Pbwt.com Overview of Tax-Exempt Organizations and Charitable Giving in the U.S. Robin Krause Patterson Belknap Webb & Tyler LLP May 11, 2016 8865027v1.

Slides:



Advertisements
Similar presentations
Judith G.H. Edington Russell J. Stein Boston Bar Association Tax-Exempt Fundamentals October 9, 2012.
Advertisements

1 WEALTH MIGRATION USING THE FAMILY LIMITED PARTNERSHIP, CHARITABLE REMAINDER TRUST AND GRANTOR TRUST IMCA INVESTMENT MANAGEMENT EXPO Consulting in Volatile.
S OUTHWEST B ORDER N ONPROFIT R ESOURCE C ENTER THE UNIVERSITY OF TEXAS-PAN AMERICAN Starting a Nonprofit.
using a Community Foundation Allyson Baumeister, C.P.A. John Hunter, J.D., C.P.A. Nancy E. Jones October 4, 2011 Charitable Planning...
 Gift Tax.  Why are gifts taxed? o Gifts were made to avoid estate taxes o Gifts were made to avoid income taxes o Taxes in general are for social welfare.
September 13, 2012 The Institute for Public Engagement The IRS’ Corporate Governance Regime.
HR A 1 © Copyright 2004 The Trust for Public Land.
501(c)3s and Compliance For DCs and Treasurers. Pony Club – DC and Treasurer Training Organization and Structure USPC, Inc. is an IRS 501(c)(3) tax exempt.
Special Events What You Need to Know. What is a Special Event? Primary purpose is to raise funds other than contributions to finance an organization’s.
1 © 2010 Venable LLP. All Rights Reserved. Intermediate Sanctions: Why You Should Be Concerned about Excess Benefit Transactions and How You Can Avoid.
TAX EXEMPTION AND RELATED ISSUES FOR THE NOT FOR PROFIT (NFP) CORPORATION REUBEN S. SEGURITAN 7 Penn Plaza, Suite 222 New York, NY Tel. No. (212)
Getting Started To create a UCLA DAF you simply transfer cash or other appropriate assets to UCLA, name your fund, and, if you wish, select family or.
“Update on Planned Giving Tax Strategies” Hampton Roads Gift Planning Council January 8, 2015 Jennifer Pierson, Manager Estate, Gift and Trust Services.
Jewish Community Foundation June 24, 2010 DONATIONS OF CERTAIN INTANGIBLES.
FUN WITH TAXES & TAX EXEMPT STATUS FOR YOUR CLUB GFWC Ohio Federation of Women’s Clubs Annual State Convention April 25, 2015.
Chapter Eighteen Accounting and Reporting for Private Not-for- Profit Entities Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction.
Social Ventures 101 Presentation for “Communiversity” February 8, 2012 Prepared by Melissa Auchard Scholz, Scholz Nonprofit Law LLC,  2012.
McGraw-Hill/Irwin Copyright (c) 2003 by the McGraw-Hill Companies Inc Principles of Taxation: Advanced Strategies Chapter 15 Income Taxation of Trusts.
September 19, 2013 ● Facilitator: Clyde W. Kunz, CFRE are.
© 2008 Gelman, Rosenberg & Freedman Basic Tax Considerations for Nonprofit Organizations Stephen Kelin Richard J. Locastro On Behalf of Maryland Nonprofits.
Charitable Giving Maximizing the impact of your contributions Insurance products are issued by Minnesota Life Insurance Company in all states except New.
Nonprofit Organizations Private Foundations Michael V. Bourland Michelle Coleman-Johnson Bourland, Wall & Wenzel, P.C.
Creating a Section 501(c)(3) Organization Elaine Waterhouse Wilson Quarles & Brady, LLP 500 West Madison Street Suite 3700 Chicago, Illinois (312)
Law 101 for Nonprofits: Key Issues and New Developments June 9, 2015 Joseph E. Miller, Jr. © 2015 Faegre Baker Daniels LLP These materials are intended.
Governing a Tax-Exempt Nonprofit Corporation The Basics MPCC December 16, 2010.
Arthritis Foundation Texas Chapter PLANNING WITH CHARITABLE REMAINDER TRUSTS R. Thomas Groves, Jr. Jackson Walker L.L.P. 901 Main Street, Suite 6000 Dallas,
© 2004 ME™ (Your Money Education Resource™) 1 Estate Planning Chapter 12: Special Elections and Post Mortem Planning.
What Every Corporate Attorney Should Know About Nonprofit and Tax-Exempt Organizations Utah State Bar Business Law Section December 8, 2010 Christopher.
S Corporation Chapter 46 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company1 An “S” Corporation is a corporation that.
OLA 1406 T 1008 Offering a Valuable Corporate Benefit.
CCIA Spring 2014 Conference Foundations: Common Observations & Other NFP Topics Heather McGee Senior Manager May 9, 2014.
