August 24, 2014

Community in Civil and Canon Law

Religious form community in that house, a community that is supportive of the commitment that they have made, particularly to a life of prayer, to gospel living, to ministry and to justice. Traditionally, the local house of religious has been seen as a witness to and support of the vows of poverty and chastity. Religious live simply and joyfully in mutual support. Read more....

July 02, 2014

New Form 1023EZ Released

The Internal Revenue Service just released the new Form 1023-EZ application form to reduce processing delays and help small charities apply for 501(c)(3) tax-exempt status more easily.

The new Form 1023-EZ is available today on IRS.gov. The final version three pages long compared with the standard 26-page Form 1023. Most small organizations, defined as those with gross receipts of $50,000 or less and assets of $250,000 or less, will qualify to use the new streamlined form.

The IRS introduced the streamlined process to speed the approval process for smaller groups and free up resources to review applications from larger, more complex organizations while reducing the application backlog. Currently, the IRS has more than 60,000 501(c)(3) applications in its backlog, with many of them pending for more than nine months or more.

The IRS revised the 1023-EZ in response to widespread criticism from state regulators and those working with charitable groups. The revisions include reducing the filing threshold from $200,000 in gross receipts to $50,000 in gross receipts.

The IRS has stated that by reducing the the time required to process applications, they will be able to devote more resources to audits and examinations to ensure charities are actually doing the charitable work they were approved to do.

The new EZ form must be filed online. The instructions include an eligibility checklist that organizations must complete before filing the form.

The Form 1023-EZ must be filed using pay.gov, and a $400 user fee is due at the time the form is submitted. Further details on the new Form 1023-EZ application process can be found in Revenue Procedure 2014-40, posted today on IRS.gov.

Organizations eligible to use the Form 1023-EZ may still elect to use the traditional long-version Form 1023.  Eligible organizations that have already submitted the Form 1023 may submit the Form 1023-EZ to supersede the earlier application, but only if the Form 1023 has not already been assigned for review.  The IRS will treat such a Form 1023-EZ as a withdrawal of the earlier Form 1023, but there is no refund of the first user fee.  The filing date of the application will become the later Form 1023-EZ date, not the earlier Form 1023 date.  The 27-month rule is not extended for these purposes.  If the Form 1023 has already been assigned for review when a Form 1023-EZ arrives to supersede it, the IRS will reject the later application and refund the second user fee.

April 20, 2014

Vow of Obedience in Civil and Canon Law


Canon 601 states: The evangelical counsel of obedience, undertaken in the spirit of faith and love in the following of Christ, who was obedient even unto death, obliges submission of one’s will to lawful Superiors, who act in the place of God when they give commands that are in accordance with each institute’s own constitutions.

The vow of obedience takes religious into the heart of the mystery of Christ that we celebrate in this Paschal season. In faith and love, we enter in a special way into the following of Christ, obedient to death. Undertaken in this spirit, each institute comes to an understanding and practice of the vow that develops over time. Read more....

For more on the vow of obedience and the exercise of authority view the recording of May's webcast on The Vow of Obedience in Civil and Canon Law. Click here....

March 21, 2014

Reinstatement of Exempt Status

In the past 5 years, many organizations had their tax exempt status revoked for non-filing of their annual information returns. 

The IRS recently issued Revenue Procedure 2014-11, 2014-3 I.R.B. 411 (the “Revenue Procedure”) providing procedures for reinstating the tax-exempt status of organizations that have had their tax-exempt status automatically revoked under section 6033(j) of the Internal Revenue Code for failure to file required annual returns or notices for three consecutive years. The Revenue Procedure modifies and supersedes Notice 2011-44, 2011-25 I.R.B. 883 (the “Notice”).

In general, the Notice permitted certain organizations to request reinstatement of its tax-exempt status effective from the date of the organization’s automatic revocation (“retroactive reinstatement”) if the organization filed its application for reinstatement of tax-exempt status within 15 months of the revocation and proved reasonable cause for failing to file the required annual return or notice in each of the three consecutive years and over the entire consecutive three-year period. The Revenue Procedure liberalizes the criteria for requesting retroactive reinstatement for an organization that (i) was eligible to file Form 990-EZ or Form 990-N for each of the three consecutive years it failed to file, (ii) has not previously had its tax-exempt status automatically revoked pursuant to section 6033(j), and (iii) files its application for reinstatement within 15 months of the revocation and pays the applicable user fee. Under the Revenue Procedure, such organizations will be deemed to have reasonable cause for its failures to file Form 990-EZ or Form 990-N, as applicable, for each of the three consecutive years and will be retroactively reinstated upon the IRS’s approval of such organization’s application for reinstatement.

The Revenue Procedure can be read in full here.

March 06, 2014

Applying for Exemption/Misc. Determination: Sample Questions

Applications for exemption and miscellaneous determination requests are assigned to Exempt Organizations specialists for review. If additional information is necessary to make a determination, a specialist will contact the organization for the information. See sample questions....

February 10, 2014

IRS Releases Revised Form 990 Instructions

The 2013 Forms 990 and 990-EZ, schedules and instructions have been revised to modify and clarify certain reporting requirements. A chart summarizing some of the more significant changes to the Form 990, Form 990-EZ, schedules and instructions for tax year 2013 may be accessed by clicking here.

January 29, 2014

Liability and Type I Supporting Organizations

Tax exempt public charities (Charity), such as schools, churches and hospitals, are subject to tort liability for accidents, etc. To help segregate liability, charities may consider owning the property in a separate entity, such as a Type I Supporting Organization.

The Type I Supporting Organization (TI-SO), organized as a separate corporation under state law, is described in Section 509(a) (3) of the Internal Revenue Code and in Treas. Reg. §1.509(a)-4(g) (1). The newly created TI-SO would be "operated, supervised, or controlled" by the Charity through its right of appointment of a majority of the TI-SO’s officers and directors. In fact, the Charity and the TI-SO can have identical officers and directors if desired. All of the TI-SO’s revenue can pass solely to the Charity, in a relationship equivalent to a corporate parent and its wholly owned subsidiary in a for-profit context.

This TI-SO design can shield the Charity from liability; if there is a lawsuit against the TI-SO arising from a tort on the property, the Charity's assets could be protected. In one case, even with identity of officers and directors, by itself, a plaintiff could not pierce the corporate veil and impose liability against the Charity. See, e.g., United States Fire Insurance Company v. Allied Towing Corp., 966 F.2d 820 (4th Cir.1992), where the Court held that, where "no other justification for piercing the veil appears in the record," the fact that the two corporations "effectively have identical officers and directors [is] alone insufficient to permit the piercing of the corporate veil."

Thus, a Charity can create a non profit corporation under state law to own property and seek IRS approval as a TI-SO to help protect the Charity's assets.

January 16, 2014

Tax Changes for Individuals 2013

The IRS summarizes important tax changes that took effect in 2013. Most of these changes are discussed in more detail throughout publication 17.  Click here....

January 09, 2014

Investment Funds Maintained by Charitable Organizations

Section 3(c)(10)(A)(ii) of the Investment Company Act of 1940 generally exempts a private investment fund from registering as an investment company if it is maintained by a charitable organization and is organized and operated exclusively for religious, education, benevolent, fraternal, chartable or reformatory purposes (“Permitted Purposes”) for the collective investment and reinvestment of certain assets.  Recently, the SEC provided new guidance to alleviate concerns related to the use of this exemption.... Read more.