IRS Creates Promoter Investigations Coordinator Position

• DOI: http://doi.org/10.1002/npc.30719
• Date: 01 May 2020
• Published date: 01 May 2020

Bruce R. Hopkins’ NONPROFIT COUNSEL

4 May 2020 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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

the complaint, language that a reasonable trier of fact

could also find sufficiently definite,” although the court

did not explain why.

The court also stated that Fidelity Charitable has “not

proved that its alleged promise to allow the Fairbairns

to advise on a price limit is unenforceable as a matter

of law.” The court wrote that “[p]erformance on the

promise is objectively measurable — did Fidelity Charita-

ble ask the Fairbairns’ opinion on the sales price before

the trades were made?” The court added that Fidelity

Charitable’s “suggestion that damages for this specific

claim are too speculative is also unpersuasive,” although

again the court did not explain why.

The court concluded that, “[b]ased on the evidence

in the record, there is a genuine dispute as to whether

Fidelity Charitable would have followed the Fairbairns’

advice had it been sought.” [11.8(b)]

Commentary: In essence, this case, at this stage, is

not a donor-advised fund case. It is an example of the

difficulties in getting a trial court to decide a case on the

basis of summary judgment and an illustration of the

capacious discretion vested in a trial judge as to whether

summary judgment in a particular case is warranted.

To the extent this case can be said to have a bearing

on donor-advised fund law at this point, it pertains to

the court’s downplaying of the admissions by the Fair-

bairns in their responses to the requests for admissions.

The court makes much of the fact that the words legal

control were not defined in the requests. The court also

differentiates between alleged conditions placed by the

Fairbairns prior to or at the time of their contribution and

conditions imposed subsequent to the gift. The fact is,

however, that the donor-advised fund law requires that

the sponsoring organization have exclusive legal control

over the gift property. Thus, no matter how legal control

may be defined, and when the legal control may have

been put in place, donors to donor-advised funds cannot

(to have deductible gifts) have it. ◆

IRS CREATES PROMOTER

INVESTIGATIONS

COORDINATOR POSITION

The IRS will soon have a promoter investigations

coordinator, the agency announced on February 24 (IR-

2020-41). This official “will coordinate promoter activity

across the agency and will serve as the point person

for Commissioner Chuck Rettig and IRS leadership on

promoter investigations,” the IRS said. The coordinator

“will work with the IRS business units, the Office of

Professional Responsibility, Criminal Investigation, Chief

Counsel and other IRS offices to ensure coordination of

ongoing investigations and develop new approaches to

identify promoters of aggressive tax arrangements.” The

official “will also assist IRS business units in developing

and resolving cases both individually and with a view

toward strategic promoter enforcement.”

The individual selected for this position is Brendan

O’Dell, currently a senior advisor in the IRS Large Busi-

ness & International Division. He is to serve on a tempo-

rary basis, beginning in early April, until the position is

filled on a permanent basis.

“Brendan brings a strong set of skills and experience

from inside and outside the IRS, which will be an asset

in this important new position,” said Sunita Lough, IRS

deputy commissioner for services and enforcement. “He

will play a leading role coordinating promoter investiga-

tions, an emerging priority concern for the IRS to help

improve compliance and ensure fairness in the tax sys-

tem.” O’Dell will report directly to Lough’s office.

This development comes at a time of increasing entan-

glement between the law of tax-exempt organizations

and the law concerning abusive tax promotions, the most

recent illustration being promotion of syndicated conser-

vation easement plans. [28A.3(b) (2020 Cum. Supp.)] ◆

TIGTA CRITICIZES TE/GE

FOR LACK OF PURSUIT OF

PROMOTER PENALTIES

The Treasury Inspector General for Tax Administration

audited the IRS to determine whether agency man-

agement has controls in place that provide reasonable

assurance that examiners consider whether abusive tax

shelter promoter penalties (IRC § 6700) are warranted

when performing examinations concerning tax-advan-

taged bonds. This penalty may be imposed on persons

who organize or participate in a bond transaction and

make false or fraudulent statements regarding the tax

benefit to potential investors.

TIGTA reviewed 127 closed bond-related exami-

nations conducted in FY 2017 and determined that

Tax Exempt & Government Entities examiners did not

always document whether this promoter penalty was

warranted. In addition, instances were identified in

which examiners failed to meet “minimum documen-

tation requirements,” workpapers were “incorrectly

completed,” and quality reviewers “did not identify

incomplete case documentation.” The TIGTA report,

dated March 6, is titled “Bond Promoter Misconduct

Procedures Should Be Improved” (2020-10-016).

TIGTA made five recommendations, including updat-

ing of guidance, by the TE/GE Division, to require

examiners to document their consideration of whether

promoter penalties are warranted in every examination.

It also recommended that the IRS ensure that quality

reviewers determine examiners’ consideration of pro-

moter penalties, develop a comprehensive training