Second Quarter 2012
ABA Business Section Newsletter for Nonprofit Organizations
Megan A. Christensen authored the "National Updates" column, as well as a review of the "Las Vegas Meeting—Innovative Community Economic Development Projects," for the Q2 2012 edition of ABA Business Section Newsletter for Nonprofit Organizations.
National Updates
- Work Opportunity Tax Credit Available to Certain
Tax-Exempt Organizations.
Section 261 of the VOW to Hire Heroes Act of 2011 (Pub. L. No. 112-056) provides a tax credit for hiring certain qualified veterans who begin work on or after November 22, 2011, and before January 1, 2013. The Act permits qualified tax-exempt organizations to claim this credit against their employer share of social security taxes. IRS Notice 2012-13 provides guidance to tax-exempt employers who seek to claim the credit. - IRS Issues Proposed Regulations Regarding
Program-Related Investments.
On April 19, the IRS published a notice of proposed rulemaking containing proposed regulations regarding guidance to private foundations on program-related investments. Under Section 4944(a) of the Internal Revenue Code an excise tax is imposed on a private foundation that makes a "jeopardizing investment" and additional excise taxes when investments are not timely removed from jeopardy. Investments that qualify as a "program-related investment" are exempted from treatment as a jeopardizing investment and are given other special treatment under the other provisions of Chapter 42 of the Internal Revenue Code. The proposed regulations provide nine new examples of investments that reflect current investment practices and illustrate a wider range of qualifying investments, including, inter alia, investments that fund activities in foreign countries and those with a high potential rate of return. - IRS Clarifies Public Inspection Rules.
The IRS has issued final regulations clarifying the rules regarding information made available for public inspection under IRC Section 6104(a) and materials made publicly available under IRC Section 6110. The final regulations clarify that, inter alia, the following are subject to these public disclosure provisions: notices of status as a political organization; letters or documents filed with, or issued by, the IRS regarding private foundation status, operating foundations, and supporting organizations; unfavorable rulings or determinations issued to organizations that applied for exemption; and determination letters revoking or modifying a favorable determination letter. The regulations are effective as of February 29, reflect the IRS practice of disclosing documents regarding the denial or revocation of an organization's tax-exempt status, and finalize proposed regulations issued as a result of the case of Tax Analysts v. IRS, 350 F.3d 100 (D.C. Cir. 2003).
Las Vegas Meeting—Innovative Community Economic Development Projects (Co-Sponsored with Committee on Community Economic Development)
The committee co-sponsored a program with the Committee on Community Economic Development regarding economic development projects. The speakers were Rochelle Lento of Dykema in Detroit, Michigan and Megan Christensen of Blank Rome LLP in Washington, DC. Ms. Lento began the program by discussing two projects in Detroit. The first was an adaptive reuse of a former pharmaceutical company on the east side of Detroit for use as an affordable assisted living development for seniors. The project makes use of a number of financing sources such as: the low-income housing tax credit; state, county, and city HOME funds; state brownfield tax credits; construction loans; state mortgage funding; and HUD vouchers. The project brought together a number of transaction partners including nonprofits, banks, and federal, state, county, and city governments. Ms. Lento discussed various challenges to bringing all of these entities and funds together into a single project.
Ms. Lento then discussed another project in north central Detroit known as the NSO Bell Building. This project is also an adaptive reuse of a former office/industrial building and will be used as a permanent supportive housing development for chronically homeless individuals. It too involved a number of funding sources and partners. Funding for this project utilized, inter alia, low-income housing tax credits, bank loans, brownfield tax credits, federal and state historic tax credits, county and city HOME funds, foundation grants, and new markets tax credits.
Ms. Christensen then discussed the use of the new markets tax credit and how nonprofits can make use of it. After reviewing the basic rules for the tax credit, Ms. Christensen discussed two projects in New York City utilizing the tax credit and involving nonprofits. The first project was a mixed-use, mixed-income, transit-oriented development with green elements, known as the Bradford in the Bedford-Stuyvesant neighborhood of Brooklyn. This project involved Bedford-Stuyvesant Restoration Corporation, the nation's first community development organization.
The second project used the new market tax credit structure to obtain funds for the construction of the KIPP NYC College Prep High School in the Bronx. KIPP and the Robin Hood Foundation, the two nonprofits in the transaction, came together with the New York City Department of Education and several for-profit transaction partners to build a permanent location to educate 1,000 high school students, substantially all of which are expected to come from low-income communities. This project creates a few hundred construction jobs and nearly 100 permanent jobs.
Program materials and a recording of the session are available here.
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