Joint Ventures Involving Tax-Exempt Organizations, 2019 Cumulative Supplement

2019 Cumulative Supplement

Michael I. Sanders

• Publisher: Wiley
• Year: 2019
• ISBN:
  9781119615897
• Edition: 4
• Topic: Personal Development
• Subtopic: Negotiation

Effective strategies for non-profit entities in a profit-based world

Joint Ventures Involving Tax-Exempt Organizations examines the procedures, rules, and regulations surrounding joint ventures and partnerships, emphasizing tax-exempt status preservation. Revised and updated to align with changes made to numerous tax codes and laws within the last year, this supplement offers expert interpretation and practical guidance to professionals seeking a complete reference, including an analysis of impact of the "siloing" of the UBIT rules, the new Opportunity Zone Funds which will incentivize investors in designated census tracts, inter alia. Sample documents enable quick reference and demonstrate real-world application of new laws and guidelines. The discussion delves into planning strategies that can be applied to joint ventures and partnerships while maintaining tax-exempt status, and which joint ventures are best suited for a particular organization.

Widely accepted business strategies for profit-based entities, joint ventures, partnerships, and alliances are increasingly being used by nonprofits in need of additional financial support in challenging economic environments. This book provides invaluable guidance to appropriate planning and structuring while complying with tax-exemption guidelines.

• Identify the most appropriate transactions for nonprofit organizations
• Recognize potential problems stemming from debt restructuring and asset protection plans
• Reference charitable organization, partnerships, and joint venture taxation guidelines
• Understand which joint venture configurations are best suited to tax-exempt organizations

Joint ventures and partnerships are currently employed by a variety of not-for-profit organizations while maintaining their tax-exempt status. Hospitals, research laboratories, colleges and universities, charter and special-needs schools, low-income housing developments, and many others are reaping the benefits of joint venture participation—but without careful planning and accurate interpretation of current laws, these benefits can be erased by loss of tax-exempt status. Joint Ventures Involving Tax-Exempt Organizations provides practical, up-to-date guidance on realizing the full benefits and avoiding the hazards unique to nonprofit organizations.

CHAPTER 1
Introduction: Joint Ventures Involving Exempt Organizations

1. § 1.4 University Joint Ventures
2. § 1.5 Low-Income Housing and New Markets Tax Credit Joint Ventures
3. § 1.6 Conservation Joint Ventures
4. § 1.8 Rev. Rul. 98-15 and Joint Venture Structure
5. § 1.10 Ancillary Joint Ventures: Rev. Rul. 2004-51
6. § 1.14 The Exempt Organization as a Lender or Ground Lessor
7. § 1.15 Partnership Taxation
8. § 1.17 Use of a Subsidiary as a Participant in a Joint Venture
9. § 1.22 Limitation on Private Foundation's Activities That Limit Excess Business Holdings
10. § 1.24 Other Developments

§ 1.4 UNIVERSITY JOINT VENTURES

p. 11. Add the following new paragraph at the end of this section:

There is continued congressional focus on university endowments in light of the soaring cost of tuition and the perceived relatively low rate of financial assistance provided by colleges and universities with substantial endowments. See Chapter 14 for a discussion on policy changes that are being proposed, including imposing an annual payout requirement on endowment funds, among others.

§ 1.5 LOW-INCOME HOUSING AND NEW MARKETS TAX CREDIT JOINT VENTURES

pp. 13–14. Delete the last paragraph on p. 13 and replace with the following:

The CDFI Fund has made 1,032 awards totaling $50.5 billion in allocation authority since the NMTC Program's inception. Through January 2017, CDEs disbursed a total of $42.8 billion in QEI proceeds to more than 4,224 qualified active low-income community businesses (QALICBs).

