Guidance on Recordkeeping Requirements for Gifts to Charity Sought from IRS

Patrick Lester of the United Way has asked Treasury for immediate guidance on new recordkeeping requirements for monetary gifts to charity under the Pension Protection Act of 2006, noting that the way the new requirements are interpreted could cause problems for United Way workplace-giving campaigns.

September 19, 2006

Mr. Michael Desmond
Tax Legislative Counsel
U.S. Department of Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Mr. Desmond,
United Way of America is seeking immediate guidance from Treasury on new record keeping requirements for monetary gifts to charity under the Pension Protection Act of 2006. Depending upon how these new requirements are interpreted, they may prove problematic for United Way workplace giving campaigns across the nation, which are already under way.

Section 1217 of the new law requires taxpayers claiming a charitable deduction to maintain records of all monetary contributions as follows:

"(17) RECORDKEEPING. -- No deduction shall be allowed under subsection (a) for any contribution of a cash, check, or other monetary gift unless the donor maintains as a record of such contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution."

Under current Treasury Department regulations (Section 1.170A-13(f)(11)), for contributions of $250 or more, taxpayers must provide substantiation through pay stubs, W-2 forms, or other written documents, combined with a pledge card prepared by the recipient charity.

We are seeking clarification of Section 1217 -- specifically to determine if existing regulatory requirements will be continued, but applied to all gifts made through workplace campaigns, or if new procedures must be adopted to comply with the new law.

Thank you for your prompt attention to this matter. Please call if I can provide further information or assistance.

Sincerely,
Patrick Lester

Five Unrelated Cases on Charitable Deduction Substantiation

Charitable Contribution Deductions Denied for Failure to Provide Proof 09/18/06 The Tax Court, in a summary opinion, has sustained the IRS's denial of an individual's claimed charitable contribution deductions because the individual failed to provide reliable evidence of the contributions that he claimed he made to a church.

Deductions for Contributions to Church Disallowed 09/18/06 The Tax Court, in a summary opinion, has sustained the IRS's deficiencies against an individual stemming from deductions claimed for charitable contributions to a church, finding that he could not produce cancelled checks, receipts, or any other reliable evidence documenting those contributions.

Deductions for Charitable Contributions Disallowed; Penalties Imposed 09/18/06 The Tax Court, in a summary opinion, has held that the IRS properly disallowed an in dividual's claimed deductions for charitable contributions to a church because he failed to substantiate the contributions and has found him liable for accuracy-related penalties.

Documents Lacking Date, Amount Fail Charitable Contribution Requirements 09/18/06 The Tax Court, in a summary opinion, has disallowed an individual's charitable contribution deductions, finding that his proffered records failed to meet the substantiation requirements because they didn't show the dates or the amounts of his individual contributions, and has imposed an accuracy-related penalty.

Tax Court Denies Charitable Deductions and Imposes Penalty 09/18/06 The Tax Court, in a summary opinion, has sustained the IRS's deficiency determinations against two individuals, finding they are not entitled to charitable contribution deductions because they could not provide reliable evidence supporting the deductions, and it has imposed an accuracy-related penalty.

New Tax Filing Requirement for Small Nonprofits

The Pension Protection Act of 2006 ccontains numerous changes to the tax law provisions affecting tax-exempt organizations, including a provision requiring exempt organizations not otherwise required to file the 990 information return to file an annual notice with the IRS. Organizations covered by the new law that are not currently required to file the form 990 information return include exempt organizations with gross receipts under $25,000.

The provision requires these organizations to furnish the following information to the Secretary annually, in electronic form:

1. the legal name of the organization,

2. any name under which the organization operates or does business,

3. the organization’s mailing address and Internet web site address (if any),

4. the organization’s taxpayer identification number,

5. the name and address of a principal officer, and

6. evidence of the organization’s continuing basis for its exemption from the generally applicable information return filing requirements.

Upon such organization’s termination of existence, the organization is required to furnish notice of such termination.

If an organization fails to provide the required notice for three consecutive years, the organization’s tax-exempt status is revoked. In addition, if an organization that is required to file an annual information return under section 6033(a) (Form 990) fails to file such an information return for three consecutive years, the organization’s taxexempt status is revoked.

The IRS will be providing further information on this requirement on its website at http://www.irs.gov/charities/article/0,,id=161145,00.html

NATRI 2006 National Conference

Marriott Anaheim California
October 11 – 14, 2006
Amy Hereford will be exhibiting at the NATRI National Conference - Booth 100. Be sure to stop by for information about her new law practice, and for information about upcoming Web Casts.

1023 Application Status

From the IRS regarding Status of 1023 Applications:

The Process: Upon receipt, exemption applications accompanied by the required user fee are initially separated into three groups: (1) those that can be processed immediately based on information submitted, (2) those that need minor additional information to be resolved, and (3) those that require additional development.

If your application falls in the first or second group, you will receive either your determination letter or a request for additional information, via phone, fax, or letter, within approximately 60 days of the date the application was submitted. If your application falls within the third group, you will be contacted once your application has been assigned to an EO specialist.

Current Status of Applications Requiring Additional Development: Cases received as of December 2005* are currently being assigned.

What You Can Do:

If you submitted your application or determination letter request:

• in or after the month indicated above, continue to check this web page for updates and wait for us to contact you. There is no need to call.
• before the month indicated above and you have not been contacted by the IRS about your application, you may want to contact TE/GE Customer Account Services.

You will need the following information before you contact the IRS to verify the status of an application or determination letter request:

• The name of the organization on whose behalf the request was submitted;
• The organization's employer identification number (EIN);
• The document locator number assigned to the request (if you have received one); and
• A proper power of attorney submitted with the exemption application unless you are legally authorized to represent the organization, such as an officer or director.

More information on the process for submitting exemption applications and requests for rulings or determination letters may be found on this website.

New Law Revises EO Tax Rules

On August 17, the President signed the Pension Protection Act of 2006. The new law contains numerous changes to the tax law provisions affecting tax-exempt organizations. Key provisions include the following:

* Controlling organziations must report income from and loans to controlled organizations as well as transfers between controlled and controlling organizations. This provision is effective for returns due (without regard to extensions) after the date of enactment.
* Section 501(c)(3) organizations must now disclose unrelated business income tax returns (Forms 990-T) and make them available for public inspection. This provision is effective for returns filed after the date of enactment.
* Private foundation and excess benefit penalty excise taxes are doubled.
* Donor advised funds, supporting organizations, and credit counseling organizations are subject to new requirements.
* Charitable contribution deductions for food, book, and certain conservation property are increased.
* Charitable contribution deductions for monetary donations, certain easements, taxidermy property, clothing and household goods, and certain other items are limited.
* Beginning in 2008, exempt organizations with gross receipts under $25,000 must file an annual notice.
* In the case of a charitable contribution of money, regardless of the amount, the donor must maintain a cancelled check, bank record or receipt from the donee organization showing the name of the donee organization, and the date and amount of the contribution.

990 Online

July 21, 2006

The Urban Institute 2100 M Street NW Washington, DC 20037 (866) 518-3874
990 Online is a Web-based system available to nonprofit organizations for the preparation of Forms 990, 990-EZ and 8868 (filing extension). The application provides user-friendly screens with comprehensive error-checking, and easy creation of schedules and attachments. Users can create Acrobat PDF copies of their forms and attachments for printing, posting on the Web, or emailing. The application supports current versions of Internet Explorer (Ver. 6 or higher), Netscape Navigator, Mozilla & Firefox (Windows, MacIntosh, or Linux). In 2005, state registration and renewal capabilities will be added. Electronic receipts and acknowledgements are provided, and best of all...the service is free!
These products have been developed by the nonprofit National Center for Charitable Statistics at the Urban Institute to help nonprofit organizations complete accurate and timely tax filings and to strengthen the information resources available on the nonprofit sector. For more information or to get started on your organization's tax return or extension request, please visit us on the Web at http://efile.form990.org.

New Grantmaking requirements. Executive Order 13224

July 17, 2006

The September 11, 2001 terrorist attacks on the United States resulted in new laws under which U.S. grant making nonprofits risk criminal prosecution, civil penalties and the freezing of their assets if they are found to have made grants to foreign or domestic individuals or organizations that engage in or support terrorism.

August 17, 2006 New Law Revises EO Tax Rules On August 17, the President signed the Pension Protection Act of 2006. The new law contains numerous changes to the tax law provisions affecting tax-exempt organizations. Key provisions include the following: * Controlling organziations must report income from and loans to controlled organizations as well as transfers between controlled and controlling organizations. This provision is effective for returns due (without regard to extensions) after the date of enactment.* * Section 501(c)(3) organizations must now disclose unrelated business income tax returns (Forms 990-T) and make them available for public inspection. This provision is effective for returns filed after the date of enactment.* * Private foundation and excess benefit penalty excise taxes are doubled. * Donor advised funds, supporting organizations, and credit counseling organizations are subject to new requirements.* Charitable contribution deductions for food, book, and certain conservation property are increased. * Charitable contribution deductions for monetary donations, certain easements, taxidermy property, clothing and household goods, and certain other items are limited. * Beginning in 2008, exempt organizations with gross receipts under $25,000 must file an annual notice. July 29, 2006 Group Ruling Letter for the United States Catholic Conference of Bishops The annual Group Tax Exemption Letter for Catholic Organizations has been issued and is available on the USCCB website at http://www.usccb.org/ogc/groupruling.pdf July 28, 2006 Alienation Limit for 2006 For the year 2006, the amount which requires approval of the Congregation for Institutes of Consecrated Life and Societies of Apostolic life in cases of alienation of stable patrimony or business transactions which could have an adverse effect on the patrimonial condition of an institute or society is raised to $5,341,000 [the amount in 2005 was $5,165,000]. This amount applies only to alienation or business transaction within the United States. Alienation and business transactions in other counties must follow the amount set for institutes and societies in each particular country. [See canons 638.3 and 1292] July 28, 2006 Exemption Application User Fees Updated User fees for exemption applications postmarked on or after July 1, 2006, require the following payment: $300 for an application for exemption under Internal Revenue Code section 501 filed by an organization that has had annual gross receipts averaging not more than $10,000 during its preceding four years, or by a new organization that anticipates gross receipts averaging not more than $10,000 during its first four years. $750 for an application for exemption under section 501 filed by an organization that has had annual gross receipts averaging more than $10,000 during its preceding four years, or by a new organization that anticipates gross receipts averaging more than $10,000 during its first four years. A table showing these changes is available. For a more information about user fees and a complete user fee schedule, see New User Fee Schedule for 2006. Form 8718, used for applications other than those submitted on Form 1023, has been updated and is currently available. An update to Form 1023, which incorporates user fee payment information, is also available. July 21, 2006 Tax Talk Today - Political Intervention Do's & Don't's View Political Intervention: Do's and Don'ts for 501(c)(3) Organizations on Tax Talk Today. This one hour video shows IRS subject matter experts explaining the political campaign intervention rules that apply to 501(c)(3) organizations, including charities and churches. The speakers provide examples to highlight acceptable activity, discuss the Service's Political Activity Compliance Initiative for the election year, and introduce new educational materials. Program materials are available on the Resources page of theTax Talk Today Web site. July 21, 2006 990 Online The Urban Institute 2100 M Street NW Washington, DC 20037 (866) 518-3874 990 Online is a Web-based system available to nonprofit organizations for the preparation of Forms 990, 990-EZ and 8868 (filing extension). The application provides user-friendly screens with comprehensive error-checking, and easy creation of schedules and attachments. Users can create Acrobat PDF copies of their forms and attachments for printing, posting on the Web, or emailing. The application supports current versions of Internet Explorer (Ver. 6 or higher), Netscape Navigator, Mozilla & Firefox (Windows, MacIntosh, or Linux). In 2005, state registration and renewal capabilities will be added. Electronic receipts and acknowledgements are provided, and best of all...the service is free! These products have been developed by the nonprofit National Center for Charitable Statistics at the Urban Institute to help nonprofit organizations complete accurate and timely tax filings and to strengthen the information resources available on the nonprofit sector. For more information or to get started on your organization's tax return or extension request, please visit us on the Web at http://efile.form990.org. July 17, 2006 New Grantmaking requirements. Executive Order 13224 The September 11, 2001 terrorist attacks on the United States resulted in new laws under which U.S. grant making nonprofits risk criminal prosecution, civil penalties and the freezing of their assets if they are found to have made grants to foreign or domestic individuals or organizations that engage in or support terrorism. Monday July 17, 2006 - 10:19am (CDT) June 29, 2006 Upcoming Seminars on the Web The Legal Audit - A series of webcasts designed to assist religious orders and other nonprofits review their legal documents and ensure that they