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August 10, 2009
It is better to give
than receive- especially advice.
~ Mark
Twain
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Indiana Community Foundations
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August 10, 2009
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GiftLaw
eNewsletter - August 10, 2009
- WASHINGTON HOTLINE
- PLR THIS WEEK
- ARTICLE OF THE MONTH
- CASE OF THE WEEK
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WASHINGTON
HOTLINE
Senators Promise
"No Individual Taxes" on Healthcare Reform
Tax Quote of the Week
"Taxes are a changing product of earnest efforts
to have others pay them."
-- Louis Eisenstein
Senators Promise "No Individual Taxes"
on Healthcare Reform
As the Senate adjourns and Senators return to their
states for town hall meetings, a "group of six" Senators
continues to develop their healthcare reform plans.
After meetings between the three Democratic and three
Republican Senators this week, Sen. Kent Conrad (D-ND) indicated that the
discussions were wide ranging. The six Senators have had extended
discussions on ways to tax medical insurance companies who offer expensive
coverage plans. They have also examined various methods to structure the
tax and reviewed possible exemptions.
Sen. Conrad suggested that they now were within
"$30 billion to $40 billion" on the tax increases and healthcare
revenue cost reductions necessary to pay for healthcare reform. The
projected cost for the Senate healthcare reform plan is now under $1
trillion.
Sen. Conrad indicated that the tax increases would
not be paid by individuals. Other senior Democratic Senators also stated
that the tax increases would be on healthcare insurance corporations and
not on individuals.
Sen. Charles Grassley (R-IA) is the Ranking
Republican on the committee. He indicated that his staff has been working
"hours and hours each day, nights and weekends to navigate through the
numerous complex issues of healthcare reform."
Sen. Grassley has been a strong advocate of a
"bipartisan solution" on healthcare reform. He stated this week,
"I am very hopeful that we can reach a bipartisan deal that makes
healthcare in America more accessible and more affordable, while at the
same time protecting taxpayers and preventing the Federal Government from
taking over healthcare."
IRS Warning on Identity Theft
On August 4, 2009, the IRS published IR-2009-71 to
warn the public about identity thieves who attempt to use the IRS name to
victimize taxpayers.
Identity theft involves the use of trickery to
persuade an individual to share credit card numbers and passwords, bank account
numbers and passwords, Social Security numbers or other financial
information. The identity thief then uses your personal information to
obtain loans, cash advances from credit cards and even IRS tax refunds.
Because of the bank and credit card debts created for
a victim, he or she may incur great time and expense to correct the records
and restore credit ratings after an identity thief has obtained cash
through fraud. It can take months to undo all of the financial damage to
your records if someone steals your identity.
The IRS reports several new identity theft scams.
Identity thieves have been sending emails to claim that the "Making
Work Pay" refund is available if you respond to the email. However,
the IRS notes that the Making Work Pay credit will benefit you through a
reduction in your withholding pay.
Second, identity theft victims may receive emails
notifying them that they have won a lottery or have received a large
inheritance. In order to claim the lottery or the inheritance, they must
deposit taxes on the winnings. The identity thief then absconds with the
funds deposited to pay taxes.
A third strategy is to use a W-8BEN, Certificate of
Foreign Status of Beneficial Owner for United States Tax Withholding, to
obtain personal financial information. The identity thief then uses this
information to obtain cash.
Finally, identity thieves have even used personal
information to file bogus tax refund claims and abscond with your IRS tax
refund.
How do you stop an identity thief scam? You should be
on guard if an email requests unusual personal or financial information. In
the letter, the IRS notes that it "does not initiate taxpayer contact
via unsolicited email." Any e-mail request claiming to be from the IRS
is instead likely to be from an identity thief.
If the email promises a financial benefit or tax
refund, you should not click on any email link or open any attachment. The
attachments often have a computer virus that places malicious software code
on your computer to allow the identity thief to steal passwords and account
numbers.
