Filed under Tax & Legal …

Dec 07 2012
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Henry Berman, Tax & Legal

In Fiscal Cliff Negotiations, Look at the Whole Picture

U.S. Capitol

By Henry Berman, ASF

We are sharing the following letter with members of the Association of Small Foundations today. We welcome your thoughts and opinions in the comments section. As a diverse community of philanthropists, it is important we share our thinking with one another.

Dear Colleagues,

Whereas the television has quieted down post-election—the seemingly non-stop advertisements for candidates, ballot questions, and initiatives have ended—conversations about the “fiscal cliff” have, in the same way, started to overwhelm news channels, newspapers, and social media.

For many in the philanthropic sector, the charitable deduction has been the focus of the conversations. Lately I’ve participated in and listened to numerous discussions and debates about the charitable deduction and the pros and cons of it being reduced or capped. Well-informed and well-meaning people make cases for both sides of the argument.

There is an opportunity today at 3PM EST for you to hear from the White House in a Fiscal Cliff Conference Call With Foundation Leaders. Officials from the Domestic Policy Council, National Economic Council, and Office of Public Engagement will discuss the charitable deduction in the context of the debate over how to find a balanced solution to the deficit challenges facing the nation. Continue reading →

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Nov 27 2012
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Floyd Keene, Tax & Legal

Save the Charitable Tax Deduction from the Fiscal Cliff

By Floyd Keene, The Triple EEE Foundation

Currently, the charitable tax deduction (CTD) is under attack. As our nation approaches the “fiscal cliff,” limiting the CTD for wealthy taxpayers is one part of a possible fiscal cliff remedy.

  • Recently on national TV, Sen. John McCain said he is “very much opposed” to a tax raise but would support closing loopholes such as the CTD.
  •  For years, the Obama administration has submitted budget proposals that limit charitable deductions for persons above the 28% tax bracket.

Wait! Is this really happening? The Democrats and at least one major Republican agreeing on something? It could happen. And the victim would be the American people (giver and receiver alike) that the CTD serves.

THE NEW REALITY

There is a new reality in our nation that is likely to continue no matter how the fiscal cliff is vaulted, and no matter which party wins future elections:

  1. There will be less government spending on social programs, and
  2. There will be an ever-increasing need for social programs, caused by a slow-growth economy and aging population base

These are truisms. Together they create an environment where there is a greater need than ever before for private social spending. Reducing the CTD in such an environment is, put simply, an irrational public policy motivated by political compromise rather than logical thinking. Continue reading →

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Nov 20 2012
3 Comments
Gerald P. McCarthy, Tax & Legal

Foundations and Lobbying: Sorting Out the Do’s and Don’ts


By Gerald P. McCarthy, Virginia Environmental Endowment

“If your foundation is not engaging in public policy, you could be missing out on one of the most effective tools in your foundation toolbox,” said Jerry McCarthy in his first post on PhilanthroFiles. Here he takes a look at the Do’s and Don’ts of lobbying.

“Can we lobby?” “What are the rules about foundations and lobbying?”

These are such scary questions for some foundations that the answers aren’t even pursued. And no wonder; it is part of the U.S. Tax Code, which ranks as one of the most complex compilations of rules ever fashioned. Thus, many foundations prefer not to deal with this. They are missing out on some of the most effective work they can accomplish.

Here are some ways you can engage. Continue reading →

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Sep 28 2012
1 Comment
Sara Beggs, Tax & Legal

IRS Reduces International Giving Regulations

By Sara Beggs, ASF

Sara BeggsWouldn’t it be great if your foundation could respond to the latest international crisis without loads of regulatory burdens? While expenditure responsibility rules are potentially less burdensome than some may think, it is still a process that is a significant barrier to international giving – especially for foundations with few or no staff.