§ 1.6 CONSERVATION JOINT VENTURES

p. 15. Add the following to the last paragraph of this section:

In January 2014, Treasury and the IRS issued Revenue Procedure 2014-12, 2014-3 I.R.B. 414, which established a safe harbor for federal historic tax credit investments made within a single tier through a master lease pass-through structure. The guidance was issued in response to the Historic Boardwalk decision referenced earlier.

§ 1.8 REV. RUL. 98-15 AND JOINT VENTURE STRUCTURE

p. 18. Add the following to the end of footnote 65:

PLR 201744019 (revocation of exemption of a § 501(c)(3) exempt hospital that was not operated exclusively for § 501(c)(3) purposes because it lacked ability to require for-profit manager to operate for charitable purposes.)

§ 1.10 ANCILLARY JOINT VENTURES: REV. RUL. 2004-51

p. 21. Add the following new paragraph to the end of this section:

In section 4.10, there is an analysis of a virtual joint venture hypothetical, as to which a similar rationale should apply in a case in which the IRS proposes the revocation of an existing 501(c)(3) organization, alleging impermissible private benefit following an examination of its relationship with a for-profit entity. This commentator believes that the rationale should apply, notwithstanding the fact that no formal joint venture arrangement exists between the parties.

§ 1.14 THE EXEMPT ORGANIZATION AS A LENDER OR GROUND LESSOR

p. 28. Insert the following new paragraph at the end of this section:

The Internal Revenue Service recently issued final guidance for private foundations that updates examples that relate to program-related investments that pass muster under § 4944(c). The rules (T.D. 9762) provide changes and examples that were first provided in the 2012 Proposed Regulations. See subsection 6.5(b) for a detailed discussion of the new examples.

In April 2016 the IRS issued final guidance for private foundations that updates a number of examples of program-related investments that won't trigger excise taxes. Final Rules (T.D. 9762) illustrate changes to the examples provided in the 2012 Proposed Rules. In one change involving Example 11, a private foundation that invested in a drug company subsidiary developing a vaccine for disease predominantly affecting poor people in developing countries recognizes that, in addition to distributing the vaccine at affordable prices, the subsidiary is allowed to sell the vaccine to those who can afford it at fair market value prices. In Chapter 6, each of the examples and its revised Treasury guidelines are set forth.

§ 1.15 PARTNERSHIP TAXATION

(a) Overview

p. 30. Add the following new paragraph to the end of this subsection:

In the Bipartisan Budget Act of 2015, the partnership audit rules have been revised, the effect of which is that adjustments of income, gain, loss, deduction, or credit are to be determined at the partnership level and the taxes attributable thereto will be assessed and collected at the partnership level. The new rules are effective beginning taxable years after December 31, 2018, although small part...

Table of contents

• Cover
• Table of Contents
• Preface
• Acknowledgments
• CHAPTER 1: Introduction: Joint Ventures Involving Exempt Organizations
• CHAPTER 2: Taxation of Charitable Organizations
• CHAPTER 3: Taxation of Partnerships and Joint Ventures
• CHAPTER 4: Overview: Joint Ventures Involving Exempt Organizations
• CHAPTER 5: Private Benefit, Private Inurement, and Excess Benefit Transactions
• CHAPTER 6: Engaging in a Joint Venture: The Choices
• CHAPTER 7: Exempt Organizations as Accommodating Parties in Tax Shelter Transactions
• CHAPTER 8: The Unrelated Business Income Tax
• CHAPTER 9: Debt-Financed Income
• CHAPTER 10: Limitation on Excess Business Holdings
• CHAPTER 12: Healthcare Entities in Joint Ventures
• CHAPTER 13: Low-Income Housing, New Markets, Rehabilitation, and Other Tax Credit Programs
• CHAPTER 14: Joint Ventures with Universities
• CHAPTER 15: Business Leagues Engaged in Joint Ventures
• CHAPTER 16: Conservation Organizations in Joint Ventures
• CHAPTER 17: International Joint Ventures
• CHAPTER 19: Debt Restructuring and Asset Protection Issues
• Index
• End User License Agreement