Title Details

MICHAEL I. SANDERS (Washington DC) is the lead partner of Blank Rome's Washington office's tax group. with a large practice in the area of exempt organizations involving healthcare and low-income housing, associations and joint ventures between for-profits and nonprofits, as well as structuring New Markets Tax Credit transactions. Sanders is also an adjunct professor at George Washington University Law Center and Georgetown University Law School teaching Income Taxation of Partnerships and Subchapter S Corporations and Tax Treatment of Charities and Other Non-Profit Organizations, Joint Ventures Involving Tax Exempt Organizations (including healthcare, universities, LIHTC, new markets, conservation organizations, respectively. Previously, Mr. Sanders served as an attorney-advisor to the assistant secretary of tax policy at the Office of Tax Legislative Counsel and as a trial attorney at the U.S. Department of Justice (Attorney General's Honors Program). He was recently honored in 2010 by The George Washington University School of Law for his 35 years of teaching at the law school.

Acknowledgments xiii

Preface xv

Chapter One: Introduction: Joint Ventures Involving Exempt Organizations Generally 1

§ 1.2 Joint Ventures in General 1

§ 1.3 Healthcare Joint Ventures 1

§ 1.4 University Joint Ventures 2

§ 1.5 Low-Income Housing Joint Ventures 2

§ 1.20 "Intangibles" Licensed by Nonprofit to For-Profit Subsidiary or Joint Venture 2

§ 1.24 Other Developments 2

Chapter Two: Taxation of Charitable Organizations 3

§ 2.3 Section 501(c) Organizations: Structural Elements 3

§ 2.4 Statutory Requirements 3

§ 2.8 Application for Exemption 12

§ 2.9 Reporting Requirements 14

§ 2.9A Redesigned Form 990 (New) 16

§ 2.13A Focus on Good Governance (New) 56

Appendix 2A: Redesigned Form 990 (2010) (New) 61

Chapter Three: Taxation of Partnerships and Joint Ventures 75

§ 3.1 Scope of Chapter 75

§ 3.2 Qualifying as a Partnership 75

§ 3.6 Allocation of Profits, Losses, and Credits 75

§ 3.7 Formation of Partnership 76

§ 3.8 Tax Basis in Partnership Interests 77

§ 3.9 Partnership Operations 77

§ 3.12 Other Tax Issues 78

Chapter Four: Overview: Joint Ventures Involving Exempt Organizations 81

§ 4.2 Exempt Organization as a General Partner: A Historical Perspective 81

§ 4.4 Joint Ventures with Other Exempt Organizations 83

§ 4.5 New Scheme for Analyzing Joint Ventures 83

§ 4.6 Revenue Ruling 2004-51 and Ancillary Joint Ventures 84

§ 4.8 Use of a Subsidiary as Participant in a Joint Venture 86

§ 4.8A Social Entrepreneurs: Exploring Alternative Structures (New) 92

§ 4.9 Use of a Supporting Organization in a Joint Venture 98

§ 4.12 Exempt Organization as Lender or Ground Lessor 103

§ 4.14 Reporting Requirements 104

Appendix 4A: Joint Venture Checklist (Revised) 109

Appendix 4B: Redesigned Form 990 (2010 Schedule R, Related Organizations and Unrelated Partnerships) (New) 115

Appendix 4C: Model Joint Venture Participation Policy (New) 121

Chapter Five: Private Benefit, Private Inurement, and Excess Benefit Transactions 125

§ 5.1 What Are Private Inurement and Private Benefit? 125

§ 5.2 Transactions in Which Private Benefit or Inurement May Occur 126

§ 5.4 Intermediate Sanctions 129

§ 5.6 Planning 133

Chapter Six: The Exempt Organization as Lender or Ground Lessor 135

§ 6.1 Overview 135

§ 6.4 Participating Loans 135

§ 6.5 Ground Lease with Leasehold Mortgage 135

§ 6.6 Sale of Undeveloped Land 136

§ 6.7 Guarantees 136

Chapter Seven: Exempt Organizations as Accommodating Parties in Tax Shelter Transactions 137

