There may be a new Form 1024-A coming, applicable only to 501(c)(4) organizations applying for tax exemption. On November 21, 2017, the ABA Section of Taxation submitted Comments Concerning Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code. If you read carefully — you will see a certain Rubric Legal attorney contributed to the comments!
The theme of the week on the Rubric legal blog is unrelated business taxable income (see yesterday’s post) and the ways that it can impact a nonprofit organization. The IRS is in on the game and has posted a few relevant issue snapshots:
- Some interesting reading on the breadth and limits of the volunteer exception to the unrelated business income tax
- The unrelated business income tax and income from renting out your member/donor/supporter lists
- Exclusive sponsorship/provider arrangements and the potential for unrelated business taxable income
The above are all just further illustrations of how complex and nuanced the unrelated business income tax can be. Analysis of the issues around the unrelated business income tax — including whether an exception applies — is very fact specific and nonprofits are encouraged to regularly review the facts with a qualified professional. Just because you were able to avoid tax when you started conducting the activity 5 years ago doesn’t mean you still can – things change!
Back in 2013, the IRS released the final report of the College and University Compliance Project and one of the important takeaways for institutions of higher education was that they needed to pay closer attention to whether they are conducting any unrelated businesses at a loss on a consistent basis, and if so, then they are at risk of greater tax liability due to what are called the “hobby loss” rules. A recent Tax Court case gave us a further example of how those rules could impact tax exempt organizations and their operations.
Since 1954, the so-called “Johnson Amendment,” a portion of the provision in the Internal Revenue Code that lays out the basic requirements for Section 501(c)(3) organizations, has prohibited charities from implicitly or explicitly endorsing or opposing political candidates. Read More
Too close for comfort?
Many patient assistance charities provide funding for patients to purchase treatments from the same pharmaceutical companies that provide the majority of funding for these charities. They are accused of increasing the profits of prescription drug companies and continuing to prop up inflated prices by enabling people to purchase expensive treatments. More recently, court records indicate that a new level of scrutiny has arisen for one of the patient assistance charities, which is under an IRS audit in large part due to the organization’s funding sources and the benefits they appear to reap from that funding.
On April 24, 2017, I’ll be presenting with Rebecca Lucero, Public Policy Director with MCN, at the Minnesota State Bar Association. We will be discussing Nonprofits and Political Activity in These Political Times. This presentation will provide an overview and specific examples on the types of issues most nonprofits need to consider in order to manage the risks that exist with engaging in advocacy activities, particularly during these times when organizations may be expanding their advocacy and lobbying work.
The IRS is now offering Issue Podcasts! Check out the latest podcast: When are Commercial-Type Activities a Substantial Nonexempt Purpose for an IRC 501(c)(3) Organization? Learn about determining when commercial-type activities further a substantial nonexempt purpose for an IRC 501(c)(3) organization. Stay up to date on the latest podcasts by visiting the IRS Stay Exempt page.
On March 14, 2017, I’ll be discussing Exemption Issues and Small Organizations (or, How to Clean Up Messes), as well as participating as a panelist on Practical and Timely Hints for Working with Nonprofits. The annual Nonprofit Law Conference will be held at the Minnesota CLE Conference Center in Minnepolis, and attendees may claim a maximum of 6.5 CLE credits for this seminar. A full list of presenters, topics, and online registration can be found here.