As part of the American Jobs Creation Act of 2004, a new Section 409A was added to the Internal Revenue Code. Section 409A generally provides that, unless certain requirements are met, amounts deferred under a nonqualified deferred compensation plan for all taxable years are currently includible in gross income to the extent not subject to a substantial risk of forfeiture.
While much of the focus on Section 409A has been with respect to taxable employers, it was recognized that there was an intersection of the standards articulated in Section 409A with the existing provisions under Section 457(f) which specifically covers ineligible (i.e., not subject to Section 457(b)) nonqualified deferred compensation arrangements of tax exempt employers.Continue reading
Election year 2016 has something for everyone, including tax-exempt law practitioners. Along with the discussion of Russian hackers and pocket Constitutions have been charges against the Trump and Clinton Foundations involving whether either has violated the laws regarding their tax-exempt status. Many of the charges against both Foundations no doubt are politically motivated and have political and other legal (non-tax) ramifications. Those issues have been well-covered by the media over the past 12 – 18 months. The focus of this article will be on the implications of the allegations, if true, on the Foundations’ tax-exempt status.1Continue reading
Both Donald Trump and Hillary Clinton say they are protecting the charitable deduction in their tax plans. Hillary Clinton initially proposed limiting the charitable deduction to the 28% tax rate even if the donor was in a higher bracket, but at the AFP Conference in March, she backed away from this proposal. Donald Trump excludes the charitable deduction from his cap on certain itemized deductions.Continue reading
In these days leading up to Election Day 2016, it’s hard not to talk about political issues. For Section 501(c)(3) organizations, it can be tempting to speak up on issues that affect their mission. Indeed, for many, not speaking out may seem contrary to their mission.
Because the presidential candidates have indicated their stance on many legislative and policy issues, speaking out for or against policies and laws requires walking a tightrope–between permissible advocacy and prohibited political campaigning.Continue reading
Reynolds Cafferata was one of the members of the legal team honored with a Clay Award from the Daily Journal and callawyer.com for ground-breaking legal work in the Estate of Duke.
In the Estate of Duke, the California Supreme Court held that a will with unambiguous terms can be reformed to reflect the testator’s true intentions. The decision reversed decades-old precedents and hundreds of years of common law. A cardinal rule of interpreting a person’s will was that if the language of the will was clear on its face, no matter what evidence was produced that showed that the will did not follow the decedent’s intentions, the terms of the will could not be altered.Continue reading
In a Private Letter Ruling released on February 13, the IRS denied an open source software project’s 501(c)(4) exemption application using a rationale sure to invite Monday morning quarterbacking. Rather than simply denying the application on the straight up the middle basis that the open source software project was carrying on a business with the general public in a manner similar to organizations which are operated for profit (See Treas. Reg. § 1.501(c)(4)-1(a)(2)(ii)), the IRS instead chose a pass route that brings into question whether any open source software project could qualify for exemption.Continue reading
A discussion that occurs at nearly every board meeting (not to mention audit, grants and finance/investment committee meetings) of a private foundation is whether the investments and grants for the year can be “managed” to reduce the excise tax on net investment income to 1 percent. Since the enactment of the Tax Reform Act of 1969, when the tax on net investment income was first introduced, the rate of tax has been 2 percent which could be reduced to 1 percent if the percentage of the current year’s charitable spending exceeded the average of the prior 5 years’ spending.Continue reading
At Rodriguez, Horii, Choi & Cafferata LLP we have been drafting more charitable remainder trusts in the last year than had been the case for the past decade or so. Three things are driving client interest in a charitable remainder trust.
First, as the economy continues to recover, clients have seen their assets appreciate significantly in value. Second, tax increases at the federal level and in the state of California have significantly increased the taxes that would be due on the sale of an appreciated asset. Third, many donors have been reaching an age where they are looking to convert appreciated assets such as real estate or closely held stock into income for retirement.Continue reading