If you receive a suspicious email, the best strategy
is to forward it to phishing@irs.gov. Afterward, delete the email
permanently from your mailbox.
CEO Personally Responsible For Payroll Taxes
In James
Doulgeris v. United States; No. 8:08-cv-00282 (3 Aug 2009), a
Tampa, Florida U.S. District Court held that an interim CEO of a medical
center was personally liable for payment of payroll taxes.
The International Philanthropic Hospital Foundation,
doing business as Granada Hills Community Hospital (GHCH), entered into
bankruptcy in 2003. GHCH hired Healthcare Resource Specialists, Inc. to
assist in the bankruptcy and James Doulgeris was appointed as Interim
President.
GHCH withheld federal income taxes and Social
Security taxes from the wages and salaries of medical center employees
during 2003. However, GHCH paid $2.9 million to other creditors and did not
remit the withheld funds to the federal government. The IRS determined that
Interim CEO Doulgeris was personally liable for the full amount of the
withheld taxes.
The U.S. District Court noted that in order to
collect tax, the IRS must prove that Doulgeris was "a person
responsible for paying the taxes" and that he "acted willfully in
failing to pay" the taxes.
The Court noted that Doulgeris was President and CEO.
He admitted that he understood the taxes were withheld and yet chose to pay
other creditors. Because willfulness is "demonstrated when it is shown
that an officer decided to use the money withheld for payroll taxes to pay
suppliers or other creditors when he knew that payroll taxes were
due," Doulgeris was knowingly in violation of the obligation to pay
the taxes. Therefore, he both had the knowledge of the tax withholding and
met the standard for willfully refusing to pay the tax. Thus, he is
personally liable for taxes of $1,935,204.33.
Editor's Note: During the past decade, the
number of nonprofits in America has nearly doubled. With the vast increase
in the number of nonprofits and a periodic economic downturn, many of them
are experiencing financial challenges. All officers and directors of
nonprofits who are experiencing financial adversity should make certain
that withheld taxes are indeed remitted to the IRS. A failure to remit the
withheld taxes could lead to personal liability.
Applicable Federal Rate of 3.4% for August -- Rev.
Rul. 2009-22; 2009-31 IRB 1 (21 Jul. 2009)
The IRS has announced the Applicable Federal Rate
(AFR) for August of 2009. The AFR under Sec. 7520 for the month of August
will be 3.4%. The rates for July of 3.4% or June of 2.8% also may be used.
The highest AFR is beneficial for charitable deductions of remainder
interests. The lowest AFR is best for lead trusts and life estate reserved
agreements. With a gift annuity, if the annuitant desires greater tax-free
payments the lowest AFR is preferable. During 2009, pooled income funds in
existence less than three tax years must use a 4.8% deemed rate of return.
Federal rates are available by clicking
here.
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PLR
THIS WEEK
PLR - 200931059
Religious Organization Denied Exemption
In PLR 200931059, the IRS denied exempt status under
Sec. 501(c)(3) to a religious organization. The organization was
incorporated to assist needy students attending education programs of
foreign organization Z in country Y.
The denial of exemption was based on four grounds.
First, there was no criteria for determining which students were needy.
Second, there was no effective control over distribution of funds. Third,
the organization did not properly supervise the foreign payments. Fourth, a
person in country Y cashed checks and distributed funds with no accounting,
thus opening the way to potential private inurement.
Editor's Note: It is permissible for exempt
organizations to make cash grants directly to individuals, including those
in foreign countries. However, the nonprofit board of directors must
control the process. There must be an objective criteria for distributions,
a method for cash control and tracking, and safeguards to preclude any
person receiving an improper private benefit. See Rev. Rul. 56-304, 1956-2
C.B. 306.
To view the full PLR Click
Here.