are complying with applicable law. Workshops will include: Overview Governance and Corporate Documents Related corporations, foundations and trusts Federal Tax issues Liability, Insurance and Risk Management Record Management Property: Asset Management and Asset Structure Member Legal Audit Thursday June 29, 2006 - 08:30pm (CDT) June 14, 2006 IRS Reminds Charities to Avoid Campaign Activities This Election Season Article IR-2006-87, June 1, 2006 WASHINGTON This election season the Internal Revenue Service reminds charities to avoid becoming involved in political campaign activities. In the 2004 elections, the IRS noticed an upturn in politicking on the part of 501(c)(3) organizations. The agency responded by increasing its educational efforts and launching an enforcement program, the Political Activity Compliance Initiative (PACI), to investigate specific, credible allegations of wrongdoing. While the vast majority of charities and churches do not engage in politicking, an increasing number did take part in prohibited activities in the 2004 election cycle, IRS Commissioner Mark W. Everson said. The rule against political campaign intervention by charities and churches is long established. We are stepping up our efforts to enforce it. The IRS has put procedures into place for the 2006 election season to more quickly address instances of potential prohibited activity on the part of charities, churches and other tax-exempt organizations. The procedures are meant to ensure that public referrals as well as activities the IRS itself uncovers are reviewed expeditiously and treated in a consistent, fair and nonpartisan manner. As a rule, charities, religious organizations such as churches, educational organizations and other groups that are tax-exempt under section 501(c)(3) of the tax code may not participate or intervene in any political campaign on behalf of or in opposition to any candidate for public office. This prohibition means 501(c)(3) organizations may not endorse candidates, distribute statements for or against candidates, raise funds for or donate to candidates or become involved in any activity that would be either supportive or opposed to any candidate. Whether an organization is engaging in prohibited political campaign activity depends upon all the facts and circumstances in each case. For example, organizations may sponsor debates or forums to educate voters. But if the debate or forum shows a preference for or against a certain candidate, it becomes a prohibited activity. Federal courts have ruled that it is not unconstitutional for the tax law to impose conditions, such as the political campaign prohibition, upon exemption from federal income tax. This position was most recently upheld in Branch Ministries v. Rossotti, 211 F.3d 137 (D.C. Cir. 2000). Several Web-based resources are available that discuss in more detail the issues outlined above. For more information, see: IRS Fact Sheet 2006-17, Election Year Activities and the Prohibition on Political Campaign Intervention for Section 501(c)(3) Organizations http://www.irs.gov/newsroom/article/0,,id=154712,00.html IRS Reports on Political Activity Compliance Initiative http://www.irs.gov/charities/article/0,,id=154622,00.html Procedures for the 2006 Election Season http://www.irs.gov/pub/irs-tege/paci_procedures-feb_22_2006. pdf.pdf IRS Publication 1828, Tax Guide for Churches and Religious Organizations http://www.irs.gov/pub/irs-pdf/p1828.pdf IRS Publication 1828 Spanish, Guia Tributaria Para Iglesias y Organizaciones Religiosas http://www.irs.gov/pub/irs-pdf/p1828sp.pdf Wednesday June 14, 2006 - 03:32pm (CDT) Edit | Delete | Permanent Link | 0 Comments Womens Global Connection Conference San Antonio, TX May 18-20, 2006 KETRA Web Seminar Important New Tax Savings for Religious Amy Hereford will present a special one-hour web conference on February 14, 2006 discussing a new tax law and how to take advantage of the tax savings it provides. The program will be archived for later viewing by those unable to attend the web conference. Registered participants in the live web conference will be able to see and hear the presenter and see slides and documents by logging into the conference web site. Participants can pose questions during the presentation or during a Q&A session at the end of the conference. Katrina Emergency Tax Relief Act of 2005 (KETRA) has special provisions allowing thousands of dollars in tax savings for members of religious orders with taxable income. A single religious with $35,000 in taxable income could save approximately $2,000; that could mean as much as $5,000,000 in tax savings across the country for religious with taxable income in 2005. All religious with taxable income and charitable contributions to their order will be able to take advantage of the Hurricane Katrina Tax Relief package. Contributions to a religious order are qualified contributions for this tax relief package, even if contributions were not directed to Hurricane Katrina relief. Amy Hereford is a Sister of St. Joseph of Carondelet from St. Louis and an attorney licensed to practice before the US Tax Court. She worked at the Legal Resource Center for Religious as Associate Director and a staff attorney and edited that office’s Taxes Notebook and counseled religious orders on taxation of their members. For more information or to register, see www.geocities.com/a.hereford Amy Hereford, CSJ, MS, JD CSJ Ministries 6400 Minnesota Ave. St. Louis, MO 63111-2807 Phone/Fax: 314-678-0389 a.hereford@yahoo.com www.ahereford.org

Group Ruling Letter for the United States Catholic Conference of Bishops

The annual Group Tax Exemption Letter for Catholic Organizations has been issued and is available on the USCCB website at http://www.usccb.org/ogc/groupruling.pdf