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Trusts' investments in entities that are indebted as a result of the acquisition of real property do not result in unrelated business income tax if the trust had no investment in the entity when the property was acquired.? However, it is possible that transactions attempting to take advantage of this rule could be caught under the step-transaction doctrine.

At a conference at Georgetown University, tax officials discussed various issues relating to tax-exempt organizations. Among the issues discussed were auditing of charities which engage in political activity, new charitable giving tax incentives, employee compensation, and changes in tax return forms for exempt organizations.

Law, regulations, and court decisions relating to taxation issues with regard to tax-exempt organizations in 2002 are reviewed.

New York University School of Law and the National Center on Philanthropy co-sponsored a conference on the tax law definition of charity. The papers presented at the conference are outlined.

Officials of the IRS Exempt Organizations Division discussed the Division's plans for the next fiscal year. They also explained changes the Division plans to make in the alignment of its workforce.

Participants at a conference on pensions co-sponsered by the ABA and the American Law Institute discussed plans for tax guidance by the US Treasury and the IRS.

The ABA has drafted a proposed Revenue Ruling which would govern joint ventures between non-profit and for-profit entities in the health care industry. This proposal is compared to Revenue Ruling 98-15.

Officials of the Exempt Organizations Division of the IRS discussed how the division plans to operate in the 2003 fiscal year.

At an ABA conference, government officials discussed tax issues relating to employee benefits of nonprofit organizations and government entities.

Issues concerning taxation of nonprofit organizations are examined, focusing on comments made by IRS officials at a May 10, 2002, meeting of the ABA Tax Section. Topics include guidance for corporate sponsorship, asset transfers between private foundations, charitable partners for hospital joint ventures, plans for the IRS to release more revenue rulings regarding exempt organizations, and tax-exempt bonds.

Issues concerning proposed regulations for taxation of employee stock options are examined, focusing on comments made at an IRS hearing during the week of May 13, 2002. Topics include exclusions under IRC section 421(a) and employee stock purchase plans under IRC sections 422 and 423.

Issues concerning IRS regulations regarding tax-exempt organizations are examined, focusing on topics discussed at the Georgetown University Law Center's 19th annual conference on tax-exempt organizations. Topics include corporate sponsorship regulations, unrelated business income, Internet activities by tax-exempt organizations, joint ventures, disaster relief, and employee benefits.

Issues concerning regulations for tax exempt organizations (EOs) are examined, focusing on comments made by EO representatives at the Mar 14-15, 2002, Non-Profit Legal and Tax conference in Wash DC. Topics include the impact intermediate sanctions on disqualified persons, as they relate to excess benefits, have on tax litigation; lobbying activities of EOs; IRS efforts to ensure charities organized after the terrorist acts of Sep 11, 2001, are actually aiding victims of the attack; and tax rules for EO internet activities.

Issues concerning the substance of final regulations on intermediate sanctions for exempt organizations, released on Jan 22, 2002, are examined. Topics include the right under IRC section 4958 to impose tax penalties, or intermediate sanctions, on exempt organization officials who unduly benefit from organization transactions; definitions of excess benefit transactions; and definitions of disqualified persons.

Issues concerning the taxation of exempt organizations (EO) are examined, focusing on legislative developments during 2001 and changes in the IRS EO Division management structure. Topics include disappointment in the tax practitioner community over the release of temporary regulations for intermediate sanctions; the newly created Tax Exempt Advisory Committee; and the release of the EO Continuing Professional Education text, which is an aid for both revenue agents and tax practitioners.

Issues concerning the impact the Economic Growth and Tax Relief Reconciliation Act of 2001 has on the taxation of deferred compensation and tax-exempt organization retirement plans are examined, focusing on comments made by IRS and Treasury staff at an American Law Institute-ABA meeting during Dec 6-8, 2001. Topics include tax planning opportunities for IRC section 403(b) plans and issues discussed by a panel on split-dollar life insurance.

Issues concering the release of the IRS Exempt Organizations Continuing Professional Education Text for fiscal 2002 during the week of Oct 1, 2001, are examined. Topics include text articles on health care, unrelated business income, intermediate sanctions, and suggestions for completing Form 990.

