Other Developments

Date01 March 2020
Published date01 March 2020
Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc
error. There is nothing in the law of tax-exempt organiza-
tions that hinges eligibility for exemption on whether, at
the board level, there is a conflict of interest. [5.7(c)]
The Office of the Taxpayer Advocate, on January 8,
released its 2019 Annual Report to Congress. There is no
letup in the blasting of the Form 1023-EZ. The Taxpayer
Advocate Service writes that its review of articles of
incorporation filed in 20 states for entities that had their
exemption recognized via the Form 1023-EZ revealed
that between 26 and 42 percent of the time, the orga-
nizations failed to meet the organizational test. A repeat
study in 2019 jumped that level to 46 percent.
The TAS notes the expansion of the form in 2018.
According to its 2019 study, the IRS “made errone-
ous determinations more frequently after it added the
description field.” [26.1(g)]
The law of self-dealing rarely is reflected in the case
law. Here is a case where this body of law is barely
reflected in the case itself. An individual was con-
victed of seven counts of filing, or aiding in the filing
of, false tax returns; he was sentenced to 33 months
in prison and ordered to pay $146,404 in restitution.
By decision dated December 19, the sentence and
order was affirmed by the US Court of Appeals for
the Sixth Circuit (United States v. Wright). One of his
tax-evasion techniques was formation of a private
foundation, then causing it to pay his children’s high
school and college tuition. He tried to avoid one of
the counts by arguing that the self-dealing penalties
should be the sole remedy in that regard. This effort
was rejected on this appeal, in part because he did
not fully correct his self-dealing acts. [12.4(a)]
An incomplete appraisal summary attached to the
donors’ tax return, in connection with a contribu-
tion of noncash property, caused disallowance of
the entirety of the claimed deduction ($297,000)
(Loube v. Commissioner). The US Tax Court ruled,
by decision dated January 8, that the donors did not
specifically comply with the appraisal substantiation
requirements, nor substantially complied with them.
The donors contended that by attaching a copy of
the full appraisal to their return, they substantially
complied with the rules. But the court stated that
the “heightened substantiation requirements” were
enacted to enable the IRS to “efficiently flag proper-
ties for overvaluation from the face of appraisal sum-
maries,” thereby preventing the IRS “from having to
sleuth through the footnotes of millions of returns.”
Update on removal of the Sackler name at Tufts
(see last month’s issue): A lawyer for some members
of the Sackler family has written to the university’s
president, arguing, in the words of a December 20
New York Times article (“Sacklers Fight Tufts on
Name Removal”), that the “move was unjustified
and a violation of agreements made when the school
wanted the family’s financial help years ago.” The
lawyer wrote that Tufts chose to “prioritize optics
over a fair process.” A spokesman for the university
retorted that its decision was the “right thing to do,
and we are prepared to vigorously defend our posi-
tion.” The lawyer asked the school’s president to
preserve documents relating to this matter.
Quote of the Month: The aforementioned New York
Times article about removal of the Sackler name at Tufts
includes the observation that this case “raise[s] compli-
cated legal questions about what room institutions have
to unilaterally remove a donor’s name long after a gift
has been accepted.”
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 four
paragraphs of the first article in this issue is available in Chapters 25 § 4, 12 § 4(f), and 19 § 5 of the book; thus, the citation is
referenced as [25.4, 12.4(f), 19.5]. 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, Tax Law of Charitable Giving, Fifth Edition (Wiley, 2019 cumulative supplement).
For example, underlying information concerning the last paragraph of the first article in this issue is available in Chapter 7; thus,
the citation is referenced as [7].
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 newsletter 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 www.
brucerhopkinsbooks.com. Follow BRHopkins_NPLaw on Twitter.
The newsletter has a dedicated website. Please visit wileyonlinelibrary.com/journal/npc.

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT