1. 1 Social Enterprise Alliance Member Teleconference

2. 2 RECENT IRS DEVELOPMENTS AFFECTING SOCIAL ENTERPRISE Perlman & Perlman, LLP By: Allen Bromberger Perlman & Perlman, LLP 41 Madison Avenue, Suite 4000 New York, NY 10010 (212) 889-0575

3. 3 Historical background Perlman & Perlman, LLP  Puritan roots of charity  Commerciality Doctrine  Important Cases allow nonprofits to engage in commerce.  Revenue Rulings 98-15 and 2004-51  IRS looking closely at social ventures and relationships between 501(c)(3) and for-profit businesses, trying to figure out what the new standard should be.

4. 4 Treasury Decision 9390 (March 2008) Perlman & Perlman, LLP  Focus is now on private benefit.  “Benefit” does not have to be economic.  Benefit may be improper even if the terms are fair and reasonable to the nonprofit.  Examples are frightening.  Incidental benefit is OK i. Qualitatively incidental ii. Quantitatively incidental

5. 5 Revised Form 990 Perlman & Perlman, LLP Requires expanded disclosures relating to commercial activities, governance, relationships with for-profit entities and many other topics. Asks specifically about certain policies IRS wants charities to adopt.

6. 6 Revised Form 990 Perlman & Perlman, LLP Expanded Disclosures: Joint ventures (details) Compensation and benefits (includes “key employees”) Revenue and expense from FR events Board review of 990 Conflicts, whistle-blowers Public disclosure of information

7. 7 Revised Form 990 Perlman & Perlman, LLP Policies: Conflicts of Interest Board Review of 990 Whistle-blower Protection Document Retention and Destruction Joint Venture Participation

8. 8 Conclusion Perlman & Perlman, LLP  IRS is looking very closely at nonprofits’ “business” practices.  Commercial enterprises must further the nonprofit’s purpose.  The nonprofit must have effective control over certain aspects of the enterprise.  No impermissible private benefit (intermediate sanctions).  UBIT

9. 9 Thank You Social Enterprise Alliance 1720 N St. NW Washington, DC 20036 202-375-774 www.se-alliance.org www.se-alliance.org