ABA Tax Section Submits Comments on Proposed Group Exemption Rules

• Published date: 01 November 2020
• Date: 01 November 2020
• DOI: http://doi.org/10.1002/npc.30785

Bruce R. Hopkins’ NONPROFIT COUNSEL

2 November 2020 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc

shelter from the IRS, with no economic risk.” The “gen-

eral outcome” of these transactions is the same: for

every dollar an individual pays to a promoter to become

an investor in one of these transactions, “he or she com-

monly purchases a little more than four dollars’ worth of

tax deductions.” Thus, the report concludes that these

transactions are designed to “provide tax deductions to

high-income taxpayers by way of (1) inflated appraisals

of undeveloped land through (2) partnership entities that

appear to serve no non-tax business purpose for existing

other than the provision of tax deductions.”

The bulk of this report consists of sections (1) dis-

cussing the relevant federal tax law for understanding

and critiquing syndicated conservation easement trans-

actions, (2)discussing how these easement promotions

work, (3)discussing the law history of these syndications,

(4) analyzing how the promoters of these transactions

“took a seemingly complicated transaction and distilled

it down to a very simple proposition to would-be taxpay-

er-investors,” (5)examining the email traffic between the

promoters and their “taxpayer-investors,” (6)discussing

the “engine of every syndicated conservation-easement

transaction: an inflated appraisal,” and (7)detailing some

of the specific syndicated conservation-easement trans-

actions that have been promoted over the last decade.

Based on the content of this report, the Finance Com-

mittee leadership concluded the “IRS has strong reason for

taking enforcement action against syndicated conserva-

tion-easement transactions as it has to date.” They believe

“Congress, the IRS, and the Department of the Treasury

should take further action to preserve the integrity of the

conservation-easement deduction.” [10.15(d)] ◆

ABA TAX SECTION SUBMITS

COMMENTS ON PROPOSED

GROUP EXEMPTION RULES

The Section of Taxation of the American Bar Association,

by letter dated September 9, submitted comments on the

IRS’s proposed substantial revisions of the group exemption

rules (summarized in the July 2020 issue). This submission

states the section’s belief that the proposal “might create

or exacerbate more difficulties than it ameliorates.” It is

said that the proposal “would oblige both central organi-

zations and their subordinates to comply with a number of

requirements without increasing the central organization’s

ability to exercise oversight over the subordinates.” The

proposal, the section writes, in some instances, “would

make such oversight more difficult to exercise properly.”

In the section’s view, the proposal “also would increase

the Service’s caseload, with thousands of organizations

submitting applications for [recognition of] exemption

that would not otherwise have needed to do so.”

The section encourages the IRS to adopt “practical

definitions” of the terms affiliation, general supervision,

and control. It is noted that the concept of affiliation is

proposed to be determined “based on the entirety of the

information submitted” by central organizations. Asking

for a definition of the term that is “both broad and

flexible,” the section states that “it is appropriate to set

the bar for affiliation fairly low in the group exemption

context,” particularly when the term is applied in addi-

tion to the other two terms. The section recommends a

BRUCE R HOPKIN S’ NONPROFIT COUNSEL

(Print ISSN: 1542-8 419; Online ISSN: 1542-8427) is pub lished monthly by Wi ley Periodicals LLC , 111 River St., Hoboken, NJ 07030-5774 USA .

Postmaster: Send all address c hanges to

BRUCE R HOPKIN S’ NONPROFIT COUNSEL

, Wiley Periodi cals LLC, c/o The Sher idan Press, PO Box 465 , Hanover, PA 17331 USA.

Copyright a nd Copying (in any f ormat): Copyright © 202 0 Wiley Periodicals L LC. All rights reser ved. No part of this pub lication may be repro duced, stored or tra nsmitted in any form

or by any means wit hout the prior permiss ion in writing from the c opyright holder. Auth orization to copy item s for internal and perso nal use is granted by the cop yright holder for lib raries

and other user s registered with the ir local Reproduc tion Rights Organi sation (RRO), e.g. Copyr ight Clearance Cente r (CCC), 222 Rosewood Drive, D anvers, MA 01923, USA (www.copyright.

com), provided the ap propriate fee is pa id directly to the R RO. This consent doe s not extend to oth er kinds of copying s uch as copying for g eneral distribu tion, for advert ising and promoti onal

purposes, fo r republicatio n, for creating ne w collective wo rks or for resal e. Permissions for s uch reuse can be ob tained using the R ightsLink “Requ est Permission s” link on Wiley Online L ibrary.