Nonprofit Organizations Spring 2004 Class Six: Overview of Federal Tax Considerations/Income Tax Rules Relating to Tax-Exempt Organizations Michelle Coleman-Johnson.
© Adler & Colvin Fiscal Sponsorship Doing it Right! October 8, 2013 Stephanie L. Petit Adler & Colvin
©2008 Rothgerber Johnson & Lyons LLP Rothgerber Johnson & Lyons LLP THE COLORADO CHARITABLE ENTITY: Where Have We Been? Where Are We Going? Presenter –
9/13/2015 Compliance Guide for 501(c)(3) Public Charities Presented By: Sabry Abdel Aziz, CPA Prepared & Presented by Sabry Abdel Aziz, CPA.
 Charitable Giving.  Some facts about Charitable Giving (2013) o 95.4% of American households give to charity o Average contribution per household is.
1 Chapter 11: S Corporations. 2 S CORPORATIONS (1 of 2) n Should an S election be made? n S corporation requirements n S corporation election n Termination.
Fort Monroe Considerations regarding a Charitable Foundation.
Determination of Income Tax Liability  Gross Income  - “Above the Line Deductions”  = AGI (Adjusted Gross Income)  - Standard or Itemized Deductions.
Split Interest Charitable Trusts, Private Foundations and Donor Advised Funds Fran M. DeMaris Executive Vice President Cannon Financial Institute, Inc.
McGraw-Hill© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Charitable Planning Chapter 30 Tools & Techniques of Financial Planning Copyright 2009, The National Underwriter Company1 What is Charitable Planning?
Reporting Issues for Nonprofit Organizations DeAnna R. Moss, CPA, CGMA.
Module 1 Accountability in the Nonprofit Sector Convery
Private Preservation Protections: Preservation Easements.
Itemized Deductions Chapter 7. Identify qualified medical expenses and compute the medical expense deduction Determine the timing of a medical expense.
Donor-Advised Funds Advantages & Implications. Donor-Advised Funds Charitable giving vehicle set up under the tax umbrella of a public charity. Alternative.
© 2007 ME™ (Your Money Education Resource™) 1 Estate Planning for Financial Planners Chapter 9: Charitable Giving.
Portfolio management for institutional investors. Foundations & Endowments. Jakub Karnowski, CFA Portfolio Management for Financial Advisers.
Charitable Uses of Life Insurance Chapter 28 Tools & Techniques of Life Insurance Planning  What is it?  Transfer of cash, or other property to.
Chapter 16 Corporations. Learning Objectives Determine the types of entities that can be classified as a corporation for federal income tax purposes Calculate.
Charitable Contributions Chapter 32 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company1 Gratuitous transfers of property.
Personal Holding Company Chapter 45 Tools & Techniques of Estate Planning Copyright 2011, The National Underwriter Company1 A personal holding company.
Charitable contributions  Qualified organizations Public charity: charitable, religious, education, government  Not: your neighbor who lost his job;
International Charitable Giving – A Quick Guide to the U.S. Federal Tax Rules Martin Hall, Ropes & Gray LLP October 2014.
1 BUILDING PROFESSIONAL BRIDGES SPANNING THE FUTURE Legal and Tax Issues for NIGP Chapters November 17, 2009 Charles M. Watkins, Esq.
166 th Ekklesia Housing Conference. Organizational and Financial Best Practices Ron Sages (Ohio ‘73) Director of Housing The Fraternity of Phi Gamma Delta.
© MAP for Nonprofits Nonprofit vs. Tax Exempt Nonprofit status is determined by STATE law, which governs organizing documents. Tax exempt status.
Copyright(c) 2012 Dr. Chase C. Rhee
Private Foundation Grant Agreements: Basics and Beyond
168th Ekklesia Phi Gamma Delta Fraternity Housing Conference
Nonprofit and Philanthropic Tax Issues in the United States
Based on program materials from ABA Business Law Section,
IRS Tax Exempt Status AWSC Fall Workshop Oct 2018.
The Legal and Regulatory Framework Governing Foundations
Tax law Updates Every Nonprofit Needs to Know June 22, 2018
Charitable Contributions
HIT Legal Issues: Legal Structure and Tax Status
Helene S. Jaron Vice Chair, Private Client Services Cozen O’Connor
Chapter 7 Itemized Deductions 1.
Presentation transcript:

