Treasury Inspector General for Tax Administration Cites Need To Improve Monitoring of Noncash Gift Compliance, Reference #2007-30-049 (March 5, 2007), www.treas.gov/tigta
The Treasury Inspector General for Tax Administration (TIGTA) recently released a report and recommendations on noncash gift compliance following a review of nine months of noncash gift transactions. TIGTA's review found that close to 20 percent of taxpayers failed to comply with noncash gift reporting requirements and over 101,000 taxpayers may have claimed $1.8 billion in unsubstantiated noncash contributions. The report recommended that the IRS engage in outreach and education and improve procedures to identify noncompliance. Sen. Chuck Grassley (R-IA) responded by noting the Pension Protection Act of 2006 contained provisions to curb these abuses but "there are still very real problems with noncash charitable contributions and …these problems contribute significantly to the tax gap." For taxpayers, this likely means more regulations and increased scrutiny of all noncash gifts and supporting documentation.
Sotheby's Recommends Change to "Qualified Appraiser"Definition Under Notice 2006-96 Expressing Concern It Will Exclude Some Top Experts, Comment Letter in Response to Notice 2006-96 (February 7, 2007)
A comment letter filed by Sotheby's, a 250-year old auction and appraisal firm, asked the Treasury to reconsider the education requirements for qualified appraisers under Notice 2006-96 expressing concern the requirements would exclude some top appraisers. Under the Pension Protection Act of 2006, qualified appraisers are required to have a designation from a recognized professional organization or meet minimum education requirements. Notice 2006-96, I.R.B. 2006-46,§3.03(3)(b)(ii) (October 19, 2006), defined those minimum education requirements as completion of "college or professional-level coursework relevant to the property being valued," a minimum of two years experience in the related trade or business to the object, and a full description of the appraiser's education and qualification in the field. In its comments, Sotheby's noted their top appraisers gained their expertise from on the job experience and were perceived as experts by others in the field, yet would not meet the educational requirements under the Notice. The letter asked that the requirements for formal education be expanded to include experience in the field. Sotheby's also asked the Treasury to suspend the February 16, 2007 application date until it had received all comments, observing many returns filed in April 2007 would contain gift transactions subject to the new rules.
Determination Letters for Functionally Integrated Type III Supporting Organizations Suspended Pending Further Guidance, Department of the Treasury, Memorandum for Manager, EO Determinations (February 22, 2007)
The Pension Protection Act of 2006 created new restrictions and penalties for IRC §509(a)(3) Type III supporting organizations (SOs) as well as a new type of Type III SO exempt from requirements – the functionally integrated Type III SO. (See IRC §4943(f)(5)(B) for a definition.) Functionally integrated Type III SOs are defined as i) an organization that performs the functions of or carries out the purposes of the supported organization or ii) performs a role that would have been performed by the supported organization if the SO were not serving that function. In the aftermath of the new law, the IRS received numerous determination requests. The memorandum suspends all functionally integrated supporting organization determinations – for new organizations and those seeking a change in status – until further guidance is provided.
Charitable Mid-Term Federal Rates
The charitable mid-term federal rates under IRC § 7520 for gifts made in May 2007 are set out below. These rates are used to determine the present value of an annuity, an interest for a life or term of years, or a remainder or reversionary interest. Call Marilyn B. Schaffer, CAP, Director of Planned Giving, if you need current rates for your calculations.
May 2007 5.6%
April 2007 5.6%
March 2007 5.8%
Pace of Number of New IRC §501(c)(3) Entities Slows in 2006, IRS Data Book 2007, www.irs.gov.
In the two years following the September 11, 2001 tragedy the IRS approved record numbers of new traditional charities, creating expedited procedures to fast track the application process for charities created to support the victims of September 11. In each year following 2004, numbers of new charities have declined, with a dramatic slowing in 2006, a year in which only 18,212 new charities were approved bringing the total to 1,064,191.