But what if the government made it easier for your foundation to evaluate whether a non-U.S. NGO is equivalent to a U.S. public charity and you didn’t have to do expenditure responsibility at all? Impossible, you say? Well, as impossible as it may seem, that’s exactly what is happening. And, just to increase the shock value, it’s also not years or months down the road; it has already started. Continue reading →

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Jul 30 2012
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Andras Kosaras, Tax & Legal

Quickest Ways to Determine a Charity’s Status

By Andras Kosaras, Arnold & Porter LLP

Even if your foundation collects an organization’s IRS determination letter (which is not required legally), your foundation must still ensure that the status is current through one of the methods below.

  • IRS Exempt Organizations Select Check is a free online database that is updated monthly providing basic data on nonprofits. Choose the option for organizations eligible to receive tax-deductible contributions and enter the organization’s information. An organization’s tax status will be reported with a code such as PC, SO, and PF, as nonprofits with similar deductibility and paperwork requirements are grouped together in the database.
  • Charity Check is a one-stop due diligence tool offered by GuideStar that provides up-to-date information on all nonprofits in a user-friendly format. ASF members can subscribe at a discounted rate.

Whichever tool you use, be sure your foundation documents the tax status by printing your search or storing it electronically. Continue reading →

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May 31 2012
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Tax & Legal, Thomas F. Blaney

IRS Announces 2012 Exempt Organizations Work Plan

By Thomas F. Blaney, CPA, CFE

Recently, the Internal Revenue Service (IRS) announced the areas within an exempt organization that they will be “deploying resources” (auditing) for 2012. The IRS is focusing their efforts on any international transactions. They will continue to examine exempt organizations that have offices or activities overseas.

Private foundations that perform international grantmaking, invest “off shore,” or maintain ownership of a foreign bank account may be subject to these examinations.

The IRS will review a private foundation’s operations to ascertain:

  • Whether the foundation maintains adequate books and records to ensure assets are used for charitable purposes,
  • Whether the foundation has maintained proper discretion and control over funds that have left the United States,
  • Whether the foundation has met all filing requirements, and
  • How foreign operations or grantmaking furthers the foundation’s exempt purpose.

Continue reading →

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Apr 25 2012
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Ruth Masterson, Tax & Legal

A Caution About the IRS Auto-Revocation List

By Ruth Masterson, ASF

The Auto-Revocation List is an official IRS record of organizations that have lost their exempt status for failing to file required annual tax returns for three consecutive years.

It’s important for private foundations to check this list to make sure grant applicants don’t appear on it. If a prospective grantee is on the list, grants to that organization cannot be counted as a qualifying distribution without exercising expenditure responsibility.

We offer an additional caution: Organizations will not be automatically deleted from the list, even if they successfully reapply for exemption and are reinstated as tax exempt. The IRS has stated that the list is an historical record of organizations whose tax-exempt status has been revoked for non-filing. The IRS will only remove an organization’s name from the list if they are provided with documentation that the organization was added to the list in error.

Continue reading →

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Apr 03 2012
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Ruth Masterson, Tax & Legal

Dispelling a Self-Dealing Myth

By Ruth Masterson, ASF

One myth about self-dealing is the idea that identifying a prohibited self-dealing transaction relies on who benefits from the transaction.

Because that’s not the case.

If your private foundation is engaged in a transaction that you think is okay because the foundation benefits, or because the other party doesn’t benefit at all or at least not very much, then you’ll be wrong about self-dealing pretty often. Who benefits is simply not what the IRS looks at when determining whether something is self-dealing.

What is self-dealing, then? What does the IRS look for when imposing penalties?

Continue reading →

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Mar 28 2012
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Henry Berman, Tax & Legal

Why Legislators Want to Hear Your Story

By Henry Berman, ASF

It’s obvious now that I think about it: The legislative process is typically a marathon and rarely a sprint.

Whereas many suggest that tax or nonprofit reform won’t happen before the fall elections, our senators, representatives, and their staff are busy at work now, learning, exploring, and thinking. If we want to talk with them about our impact—if we want to make a difference legislatively—we need to let our government officials know about the good work we do.

And we need to let them know now.

Continue reading →

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