Monday, December 22, 2014

On Dec. 16, 2014, Congress passed the “Tax Increase Prevention Act of 2014, (“TIPA”, or “the Act”), which the President has now signed into law. The Act extends a host of individual tax provisions, including non-taxable IRA transfers to eligible charities.

Taxpayers who are age 70 ½ or older can make tax-free direct distributions to a charity from an Individual Retirement Account (IRA) of up to $100,000 per year.  These distributions aren’t subject to the charitable contribution percentage limits since they are neither included in gross income nor claimed as a deduction on the taxpayer’s return.  Under pre-Act law, these rules didn’t apply to distributions made in tax years beginning after Dec. 31, 2013.  TIPA retroactively extends this provision for one year so that it’s available for charitable IRA transfers made in tax years beginning before Jan. 1, 2015.  Therefore, there are less than two weeks to complete a charitable IRA transfer!

Friday, October 3, 2014

conservationThe increasingly popular conservation easement charitable deduction allows a landowner to deduct a portion of the value of a piece of land by limiting the land’s use.  In a typical scenario, a landowner records a conservation easement on the land and then donates the conservation easement to a conservation organization.  The landowner receives an appraisal of the value of (i) the developable land and (ii) the land once the conservation easement has been recorded.  The landowner then deducts the difference as a charitable contribution.  In such a scenario, Section 170 of the tax code allows a deduction as long as the easement is perpetual, made to a qualified organization, and for a valid conservation purpose.

The typical scenario is changing, however, as more and more landowners are holding their property in trust.  When the land is held in trust, it is more difficult to deduct a conservation easement. (more…)

Monday, September 8, 2014

Originally Posted on BryanCaveCharityLaw.com.

Wednesday, Oct. 29, 2014, from 9 a.m. to 5 p.m. in 202 J.C. Penney Conference Center at UMSL.

Starting a 501(c)(3) nonprofit organization and governing a 501(c)(3) nonprofit organization are flip sides of the same coin. Instructor Dan Sise knows that the steps you take in forming a 501(c)(3) nonprofit corporation affect how your organization must operate in the future. And the steps you take in the governance and operation of your 501(c)(3) nonprofit corporation affect your ability to maintain your 501(c)(3) tax-exempt status with the IRS on an ongoing basis.

Come to this class to learn how to start a Missouri nonprofit corporation that will seek to obtain 501(c)(3) tax exempt status from the IRS. In addition, this class will also cover good governance policies, strategies, and requirements that will allow your organization to maintain its 501(c)(3) tax exempt status on an ongoing basis once you are up and running.

This is an intensive 8 hour class that will focus on practical information and resources like forms to use, web sites to access, governmental offices to contact or be aware of, and a checklist of steps to take. The fee for this class includes lunch.

To register, see here.

Monday, May 12, 2014

With research and drafting assistance provided by our extern from Washington University School of Law, Rachael Lynch.

Now that we’ve scared you with the potentially high taxes for self-dealing in private foundations, what is self dealing?

Self dealing includes any of the following transactions:

(more…)

Friday, February 28, 2014

With research and drafting assistance provided by our extern from Washington University School of Law, Rachael Lynch.

As we discussed in our prior post, Review of Income Tax Deduction Rules for Charitable Gifts, an income tax deduction up to fifty percent (50%) of the taxpayer’s adjusted gross income is allowed for gifts to public charities of non-capital gain property and up to thirty percent (30%) for gifts of capital gain property. These same contribution limits apply to gifts to supporting organizations.

What is a supporting organization? Supporting organizations are described in Section 509(a)(3) of the Internal Revenue Code as charities that carry out their exempt purposes by supporting other public charities. A supporting organization generally warrants public charity status because it has a relationship with its supported organization sufficient to ensure that the supported organization is effectively supervising or paying particular attention to the operations of the supporting organization. (more…)

Monday, January 27, 2014

A program related investment (PRI) is a powerful tool for a private foundation to positively influence social enterprise while advancing its philanthropy and satisfying its 5% annual minimum distribution requirement.
Traditionally, private foundations have used grant-making activities as the primary means to satisfy their 5% annual minimum payout requirement and to accomplish their tax exempt purposes. However, modern trends reveal a new focus of private foundations on PRIs to achieve the same results.

What is a PRI?

A PRI is an investment, rather than a grant, whose primary purpose is to achieve one or more of the private foundation’s tax exempt purposes and no significant purposes of which is the production of income or the appreciation of property. However, the fact that an investment produces significant income or capital appreciation is not conclusive evidence that income or appreciation was a significant purpose of the investment, and, therefore, does not preclude the investment from being a valid PRI. As a practical matter, many PRIs produce income or capital appreciation. The test is whether the production of income or capital appreciation is a significant purpose of the investment over the tax exempt purposes of the investment. As long as the tax exempt purpose of the investment is strong, the production of income or capital appreciation should be viewed as a mere ancillary benefit.

