The Law of Tax-Exempt Organizations, 2021 Cumulative Supplement. Bruce R. Hopkins

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Preface

      This 2021 cumulative supplement is the second supplement to accompany the twelfth edition of this book. The supplement covers developments in the law of tax‐exempt organizations as of the close of 2020.

      Enactment of what is informally known as the Tax Cuts and Jobs Act (TCJA) continues to reverberate through exempt organizations law and dominates the current developments scene. The Department of the Treasury and the IRS are issuing guidance (notices and final regulations) in the aftermath of the TCJA, such as in the context of the bucketing rule for computation of unrelated business taxable income, taxation of certain private colleges' and universities' endowment income, and taxation of the excess compensation of certain exempt organizations' executives. Fortunately, the law causing inclusion as unrelated business income items of the value of certain types of fringe benefits was repealed.

      The Treasury/IRS 2020–2021 Priority Guidance Plan, dated November 17, 2020, inventories the federal government's efforts to generate guidance in TCJA and other contexts. (As of the date of publication, the proposed regulations to accompany the donor‐advised funds statutory law have yet to emerge.) This guidance is summarized in this cumulative supplement.

      Another item of legislation, the Taxpayer First Act, brought more statutory law to the exempt organizations setting (although not nearly as dramatic as the TCJA). This statute instituted mandatory electronic filing of tax‐exempt organizations' returns, provided some relief for organizations that may otherwise have their exemptions revoked for nonfiling of returns, and established a statutory Independent Office of Appeals in the IRS. These new laws are also summarized in this cumulative supplement.

      The Office of Audit fiscal year 2021 Annual Audit Plan, which reflects the Treasury Inspector General for Tax Administration's (TIGTA's) current IRS audit priorities, released on October 6, 2020, includes these planned audits in the tax‐exempt organizations context: TIGTA's efforts to (1) review the Tax Exempt and Government Entities (TE/GE) Division's efforts to identify and examine exempt organizations with unreported or underreported unrelated business income tax; (2) assess whether the streamlined application for recognition of exemption results in fewer compliant tax‐exempt organizations; (3) review 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; (4) determine the effectiveness of the Division's implementation of the Compliance Planning and Classification Unit to consolidate examination identification planning, assignment, and monitoring; (5) assess the IRS's implementation of the notice requirement for exempt organizations that have not filed an annual information return or notice for two consecutive years; and (6) provide various statistical information and data trends related to the Division.

The IRS continues to invigorate the law of tax‐exempt organizations with private letter rulings in areas such as the commerciality doctrine, nonqualification of organizations as exempt business leagues, private inurement and private benefit doctrines, the lobbying rules, and the unrelated business rules. Summaries of these and other rulings are interspersed throughout the cumulative supplement.

      Courts, too, are contributing their fair share of law developments. This is particularly true in the realm of disclosure of donor and membership information. Several recent opinions on this subject, reflecting views on both sides of the issue, have been issued in recent months, such as the matter of providing Form 990, Schedule B, information to states in conjunction with fundraising regulation and disclosure of similar information in settings where free speech and privacy rights are implicated. Treasury has relieved most categories of exempt organizations of the burden of disclosing this type of information. These cases are summarized herein.

      An unfortunate subject is the interplay between the law of tax‐exempt organizations and the law of tax shelters (or, if you prefer, abusive tax schemes). Interest in this area continues to grow, leading to a new chapter of the book on the point, which is included with this supplement. In fact, just as this supplement was about to be submitted to the publisher, the U.S. Government Accountability Office, in early October 2019, issued a report on this subject (summarized in this supplement).

      I wish to thank my research assistant, Greg Gietzen, for his assistance in providing content material and in completing footnotes. My thanks also go to my senior editor, Brian T. Neill, and production editor, Caroline Maria Vincent, for their assistance and support in connection with creation of this supplement to accompany the book.

      Bruce R. Hopkins

      March 2021