Charity Governance

IRS NEEDS TO DO A BETTER JOB OF EXPLAINING THE COMMENSURATE-IN-SCOPE TEST: WHERE’S THE MEMO TO IRS EMPLOYEES?

DATELINE June 24, 2008, Chicago

The IRS is up to its new tricks again. In Determination Letter 200825046 (Release Date July 20, 2008), the IRS revoked the exemption of a charity that had received Section 501(c)(3) status as an arts organization that sponsors ballet performances. Apparently, the performances were funded with the proceeds from bingo games. This determination letter is not all that interesting until the phrase "commensurate in scope" appears. With TE/GE Commissioner Steve Miller recently referring in public comments to the commensurate-in-scope test, every tax professional who works in the exempt organizations arena is now...

THE COMING SMACKDOWN: BE CAREFUL WHAT YOU PRAY FOR

DATELINE: June 23, 2008, Chicago

We had heard about the planned challenge by certain churches to the prohibition in Section 501(c)(3) on campaign interventions, but we found Russell Goldman's coverage on the ABC News Web site to be detailed and especially interesting. Pastors Challenge Law, Endorse Candidates From Pulpit, June 20, 2008. Goldman's article focuses on Gus Booth, the pastor of the Warroad Community Church in Minnesota. Pastor Booth told his congregation,

If you are a Christian, you cannot support a candidate like Barack Obama or Hillary Clinton for president.

That strikes us as a...

IS THE IRS PROVIDING A HINT ABOUT THE FUTURE?

DATELINE: May 27, 2008, Chicago

Those interested in ascertaining the direction in which the Internal Revenue Service is moving used to wait for revenue rulings, but in recent years, the IRS has moved away from issuing revenue rulings. It still does, but far less frequently. The tea leaves have taken a variety of forms. In the exempt organization area, determination letters denying tax-exempt status appears to be where the action is these days. Case in point, IRS Determination Letter 200821037 (released May 23, 2008).

We probably agree with the IRS's decision...

“IT’S ALIVE, IT’S ALIVE”: THE SERVICE RESURECTS THE COMMENSURATE-IN-SCOPE TEST

Hit me with your best shot!
Why don't you hit me with your best shot!
Hit me with your best shot!
Fire away!

Pat Benatar, Hit Me With Your Best Shot on Crimes of Passion (August 1980)

DATELINE: May 14, 2008, Chicago

You know something is up when our friends at the Chronicle of Philanthropy feature the release of an IRS determination letter in their News Update column, but Chronicle reporter Grant Williams and his editors know a big story when they see one. IRS Revokes Tax-Exempt Status of Charity That Spends Too Little Money on Charitable Programs, May 13, 2008. Williams reported yesterday that the Service issued Determination Letter 20080818023 (May 2, 2008), which concluded that a Section 501(c)(3) organization did not qualify for tax-exempt status. "Big whoop," you say, but it is because the Service invoked the much heralded...

FASB SHOULD WAKE UP AND SMELL THE COFFEE: MASSACHUSETTS TAX ON ENDOWMENTS

DATELINE: May 12, 2008, Chicago

As regular readers know, we are dissatisfied with proposed FSP 117-a, a rather obscure proposal being considered by the Financial Accounting Standards Board (FASB). It would extend current accounting principles to the financial statements of charities operating in states that have adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA). UPMIFA is spreading like wildfire, with at least 20 states enacting versions of it.

To make a long story short, FSP 117-a will continue the accounting profession's practice of overstating the amount of a charity's assets that are freely spenadable. For institutions with large endowments, this means that to donors and legislators, much of endowment looks like it is available for current expenditure despite legal restrictions which prohibit the institution's board from spending the funds. As our Jack Siegel pointed out in his recent article, FASB Puts Infinity Up on Trial: Accounting for Endowments, 60 EOTR 23 (April 2008), the inaccurate reporting mandated by FASB will pose serious problems for colleges and universities. For example, rising tuition and related costs...

ADDING FUEL TO THE FIRE: UPFRONT PAYMENTS AND CHARITY CARE

DATELINE: April 28, 2008, Chicago

Barbara Martinez of the Wall Street Journal reports today on a new trend in nonprofit hospital finance that surely will catch the attention of Senator Grassley. Cash Before Chemo: Hospitals Get Tough. As is often true of many health care exposes, this one focuses on the story of one particular patient. In this case, Lisa Kelly's dramatic story serves as the anecdotal evidence. She was advised by her doctor in 2006 that she had leukemia. When she sought treatment at M.D. Anderson Cancer Center in Houston, Texas, she was told that the nonprofit hospital would not treat her unless she prepaid the estimated...

WALL STREET JOURNAL FUELS THE FIRE: FRONTPAGE ARTICLE ON CHARITY CARE

DATELINE: April 4, 2008, Chicago

As this is written, the American Hospital Association is in the back of an ambulance, rushing to the nearest hospital emergency room with severe chest pains. This assumes the AHA found today's Wall Street Journal outside its door. Splashed across the paper's front page is a major expose by John Carreyrou and Barbara Martinez entitled, "Nonprofit Hospitals, Once For the Poor, Strike it Rich." While the AHA is being transported by ambulance, Senator...

DO WE NEED 85,000 NEW CHARITIES? SOMEBODY THINKS SO

Dateline: March 17, 2008, Chicago

Yup, you read that headline correctly. The IRS released its 2007 Data Book last Friday. For the period from October 1, 2006 through September 30, 2007(fiscal year 2007), the IRS received...

THE TAX COURT DEMONSTRATES THAT NOT EVERY ORGANIZATION IS TAX EXEMPT

DATELINE: February 6, 2008, Chicago

As our regular readers know, we think there are far too many charities and other exempt organizations. Unfortunately, the IRS cannot take a position on the issue.  As an administrative agency charged with administering the law, the IRS has to take 'em as they come, but it can deny or revoke exemption when an organization does not satisfy the statutory requirements.

This past week, the Tax Court upheld the IRS's conclusion that one organization...

EVERY EXEMPT ORGANIZATION SHOULD CALL ITS CONGRESSMAN TODAY!!

DATELINE: January 10, 2008, Chicago

Today, Nina Olson, the National Taxpayer Advocate, issued her annual report to Congress. Like the Internal Revenue Code, it seems to get a little longer each year. This year Volume 1 of the two-volume report comes in at 724 pages. Our friends in the EO community should take a good look at pages 197 through 221 of the report. Olson provides a detailed description of the EO division's...