Joint Ventures Involving Tax-Exempt Organizations, 2022

Cover
Title Page
Copyright Page
Contents
Preface
Acknowledgments
Chapter 1 Introduction: Joint Ventures Involving Exempt Organizations
§ 1.4 University Joint Ventures
§ 1.5 Low-IncomeHousing and New Markets Tax Credit Joint Venture
§ 1.6 Conservation Joint Ventures
§ 1.8 Rev. Rul. 98-15and Joint Venture Structure
§ 1.10 Ancillary Joint Ventures: Rev. Rul. 2004-51
§ 1.14 The Exempt Organization as a Lender or Ground Lessor
§ 1.15 Partnership Taxation
(a) Overview
(b) Bargain Sale Including “Like Kind” Exchange
§ 1.17 Use of a Subsidiary as a Participant in a Joint Venture
§ 1.22 Limitation on Private Foundation’s Activities That Limit Excess Business Holdings
§ 1.24 Other Developments
Chapter 2 Taxation of Charitable Organizations
§ 2.1 Introduction
§ 2.2 Categories of Exempt Organizations (Revised)
(a) § 501(c)(4) Organizations: A Brief Overview
§ 2.3 § 501(c)(3) Organizations: Statutory Requirements
(a) Organizational Test
(b) Operational Test
§ 2.4 Charitable Organizations: General Requirements
(a) Organization Must Benefit a Charitable Class
§ 2.5 Categories of Charitable Organizations (New)
(a) Charitable
(d) Educational Organizations
§ 2.6 Application for Exemption
(a) Individual Organizations (Revised)
(b) Group Exemption
(c) Social Welfare Group Exemptions
§ 2.7 Governance
§ 2.8 Form 990: Reporting and Disclosure Requirements (Revised)
(a) Who Must File
(b) Disclosure of Returns
§ 2.9 Redesigned Form 990 (New)
(h) Compensation of Officers, Directors, Trustees, Key Employees, and Five Highest-Compensated Employees
§ 2.10 The IRS Audit (Revised)
(b) Surviving an Audit
(c) Strategies in the Event of a Proposed Revocation of § 501(c)(3) Status
(d) IRS Compliance Strategy Examinations (New)
§ 2.11 Charitable Contributions (Revised)
(a) Contributions of Cash, Ordinary Income Property, and Short-Term Capital Gain Property (Revised)
(b) Contributions of Capital Gain Property (New)
(c) Contributions of Conservation Easements
(e) Charitable Contributions to SMLLCs (Revised)
(f) Contribution of LLC/Partnership Interests to Charity
Chapter 3 Taxation of Partnerships and Joint Ventures
§ 3.1 Scope of Chapter
(a) Treatment of Business Income to Noncorporate Taxpayers
§ 3.3 Classification as a Partnership (Revised)
(b) Overview of the Check-the-Box Regulations
(c) Classification of Exempt Organizations (New)
(f) IRS Analysis: The Double-Prong Test and Rev. Rul. 98-15
§ 3.4 Alternatives to Partnerships
(b) Title-Holding Companies
§ 3.7 Formation of Partnership
(b) Partnership Interest in Exchange for Services
§ 3.8 Tax Basis in Partnership Interest
(a) Loss Limitation
(b) Basis
(c) Liabilities and Economic Risk of Loss
§ 3.9 Partnership Operations
(d) Transactions between Partner and Partnership
§ 3.10 Partnership Distributions to Partners
§ 3.11 Sale or Other Disposition of Assets or Interests
(c) Termination of the Partnership
(d) Liquidating Distributions
(f) Application of Bargain Sale Technique to “Burned Out” Shelters
§ 3.12 Other Tax Issues
(c) Passive Activity Loss Rules
(f) Unified Audits and Adjustments
Chapter 4 Overview: Joint Ventures Involving Exempt Organizations
§ 4.1 Introduction
§ 4.2 Exempt Organization as General Partner: A Historical Perspective
(d) The Two-Prong Test: IRS Adopts Plumstead Theatre Doctrine
(h) A Road Map
§ 4.6 Revenue Ruling 2004-51and Ancillary Joint Ventures
(c) Factual Scenarios 1 through 4: Joint Venture Is a “Substantially Related” Charitable Activity (See Exhibit 4.1)
§ 4.9 Conversions from Exempt to For-Profit and from For-Profit to Exempt Entities
§ 4.10 Analysis of a Virtual Joint Venture
Chapter 5 Private Benefit, Private Inurement, and Excess Benefit Transactions
§ 5.1 What Are Private Inurement and Private Benefit?