Issues concerning subjects discussed at a conference entitled "Representing and Managing Tax-Exempt Organizations," held at the Georgetown University Law Center on Apr 26-27, 2001, are examined. Topics include IRS initiatives to take advantage of the Internet and electronic technology in its relationship with exempt organizations; workshops on applying for tax exempt status; the New Markets Tax Credit, which is aimed at increasing investments in low-income sectors; and the unrelated income business tax.

Issues related to the implementation of the IRS Tax Exempt/Government Entities Division in 2000 are examined. Topics include the structure of the division; education of division agents; progress on division projects; controversy regarding IRC section 527 regarding the need for tax exempt organizations to disclose names of contributors, especially as it may regard political campaigns; and tax issues specifically related to nonprofit institutions.

Issues related to IRS policy regarding exempt organizations, particularly universities and colleges, are examined, focusing on statements made by IRS officials at an annual conference in December 2000 sponsored by the National Association of College and University Business Officers. Topics include final intermediate sanctions under IRC section 4958, related to excess benefit transactions; corporate sponsorship regulations; intellectual property issues regarding the work of professors; and taxation of foreign students.

Issues related to the Boy Scouts of America's (BSA) policy prohibiting gay scout troop leaders are examined, focusing on a US Supreme Court case, Boy Scouts of America v. Dale, regarding the issue and the implications the policy has for BSA's tax-exempt status.

Tax policy issues facing nonprofit organizations in a changing technological and political environment are examined, focusing on topics discussed at a Nov 30-Dec 1, 2000, meeting of the American Law Institute-American Bar Association. Topics include use of Internet by nonprofits, campaign finance reform, IRS reorganization of its Exempt Organization division, and IRS education and outreach.

The authors discusse comments from IRS officials to the American Law Institute-ABA seminar participants on the Service's audit plans and on the retirement and deferred compensation plans of tax-exempt and government employers.

Participants at a public meeting offered suggestions about how the IRS can improve its administration of tax rules for government and tax-exempt entities.

The Abraham Lincoln Opportunity Foundation and the Howard H. Callaway Foundation issued a statement denying that political considerations played a role in the IRS's decision to restore their tax exemptions. The two nonprofits had their exemptions revoked after it was found that they had aided GOPAC, the political action committee of former House Speaker Newt Gingrich. Their exemptions were restored after George W. Bush became president.

IRS Chief Counsel B. John Williams and National Taxpayer Advocate Nina E. Olson recently talked about the precertification process for the earned income tax credit and IRS low-income taxpayer clinics. Olson defended the precertification policy for the ETIC against attacks that it was unfair to low-income taxpayers.

IRS proposed regulations attempting to prevent age discrimination in cash balance retirement plans are under attack from affected persons and members of Congress. They claim that the rules would allow employers to adopt cash balance pension plans worth less to employees than defined benefit plans.

The Senate may soon consider a package of charitable giving incentives which has been approved by the body's Finance Committee. The IRS is planning to set up a filing system that can be used by tax-exempt organizations to submit required information.

In Lapham Foundation, Inc. v. Commissioner, the U.S. Tax Court decided that the Lapham Foundation is not a supporting organization under Internal Revenue Code 509(a)(3), but rather a private foundation. The foundation was found not to have met the requirement that it be "significantly involved" in a publicly supported organization to be considered a supporting organization.

The US Court of Appeals for the 9th Circuit decided, in Winn v. Killian, that federal courts do have jurisdiction over a lawsuit challenging the constitutionality of an Arizona law allowing tax credits for contributions to religious schools. Law professors discuss their views on the case.

Different variations of a plan to use life insurance at very high premiums to pass estates on to heirs with reduced tax liability are being marketed. There are real questions about whether the IRS will approve such techniques.

Issues discussed at a May 3-4, 2001, conference sponsored by the National Association of Bond Lawyers are examined. Topics include the IRS interpretation of private activity bond rules, disclosure obligations of bond issuers, IRC section 6700 penalties regarding tax shelters, and tax exempt bond legislation now before Congress regarding such issues as school construction.

Issues regarding changes in IRS administrative procedures, as announced at a meeting of the Tax Executives Institute during the week of Apr 2, 2001, are examined, focusing on changes regarding the IRS Large and Mid-Size Business Division, prefiling agreements (PFAs), and the industry issue resolution pilot program. Topics include participation by financial service companies in the PFA process; IRS plans for processing 24 submissions to the industry issue resolution pilot program; and IRS hopes that the program represents the industry sector as a whole and provides guidance on common issues.