Exempt Organizations Advisory - President Signs Tax Reconciliation Bill Into Law

On May 17, President Bush signed the "Tax Increase Prevention and Reconciliation Act of 2005" into law. The Act includes a provision under which certain tax-exempt entities will be subject to penalties for being party to a prohibited tax shelter transaction. An exempt organization would be penalized if it served as an accommodation party or invested in the transaction for its own benefit.

A second package of tax extenders, or "trailer bill," which is expected to include additional charitable reform provisions and charitable giving incentives, is still in negotiation.

Ways and Means Subcommittee Schedules Hearing On Charities and Employment Taxes

On May 25, the House Ways and Means Subcommittee on Oversight will hold a hearing focusing on compliance by charities with their employment tax obligations.

In announcing the hearing, Subcommittee Chairman Rep. Ramstad (R-MN) said, "The Federal Government's fiscal health cannot be maintained without effective employment tax compliance. It is important to ensure that tax deadbeats are not unnecessarily receiving benefits from the Federal Government, whether through tax-exempt status, grants, or promotion in the Combined Federal Campaign."

Additional details can be accessed here.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.

The Exempt Organization Advisory is a general summary of the law and is not intended as specific legal advice for any organization.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.