(a) Introduction
(b) Private Inurement and “Insiders”
(c) Distinction between Private Benefit and Private Inurement
§ 5.2 Transactions in Which Private Benefit or Inurement May Occur
(a) Compensation for Services
(c) Joint Ventures with Commercial Entities
(e) Asset Sales to Insiders
(f) Valuation of New-Economy and Internet Companies
(g) § 501(c)(3) Bonds
§ 5.3 Profit-Making Activities as Indicia of Nonexempt Purpose
(a) Operations for Profit
§ 5.4 Intermediate Sanctions (Revised)
(c) Compensation
§ 5.7 State Activity with Respect to Insider Transactions
(a) State Activity
Chapter 6 Engaging in a Joint Venture: The Choices
§ 6.1 Introduction
(a) Impact of the 2017 Tax Act (Pub. L. No. 115-97) of Choice of Entity and Partnership Taxation
§ 6.2 LLCs
(b) Comparison with Other Business Entities
(c) Exempt Organizations Wholly Owning Other Entities
(d) Private Foundations as Members of LLCs
§ 6.3 Use of a For-Profit Subsidiary as Participant in a Joint Venture (Revised)
(a) Reasons for Use of a Subsidiary
(b) Requirement for Subsidiary to Be a Separate Legal Entity
(d) UBIT Implications Applicable to the Use of a Subsidiary
§ 6.5 Private Foundations and Program-Related Investments (Revised)
(a) Program-RelatedInvestments
(b) Proposed Regulations: Additional Examples of PRIs
(c) Final Regulations: Additional Examples 11–19
§ 6.6 Nonprofits and Bonds
(b) The Social Impact Bond: Impact Investing
§ 6.7 Exploring Alternative Structures (Revised)
(b) A New Legal Entity—the L3C—a Low-Profit LLC
(c) Benefit and Flexible Purpose Corporation—A Legislative Approach
§ 6.8 Other Approaches
(c) Forgoing Tax Exemption
(d) Hybrid Structures
(f) Cause-Related Marketing
(g) Commercial Co-Venture
(h) Impact Investing (as renumbered above)
Chapter 7 Exempt Organizations as Accommodating Parties in Tax Shelter Transactions
§ 7.2 Prevention of Abusive TaxShelters
(b) Reportable Transactions
§ 7.3 Excise Taxes and Penalties
(c) Disclosure Requirements
Chapter 8 The Unrelated Business Income Tax
§ 8.1 Introduction
(a) The Rising Tide of Commercialism
(b) Impact of UBIT and Reporting Trends
§ 8.3 General Rule
(b) The Definition of “Unrelated Trade or Business”
§ 8.4 Statutory Exceptions to UBIT
(b) Activities for the Convenience of Members
(h) Corporate Sponsorship
§ 8.5 Modifications to UBIT
(d) Royalties
(g) Income from Internet Activities
§ 8.7 Calculation of UBIT
(a) General Rules
(b) Expenses
(c) Tax on Transportation Fringe Benefits: Qualified Parking, etc
Chapter 9 Debt-Financed Income
§ 9.1 Introduction
§ 9.2 Debt-Financed Property
(a) Overview
(c) Acquisition Indebtedness
§ 9.3 The §514(c)(9) Exception (New)
§ 9.6 The Final Regulations
(c) Exceptions to the Fractions Rule for Preferred Returns and Guaranteed Payments
(d) Chargebacks and Offsets
(e) Partner-SpecificItems of Deductions
(f) Unlikely Losses and Deductions
(g) De Minimis Rules
Chapter 10 Limitation on Excess Business Holdings
§ 10.1 Introduction
§ 10.2 Excess Business Holdings: General Rules (Revised)
