More on unrelated business income

By | Nonprofit

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:

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!

When your unrelated business is a hobby…

By | Nonprofit


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.

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Johnson Amendment

By | Nonprofit

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

Pharma-funded Charities and Private Benefit

By | Nonprofit


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.

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EO Update – Gulf Coast TEGE

By | Nonprofit
The next Gulf Cost TEGE Exempt Organizations Update is coming up June 16, 2017, in Dallas, TX.  Heidi Christianson of Nilan Johnson Lewis and I are co-hosting the local participation of this great event again this year. Heidi has graciously agreed to provide us again with WebEx capability to participate in this meeting at the Nilan Johnson Lewis offices.
As usual, it looks to be a great line-up of topics with great speakers:
“Update from Director of Exams, Maria Hooke”
“Capitol Hill Update” – moderated by Alex Reid (joined by counsel to JCT, Ways & Means, and Senate Finance)
“EO Technical Update from TEGE Associate Chief Counsel Office”
“Updates from TEGE Quarterly Call with Margaret Von Lienen (Acting Director, Exempt Organizations)”
Additional anticipated speaker from IRS Division Counsel
“Controversy Topics the Non-Controversy Practitioner Needs to Know”
We also have a request in to state regulators
The agenda and all details are available here, and registration is open now. Please submit any questions for speakers to danika at mendrygallaw dot com.
Heidi has applied for CLE credit, and the event is already approved for CPE credit. Please feel free to reach out to me if there are questions.

Upcoming presentation: Nonprofits and Political Activity

By | Nonprofit

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.

Nonprofit Law Conference, March 14, 2017

By | Nonprofit

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.

Minnesota Women Lawyers panel

By | Nonprofit

Please join me February 15th for a panel discussion put on by the MWL Equity Committee, regarding non-profit board service: considerations for attorneys. Registration is open online until February 13th. The fee is $10 for non-members, and free for MWL members.

Qualified Small Employer Health Reimbursement Arrangements Allowed in 2017

By | Nonprofit

I don’t often address employee benefits issues on this blog because I don’t myself practice in that area.  However, a new law that just passed reinstates (to a degree) a health care reimbursement option that some smaller nonprofits may be able to take advantage of!  Since I know only enough to get in trouble in this area, I asked my good friend Jewelie Grape to give me a summary.  If you want to know more, I suggest you contact her directly or let me know and I would be happy to put you in contact with her!

Great news for small employers who want to provide payment or reimbursement for employees’ individual health insurance policies on a pre-tax basis…On December 13, 2016, President Obama signed into law the 21st Century Cures Act which includes a section allowing qualified small employers to offer a new type of health reimbursement arrangement (HRA) to employees effective January 1, 2017 (the Affordable Care Act previously prohibited most stand-alone HRAs). The new arrangement is called a qualified small employer health reimbursement arrangement (QSEHRA).

Only employers who employ fewer than 50 full-time equivalent employees and do not offer a group health plan to any employee will be allowed to pay or reimburse employees’ eligible medical care expenses through a QSEHRA.

The QSEHRA must:

  • be provided on the same terms to all eligible employees of the eligible employer (variation is allowed in the pricing of a policy based on age and number of family members),
  • be funded solely by the employer (no employee salary reduction contributions are allowed),
  • provide for the payment or reimbursement of eligible medical care expenses incurred by the employee or family members (including premiums for individual health coverage) only after the employee provides proof of health coverage, and
  • ensure annual payment or reimbursement does not exceed $4,950 ($10,000 if family members are covered under the HRA) in 2017 (this amount could change in future years).

An eligible employer funding a QSEHRA must provide a notice to eligible employees not later than 90 days before the beginning of the year or the date the eligible employee is first eligible to participate in the QSEHRA.

A few additional points – the health coverage must be minimum essential coverage (as defined under the Affordable Care Act) in order for the payment or reimbursement to be tax-free.  Reimbursement amounts may reduce the amount of premium tax credit/marketplace subsidies available to eligible employees, and if the QSEHRA provides “affordable coverage” (as defined under the Affordable Care Act), employees will not be eligible for a marketplace subsidy. Finally, the employer must report QSEHRA reimbursement amounts on employees’ Form W-2s.