Charitable Giving Corner

Date01 September 2019
Published date01 September 2019
Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc
An entity created a charitable lead annuity trust, to
provide annuity payments to a private foundation. Sub-
sequently, the entity assigned its interest in the trust (the
reversion) to an individual. This individual died during the
annuity period. By will, this interest was transferred to the
foundation, thereby merging the annuity and remainder
interests. A court order is required to consummate the
transfer to the foundation. The IRS ruled (applying IRC §
661) that the distribution of the trust’s assets to the foun-
dation will not be a distribution in satisfaction of a right
to receive a distribution of a specific dollar amount or in
specific property other than that distributed, nor will it
be a distribution in satisfaction of a general claim for an
ascertainable value (Priv. Ltr. Rul. 201928005). Therefore,
the IRS concluded, no gain or loss need be recognized
by the trust as a consequence of the distribution. [16]
A corporation has charitable contribution and net
operating loss carryovers from multiple tax years avail-
able in the year at issue. A reduction to a person’s chari-
table contribution carryover is required to the extent an
excess charitable contribution reduces modified taxable
income and an increase in a NOL carryover is required
(to eliminate a double tax benefit) (IRC § 170(d)(2)(B)).
The IRS ruled that the corporation is required to use a
year-by-year NOL absorption computation to determine
the charitable contribution carryover adjustment (IRC
§ 172(b)(2)) and the corporation must first reduce its
current-year charitable contributions by the adjustment
(under IRC § 170(d)(2)(B)) before reducing its earliest
year’s charitable contribution carryover (Chief Couns.
Adv. Mem. 201928014). The corporation’s position that
the adjustment should be calculated on an aggregate
basis was pronounced incorrect. [7.4(b)]
The IRS calculated, in the case of a charitable lead annu-
ity trust, where the income interest charitable beneficiary
is being split into two private foundations, the termina-
tion date for the trust based on the “trust mechanics”
and “basic actuarial and financial principles” (Priv. Ltr.
Rul. 201930017) (see next month’s issue). [16]
According to the National Taxpayer Advocate’s Objec-
tives Report FY 2020 to Congress, made public on June
20, the Tax Exempt and Government Entities Division
just cannot seem to properly function when it comes
to processing applications for recognition of exemption
filed by organizations seeking charitable status.
The report observes that the IRS has “struggled for
years to contain Form 1023 processing times.” With
adoption of Form 1023-EZ, the IRS reduced Form 1023
cycle times, the report states, “but at the cost of exer-
cising actual oversight of the tax-exempt sector.” Then,
the report continues, as these cycle times increased, the
IRS “shifted resources away from post-determination
compliance efforts that were intended to correct for the
lack of up-front oversight.”
The report states that the IRS plans to develop a
revised, electronic Form 1023, to be released in Janu-
ary 2020. It is said that the Taxpayer Advocate Service
“will seek to ensure that the revised form does not
undermine the IRS’s oversight role of the tax exempt
sector as occurred in 2014 with the introduction of Form
Quote of the Month: Due to ambiguities in the law
concerning the excise tax on organizations paying excess
compensation (IRC § 4960), for-profit companies may
end up paying part of the tax, causing the nonprofit
sector to “suffer a major setback,” according to a June
18 letter (just made public) to the IRS from the Alliance
for Charitable Reform. The letter adds: “The risk that for-
profit companies will be responsible for the tax simply
because their highly skilled, highly compensated employ-
ees volunteer, or provide minimal time, with a related
[applicable tax-exempt organization] will lead many
companies to prevent these individuals from providing
any services to related ATEOs whatsoever.”
Each article in the newsletter on a tax-exempt organizations law topic ends with a citation to the appropriate chapter(s) or
subchapter(s) in Hopkins, The Law of Tax-Exempt Organizations, Twelfth Edition (Wiley, 2019). This is done to provide ready access
to additional and background information concerning these articles. For example, underlying information concerning the first article
in this issue is available in Chapter 11 § 9(b) of the book; thus, the citation is referenced as [11.9(b)]. Likewise, each article in the
newsletter on a charitable giving law topic ends with a citation to the appropriate chapter(s) or subchapter(s) in Hopkins, The Tax
Law of Charitable Giving, Fifth Edition (Wiley, 2019 cumulative supplement). For example, underlying information concerning the
fourth article in this issue is available in Chapter 3 § 1 of the book; thus, the citation is referenced as [3.1].
This newsletter is a stand-alone publication. An inventory of articles in the newsletter since its inception in 1983, and a subject mat-
ter index, as well as an index of the court opinions, IRS revenue rulings and procedures, IRS technical advice memoranda, and IRS
private letter rulings discussed in the newsletter, are available at For those who have the books, the
newsletter also provides monthly updates. Both books are annually supplemented. Questions concerning nonprofit law develop-
ments in general may be sent to Also, a comprehensive summary of nonprofit law is avail-
able in the Bruce R. Hopkins Nonprofit Law Library, an e-book published by Wiley. Follow BRHopkins_NPLaw on Twitter.
The newsletter has a dedicated website. Please visit

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