Exempt Status Not Affected by Expanding Purposes

The IRS ruled that the tax-exempt status of a scientific research organization that studies indoor air quality will not be adversely affected when the organization expands its purposes to transform the region where it is located into a leader of environmental research.
Ltr. Rul. 200714026

TY 2006 EO Returns - Significant Changes

The instructions to the 2006 Forms 990 and 990-EZ and Schedule A incorporate significant changes to address legislation enacted in 2006 and comments received from the public. The following are highlights of the significant changes.
IRS officials have highlighted these changes in two public forums; resources from those events may also be of interest

Telephone conferences conducted on March 21 and 22, 2007. The text of the presentation can be found here.

A Tax Talk Today program highlighting legislative changes to exempt organizations tax law

click here
For more information, click here or see the What’s New section of the form instructions.

New Electronic Filing Requirement for Small Tax-Exempt Organizations

Annual Electronic Notice — e-Postcard (Form 990-N)

Beginning in 2008, small tax-exempt organizations that previously were not required to file returns may be required to file an annual electronic notice, Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ. This filing requirement applies to tax periods beginning after December 31, 2006.

For more information, click here
Frequently Asked Questions

Income From Trade Show Activities Not Unrelated Business Income

The IRS has ruled that income a tax-exempt trade group received from its activities with a for-profit trade show operator is not unrelated business income because the activities are substantially related to the trade group's exempt purpose.

"X is exempt from federal income tax as an organization described in section 501(c)(6) of the Code. X represents the a industry to government, media, business and consumers.

Y is a for-profit entity that owns and operates several trade shows for the a industry. The trade shows are held annually around the world, and promote and stimulate interest in the a Industry. The industry is promoted through exhibits and educational programming. The trade shows provide a gathering place for industry professionals to exchange ideas, know-how and exhibit their wares. The educational programming provides ideas for solutions to industry problems; offers trends and innovations; and, promotes awareness of the industry legislative objectives and legal compliance imperatives. The trade shows draw a wide variety of members of the industry, and also attract many consumers of industry products. They attract approximately u attendees and approximately v exhibitors and related staff.

X and Y entered into a b Agreement and subsequently executed a c Agreement that provide the terms and conditions by which X will sponsor two of the annual trade shows conducted by Y."

Under these conditions, the IRS determined that "Conference Net Profit Revenue and Sponsorship Revenue received by X is substantially related to the activities of the organization, and the income therefore is not unrelated business income."

Ltr. Rul. 200713024

Charitable Donation Denied for Lack of Substantiation

In 2003, the Taxpayers introduced receipts indicating they donated clothing and other miscellaneous goods eight times in 2003. These receipts do not list the specific items contributed and simply note that petitioners donated a certain number of bags. Taxpayers also introduced a worksheet they prepared when preparing their tax return that purports to list and value more specifically the items petitioners contributed. Taxpayers estimated the value of the clothing they donated at one-half the original cost but also admitted he did not think used clothing was worth half as much as it was worth new. Taxpayers did not introduce any evidence supporting their estimated value or regarding the quality of the donated items that would permit IRS to estimate its value.

While the Tax Court was convinced that taxpayers donated property to charity in 2003, taxpayers failed to provide any reliable evidence of the items they donated or their values. Taxpayers are therefore not entitled to deduct any additional amount for charitable contributions of property.

James A. Soholt et ux. v. Commissioner; T.C. Summ.

IRS Report on EO Executive Compensation

Executive Compensation Compliance Project
March 2007
In 2004, the Internal Revenue Service, through the Exempt Organizations Office of the Tax Exempt and Government Entities Division (EO), implemented the Executive Compensation Compliance Initiative (the Project). The Project encompassed Forms 990 and related returns for tax years beginning in 2002, and was divided into three parts. This report discusses Part I, involving compliance check letters sent to 1,223 organizations, and Part II, a separate project involving examinations of 782 organizations. Approximately 10% of the examinations remain open. Part III, which was initiated based on information gathered in Part II, will be discussed subsequently, as will our continuing work in the executive compensation compliance area. Click here

Tax Talk Today Program – Emerging Nonprofit Issues

The IRS invites you to an on-line program that will cover the changes affecting tax-exempt organizations resulting from the Pension Protection Act of 2006. The March 13, 2007 program will feature IRS subject matter experts. Click here.

Draft Principles on Self Regulation

The Panel on the Nonprofit Sector continues its efforts to help nonprofits do the right things right. Its new Advisory Committee on Self-Regulation of the Charitable Sector has carefully studied numerous existing standards and guidelines to get a better understanding of the needs of diverse charities. The result? A proposal that charities with $1 million or more in annual revenue and foundations with $25 million or more in assets implement 29 principles. While the period for public comment ended February 2, the recommendations are a great starting point for a self-directed accountability audit. Click here.

IRS on Good Governance Practices for Nonprofits

The IRS has prepared a discussion draft of preliminary guidelines designed to help charity boards promote good governance practices by the charities they serve. Click here for more information.

New Online Training for Tax Exempt Organizations

Obtaining and maintaining 501(c)(3) tax exempt status is crucial to the success of many organizations. This online training from the IRS provides the tools and knowledge to help you keep your organization’s exempt status intact. It consists of five interactive courses, which you can take individually and in any order. Click here.

See also the one hour program by Amy Hereford that explores legal issues involved in establishing or reestablishing a nonprofit organization. The program goes beyond the IRS tax issues to examine the range of requirements for keeping your organization in good legal health. The program is recommended to entrepreneurs, boardmembers and directors of both new and established nonprofits. Click here.