Mergers and Affiliations Require ‘Due Diligence’

Information gained in the process will help you know what you are getting into and may help structure the form of the transaction to protect what you have

The due diligence process in considering a merger or affiliation is serious, but don’t let the lawyers use it to tell you why it shouldn’t be done. Lawyers are trained to tell you the risks. They will seldom provide the vision.

Lobbying Rules Create Opportunity for Charities

There are many ways to advocate for public policy goals without going beyond the limitations of the Tax Code

A charity that does not spend at least a portion of its time in advocacy work is probably not doing its job as well as it should.

Therefore, charities must understand the tax law definitions of "lobbying" and "legislation." There is a vast amount of advocacy that can be carried on without approaching tax limitations. Private foundations can support most of it, and preparing an application with foundation rules in mind can make it easier to get funded.

Tax law is not the only issue, however. Beware of federal and state lobbying registration requirements, with different definitions, and different reporting.

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IRS Tea Party “Scandal” Shows Need for (c)(4) Definition

Evidence shows workers struggling to define limits, not Administration effort to target political foes

Despite the political grandstanding that erupted after the disclosure that IRS determinations staff and attorneys had asked some improper questions of Tea Party and other potentially political organizations applying for 501(c)(4) social welfare exempt status, there has been no evidence that the IRS or the Obama Administration was targeting political foes. 

When one reads the Treasury Inspector General’s Report, press reports of staff statements to the House Committee on Oversight and Government Reform, and comments of former IRS officials, one comes away with a vision of front line staff struggling to try to determine who can qualify as a (c)(4) organization when there is no clear definition to work with. 

IRS Requires Substantiation of Contributions

Donors must obtain acknowledgment from charity for gifts worth $250 or more, must file Form 8283 for gifts of property over $500, with appraisal over $5,000

It isn’t as easy as it once was to claim a charitable contribution deduction for a gift to charity.

Because of perceived abuses by taxpayers claiming inflated deductions without adequate justification, Congress and the Internal Revenue Service have tightened the rules over the last several decades.  

The rules apply to the taxpayers seeking the deduction.  In most cases, they do not directly apply to the charities receiving the gifts and do not impose penalties on charities, but charities that want to assist their donors and receive additional gifts will want to be sure that the donors are in position to claim their deductions properly.

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DC Court holds Order against law firm unconstitutional

The federal District Court for the District of Columbia (Richard J. Leon) has found that a Trump Executive Order suspending security clearances of attorneys at the Wilmer Cutler Pickering Hale and Dorr law firm, terminating governmental contracts with the firm or with contractors retaining the firm for legal work, investigating it for discriminatory practices, and limiting its lawyers’ access to federal buildings is unconstitutional.  The Court said it violated the First and Fifth Amendments and the Spending Clause of the Constitution.

IRS issues more technical guides

The Internal Revenue System has released three new technical guides that update and combine audit technique guides and other technical information for the benefit of staff and the public.  The Guides pronounce that they are ot official pronouncements and cannot be used as such, but do reflect current positions of the Service.

TG 3-8 addresses the concepts of inurement and private benefit in 501(c)(3) charities.

Release in charity bike ride ineffective against city

The Supreme Court of California has reversed lower courts and held that a release of liability signed by a rider in a charity bike ride is ineffective against a city that did not adequately maintain the public road on which the rider was injured.  The Court said the release was void as against public policy.