§ 10.3 Tax Imposed
§ 10.4 Exclusions (Revised)
(a) Functionally Related Business
(c) Income from Passive Sources
Chapter 11 Impact on Taxable Joint Ventures: Tax-Exempt Entity Leasing Rules (New)
§ 11.3 Internal Revenue Code §168(h) (New)
(c) Subsidiaries of Tax-Exempt Organizations
Chapter 12 Healthcare Entities in Joint Ventures
§ 12.1 Overview
§ 12.2 Classifications of Joint Ventures
§ 12.3 Tax Analysis
(b) The IRS’s Historical Position
(d) Revenue Ruling 98-15
§ 12.4 Other Healthcare Industry Issues
(d) Federal Healthcare Fraud and Abuse Statutes
(e) IRS Policy and the HHS Office of Inspector General
(h) Integrated Delivery Systems, PHOs, MSOs, and HMOs
§ 12.5 Preserving the 50/50 Joint Venture
(b) Expanding Nonprofit Veto Authority in the 50/50 Joint Venture
(e) Preserving “Control” in the 50/50 Venture
§ 12.9 Government Scrutiny
(a) The IRS Exempt Organizations Hospital Compliance Project
(b) Congressional Scrutiny
(c) State Action
§ 12.11 The Patient Protection and Affordable Care Act of 2010: § 501(r) and Other Statutory Changes Impacting Nonprofit Hospitals
(a) Introduction
(d) Additional Statutory Requirements Applicable to Hospital Organizations
(e) Implications for Joint Ventures
§ 12.12 The Patient Protection and Affordable Care Act of 2010: ACOs and Co-Ops: New Joint Venture Healthcare Entities (Revised)
(b) ACOs
Chapter 13 Low-Income Housing, New Markets, Rehabilitation, and Other Tax Credit Programs
§ 13.2 Nonprofit-Sponsored LIHTC Project
§ 13.3 Low-Income Housing Tax Credit(Revised)
(b) Introduction to the Low-Income Housing Tax Credit
(c) Utilization of the LIHTC by Tax-Exempt Organizations
(e) Tax-ExemptBond-Financed Project
(g) Applicable Credit Percentage
(m) Disposition of the Partnership’s or Investor’s Interest Following the Compliance Period
(n) LIHTC 15-Year Issues
§ 13.4 Historic Investment Tax Credit
(f) Profit Motive Requirement
(g) Recapture Provisions
(h) The Treatment of 50(d) Income and Qualified Leasehold Improvements
(i) The 2017 Tax Legislation and Issuance of the Proposed Regulations
§ 13.6 New Markets Tax Credits (Revised)
(b) Allocation of New Markets Tax Credits
(d) Allocation Process
(g) Qualified Low-Income Community Investments
(i) Qualified Active Low-Income Community Business
(w) Nonprofits’ Use of NMTC (Revised)
(y) Future of the NMTC Program
§ 13.10 The Energy Tax Credits
(a) Overview
(g) 2015 PATH Act
§ 13.11 The Opportunity Zone Funds: New Section 1400Z-1 and Section 1400Z-2 (Revised)
(a) Introduction
(b) Operations of QOZ Business
(c) Pairing Opportunity Zone Incentives with NMTCs
(d) Use by Tax-Exempt Organizations: Win-Win
(e) Preliminary Steps in Formation of Opportunity Fund
(f) Treasury Publishes Opportunity Zone Proposed Regulations
(g) Treasury Publishes the Second Tranche of Proposed Opportunity ZoneRegulations
(h) Opportunity Zone Funds: Application of Final Regulations: The Opportunity Zone Tax Incentive Program in the Wake of the COVID-19 Pandemic (Revised)
(j) Changes Related to Type of Entity
