As discussed in our prior article, use of a copyrighted work by a nonprofit organization will not usually qualify as a fair use. However, several statutory provisions of the Copyright Act (17 U.S.C. § 101 et seq.) allow certain nonprofit organizations to use copyrighted works without obtaining the copyright owner’s permission. Most of those provisions have very technical requirements and apply to limited circumstances. Before relying on one of those provisions, the nonprofit organization should review all statutory requirements to make sure its use qualifies. One of the more useful provisions allows a nonprofit organization to perform a nondramatic literary or musical work at fundraisers. In order to qualify for this provision, no admission fees can be charged at the showing, those performing the work must do so at no charge, and all proceeds from the performance, such as donations, must be used exclusively for charitable purposes.Continue reading “Special Copyright Provisions for Certain Nonprofits”
Proposed changes to IRS group exemption letters could result in organizations needing to re-structure their operations or seek new exemption rulings from the IRS. In Notice 2020-36 (available here), the IRS announced that as of June 17, 2020, it would no longer accept applications for group rulings under Rev. Proc. 80-27. All applications for group rulings after that date would be decided under a new final revenue procedure or other IRS guidance. Exempt organizations covered under a group letter should review the proposed changes and make plans now to comply with the changes once they become final.Continue reading “Group Exemption Letters to Become More Restrictive”
One of the more significant changes made by the Tax Cuts and Jobs Act of 2017 was to require tax-exempt organizations to separately calculate unrelated business income tax for each unrelated trade or business. Instead of offsetting all losses from all income attributable to all unrelated trade or business activities, organizations are now required to “silo” each trade and business and calculate unrelated business income tax for each. The statutory text of the Act was silent about how to determine if an organization has more than one unrelated trade or business or how to identify separate trades or businesses. The IRS previously issued guidance that allowed organizations to consider “all the facts and circumstances” in determining if it had multiple or separate trades or businesses. This standard was vague and not very helpful to organizations seeking concrete guidance on making these determinations.Continue reading “IRS Announces Guidance for “Siloing” Separate Unrelated Businesses”
It is a common misconception that nonprofit organizations have special rights to use copyrighted works without permission. This misconception arises from the first fair use factor, which considers “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” As explained below, “nonprofit educational purposes” is very narrowly defined. Even if a use is actually included in “nonprofit educational purpose” the use may not qualify as a fair use if the other fair use factors weigh against fair use. While the law does not generally grant nonprofit organizations the right to use copyrighted works as a fair use, the U.S. Copyright Act does grant several statutory exemptions in limited situations.Continue reading “Nonprofits and the Fair Use Defense”
More frequently, nonprofit development officers and fundraisers are asked by prospective donors about whether their organization will accept donations of “Crypto Currency”, or other types of virtual currency.[i] The most commonly known form of Crypto Currency is Bitcoin, however, there are many other types of Crypto Currency that can be bought, traded, and sold.Continue reading “Accepting Donations of Crypto Currency”
On December 20, 2019, the President signed, “The Further Consolidated Appropriations Act” (H.R. 1865), which contained the “Taxpayer Certainty and Disaster Tax Relief Act of 2019” (“Act”). The Act contains two important changes to federal tax laws affecting nonprofits: (1) repeal of the parking tax and (2) reduction in the private foundation excise tax.Continue reading “Year-End Federal Tax Changes Benefiting NonProfits”
In an interesting new development, the IRS granted 501(c)(3) tax-exempt status to a major daily newspaper. On November 3, 2019, the Salt Lake Tribune announced that it had incorporated as a non-profit corporation, re-structured its operations, and obtained IRS recognition of its 501(c)(3) status. Tax-exempt practitioners have speculated for years that a daily newspaper could, in theory, qualify for tax-exempt status under Section 501(c)(3). However, the Salt Lake Tribune’s announcement was the first time that a major daily newspaper is known to have succeeded in obtaining recognition of 501(c)(3) tax-exempt status. Granting tax-exempt status to this daily newspaper means that the IRS has now officially recognized news-reporting as an exempt purpose.Continue reading “IRS Grants The Salt Lake Tribune Tax-Exempt Status”
An early decision founders of new non-profit organizations must make is where to incorporate. A U.S. charitable, religious, or educational organization has its choice of incorporating in any of the 50 states as well as the District of Columbia. With this many choices, founders may ask if it is advantageous to incorporate in one state over another. When it comes to for-profit companies, it is common for them to incorporate or organize in Delaware due to tax or regulatory issues. We recently ran across an article advising non-profits to incorporate in Delaware. We thought it would be helpful to address if non-profits derive any advantage from incorporating in Delaware or another state in particular.Continue reading “Where to Incorporate?”
Navigating the Possibility of Incurring UBTI
UPDATE: The Taxpayer Certainty and Disaster Tax Relief Act of 2019 retroactively repealed the tax on employee parking benefits for nonprofit employers by striking paragraph 512(a)(7) from the Internal Revenue Code. An organization that paid the tax may be eligible for a refund. To claim a refund, the organization needs to file an amended 990-T, as further explained by the IRS here.
Nonprofit organizations that provide employee parking benefits may be surprised to learn that they may be subject to incur unrelated business taxable income (UBTI). In addition, organizations with no UBTI may now be required to file form 990-T.
The Tax Cuts and Jobs Act (Act) amended Section 274 of the Internal Revenue Code (IRC) to disallow for-profit employers from deducting certain expenses related to transportation fringe benefits provided to their employees. The Act added IRC Section 512(a)(7) to what constitutes UBTI for nonprofits and other tax-exempt entities. The Act states that tax-exempt entities are required to increase their UBTI by expenses related to transportation fringe benefits provided to their employees. The transportation fringe benefits subject to this tax include expenses associated with:
Don’t be complacent.
Each year tax-exempt organizations in the United States receive hundreds of millions of dollars in donations. Donors contributing to 501(c)(3) organizations are able to deduct their own contributions from their taxes, subject to IRS limitations. Recently, a higher standard deduction has been put in place through the Tax Cuts and Jobs Act. This will likely diminish the number of taxpayers and donors who itemize their deductions, making it tempting for charities to assume that receipting donations is no longer important. However, charities should continue to exercise care in receipting donations for the benefit of the donor. Continue reading “Receipting Donations”