In This Issue:
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IRS Releases Draft Nonprofit Return Forms for Comment |
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Prospective Nonprofit Legislation Hits Snag |
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Raffles and Charitable Lotteries |
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Please Share With a Friend or Colleague! |
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IRS Releases Draft Nonprofit Return Forms for Comment
The IRS has released drafts of new nonprofit tax return forms for public comment.
The revised draft forms include: Form 990-EZ, Short Form Return of Organization Exempt from Income Tax; Schedule A, Form 990 or 990-EZ, Organization Exempt Under Section 501(c)(3); Schedule B, Form 990, 990-EZ, or 990-PF, Schedule of Contributors; Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes; Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations; Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the Internal Revenue Code.
Prospective Nonprofit Legislation Hits Snag
Sen. Rick Santorum (R-PA), the prime sponsor of the CARE Act, has sent a letter cosigned by 19 other Senators to Senate Finance Committee Chairman Charles Grassley (R-IA) and ranking member Max Baucus (D-MT) expressing serious concerns about legislation the Finance Committee may introduce as soon as next month.
The Finance Committee has been working to draft legislation that addresses several areas of nonprofit governance, accountability, fund raising, and charitable deductions. A Committee staff "discussion paper" was issued last year, hearings were held this spring, and Independent Sector convened a 100-member Panel to provide feedback and recommendations.
The bipartisan letter expresses concerns that proposed legislation will reduce philanthropic gifts, be overburdensome on smaller charities (94% of all US nonprofits have annual income under $1 million), and does not take into account the significant success of current regulation in curbing abuses.
The letter indicates that drafters of legislation may have to revise their efforts prior to introduction, and/or may see their efforts being subjected to significant amendment.
OMBwatch.com has a report on this, as well as a link to a PDF version of the letter signed by the 20 Senators.
Raffles and Charitable Lotteries
Recently, a member of a nonprofit sector online discussion list asked a question to which we responded. The exchange is reproduced here:
Question:
"If we offered a prize (say a paid trip for 2) and enter everyone who gives a gift of a certain level during this time frame, what would be the tax consequences? I know that the person who wins the gift would have taxable income over and above the amount of the gift they gave, but what would be the consequences to everyone else who gave? Our VP is thinking of this as a way to increase our annual giving gifts. Thanks for your help."
Our response:
"As I understand it, the charitable tax deductibility of all gifts would be invalidated. The opportunity to win a prize is considered by the IRS to be something of value, making the transaction a sale rather than a gift. The prize winner would be liable for income taxes on the fair market value (FMV) of the prize.
"Further, your institution would have to abide by Federal, state, and local laws governing charitable lotteries (raffles) -- not only in your jurisdiction, but in any jurisdiction where the offer (solicitation) is made. Of course, the US Mail may not be used to further a charitable lottery or raffle, so no solicitations could legally be mailed. Some states require that no purchase be required to enter a charitable lottery, and many restrict the value of prizes that may be awarded. Many cities and counties require the issuance of a permit to a nonprofit to solicit using charitable lotteries (raffles).
"I would advise your VP to, at minimum, consult with the institution's legal counsel before doing anything like this."
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