(k) Changes Related to Basis Adjustments
(L) Changes Related to Property That a QOF Leases
(O) Legislative Recommendations
Appendix 13B
Chapter 14 Joint Ventures with Universities
§ 14.1 Introduction
(b) The 2017 Tax Act (Pub. L. No. 115-97)
§ 14.3 Colleges and Universities IRS Compliance Initiative
(a) Publication of Nondiscrimination Policy
(b) Varsity Blues Investigation
§ 14.5 Faculty Participation in Research Joint Ventures
§ 14.6 Nonresearch Joint Venture Arrangements
(a) Basic Functions
(b) Entertainment, Sports, and Travel Activities
§ 14.7 Modes of Participation by Universities in Joint Ventures (Revised)
(c) Distance Learning
(f) University Endowments
(g) Other Commercial Arrangements
(h) UBIT Implications for Universities with the Emergence of NIL Deals (New)
Chapter 15 Business Leagues Engaged in Joint Ventures
§ 15.1 Overview
(a) General Rules
(b) § 501(c)(6) and Joint Ventures
(c) Definition of § 501(c)(6) Organizations
§ 15.2 The Five-Prong Test (Revised)
(a) Members with a Common Business Interest
(b) Promoting the Common Business Interests
(c) Activities
(d) Commercial Activity for Profit
§ 15.3 Unrelated Business Income Tax
(a) General Rules
(b) Exception for Indirect Investment in Ancillary Joint Ventures
Chapter 16 Conservation Organizations in Joint Ventures
§ 16.1 Overview
§ 16.2 Conservation and Environmental Protection as a Charitable or Educational Purpose: Public and Private Benefit
(a) IRS Ruling Position
(b) Judicial Holdings
§ 16.3 Conservation Gifts and § 170(h) Contributions (Revised)
(a) Qualified Conservation Easements
(b) Exclusively for Conservation Purposes: Enforceable in Perpetuity
(c) Qualified Farmers and Ranchers
(d) Valuation Issues
(f) IRS Conservation Easement Audit Guidelines (Rev. Nov. 4, 2016)
(g) IRS Notice 2017-10 Regarding Syndicated Conservation Easements (Revised)
§ 16.7 Emerging Issues
(d) Developments at the State Level
(e) Partnership and Disguised Sale Issues
Chapter 17 International Joint Ventures
§ 17.5 General Grantmaking Rules
(c) Final Foreign Grantmaking Regulations
§ 17.11 Application of Foreign Tax Treaties
(c) Joint Ventures with Canadian Nonprofits: The Legal Challenges
Chapter 19 Debt Restructuring and Asset Protection Issues
§ 19.1 Introduction
§ 19.2 Overview of Bankruptcy
(a) Chapter 7 Bankruptcy
(b) Chapter 11 Bankruptcy
§ 19.3 The Estate and the Automatic Stay
(a) Automatic Stay: Generally
(d) Acts Done in Violation of the Stay
(f) Relief from the Automatic Stay
(g) Application of the Automatic Stay to Third Parties
(h) Application of Automatic Stay to IRS Revocation of Tax-Exempt Status
§ 19.4 Case Administration
(b) Use of Cash: HUD Context
(c) Postpetition Financing
(d) Sale of Property/Rejection, Assumption or Assignment of Contracts
§ 19.5 Chapter 11 Plan
(a) Basic Contents of Plan
(b) Acceptance Requirements
(d) Cramdown
(e) Effect of Plan Confirmation on HUD Regulatory Agreement
§ 19.6 Discharge
§ 19.7 Special Issues: Consequences of Debt Reduction
Index
EULA