pbwt.com Overview of Tax-Exempt Organizations and Charitable Giving in the U.S. Robin Krause Patterson Belknap Webb & Tyler LLP May 11, v1

Landscape of Tax-Exempt Entities in the U.S. “Tax-exempt” or “exempt” organizations refers to those that are exempt from U.S. Federal income tax under Section 501 of the U.S. Internal Revenue Code. There are over 25 different types of tax-exempt organizations, for example: ■ 501(c)(3): organizations formed for “charitable” purposes (discussed further below) ■ 501(c)(4)s: organizations formed for promotion of social welfare ■ 501(c)(5)s: labor or agricultural organizations ■ 501(c)(6)s: business leagues, boards of trade, professional associations 2

Landscape of Tax-Exempt Entities in the U.S. 501 (c)(3)s Public Charities Private Foundations 3 501(c)(3) organizations are the ones we identify as “charities”

Landscape of Tax-Exempt Entities in the U.S. All 501(c)(3) charities have the following characteristics: ■ Purposes that are exclusively religious, charitable, scientific, testing for public safety, literary or educational, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals ■ No part of earnings of the organization “inures to the benefit of private shareholders or individuals” ■ May not have substantial lobbying activity ■ Prohibited from any political campaign activity 4

Landscape of Tax-Exempt Entities in the U.S.–Public Charities Public Charities: ■ Usually funded by the general public or have a purpose that makes them responsive to the general public ■ Favored in certain ways in the Internal Revenue Code (e.g., higher charitable deduction percentage limitations, not subject to the excise taxes applicable to private foundations, discussed below) ■ May engage in an insubstantial amount of lobbying activity (in contrast to private foundations) ■ May not engage in political campaign activities 5

Landscape of Tax-Exempt Entities in the U.S.–Public Charity Status 6 Three ways to earn public charity status: Purposes/ActivitiesSupport from PublicRelationships to Public Charities Churches (170(b)(1)(A)(i))Supporting organizations (509(a)(3)) Schools (170(b)(1)(A)(ii))10% public support plus facts and circumstances (Treas. Reg A- 9(f)(3)) Medical research organizations (170(b)(1)(A)(iii)) Hospitals (170(b)(1)(A)(iii))Gross receipts (509(a)(2))

Landscape of Tax-Exempt Entities in the U.S.–Private Foundations 7 Private Foundations ■ Usually funded by an individual, a family, a corporation or a limited variety of sources ■ Subject to excise tax provisions of Sections 4940 through 4946 ■ Net investment income tax of 1% or 2% ■ Prohibitions and taxes on self-dealing transactions with “disqualified persons” ■ Required annual payout of 5% of assets for charitable purposes or taxes on undistributed income ■ Excess business holdings tax ■ Jeopardizing investments tax ■ Taxable expenditures for expenditures for non-charitable and other purposes ■ May not engage in lobbying ■ May not engage in political campaign activities

