November 20, 2019

Nonprofits: Creeping Commercialization and the Specter of Unrelated Business Income Tax

November 20, 2019/ Ruchelman P.L.L.C.

In 2018, charitable giving in the U.S. totaled over $427 billion. Yet, charitable contributions are not the only source of revenue for nonprofit organizations. Commercial activities are an ever-growing source of revue in the sector – and one that is causing its own set of issues. Nonprofits face unrelated business income tax (“U.B.I.T.”) on business income derived from commercial activities not related to tax-exempt status, and in more extreme cases, they may even face the loss of tax-exempt status if not operated exclusively for tax-exempt purposes. Nina Krauthamer and Hannah Daniels, an extern at Ruchelman P.L.L.C. and student at New York Law School, explain.

April 30, 2019

The Impact of Brexit on German Taxes for Private Clients and Nonprofit Organizations

April 30, 2019/ Ruchelman P.L.L.C.

American business executives responsible for regional operations in Europe often see different approaches to problem solving in terms of cultural differences between various European countries. It can be said that British colleagues often continue to rethink decisions even after solutions are adopted, and German colleagues focus on engineering a unified approach to reach the best solution to the matter at hand. These cultural characteristics seem to have manifested in the different ways Parliament in the U.K. and the Bundestag in Germany are addressing Brexit. Parliament continues to debate whether, when, and how to implement Brexit, while the Bundestag has enacted several laws to address how a hard or soft Brexit will affect various aspects of German tax law. Dr. Andreas Richter of P+P Pöllath + Partners, Berlin and Frankfurt, provides the reader with an overview of the German tax consequences to be anticipated from a U.K. departure from the E.U. – with or without a formal Brexit agreement.

April 01, 2018

Insights Vol. 5 No. 3: Updates & Other Tidbits

April 01, 2018/ Ruchelman P.L.L.C.

This month, Tomi Oguntunde, Sheryl Shah, and Nina Krauthamer look briefly at four recent developments in international tax: (i) the E.U. counteroffensive to U.S. tax reform involving stricter tax rules, (ii) the amendment of Form 1023-EZ, which is a streamlined application for non-profit entities applying for tax exempt status, (iii) Spain’s crackdown on celebrities attempting to evade tax, and (iv) Luxembourg’s continued pushback against the Amazon State Aid case.

January 26, 2017

Foreign Charities active in the U.S. – Public? Or Private Foundations?

January 26, 2017/ Ruchelman P.L.L.C.

Foreign nonprofit organizations have become more active in the U.S. in carrying out their charitable mandates. Such activities include performances in the U.S. by foreign artistic companies and the use by U.S. charities of technology and know-how developed by foreign charities. Fees earned by foreign charities could be subject to U.S. income or withholding taxes, but those taxes can be reduced or eliminated if specific procedures are followed. Much will depend on the status of organization as a “public charity” or a “private foundation,” terms that make reference to the organization’s funding sources. Nina Krauthamer and Galia Antebi explain the U.S. rules that are applicable.

January 15, 2016

Insights Vol. 3 No. 1: Updates & Other Tidbits

January 15, 2016/ Web Admin

This month, Insights discusses recent events including a Beanie Baby billionaire’s light sentence; a tax reform report by the European Parliament addressing tax rulings, a common consolidated corporate tax base, a crackdown on tax havens, whistle-blower protection, public access to country-by-country (CbC) reports, and a lower threshold to approve E.U. tax legislation; a House Ways and Means Committee action in regard to B.E.P.S., E.U. investigations on State Aid, patent box regimes, and inversions; identity theft risk in I.R.S. proposed regulations regarding charitable deductions; and allowance of accounting non-conformity for foreign-based groups that do not adopt L.I.F.O. accounting when that method is adopted by a U.S. member.

July 15, 2015

P.L.R. 201446025 – A Change of I.R.S. Direction?

July 15, 2015/ Ruchelman P.L.L.C.

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INTRODUCTION

U.S. charities are required to obtain I.R.S. approval in order to be exempt from federal income tax under §501(a) of the Internal Revenue Code (the “Code”). Under Code §508(a), new organizations must notify the Secretary of the Treasury that they are applying for recognition of Code §501(c)(3) status. In order to establish such exemption, Treasurey Regulation §1.1501(a)-1(a)(2) requires that an organization must file an appropriate application form with the district director for the internal revenue district in which the principal place of business of the organization is located. Furthermore, any rulings or determination letters holding the organization exempt are effective so long as there are no material changes in the organization’s character, purposes, or methods of operation. To be tax-exempt under §501(c)(3), an organization must be organized and operated exclusively for exempt purposes and none of its earnings may inure to any private shareholder or individual.

This begs the following question: If a charity changes its organizational structure or state of incorporation, will a new application be required?

September 15, 2014

I.R.S. Issues New Form 1023-EZ: Streamlined Exemption for Small Charities

September 15, 2014/ Web Admin

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On July 1, 2014, the Internal Revenue Service (“I.R.S.”) introduced a new, shorter application form to help small public charities apply for recognition of tax-exempt status, under §501(c)(3) of the Internal Revenue Code (“the Code”), more easily.

Ruchelman P.L.L.C. used the new Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, for a client and received recognition of tax-exempt status in less than three weeks. Recognition of tax-exempt status ordinarily can take months, if not years (in the case of charities operating abroad). Prior to the introduction of Form 1023-EZ, expedited processing was available only under certain circumstances, generally in the case of a mass disaster (e.g., terrorist attack, hurricane, etc.).

The new procedures may reduce the need for small charities to engage in fiscal sponsorships with larger public charities. Under a fiscal sponsorship, the larger charity agrees to sponsor the start-up charity, receiving and administering charitable contributions on behalf of the sponsored organization, for a fee.

The new Form 1023-EZ, is three pages long, compared with the standard 26-page Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Most small organizations (which the I.R.S. estimates to be as many as 70% of all applicants) qualify to use the new streamlined form. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible. These are the same organizations that are eligible to file an “ePostcard” annual return on Form 990-N.

The Form 1023-EZ must be filed using pay.gov (the secure electronic portal for making payments to Federal Government Agencies) and a $400 user fee is due at the time the form is submitted.

February 15, 2014

New York Enacts New Legislation For New York Nonprofits

February 15, 2014/ Web Admin

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New York’s Governor Andrew Cuomo has signed the Nonprofit Revitalization Act of 2013 into law, effective July 1, 2014, making a number of key reforms to New York law that have long been sought by the charitable sector and legal practitioners. Nonprofit organizations will now be able to incorporate, dissolve and merge more easily; communicate and hold meetings using modern technology like Skype and videoconference; and effect various transactions without the need to seek Court approval. The new law has added new governance provisions to provide crucial oversight and governance reforms. Nonprofit boards will have to perform stricter oversight of insider deals, and the Attorney General will be better able to hold insiders accountable for abuse. The new law requires the adoption of more robust financial oversight requirements, conflict of interest policies, and, for certain charities, whistleblower policies to protect nonprofit employees from retaliation when they identify wrongdoing.