A PRI is also a great benefit to a private foundation. PRI counts towards a foundation’s qualifying distributions just as if they were grants and are exempt from the excess business holdings tax (imposed on foundation investments that exceed 20 percent of a for-profit venture) and the jeopardizing investment tax (imposed on investments that jeopardize the tax exempt purposes of a foundation).

(more…)

Wednesday, January 8, 2014

zuckerbergThe Chronicle of Philanthropy recently released its list of the Top 10 biggest charitable gifts of 2013 (which is really the Top 15, since 5 gifts tied at 10th place), and do they make me wish I qualified as a charity!

Topping the list at Number 1 were Mark Zuckerberg of Facebook, and his wife, Priscilla Chan, who gifted $992.2 million of Facebook shares to the Silicon Valley Community Foundation. Number 2 on the list were Nike Chairman Phil Knight and his wife, Penelope Knight, who made a $500 million pledge to the Oregon Health and Science University Foundation.

The list continues:

3. Michael Bloomberg: $350 million pledge to Johns Hopkins University (more…)

Wednesday, November 27, 2013

Originally posted on bryancavefiduciarylitigation.com

Testators may want to keep careful track of who has copies of their will and where those copies are.  If only a copy of a will – and not the original – is found, it may raise a question about whether the testator destroyed the original in an attempt to revoke it.  Such was the argument made by the caveators in Johnson v. Fitzgerald.  Let’s see why the Georgia Supreme Court felt like a copy was good enough to admit to probate in solemn form.

The executor of an estate offered a copy of a will for probate in solemn form, requesting that it be admitted to probate upon proper proof.  The original could not be found.  The testator’s heirs at law filed a caveat alleging that the will had been revoked by the testator’s destruction of it.

Under Georgia law, if the original of a will cannot be found for probate, there is a presumption that the testator intended to revoke the will.  But this presumption can be overcome if a copy is established by a preponderance of the evidence to be a true copy of the original and if it is established by a preponderance of the evidence that the testator did not intend to revoke the will.  Here, there was “ample evidence” that the testator intended for provisions in his will to continue in force.

Under the propounded will, $50,000 was bequeathed to a church for the use of its cemetery fund, $50,000 was bequeathed to an individual, and the will named a trust which benefited a foundation as the residuary beneficiary.  The Georgia Supreme Court highlighted the following evidence that supported a conclusion that the testator did not intend to revoke the will:

– The testator executed a document guiding the trust referenced in the will, and he later amended the trust;

– In discussions with his attorney about the trust amendment, the testator understood that his assets had grown to a point that the church named as the primary beneficiary of the trust might not have need for the full amount, and he wanted to give the trustees of the trust the flexibility to fund charitable contributions from the money that would pour over from the estate to the trust;

– The testator told the pastor of the church that he was leaving money for the cemetery fund in his will;

– The testator expressed disdain for what he considered his relatives’ greed, stating that he did not wish for them to have his money; and

– Prior wills were consistent with the propounded will insofar as they left money for the cemetery fund and excluded the caveators.

Monday, October 14, 2013

birdOnce again, the Internal Revenue Service reminds us in PLR 201330011 that a distribution from an IRA to a residuary beneficiary will not result in recognition of IRD (also known as income in respect of a decedent) to the estate or trust, as only the residuary beneficiary will recognize the IRD.

Here the Decedent’s Estate was the beneficiary of the Decedent’s IRA. Under the provisions of the Decedent’s Will, his Estate poured over to his Revocable Trust on his death. His Revocable Trust provided that each of two Charities were to receive a percentage of the residue of his Trust, and further provided that the Trustee could satisfy this percentage gift in cash or in kind and also could allocate different assets to different residuary beneficiaries in satisfaction of their percentage interest in the trust residue.

Of course, the IRA constitutes income in respect of a decedent (IRD), and pursuant to IRC § 691 (a)(2) and Reg. § 1.691(a)-4(b)(2), the transfer of an item of IRD by an estate, such as by satisfying an obligation of the estate, will cause the estate to recognize the IRD, but if the estate transmits the item of IRD to a specific legatee of the item of IRD or to a residuary beneficiary (emphasis added), only the legatee or the residuary beneficiary will recognize the IRD. (more…)

Thursday, January 3, 2013

From BryanCaveCharityLaw.com

Effective December 31, 2012, Congress passed The American Tax Relief Act of 2012 (the “Act”) to avoid the fiscal cliff and President Obama is expected to sign the bill into law.  The full text may be obtained by clicking here.  In a Chronicle of Philanthropy article (which may be obtained by clicking here), Doug Donovan writes that the Act may hurt charitable giving in light of the fact the Act “reinstates a provision eliminated in 2010 that reduces itemized deductions by 3 percent of the amount that household income exceeds $300,000.”  Mr. Donovan goes on to explain that “[w]rite-offs grow more limited the more taxable income a person has and could reduce the value of deductions by up to 80 percent for the highest-income taxpayers, according to the Tax Policy Center.” (more…)