Other Developments

• Date: 01 March 2020
• Published date: 01 March 2020
• DOI: http://doi.org/10.1002/npc.30707

Bruce R. Hopkins’ NONPROFIT COUNSEL

8 March 2020 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

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)] ◆

NATIONAL TAXPAYER

ADVOCATE BLASTS IRS

(AGAIN)

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)] ◆

OTHER DEVELOPMENTS

• 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.”

[21.5]

• 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.