To retain status as a §501(c)(3) charitable organization, an entity must not only have been organized for charitable purposes (a requirement for initial qualification), it must also be operated exclusively for charitable purposes in order to retain that status.  A failure on the second test caused the organization in the case of Giving Hearts, Inc. v. Commissioner, TC Memo 2019-94[1] to retroactively have its status revoked by the IRS.

The case involves an attempt by a business that was negatively impacted by the National Do Not Call Registry, a program conducted jointly by the Federal Trade Commission and the Federal Communications Commission, to blunt the impact of that program.  The business, Windows Plus, relied primarily upon telemarketing calls to sell replacement windows and other home improvement services to homeowners.

One of the features of the new centralized partnership audit regime that was enacted as part of the Bipartisan Budget Act of 2015 is that once a partnership return is filed that is covered by the program, any later change does not lead to the partners amending their return for the year of change.  Rather, after the return is filed the partnership files an administrative adjustment request (AAR) and either:

• Pays tax with the request, computed under the CPAR rules to compute tax due on the imputed adjustment or

• If the partnership elects the alternative to the imputed adjustment, the partners report the additional tax, penalties and interest on their return for the year the AAR is filed.

The IRS posted a clarification on its website that the IRS has changed its position with regard to certain taxes paid to France, holding that these taxes are not covered by the Agreement on Social Security between the two countries.[1]  Thus, these taxes will be retroactively treated as income taxes for which a foreign tax credit is available.

Although it’s an issue we’ve discussed before, it’s important to remember to remind noncustodial parents of the requirement to submit a signed Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent with their tax return to claim the child as a dependent.  In the case of DeMar v. Commissioner, TC Memo 2019-91,[1] the taxpayer was denied such benefits due to his failure to submit the form.  And even though the taxpayer did eventually obtain a signed form, he failed to prove that his former spouse had filed an amended return to give up her tax benefit—a condition imposed in proposed regulations when taxpayers attempts to submit Form 8332 after initially filing a return for the year.

Divorces often leave the parties with hard feelings, and the issues surrounding children can be especially sensitive.  To keep the Tax Court from getting into the middle of such squabbles between former spouses, the law provides a very mechanical test for which of the divorced parents will be able to claim the child as a dependent.

Although it took 30 years, the IRS has issued a correction to a regulation dealing with attribution rules for purposes of determining a “brother-sister group” under IRC §52.  In TD 8179 the IRS changes a reference from “Reg. §1.414(c)-4(b)(1)” to “Reg. §1.414-4.”  And it’s the sort of quirky flaw that only tax geeks can love—and potentially exploit for the (temporary) benefit of eligible clients.

The IRS has issued a frequently asked questions document related to changes made by the Tax Cuts and Jobs Act of 2017 (TCJA) in the computation of a partner’s outside basis limitations due to the payment of foreign taxes and certain charitable contributions.[1]

The IRS outlines the changes in a set of three examples discussing how a partner computes his/her limitations on claiming a tax benefit from charitable contributions and payment of foreign taxes dependent on basis in the partnership under IRC §704(d).

In the case of Rodgers v. United States, 123 AFTR 2d 2019-2294[1], the Ninth Circuit Court of Appeals agreed that the District Court had applied the wrong standard in determining if a preparer penalty applied.  But, as will become clear, that doesn’t mean the preparer will fare any better when the case goes back to the District Court to have the proper standard applied.

The IRS has issued proposed regulations that would apply to defined contribution multiple employer plans (MEPs) in REG-121508-18[1] in response to an executive order[2] issued by the President in August 2018.  The EO directed the IRS and related agencies to take actions to encourage the use of MEPs, specifically to limit the consequences should one of the employers participating in the MEP fail to take actions required to allow the plan to remain qualified.

Concerns had been expressed that the above rule (often referred to as the “one bad apple rule” and officially referred to as part of the overall unified plan rule) discouraged employers from joining an MEP plan, since the actions of an unrelated employer over which they would have no control could jeopardize the qualified status of the plan, putting the innocent employer and its employees at risk for the tax consequences of plan disqualification.[3]