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Foreign Grants Require Special Considerations

Both public charities and private foundations should take special precautions to avoid tax, criminal penalties

U.S. taxpayers and domestic charities often seek to support charitable activities abroad. But making grants for charitable activities in foreign countries subjects both U.S. taxpayers and U.S. charities to additional rules.

Contributions by U.S. donors are deductible if made to U.S. charities that conduct activities abroad, but are usually not deductible if made directly to foreign charities. Tax treaties with Canada, Mexico and Israel allow deductions for gifts to certain charitable organizations in those countries, but generally deductions are available only for gifts to U.S. charities.

Grantmakers May Not Support Terrorism

Welter of new and revised rules make it difficult to know how to comply with governmental expectations

By Virginia P. Sikes and Don Kramer
Montgomery McCracken

Even before 9/11, federal statutes and regulations prohibited support for terrorist organizations, but after the World Trade Center attack, the regulation and potential penalties have become even more severe.

Charities providing grants at home or abroad should familiarize themselves with the basic rules and take reasonable steps to try to avoid violations that can cost their exempt status or even send someone to jail.

New UPMIFA Sets Rules For Management of Charitable Funds

Act expands prudent investment standards, changes authority to spend portions of endowment

The National Conference of Commissioners on Uniform State Laws (“NCCUSL”) has approved some major revisions to the Uniform Management of institutional Funds Act (See Ready Reference Page: “UMIFA Sets Rules for Charitable Endowments.”) to adopt more modern standards for prudent investing and to allow more flexibility in spending endowment funds.

UMIFA was originally approved in 1972 and was considered highly successful in providing standards for charities to use in managing their investments and spending from endowments. It has been adopted, with some variations, in 48 states.

The new Act is the result of four years of work and debate by...

Can’t Get No Satisfaction?

Revised Uniform Commercial Code clarifies some of the rules

Many businesses, including nonprofit businesses, face the dilemma associated with receiving or sending a check marked “In Full Satisfaction” in the midst of a disagreement with a vendor. The situation usually starts out with a dispute between a buyer and a seller of goods that ends up with the buyer sending the seller a check for less than the entire amount that the seller claims is due. The check or the accompanying letter ordinarily includes language to the effect that deposit of the check constitutes full satisfaction of the disputed amount. Cash the check and forever hold your peace.

The...

Nonprofits Must Deal With Religiously Diverse Workplace

Title VII requires reasonable accommodation that does not impose undue hardship on business

In his inaugural address, President Barack Obama stated that “…[w]e know that our patchwork heritage is a strength, not a weakness.  We are a nation of Christians and Muslims, Jews and Hindus – and nonbelievers.” 

It is this patchwork of different faiths, beliefs and non-beliefs that the Equal Employment Opportunity Commission (“EEOC”) calls America’s “rich tapestry of religious beliefs and practices.”  It is, however, this very tapestry of differences that has seeded conflict and increased litigation about religious discrimination in the workplace.

IRS Expands Availability of Flip Unitrusts

Final regulations permit switch to fixed percentage payout in certain situations outside the control of the trustee, and give one-time option for reformation

Unitrusts are among of the most flexible tools available to the planned giving officer. The final regulations permitting a "flip" from an income only payout to a fixed percentage payout in the case of sale of unmarketable assets are a significant advantage for both donors and charities. They should be studied carefully to see if they can be used with preexisting trusts.

Using a CRUT for Stock Options Can Be a Strategy That Sells Itself

Planning testamentary disposition of non-qualified deferred compensation can provide a virtually no risk technique for younger donors

Donors who hold non-qualified stock options or other forms of non-qualified deferred compensation should consider an absolutely no risk planned giving technique that could result in both a substantial gift to charity and more income for a surviving spouse.

Be Careful Handling Gifts with Strings Attached

Miscalculations can create both legal and public relations problems if development officers fail to find the right balance for gifts with restrictions

It is not necessarily easy to strike the right balance in accepting gifts with strings attached. If there are restrictions on any gift, be sure that both the donor and the charity fully understand what they are and that both can live with the limitations. You will be more likely to avoid both legal and public relations problems.

IRS Proposes Regulations for Travel Tours

Key to taxability of income is the amount of time participants spend on actual instruction and education

Travel tours have been one of the primary points of contention between small business and charities in the battle over unrelated business income. The IRS and Congress have regularly looked for abuses. Unless a tour program can contribute very significantly to your mission, it may not be worth the hassle to set one up and claim that it is not subject to unrelated business income tax.

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