Other Developments

• DOI: http://doi.org/10.1002/npc.30412
• Published date: 01 December 2017
• Date: 01 December 2017

Bruce R. Hopkins’ NONPROFIT COUNSEL

December 20178THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc

• The standard deduction stays at $6,300 for single

and married individuals filing separate returns, stays

at $12,600 for married couples filing jointly, and rises

slightly to $9,300 for heads of households.

• The limitation for itemized deductions claimed on

returns of individuals for 2016 begins with incomes

of $259,400 in the case of singles ($311,300 for

married couples filing jointly).

• The personal exemption rises slightly to $4,050, subject

to a phase-out that begins with adjusted gross incomes

of $259,400 for singles ($311,300 for married couples

filing jointly); it phases out completely at $381,900 for

singles ($433,800 for married couples filing jointly).

• The annual exclusion for gifts is $14,000. ◆

OTHER DEVELOPMENTS

◆The US Tax Court, on October 10, ruled that when

the IRS retroactively revokes a corporation’s tax-exempt

status, the interest on the resulting tax deficiency is

determined by reference to the date prescribed by law

for filing a corporate tax return (Form 1120) for the first

year the entity became taxable, rather than the date on

which the IRS issued the final adverse determination let-

ter (Creditguard of America, Inc. v. Commissioner). The

court stated that this outcome is among the “logical

consequences” of the retroactive revocation, enabling

the IRS to be “restored to the position it would have

occupied if [the organization] had never enjoyed tax-

exempt status” during the taxable period. The court

declared: “Retroactive revocation is not just a slap on

the wrist; it has real tax consequences.” [27.3, 27.4(a)]

◆A nonprofit organization sued the IRS to obtain cop-

ies of records, pertaining to the agency’s procedures for

church tax inquiries or examinations, under the Freedom

of Information Act. The IRS identified 16,439 pages of

responsive documents, withholding 10,672 pages on

the basis of FOIA exemptions from disclosure. The IRS

submitted three declarations in support of its position

that its document search was adequate as a matter of

law. Rejecting the claim that the IRS’s search for docu-

ments was unreasonably narrow in scope, the US District

Court for the District of Columbia, on September 27,

ruled in favor of the IRS (Alliance Defending Freedom v.

IRS). [28.10(b)]

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

October 19, held that an individual may not deduct

unrelated business losses sustained by two partner-

ships held in an individual retirement account from his

personal taxable income (Fish v. Commissioner). IRAs,

although tax-exempt, are subject to unrelated business

income taxation. Unrelated business income losses may

be carried forward or backward to deduct against gains

within an IRA. But, the court stated, the federal tax law

“does not provide for the pass-through of UBTI losses to

an IRA beneficiary’s personal tax return.”

◆The Department of Justice, on October 26, announced

a settlement in two of the Tea Party exemption applica-

tion cases. The settlements, which must be approved by

the district courts, pertain to Linchpins of Liberty v. U.S.

(D.D.C.) and NorCal Tea Party Patriots v. IRS (S.D. Ohio).

The Daily Tax Report, in its October 27 issue, reported

the settlement in the latter case is in “seven figures.”

[26.1(j)]

◆In December 2016, the IRS issued a notice identifying

certain syndicated conservation easement transactions

and substantially similar transactions as listed transac-

tions under the tax shelter rules (summarized in the

March 2017 issue). In the case of a participant with a

disclosure obligation with respect to these transactions,

the disclosure was originally due on June 21, 2017. A

subsequent notice extended that deadline to October 2,

2017 (summarized in the July 2017 issue). In response

to Hurricanes Harvey, Irma, and Maria, the IRS further

extended this due date to October 31, 2017 (Notice

2017-58). [28.18(d), (e)]

Quote of the Month: The proposed relaxation of the

Johnson Amendment for churches (see the first article)

would apply with respect to the “content of any homily,

sermon, teaching, dialectic, or other presentation made

during religious services or gatherings.” ◆

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, Eleventh Edition (Wiley, 2017 cumulative supplement). This is done to provide ready

access to additional and background information concerning these articles. For example, underlying information concerning the sec-

ond article in this issue is available in Chapter 10 § 1(a)(ii) of the book; thus, the citation is referenced as [10.1(a)(ii)]. 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, 2017 cumulative supplement). For example, underlying information concerning

the fifth article in this issue is available in Chapter 9 § 7(a) of the book; thus, the citation is referenced as [9.7(a)].

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.nonprofitlawcenter.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. Follow BRHopkins_NPLaw on Twitter.

The newsletter has a dedicated website. Please visit www.hopkinsnonprofitcounsel.com.