Special requests should be addressed to: permissions@wiley.com.

Delivery Terms and Legal Title: Where the subscription pri ce includes print iss ues and delivery is to t he recipient’s addre ss, delivery term s are Delivered at Pl ace (DAP); the recipi ent

is responsible f or paying any impor t duty or taxes. T itle to all issues tran sfers FOB our shipp ing point, freigh t prepaid. We will ende avour to fulfil claim s for missing or damage d copies within

six months of pub lication, within o ur reasonable disc retion and subjec t to availability.

Information for subscribers:

Bruce R Hopkins’ Non profit Counsel

is published in 12 issu es per year. Subscript ion prices for 2020 are: In stitutional: Online Only: $1118 (The Ameri cas),

£573 (UK), €726 (Eu rope), $1118 (rest of the world). Institutional: Print + Online: $1397 (The Americas), £717 (UK), € 907 (Europe), $1397 (rest of the w orld). Institutional: Print Only:

$1118 (The Americas), £573 (UK), € 726 (Europe), $1118 (rest of the world). Personal: Online Only: $597 (The Ameri cas), £306 (UK), €3 86 (Europe), $597 (rest of the wor ld). Personal:

Print + Online: $689 (The Americ as), £531 (UK), €632 (Europe), $689 (re st of the world). Personal: Print Only: $597 (The Americ as), £306 (UK), €386 (Euro pe), $597 (rest of the

world). Price s are exclusive of tax. A sia-Pacific GST, Canad ian GST/HST and European VAT wil l be applied at the appro priate rates. For more in formation on current t ax rates, please go to

https://onlinelibrary.wiley.com/library-info/products/price-lists/payment. T he price includes on line access to the cur rent and all online back files to January 1, 2016, w here available. For ot her

pricing options, including access information and terms and conditions, please visit https://onlinelibrary.wiley.com/library-info/products/price-lists. Terms of us e can be found here: htt ps://

onlinelibrary.wiley.com/terms-and-conditions.

Back issues: Single issues fr om current and recen t volumes are availabl e at the current singl e issue price from cs- journals@wile y.com.

Disclaimer: The Publisher and Ed itors cannot b e held responsib le for errors or a ny consequenc es arising from t he use of informa tion containe d in this journal; th e views and opini ons express ed

do not necessa rily reflec t those of the Publi sher and Editors , neither does th e publication of a dvertiseme nts constitu te any endorsem ent by the Publishe r and Editors of the p roducts ad vertised.

Wiley’s Corpor ate Citizenship init iative seeks to ad dress the environ mental, social, ec onomic, and ethic al challenges face d in our business and w hich are importa nt to our diverse sta keholder

groups. Since la unching the initia tive, we have focuse d on sharing our conte nt with those in nee d, enhancing commu nity philanthro py, reducing our car bon impact, cr eating global guid elines

and best prac tices for paper u se, establishin g a vendor code of et hics, and engag ing our colleagu es and other stake holders in our ef forts. Fo llow our progres s at www.wiley.com/go/citizenship.

Wiley is a foundi ng member of the UN-b acked HINARI, AGO RA, and OARE init iatives. They are no w collectively k nown as Research4L ife, making online sc ientific content a vailable free or at

nominal cost to re searchers in devel oping countries . Please visit Wiley ’s Content Access – Corp orate Citizenship sit e: http://ww w.wiley.com/Wile yCDA/Sect ion/id-390082 .html

Journal Customer Services: For ordering information, claims and any enquiry concerning your journal subscription please go to https://hub.wiley.com/community/support/onlinelibrary or

contact your nearest office. Americas: Email: cs-j ournals@wiley.c om; Tel: +1 781 388 8598 or +1 800 835 6770 (toll free i n the USA & Canada). Euro pe, Middle East a nd Africa: Email:

cs-journals @wiley.com; Tel: +44 (0) 1865 778315. Asia Pacific: Em ail: cs-journals@wi ley.com; Tel: +65 6511 8000. Japan: For Japanese s peaking support, E mail: cs-japan@wile y.com.

Visit our Online Customer Help available in 7 languages at https://hub.wiley.com/community/support/onlinelibrary.

Editor: Bruce R. Hopkin s. Production Editor: Mary Jean Jones . Address for Editorial Correspondence: Bruce R. Hopkin s. email: brucerhopkins@brucerhopkinslaw.com. For submission

instructions, subscription and all other information visit: wileyonlinelibrar y.com/journal/npc

View this journ al online at wileyonlinelibrary.com/ journal/npc

Printed in the US A by The Sheridan Pres s.