2009 Georgetown Exempt Organizations Conference – Day Two

Published on: by Gene Takagi Category:EVENTS

Here are my tweets from day two of the Georgetown Representing & Managing Tax-Exempt Organizations Conference:

  • Nonprofit lawyers James Hansen, Peter Holiat (IRS), and Virginia Richardson (IRS) speak on current UBIT issues at Georgetown EO Conf
  • 2008 PLR: Community foundation sells unique grantmaking consulting svcs (related income) and admin svcs (unrelated) to grantmaking orgs
  • 2008 PLR: Charity spends 2% to further charitable purposes, 98% on other costs (including running bingo) – not exempt (commensurate test).
  • 2008 PLR: providing housing to low income persons not necessarily charitable (may be serendipitous).
  • 2008 PLR: charity owns debt-financed bldg, leases space to unrelated lessee who hires charity's beneficiaries (disabled) – subst related
  • 2008 PLR: economic development org constructs debt-fin arena & leases to college athletic ass'n – subst related (lessening gov't burdens)
  • IRS EO manager David Fish sings "What a Wonderful Initiative" (w/ apologies to Louis Armstrong) re: Colleges/Universities Initiative
  • Attorneys Carol Kroch & Morey Ward, & Adrian Cronje discuss endowment and spending policies at Georgetown EO Conference
  • Kroch: UPMIFA: Spending & investing in a post-UMIFA world. UPMIFA enacted in 29 states now. Eliminates historic dollar value concept.
  • UMIFA: Problems for underwater funds; limited guidance for highly appreciated funds.
  • UPMIFA: permits org, subject to donor's intent in gift instrument, to spend/accumulate as much of endowment as org determines is prudent.
  • UPMIFA: optional cap on spending rate (e.g., CA 7%), rebuttable presumption that spending >7% is imprudent.
  • Ward: FSP FAS 117-1 (effective after 12/15/08): guidance on net asset classification of donor-restricted endowment funds in UPMIFA states.
  • FAS 117-1: Orgs subject to UPMIFA must classify portion of donor-restricted endwmnt fnd of perpetual duration as perm restricted net assets.
  • FAS 117-1: Amts in endowmnt fund in excess of portion deemed perm restricted are classified as temp restricted net assets until appropriated
  • FAS 117-1: Portion of donor-restricted endowment fund that is unrestricted is reduced by investment losses before perm restricted portion.
  • Marsha Shaines, GC Smithsonian, discusses corporate sponsorship & merchandising at Georgetown Exempt Organizations Conference.
  • Shaines: Merchandise may be related to museum's exempt purpose even though it has utilitarian purpose if it also has related purpose.
  • Shaines: Remember there's nothing wrong with paying UBIT; you just have to plan for it.
  • Shaines: "Corporate sponsorship" may refer to different things; clarify whether "qualified sponsorship payment" (exempt from UBIT).
  • Qualified sponsorship payment: one where there is no expectation that the sponsor will receive any substantial return benefit.
  • Advertising is generally subject to UBIT (unless not regularly carried on) – beyond name, logo, value neutral description of products/svcs.
  • Nonprofit lawyers Ann Batlle and Karen Haque discuss International Grantmaking at Georgetown Exempt Organizations Conference.
  • Haque: Expenditure responsibility (ER) required for exempt orgs not public charities (incl. new charities without a determination letter).
  • ER grants – pros: fairly clear rules, easy to apply; cons: strictly interpreted, no gen operating support grants, may req 2x ER (subgrants)
  • Equivalency Det (alt to ER) – pros: grantee treated as pubic charity, operating grants okay; cons: significant judgment/risk, need to update
  • Public charity equivalency: does support from a foreign gov't count completely as public support for purposes of public support test?
  • Equivalency Test – foreign gov't affidavits: 1) gov't entity or political subdiv (soverigh powers), 2) instrumentality, 3) public school
  • Expenditure responsibility – pre-grant inquiry; written grant agreement; regular reports; 990-PF reports; investigate diversion/problems
  • International charitable activities – may need license from OFAC in certain countries.
  • Treasury Anti-Terrorist Financing Guidelines: Voluntary Best Practices for US-Based Charities. USAID Partner Vetting System.
  • Int'l grantmaking due diligence: perform a risk assessment; check SDN list; examine org docs; solicit addnl info; consider site visit.
  • Int'l grantmaking: consider tax withholding rules under IRC Sec 1441. Gifts not income – Gates Fdn asks for PLR; IRS declines.
  • Repressive Ethiopian proclamation barring foreign NGOs from operating in country (January 6, 2009).
  • Nonprofit lawyer Suzanne Ross McDowell discusses exempt organizations and intellectual property issues at Georgetown EO Conference.
  • Scientific research benefiting public: aid sci education; published in treatise; to discover cure for disease; attract industry to community
  • Commercially sponsored research – may benefit public (exemption req) if results are published within short time after project completion.
  • Publishing of scientific lit exempt if content is educational; edu prep methods; distribution valuable; distinguish from commrcial publisher
  • Structures for commercializing IP: licensing for royalty or equity; using controlled subsidiary; joint ventures.
  • To avoid recognition of UBTI on royalty income from controlled sub, org may consider assigning (rather than licensing) IP rights to fp sub.

The link to my day one tweets is here.