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ARTICLE
OF THE MONTH
Current Planned Gifts
II - UT, DAF & AT
The combination of a charitable remainder unitrust
and a donor advised fund (DAF) enables a very flexible plan. This might
appropriately be called a "Personal Foundation." A donor may
create a charitable remainder trust. So long as there is no
pre-arrangement, the donor may then make annual distributions from the
charitable trust to the DAF. The trust instrument could include a statement
as follows:
"If a grantor is a current income recipient,
then a grantor shall retain the right to direct the trustee to distribute
an undivided percentage of trust assets to qualified exempt charities on
the last day of any trust taxable year."
With this sentence and the right to select the
charities, a unitrust grantor may decide to distribute part or all of the
trust principal each year. It is preferable for this power to be exercised
at the end of the taxable year in order not to affect the calculation of
the unitrust payout. The trust on January 1 of the following year will then
be reduced by the amount of the transfer to the DAF.
The flexibility of this plan is very high. If the
trust increases in value, that growth may be transferred to a DAF. A donor
is able to make the decision concerning the amount of the transfer at the
end of each calendar year. The funds in the DAF may then be distributed
with the recommendation of the donor to a wide variety of qualified
charitable purposes.
Because the DAF is maintained by a public charity,
the donor receives the benefit of the public charity income tax deduction
limits of 50% for cash or 30% for appreciated property. In addition, the
donor benefits from a full fair market value charitable deduction. Each
year when the gift is made, the donor will receive a charitable deduction
for the value of the income interest. See PLR 9550026.
To view the full Article of the Month Click
Here.
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CASE
OF THE WEEK
The Gas Guzzler's Deduction,
Part 1
Brandon Bigtop loves his truck, which he
affectionately named "the Beast." It was a gift for Brandon's
eighteenth birthday. It is painted bright red and is two tons of metal,
muscle and noise. Indeed, many neighbors would grumble as Brandon drove by
because the rumbling engine could be heard three blocks away. As you can
imagine, eighteen-year old Brandon was in truck heaven.
Brandon is now 20 years older and a university
professor, but he never could part with his beloved truck. So, the Beast
now sits quietly in the driveway collecting dust and serving as merely an
"eye sore" according to his wife. Every once in a while, Brandon
will take the truck out for a spin but the nine miles per gallon truck make
it a costly joy ride. Plus, Brandon still gets the glares from neighbors as
he passes through the neighborhood, something he does not relish anymore.
After much deliberation regarding what to do with the
Beast, Brandon decides to give his truck to a local charity. It is time to
part ways with his old childhood companion. Before deciding to contribute
the truck to charity, Brandon checked with his tax advisor regarding the
tax benefits of his gift. Brandon wanted to make sure he received the
maximum tax benefit from his gift while at the same time not risking an IRS
challenge to his gift.
What are the tax rules for gifts of automobiles? The
local charity plans to sell the truck immediately after receipt. Does this
affect Brandon's charitable deduction in any way?
To view the solution to this Case of the Week Click
Here.
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Note:Case
studies, articles, commentary and other materials in the GiftLaw system are
included solely as educational information. Articles and editorial comments
are offered as an educational service to friends of this organization, and
may not always reflect our official position on any issue. Since case
studies or articles may not always reflect the current AFR or tax law, it
may be necessary to run any illustration with a current version of
Crescendo to obtain updated information. If professional services are
required, all persons shall consult with their qualified professional
advisors. Tax Quotes are courtesy of Jeffery L. Yablon, Washington, D.C.
© Copyright 1999-2009
Crescendo Interactive, Inc.
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Indiana Community Foundations
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August 10, 2009
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Thank
you for your interest in the Community Foundation of Grant County. To
contact us, please call 765.662.0065 or check out our website at www.comfdn.org.
If you do not wish
to receive future emails, please click
here to unsubscribe.
Thank you for your
continued interest in a better quality of life in Grant County.
Yours in Philanthropy,
Elizabeth A. Wright and Dawn M. Brown...
on behalf of the entire
Community Foundation Team
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