Wednesday, December 17, 2014

An article for charities from the IRS:

How to lose your 501(c)(3) tax-exempt status (without really trying)  
It’s easy for a 501(c)(3) organization to maintain its tax exempt status – and can be just
as easy to lose it.
Organizations recognized as exempt from federal income tax under this section of the Internal Revenue Code include private foundations as well as churches, educational institutions, hospitals, and many other types of public charities.
A 501(c)(3) organization can maintain its tax-exempt status if it follows the rules affecting these six areas: private benefit/inurement, lobbying, political campaign activity, unrelated business income (UBI), annual reporting obligation, and operation in accordance with stated exempt purpose(s).
1. Private Benefit/Inurement
Private benefit:
A 501(c)(3) organization’s activities should be directed toward some exempt purpose. Its activities should not serve the private interests, or private benefit, of any individual or organization more than insubstantially.
A 501(c)(3) organization is prohibited from allowing its income or assets to benefit insiders – typically board members, officers, directors and important employees of an organization. If an organization benefits insiders, the insiders and the organization could be subject to penalty excise taxes and the organization could lose its tax-exempt status.
2. Lobbying
Lobbying is when an organization contacts, or urges the public to contact, members or employees of a legislative body (or any executive branch official who may participate in the formulation of legislation) for the purpose of proposing, supporting, or opposing legislation, or when the organization advocates the adoption or rejection of legislation.
While a 501(c)(3) organization is allowed to do some lobbying, too much can hurt its tax-exempt status. Its lobbying activities cannot be more than an insubstantial part of its overall activities.
3. Political activity
All 501(c)(3) organizations are prohibited from participating in any political campaign on behalf of (or in opposition to) any candidate running for public office. The prohibition applies to all campaigns at the federal, state and local levels.
For more guidance on what constitutes prohibited political campaign intervention, check out Charities, Churches and Educational Organizations - Political Campaign Intervention.
4. Unrelated Business Income (UBI)
Earning too much income generated from unrelated activities can jeopardize an organization’s 501(c)(3) tax-exempt status. This income comes from a regularly carried- on trade or business that is not substantially related to the organization’s exempt purpose. However, there are some modifications, exclusions and exceptions.
For more information about what constitutes unrelated business income of an exempt organization and how it is taxed, see Publication 598, Tax on Unrelated Business Income of Exempt Organizations.
5. Annual reporting obligation
While 501(c)(3) public charities are exempt from federal income tax, the Internal Revenue Code requires most of these organizations to report certain information annually.
This reporting requirement, fulfilled by completion of one of the Form 990 series of returns, verifies that the organization continues to qualify for exemption and informs the public about the organization’s programs and operations.
The Pension Protection Act of 2006 added a new law that provides for automatic revocation of an organization’s tax-exempt status if it fails to file a required annual information return for three consecutive years.
In June 2011, the IRS enforced this provision for the first time by publishing a list of approximately 275,000 organizations that lost their tax-exempt status for failing to meet their annual filing obligations for three consecutive taxable years.
Organizations can learn more about their filing requirements, including new requirements applicable to supporting organizations, at IRS Nonprofits and Charities.
6. Operation in accord with stated exempt purpose(s)
An organization must pursue the exempt activities it promised in its IRS application for exemption. If an organization has deviated from its original purposes, it must inform the IRS to prevent future problems.
For more information on this or other IRS topics, go to Helpful topics:
  •   Tax Information for Charities & Other Non-Profits
  •   Subscribe to IRS’s free exempt organization newsletter, the EO Update
  •   Review phone forum presentations on tax-exempt issues

Tuesday, April 29, 2014

April 30 DEADLINE to appeal 2013 Property Tax Classification or Valuation

Anyone considering appealing their property tax classification or valuation for assessment year 2013 for taxes payable in 2014 is reminded that the deadline to file a petition in tax court is April 30 of the year taxes are payable.

