Other Developments

• Published date: 01 August 2019
• DOI: http://doi.org/10.1002/npc.30630
• Date: 01 August 2019

Bruce R. Hopkins’ NONPROFIT COUNSEL

8 August 2019 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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

OTHER DEVELOPMENTS

◆The Department of the Treasury, on June 11, issued

final regulations governing the availability of chari-

table contribution deductions when a donor receives

or expects to receive a corresponding state or local tax

credit (T.D. 9864). These regulations were promulgated

in response to enactments by some states and local gov-

ernments intended to work around the cap on deduct-

ibility of state and/or local taxes. The proposed rules are

summarized in the November 2018 issue. Greater atten-

tion will be given to these regulations next month. [3.1]

◆Next month’s issue will also include a summary of the

Taxpayer First Act, an IRS modernization bill signed into

law on June __.

◆A lawsuit was filed, on August 10, 2018, against an

organization sponsoring donor-advised funds, alleging

that the organization sold stock contributed for a fund

despite having promised it would hold the stock and sell

it gradually as the securities appreciated in value (Fair-

bairn v. Fidelity Investments Charitable Gift Fund (N.D.

Cal.). The sponsoring organization’s position is that it

is its policy to sell securities immediately on receipt and

that the plaintiffs were aware of the policy. The defen-

dant’s motion to dismiss was denied on November 28,

2018. A commentary on this litigation asserts that the

case is a “challenge to how the funds are becoming the

dominant charitable behemoths in the United States”

and “has the potential to cool a fast-growing area of

charitable giving” (Sullivan, “Lawsuit Could Cool a Fast-

Growing Way of Giving to Charities,” The New York

Times, May 31). [11.8]

◆Riddle: When is a tax not a tax, unless it is or perhaps

isn’t? As is well-known, the US Supreme Court found

that the shared-responsibility payment (IRC § 5000A(b))

is a tax for purposes of upholding the constitutional-

ity of the health insurance individual mandate (IRC §

5000A(a)), while holding in the same opinion that the

SRP is not a tax for purposes of determining a court’s

subject-matter jurisdiction in relation to the Anti-Injunc-

tion Act (National Federation of Independent Business v.

Sebelius (2012) (opinion summarized in the September

2012 issue)). Faced with the issue as to whether the SRP

is a tax for purposes of securing priority treatment in a

debtors’ bankruptcy case, the court held it is a penalty,

not a tax, giving rise to only a general unsecured claim

(In re Bailey (US Bank. Ct., E.D.N.C., decision dated May

24)). The court stated that it is evaluating the SRP “in a

different context” and “is not constrained or convinced

by” the NFIB decision. Indeed, the bankruptcy court

noted that Congress, by enactment of the Tax Cuts and

Jobs Act, reduced the SRP to zero, observing that the

law change “implies” a “penalty abatement.” Wrote

the court: “It is difficult to imagine that a tax would be

reduced to zero.”

◆The US Tax Court has again held, by decision dated

June 10, that “gifts” to a member of the clergy by con-

gregants of the minister’s church are gross income, due

to the nature of services rendered, the routinized and

highly structured system of the church in tracking giving,

and the ratio of church salary to the donations (Brown

v. Commissioner). (See Felton v. Commissioner (summa-

rized in the December 2018 issue).) The court also held

that payments to the minister were not in the form of a

parsonage allowance because they were not adequately

designated as such.

◆The US Court of Appeals for the Ninth Circuit, on

June 7, again upheld a tax regulation, in a case with

implications for the law of tax-exempt organizations

(Altera Corporation & Subsidiaries v. Commissioner).

The significance of this decision is summarized in the

October and November 2018 issues. Next steps are a

petition for a rehearing before the full panel of Ninth

Circuit judges and a petition for certiorari filed with the

US Supreme Court.

Quote of the Month: “Fiddlesticks.” This was the

reaction of the US Court of Appeals for the DC Circuit,

in response to RERI’s claim (see the article beginning

on p. 2) that it lacked the basis to raise an interpreta-

tion argument, in connection with the supervisory

approval requirement (IRC § 6751(b)(1)) (referenced in

last month’s issue), when it was before the Tax Court. ◆

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 20 § 5 of the book; thus, the citation is referenced as [20.5]. Likewise, each article in the news-

letter 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 second

article in this issue is available in Chapters 10 § 14(a) and 21 § 4 of the book; thus, the citation is referenced as [10.14, 21.4].

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 www.brucerhopkinslaw.com. 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 brucerhopkins@brucerhopkinslaw.com. 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 wileyonlinelibrary.com/journal/npc.