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Private Operating Foundations Are Hybrids

Organizations which are not publicly supported but use most of their assets and income in the active conduct of their charitable activities avoid some private foundation limitations.

Most charities exempt under Section 501(c)(3) of the Tax Code are classified either as publicly supported organizations, including churches, schools, hospitals, social service or healthcare organizations and cultural groups, or as private foundations, which are usually endowments making grants to other charities. Private foundations must function under significantly more stringent limitations, and organizations would usually rather qualify as publicly supported.

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Tax compliance officer fired for non-compliance

An IRS tax compliance officer has been fired for her personal non-compliance with the tax law.  The U.S. Court of Appeals for the Federal Circuit has affirmed the decision of the Merit Systems Protection Board, which affirmed the decision of an administrative law judge, who affirmed the agency’s decision to terminate her employment. 

Student, Faculty and Donor Lists Are Not Trade Secrets

Court dismisses claims that former exec unfairly used information for new school

When the executive director of the Bronx Conservatory of Music failed to reach agreement with the school on an extension of his employment contract in 2020, he shortly thereafter founded the Bronx School of Music and sent emails to his personal contacts, former students, community friends, and donors, seeking to recruit them to his new endeavor. 

Trustee loses expenses for improper distributions

The trustee of a charitable trust has lost a substantial portion of its expenses when it made improper distributions of income to an organization no longer eligible to receive the income.  An appellate court in New York has affirmed the denial of fees ordered by a Surrogate’s Court.

IRS issues new technical guide on (c)(8) and (c)(10)

The IRS has recently issued another new Technical Guide, this time on Fraternal Beneficiary Societies and Domestic Fraternal Societies under Tax Code sections 501(c)(8) and 501(c)(10).  The 36-page Guide updates and combines the Audit Technique Guide with other technical content. 

It covers the background of the laws, exemption issues, unrelated business income tax, deductibility of contributions, filing requirements and examination techniques. (TG 8)

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