Also, a reminder to all those who have pending property tax petitions for assessment year 2012 or prior:  you must file a new petition every year to maintain the tax court's jurisdiction to make changes to your classification or valuation.  A petition appealing classification or valuation only applies to the assessment year of that particular petition.  It can take years to get a decision from the tax court.  In the meantime, you've got to keep filing a new petition for each assessment year.

Please call with any questions about your individual situation, and have a great year in 2014!

Wednesday, April 16, 2014

This Year's Minnesota Horse Expo Presentation: How to Write a Horse Sales Contract

Despite concerns about the dreaded EHV-1 virus and limitations on attendance of horses from infected areas, the Minnesota Horse Expo is enthusiastically ON.

The Minnesota Horse Expo is at the Minnesota State Fairgrounds on April 25, 26, and 27, 2014.  I'll be an exhibitor in the Coliseum and a presenter again.  The presentation topic is of nearly universal interest and importance to horse owners both new and experienced, and to anyone considering buying or selling a horse.  Presentation schedule and description:

For up-to-the-minute information about Expo programming this year - as well as Expo's equine public health policy - visit

See you at Expo!

Saturday, April 12, 2014

New Laws in Minnesota: Minimum Wage Increase

Minnesota has increased the minimum wage and lowered the threshold distinction between "large employer" and "small employer."

Effective August 1, 2014, a "large employer" means an enterprise whose annual gross volume of sales made or business done is not less than $500,000 (it used to be $625,000).  The minimum wage paid by large employers is increased from $5.15 an hour to $8.00 an hour starting August 1, 2014, increasing to $9.00 in 2015 and $9.50 in 2016.

The minimum wage paid by small employers, and by any employer of a person under age 20, is increased to $6.50 an hour effective August 1, 2014, increasing to $7.25 in 2015 and $7.75 in 2016.

Starting in 2017, the minimum wage will be tied to the rate of inflation, subject to the commissioner's ability to sever the tie depending on economic conditions.

The full text of the bill presented to the Governor may be viewed here.

New Laws in Minnesota: School Anti-Bullying Policy Requirement

Minnesota has a new law requiring public schools to adopt an anti-bullying policy consistent with a uniform policy to be approved by the Commissioner of Education in consultation with the Human Rights Commissioner.

The new law sets forth the goals of the policy requirement and definitions of bullying, including cyber-bulling.  The bill signed into law by Governor Dayton may be viewed here.

New Laws in Minnesota: Revised Uniform Limited Liability Company Act

Minnesota Statutes has a new chapter, 322C, replacing most of chapter 322B governing LLCs in Minnesota.

The new chapter includes greater protections and clarity of responsibilities for governors and members of LLCs.  Virtually all states have adopted a Uniform LLC Act drafted by a nonprofit group, the Uniform Law Commission.  The Commission adopted changes to its Uniform LLC Act in 2006, which were endorsed by the American Bar Association.  The Minnesota State Bar Association also endorsed the changes and the Revised Uniform LLC Act as enacted by the Legislature this session.

Here is a detailed summary of changes in the Revised Uniform Limited Liability Company Act on the Uniform Law Commission's web site.

New Laws in Minnesota: Estate tax threshold increased

A number of new laws and changes to existing laws have already been passed this legislative session.  Here's one that comes up quite a bit in my estate planning practice:  an increase in Minnesota's estate tax threshold.

Previously, Minnesota required an estate tax return to be filed if the decedent filed a Federal estate tax return or if the decedent's federal gross estate and federal taxable gifts made within 3 years of death exceeded $1,000,000.

Now, the threshold is increased to $1,200,000 for decedents dying in 2014; $1,400,000 for decedents dying in 2015; $1,600,000 for decedents dying in 2016; $1,800,000 for decedents dying in 2017; and $2,000,000 for decedents dying in 2018 or thereafter.

The federal estate tax threshold is still $5,000,000, but debate about lowering, raising, or abolishing it altogether continues in Washington.