only prevents the government from collecting $35.

Nonprofit Termination and Dissolution
Presented by: Ann K. Batlle of Morgan, Lewis & Bockius LLP and Tomar J. Inbar of Patterson Belknap Webb & Tyler LLP
This presentation provided an overview of the operating, legal, and tax implications and best practices for dissolving and terminating non-profits. In addition to the typical tax and legal implications, the presenters highlighted practical considerations that may easily be overlooked such as determining which employee and board positions should be maintained throughout the dissolution, incentives for retaining employees and officers and severance pay for those let go, and identifying organizations to contribute assets to or creating successor organizations.

Charitable Giving Update
Presented by: Victoria B. Bjorklund of Simpson Thacher & Bartlett LLP and Betsy Buchalter Adler of Adler & Colvin
In addition to highlighting important charitable giving related rulings and cases that have come out recently, this presentation included a discussion and illustration on determining the proper charitable giving plan for donors (i.e., private foundation, gifting program, revocable trust, nonprofit corporation, etc.). It was pointed out that though some practitioners may automatically assume private foundations to be the best vehicles for giving large sums of money, considering the donor’s managerial wishes, age, and potential future income and expenses (among other factors) should be important to determining if another option is best.

Insider Theft or Fraud
Presented by: Janne Gallagher of Council on Foundations and Marcus S. Owens of Caplin & Drysdale
Complete with statistics, this presentation included a discussion on the prevalence and effects of theft and fraud from an employee of an exempt organization. It also included tips for identifying and preventing this type of theft.

Tara C. Jackson, J.D., LL.M.
Federal Tax Law Editor
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