Top 5 Tax Controversy Posts of 2017

2017 bankTax Controversy Posts covered a number of interesting developments in 2017. The five most popular included a tax shelter case, a look at a particularly disastrous exempt organization audit, an Affordable Care Act case, and two transferee cases. They are linked below.

My personal favorite is #4, where the Ninth Circuit held that a bankruptcy trustee could use one of the favorite tools of the IRS, transferee liability, to recoup tax payments made by the debtor.

-Jim Malone

#1. Tax Shelters: The Government Prevails Against Santander
The IRS and the Tax Division of the Department of Justice have expended significant effort fighting tax shelters, and they have enjoyed many successes in that endeavor. … Read More

Heal Thyself: A Look at Audits of Hospital Organizations Under Section 501(r)

affordable care act, tax, 5901(r)Love it or loathe it, the Affordable Care Act brought big changes to health care.

One of those changes has not received the attention it deserves. The act amended section 501 of the Internal Revenue Code to impose certain specific requirements on “hospital organizations,” which are exempt organizations that operate one or more facilities that are “required by a State to be licensed, registered, or similarly recognized as a hospital.” I.R.C. § 501(r)(2)(A)(i).

The fact that these requirements are included in section 501 of the Code is significant, as it means that a hospital organization needs to comply to maintain tax-exempt status.… Read More

Flirting with Disaster: A Look at How Tax-Exempt Status Can Be Revoked

Non Profit, Tax-ExemptWhen a non-profit loses its tax-exempt status under the Internal Revenue Code, it is frequently the end of the organization.

Sometimes the problem is easily resolved; an exempt organization that has its status revoked because it failed to file its annual returns on Form 990 can be reinstated retroactively if it acts promptly. See Rev. Proc. 2014-11, 2014-3 I.R.B. 411; see also Rev. Proc. 2017-5, 2017-1 I.R.B. 230. But in most other cases, the loss of the exemption is a disaster:

  • First, the organization will be liable for income taxes that were not part of its budget.
  • Second, its sources of funding will likely disappear, as donors will no longer receive a tax deduction, and governmental grants may be conditioned upon tax-exempt status.
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