Deductibility of Charitable Contributions in the U.S. The Internal Revenue Code allows for an income tax deduction by a donor for charitable contributions made within the taxable year to a “qualified organization.” (Section 170) “Qualified organizations” must be created as a U.S. legal entity and be a charitable organization, generally under Section 501(c)(3). A contribution or gift is a payment of money or transfer of property without adequate consideration The donor must be acting with disinterested generosity and there must be a “completed gift” (no strings attached) Quid pro quo contributions reduce the deductible amount ■ any part of a donor’s contribution that is given in exchange for goods or services is not tax deductible ■ special documentation rules apply to these types of contributions 8

Deductibility of Charitable Contributions in the U.S.– Deduction Amounts Donors deduct the amount of their charitable gifts from their income, reducing their taxable income The total amount of charitable deductions that can be taken in a year is limited and is based on type of donor and donee: ■ Individual donors deduct up to the following amounts for gifts to: ■ Corporate donors are generally subject to a limitation of 10% of taxable income and also utilize ordinary deductions for business and marketing expenses. 9 Private FoundationPublic Charity Cash or ordinary income property: 30% of donor’s adjusted gross income 50% of donor’s adjusted gross income Capital gain property:20% of donor’s adjusted gross income 30% of donor’s adjusted gross income

Deductibility of Charitable Contributions in the U.S.–Required Documentation and Valuation Charities are required to provide written acknowledgment and substantiation of gifts to donors ■ Maintain and provide written record or receipt for all gifts including specific written acknowledgments for all gifts $250 and above ■ Qualified appraisal requirements for property gifts $500 and above ■ IRS Forms 8282 and 8283 required for certain gifts of property and are filed with the Internal Revenue Service Valuation of gifts of property ■ General rule is that the deductible amount is the fair market value at the time of the contribution for non-cash gifts ■ Special rules for different types of property such as appreciated property, tangible personal property, intellectual property 10

Structures for Giving to Non-U.S. based Entities A U.S. entity or partner is needed to raise and receive tax-deductible contributions from U.S. individual and corporate donors ■ These fundraising entities must be more than mere conduits for the non-U.S. entity and must retain control and discretion over charitable funds raised. Fundraising entities or structures can take various forms including: ■ a “friends of” organization ■ a donor advised fund operated by a public charity (“DAF”) to support the non-U.S. entity ■ a fiscal sponsor of the non-U.S. entity ■ a community foundation or other entity that supports the non-U.S. entity Non-U.S. charities can seek tax-exempt 501(c)(3) status for themselves but will be subject to U.S. tax requirements ■ 501(c)(3) status for a non-U.S. charity does not allow for deductible contributions by individuals (who can only deduct gifts to charities formed in the U.S.) Individuals can support a non-U.S. entity out of their donor advised fund or private foundation subject to specific rules or make the gift directly if a U.S. fundraising vehicle is established 11

Structures for Giving to Non-U.S. Entities Special grant making rules apply to grants made by U.S. private foundations or donor advised funds to non-U.S. entities which do not have 501(c)(3) status from the Internal Revenue Service. Such grants to the non-U.S. entity must be in support of a specific charitable purpose and be made subject to the “expenditure responsibility” provisions in the Internal Revenue Code which require the grantor to: ■ see that the grant is spent solely for the purpose for which it was made and have a written grant agreement ■ obtain reports from the grantee on how the grants were spent, and ■ make reports on the expenditures to the Internal Revenue Service 12

Structures for Giving to Non-U.S. Entities Foundations and donor advised funds may also make an “equivalency determination” of the non-U.S. entity by which they determine that the non-U.S. entity is equivalent to a U.S. public charity ■ Based on documentation including an affidavit and financial support information or information on status as an equivalent educational institution ■ Allows the grantor to avoid expenditure responsibility 13

Contacts 14 Robin Krause