Daily Tax Update - July 31, 2012: IRS Issues Guidance on the Deductibility of Contributions to Disregarded Entities of US Charities

IRS ISSUES GUIDANCE ON THE DEDUCTIBILITY OF CONTRIBUTIONS TO DISREGARDED ENTITIES OF US CHARITIES:  The Service has issued guidance on the deductibility of contributions to domestic single-member limited liability companies that are wholly owned and controlled by organizations described in section 170(c)(2).  If an organization described in section 170(c)(2), which includes section 501(c)(3) organizations, is the sole owner of a domestic limited liability company that is disregarded as separate from its owner, contributions to the disregarded entity will be treated as if they were contributions to a branch or division of the US charity.  Furthermore, the US charity is the donee organization for purposes of the substantiation and disclosure rules of sections 170(f) and 6115, and the percentage limitations of section 170(b) apply as if the gift were made to the US charity.

DEAL REACHED TO AVOID GOVERNMENT SHUTDOWN:  Senate Majority Leader Harry Reid and House Speaker John Boehner have reached an agreement to keep the government funded for half of the next fiscal year.  A vote will be delayed until September.  Reid said, "This agreement reached between the Senate, the House and the White House provides stability for the coming months, when we will have to resolve critical issues that directly affect middle-class families.  The funding levels in the six-month CR will correspond to the top-line funding level of $1.047 trillion.  I hope that we can face the challenges ahead in the same spirit of compromise."

  • Boehner said, "Leader Reid and I have reached an agreement by which the House and Senate will approve a six-month continuing resolution in September to keep the government operating into next year.  During the August district work period, committee members and their staff will write legislation that can be passed by the House and Senate in September and sent to President Obama to be signed into law."

GRASSLEY LIFTS HOLD ON TREASURY NOMINATIONS:  Sen. Charles Grassley said that he has released his objection to proceeding to the nominations of two Treasury nominees after receiving responses to his inquiries urging action to correct slow progress on whistleblower claim processing and the issuance of awards at the IRS whistleblower office.  The two nominations that Grassley had placed a hold on were:  Mark J. Mazur (Assistant Secretary for Tax Policy), and Matthew S. Rutherford (Assistant Secretary for Financial Markets).  Grassley’s statement said, "It is unfortunate that objecting to these nominees, both of whom were approved by the Finance Committee by unanimous, bipartisan votes, was the only way I could get information about the whistleblower program."

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.

STEPTOE & JOHNSON LLP - TAX PRACTICE 
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country.  The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court.  The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving.  Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.