Bruce R. Hopkins' Nonprofit Counsel最新文献

The IRS, on April 8, announced several key leadership appointments as work continues in implementation of major provisions of the Taxpayer First Act (summarized in the September 2019 issue). The IRS said that these leadership changes are part of a larger effort underway to “reimagine the agency's tax administration and work to improve taxpayer service and enforcement” (IR-2021-80).

A perfect storm is shaping up: a mix of the Biden Administration's federal government budget request for fiscal year 2022, its tax law revision package, and its infrastructure proposal. Plus, the IRS is pushing Congress for authority to regulate tax return preparers and increasing its pursuit of promoters of abusive tax avoidance transactions.

It has been some time since a court explored the concept of research in the tax-exempt organizations law context, such as in connection with the field of scientific research or the unrelated business rules. A recent US Tax Court opinion, however, reviewed this concept in the setting of the research and development tax credit (IRC § 41) (Leon Max v. Commissioner (March 29)). While the statutory law concerning the credit is more detailed, the basic issue in both tax fields is the same: Is the activity truly research or is it merely carried on incident to commercial operations (e.g., testing or designing)? As the following illustrates, the law in this regard as to the credit generally aligns with exempt organizations law.

The flow of IRS rulings concerning grants to individuals by private foundations, holding that they do not constitute taxable expenditures, is a constant one, with these determinations tumbling out by the tens annually; this is not, by itself, news. Usually, these grants are in the form of scholarships, fellowships, internships, and the like (e.g., most recently, Priv. Ltr. Ruls. 202114025 and 202114026). But, recently, these approved grants have been of more exotic varieties. An illustration follows, involving grants to IT service providers.

Readers will recall the case of the foreign charity that was denied recognition of exemption by the IRS on the grounds of violation of the organizational and operational tests (Priv. Ltr. Rul. 201947020) (summarized in the February 2020 issue). The case is now before the US Tax Court (The Joachim Herz Stiftung v. Commissioner).

The IRS announced, on March 30, that emergency financial aid grants made by higher education institutions, federal or state agencies, or other scholarship-granting organizations to students because of an event related to the COVID-19 pandemic are not included in the students’ gross income (IR-2021-70).

Also, the IRS stated, students should not reduce an amount of qualified tuition and related expenses by the amount of an emergency financial aid grant. The agency said that, if students used any portion of the grants to pay for qualified tuition and related expenses on or before December 31, 2020, they may be eligible to claim a tuition and fees deduction or the American Opportunity Credit or Lifetime Learning Credit on the 2020 tax return. (The tuition and fees deduction is not available for tax years beginning after December 31, 2020.)

Because students do not include these emergency financial aid grants in their gross income, the IRS said that higher education institutions are not required to file or furnish Forms 1099-MISC reporting the grants made available by the Coronavirus Aid, Relief, and Economic Security Act or the COVID-related Tax Relief Act and do not need to report the grants on Form 1098-T (box 5).

But any amounts that qualify for the tuition and fees deduction or the two credits are considered qualified tuition and related expenses and thus trigger the reporting requirements (IRC § 6050S). Higher education institutions must include qualified tuition and related expenses paid by emergency financial aid grants awarded to students in Form 1098-T (box 1).

As also discussed in the December 2020 issue, TIGTA's FY 2021 audit plan references a review of the IRS's policies and audit procedures to identify improper conduct by exempt organizations and determine whether the IRS has sufficient information to combat abuse and enforce federal tax laws.