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1. Form 990: Late filing penalty abatement  

BY Vani Murthy, CPA
Many small and medium-size not-for-profit organizations are mostly run by volunteers, and the staff of these charities may forget or inadvertently fail to timely file Form 990, Return of Organization Exempt From Income Tax, Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, or even Form 990-N, Annual Electronic Filing Requirement for Small Exempt Organizations, which is a postcard-size information return that is electronically filed.

2. Exemption from PFIC regime for indirect ownership expanded  

BY Dahlia B. Doumar, J.D., LL.M. and Carl A. Merino, J.D., LL.M.
The IRS clarifies that shares held through a variety of tax-exempt organizations, plans, and accounts are generally excluded.On April 14, Treasury and the IRS announced they will amend the regulations under Sec. 1291 to provide that a U.S. person who indirectly owns stock of a passive foreign investment company (PFIC) through a tax-exempt organization or account will not be treated as a U.S.

3. Recycling charitable dollars: IRS gives green light to more program-related investments   CPEDirect

BY Allison L. Evans, CPA, Ph.D., and Christine M. Petrovits, CPA, Ph.D.
Private foundations lost more than 20% of their assets during the economic crisis, according to the Foundation Center (see Foundation Growth and Giving Estimates, available at At the same time, the demand for charitable services—and foundation dollars to support those services—increased significantly. The combination of these dynamics prompted many private foundations to consider new strategies to do more with less.

4. Conservation easements are deductible despite reimbursement provision  

BY Janet A. Meade, CPA, Ph.D.
The Tax Court upheld charitable donations of conservation easements in a bargain sale, despite a requirement that, in the event of a later disposal of the property and extinguishment of the easements, the donee organization use the proceeds to reimburse the government agencies that funded the purchase. The court determined that the reimbursement provision did not violate the perpetuity requirement of Regs.

5. Documenting charitable contributions  

BY Alistair M. Nevius
At this time of year, many charities see an upsurge in donations, and the federal tax deduction for charitable contributions is a significant incentive. The Tax Court recently highlighted how an apparently slight oversight in documentation can upend the interdependent relationship between donee and donor. General Substantiation Requirements The substantiation requirements for monetary donations of less than $250 remain fairly informal under Sec.

6. Ban on political activities: An election-year warning for charities  

BY Claudia L. Kelley, CPA, Ph.D., and F. Douglas Roberts, CPA, Ph.D.
As the 2012 elections draw near, the IRS is once again increasing its oversight of the ban on political campaign activities by Sec. 501(c)(3) charitable organizations. An IRS work plan (Exempt Organizations 2011 Annual Report & 2012 Work Plan, available at states that, in enforcing the ban this year, the IRS will use new information about organizations’ activities from Form 990, Return of Organization Exempt From Income Tax, which was expanded in 2008.

7. IRS looks into international activities  

BY Alistair M. Nevius
Many tax-exempt entities participate in the global economy by engaging in charitable or other exempt activities overseas and/or making foreign financial investments. These activities have drawn attention from the IRS and other federal agencies as they examine the flow of tax-exempt funds around the world. FOREIGN BANK ACCOUNTS The first step tax-exempt organizations may take toward establishing an international presence is opening a bank account or other financial account overseas.

8. Some tax-exempt organizations are receiving erroneous penalty notices; relief available   WebExclusive

BY Alistair M. Nevius
Practitioners are reporting that some tax-exempt organizations have received penalty notices from the IRS for late filing of Forms 990, 990-EZ, 990-PF, and 1120-POL, even though they received an automatic extension and filed during March, as instructed by the IRS. The IRS’s e-filing computer system was not available for filing Forms 990, 990-EZ, 990-PF, and 1120-POL from Jan.

9. Court upholds IRS’s denial of college insurance fund’s application for tax exemption   WebExclusive

BY Sally P. Schreiber
An association of tax-exempt secondary schools and universities in Florida formed to pool insurance risk and obtain insurance for its members did not qualify for federal tax-exempt status because it fell under the prohibition against exemption for commercial-type of insurance companies in Sec. 501(m) (Florida Indep. Colleges & Universities Risk Mgmt.

10. New online search tool makes it easier to find information about exempt organizations   WebExclusive

BY Sally P. Schreiber
On Thursday, the IRS announced that taxpayers can find information about tax-exempt organizations in a new online search tool called Exempt Organizations Select Check (IR-2012-34). The information that is searchable online includes whether the organization: Is eligible to receive tax-deductible contributions. Had its tax exemption automatically revoked for failing to file a required Form 990, Return of Organization Exempt From Income Tax, for three consecutive years.
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