ABA Exempt Organizations Committee Meeting – September 20, 2013


ABA Joint Meeting 2013

I had the pleasure of attending the American Bar Association Exempt Organizations Committee Meeting yesterday (chaired by Robert Wexler of Adler & Colvin) and seeing many of the most respected attorneys working with nonprofits from throughout the country. Here are a few takeaways:

  • Some applicants for 501(c)(3) status are getting exempt status revoked before getting recognition of exemption. The Committee intends to raise this systems issue with the IRS.
  • Although we’ve been waiting several years for Treasury regulations on donor-advised funds, Ruth Madrigal from the Office of Tax Policy advised us not to expect anything this year.
  • Senior Treasury counsel Victoria A. Judson, encouraged attorneys to review the Colleges and Universities Compliance Project Final Report and recommend unrelated business compliance checks for clients. Ofer Lion, counsel with Hunton & Williams, and I will be discussing this topic at the Western Conference on Tax Exempt Organizations in November.
  • Treasury counsel Janine Cook informed us of a few significant litigation cases: Partners in Charity (see Downpayment Assistance Organization’s Exemption Retroactively Revoked; No Abuse of Discretion), Capital Gymnastics Boosters Club (see Parent Booster Clubs – Raising Money For Your Own Kid Is Not Charity), and Cencast Services (see Film Cos. Cannot Pass Tax Liabilities To 3rd Parties: Fed. Circ.).
  • Treasury counsel also noted its focus on employment tax liability in the nonprofit sector. This is a critical area for nonprofits to get right, and board members of nonprofts should recognize that they may be held personally liable if their organizations do not meet their payroll tax obligations. See, e.g., Tips for Employers Who Outsource Payroll Duties (IRS).
  • Michael Sanders and Megan Christensen of Blank Rome discussed New Market Tax Credits (see New Markets Tax Credit Program). Since the NMTC Program’s inception, the Community Development Financial Institutions (CDFI) Fund has made 749 awards allocating a total of $36.5 billion in tax credit authority to Community Development Entities through a competitive application process.
  • The Charleston Principles provide guidance on multi-state Internet solicitations, cause-related marketing & commercial coventuring. The panel, moderated by Cindy Lott, Senior Counsel of the NSAG Program at Columbia University, made clear that if a commercial coventure results in a business entity soliciting for a charity in another state, the charity must comply with the charitable registration laws of that other state. Additionally, it was important for commercial coventurers to ensure they were accurately representing how monies were being divided and the timing of any transfer of funds to the charity. It was advised that charities seek approval rights before their for-profit coventurers published any materials regarding the coventure.
  • Sheila Warren, General Counsel of TechSoup and NGOsource, provided a description of her program’s role as a repository for equivalency determinations, one of two alternative methods for lawfully making private foundation grants to international NGOs. I’m a fan though it’s still in its very early stages and there are some unanswered questions.
  • David Shevlin of Simpson Thacher (Erin’s former firm) moderated a panel discussing donor-advised funds. We were reminded of the major differences between a private foundation and donor-advised fund (DAF) that would support not burdening DAFs with all of the private foundation rules. Notably, DAFs are not legally controlled by their donors and donor have no say on how DAFs are invested. Additionally, DAFs on average grant 17% of their assets while private foundation only grant 5.6% of their assets.
  • To close the meeting, Rosemary Fei of Adler Colvin moderated a panel on Helping the IRS: 501(c)(4) Reform Proposals. Her partner and panelist Greg Colvin briefed us of the Bright Lines Project, an extremely thoughtful set of regulatory solutions to the problem of determining where the line is with respect to political intervention activities.