IRS Sending Warnings As To Opportunity Funds

• Date: 01 February 2021
• DOI: http://doi.org/10.1002/npc.30828
• Published date: 01 February 2021

Bruce R. Hopkins’ NONPROFIT COUNSEL

8 February 2021 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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

certain exempt organizations with nondeductible

lobbying expenditures is $120. [22.6(a)]

• The limitation regarding the exemption of annual dues

required to be paid by a member to an exempt agri-

cultural or horticultural organization is $173. [25.2(l)]

This revenue procedure also includes the tax rate

tables, the standard deduction amount (e.g., $25,100

for married individuals filing jointly), and the gift tax

exclusion ($15,000). ◆

IRS SENDING WARNINGS AS

TO OPPORTUNITY FUNDS

The IRS has started sending letters to taxpayers who

may need to take additional actions related to Qualified

Opportunity Funds. More specifically, taxpayers who at-

tached or indicated they attached a Form 8996 to their

return may receive a letter letting them know that, if

they intended to self-certify with respect to a QOF, they

may need to take additional action to meet the annual

self-certification requirement.

To correct a self-certification for 2018 as to a QOF,

these taxpayers should file an amended tax return or

an administrative adjustment request. If an entity that

receives the letter fails to take action to self-certify as a

QOF, the IRS may refer its tax account for examination.

Investors who made an election to defer tax on eligible

gains invested in that entity may also be subject to exam-

ination for an invalid election.

Additionally, taxpayers may receive a letter notifying

them that they may not have properly followed the

instructions for Form 8949 (sales and other dispositions

of capital assets) or do not appear to have an eligible

gain that would enable them to make a valid deferral

election for gains invested in a QOF.

If these taxpayers intended to make a valid deferral

election, they can file an amended return or an administra-

tive adjustment request. Failure to act will mean those who

received the letter may not have a qualifying investment

in a QOF and thus the IRS may refer their tax accounts

for examination. This may result in letter recipients owing

taxes, interest, and penalties on gains that were not prop-

erly deferred. (IR-2020-274 (December 6) [7.17] ◆

OTHER DEVELOPMENTS

◆As noted in last month’s issue, the trial in the Fidelity

Charitable Gift Fund case ended on December 4. Another

summary of the trial proceedings is in the December 7

print issue of Bloomberg Law’s Daily Tax Report. [11.8(b)]

◆The IRS Office of Chief Counsel addressed the method

by which the IRS applies the civil fraud penalty (IRC §

6663(a)) for partnerships, subject to the centralized

partnership audit regime, that participated in listed syn-

dicated conservation easement transactions. The answer:

the procedures are the same as those for establishing a

civil fraud against a partnership subject to the regime

generally, that is, through all facts and circumstances that

establish the willful intent to evade tax at the partnership

level (Chief Couns. Adv. Mem. 202044009).

◆The IRS, on November 19, released a revised version

of its Conservation Easement Audit Technique Guide

(Pub. 5464). The overall purpose of this guidance is to

summarize the general requirements for charitable con-

tributions and the specific requirements for contributions

of conservation easements. Included in the Guide is a

summary of examination techniques, an overview of the

process for valuing these easements, and a discussion of

applicable penalties. [9.7] ◆

Each article in the newsletter on a tax-exempt organization’s 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, 2020 supplement). This is done to

provide ready access to additional and background information concerning these articles. For example, underlying information con-

cerning the first article in this issue is available in Chapters 12 § 3(b)(i), (iv) and 25 § 5 of the book; thus, the citation is referenced as

[12.3(b)(i), (iv), 25.5]. 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, 2014, 2020 cumulative supplement).

For example, information concerning the second article in this issue is available in Chapters 9 § 7 and 10 § 1 of the book.

This newsletter is a stand-alone publication. An inventory of articles in the newsletter since its inception in 1983 and a subject matter

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 www.brucerhopkinslaw.com. For those who have the books, the newslet-

ter also provides monthly updates. Both books are annually supplemented. Questions concerning nonprofit law developments in

general may be sent to brucerhopkins@brucerhopkinslaw.com. Also, a comprehensive summary of nonprofit law is available in the

Bruce R. Hopkins Nonprofit Law Library, an e-book published by Wiley. Other law resources are referenced at brucerhopkinsbooks.

com. Follow BRHopkins_NPLaw on Twitter.

The newsletter has a dedicated Web site. Please visit wileyonlinelibrary.com/journal/npc.

Quote of the Month: The Internal Revenue Manual

was revised, by a Manual Transmission dated December

11, in connection with the section concerning use of

summons (25.5.8). This revision states that the “desig-

nated official to approve a church tax inquiry under IRC

[§] 7611(a) is the Commissioner, TEGE” (25.5.8.3.2). It is

not known at this time if this development is intended to

trump the existing regulation project (summarized in the

October 2009 issue) or whether this amendment of the

IRM will be reinforced by a regulation. [27.6(c)]