§ 7.2 Prevention of Abusive Tax Shelters 137

§ 7.3 Excise Taxes and Penalties 140

Chapter Eight: The Unrelated Business Income Tax 143

§ 8.1 Introduction 143

§ 8.3 General Rule 144

§ 8.4 Statutory Exceptions to UBIT 145

§ 8.5 Modifications to UBIT 145

§ 8.7 Calculation of UBIT 147

§ 8.8 Governmental Scrutiny and Legislative Initiatives 147

Chapter Nine: Debt-Financed Income 151

§ 9.1 Introduction 151

§ 9.2 Debt-Financed Property 151

§ 9.3 The §514(c)(9) Exception 152

Chapter Ten: Limitation on Excess Business Holdings 153

§ 10.1 Introduction 153

§ 10.2 Excess Business Holdings: General Rules 153

§ 10.4 Exclusions 154

Chapter Eleven: Impact on Taxable Joint Ventures: Tax-Exempt Entity Leasing Rules 155

§ 11.3 Internal Revenue Code §168(h) 155

§ 11.5 Restrictions on Tax-Exempt Use Property 155

Chapter Twelve: Healthcare Entities in Joint Ventures 159

§ 12.3 Tax Analysis 159

§ 12.4 Other Healthcare Industry Issues 162

§ 12.7 Joint Operating Agreements 170

§ 12.8 UBIT Implications of Hospital Joint Ventures 170

§ 12.9 Government Scrutiny 171

§ 12.9A The Patient Protection and Affordable Care Act of 2010: §501(r) and Other Statutory Changes Impacting Nonprofit Hospitals (New) 178

§ 12.9B The Patient Protection and Affordable Care Act of 2010: ACOs and CO-OPs: New Joint Venture Health Care Entities (New) 200

Appendix 12B: Redesigned Form 990 (2010), Schedule H, Hospitals (New) 213

Appendix 12C: Model Joint Venture Participation Policy (New) 222

Chapter Thirteen: Low-Income Housing, New Markets, Rehabilitation, and Other Tax Credit Programs 227

§ 13.1 Relationships between Nonprofits and For-Profits in Affordable Housing—A Basic Business Typology 227

§ 13.2 Low-Income Housing Tax Credit 228

§ 13.3 Historic Investment Tax Credit 239

§ 13.4 Empowerment Zone Tax Incentives 244

§ 13.5 New Markets Tax Credits 246

§ 13.6 Recent IRS Guidance Regarding Guarantees and Indemnifications 282

§ 13.8 Gulf Opportunity Zone Act of 2005 283

§ 13.9 The Energy Tax Credits (New) 285

Appendix 13A: New Markets Tax Credits Project Compliance/Qualifications/Accounting Projections Checklist (Revised) 290

Chapter Fourteen: Joint Ventures with Universities 293

§ 14.2 IRS Focus on Universities 293

§ 14.4 Research Joint Ventures Generally 301

§ 14.6 Nonresearch Joint Venture Arrangements 301

§ 14.7 Modes of Participation by Universities in Joint Ventures 302

Chapter Fifteen: Business Leagues Engaged in Joint Ventures 309

§ 15.1 Overview 309

§ 15.2 The Five-Prong Test 310

§ 15.3 Unrelated Business Income Tax 312

Chapter Sixteen: Conservation Organizations in Joint Ventures 313

§ 16.2 Conservation and Environmental Protection As a Charitable or Educational Purpose: Public and Private Benefit 313

§ 16.3 Conservation Gifts and §170(h) Contributions 314

§ 16.7 Emerging Issues 321

Chapter Seventeen: International Joint Ventures 325

§ 17.1 Overview 325

§ 17.2 Domestic Charities Expending Funds Abroad 326

§ 17.3 Potential for Abuse: The Use of Charities as Accommodating Parties in International Terrorist Activities 327

§ 17.4 Guidelines for U.S.-Based Charities Engaging in International Aid and International Charities 330

§ 17.11 Application of Foreign Tax Treaties 330

§ 17.12 Current Developments in Cross-Border Charitable Activities 334

Appendix 17A: Redesigned Form 990 (2010) New Schedule F, Statement of Activities Outside the United States (New) 338

Chapter Eighteen: Private Pension Fund Investments in Joint Ventures 343

§ 18.1 Overview 343

§ 18.2 Private Pension Fund Participation in Joint Ventures 343

Chapter Nineteen: Exempt Organizations Investing through Limited Liability Companies 347

§ 19.2 The Basics of LLCs: State and Federal Income Tax Law 347

§ 19.3 Comparison with Other Business Entities 347

§ 19.4 Background and Development of LLCs 349

§ 19.5 Tax Classification of LLCs under Check-the-Box Regulations 349

§ 19.6 Exempt Organizations Wholly Owning Other Entities 352

§ 19.7 IRS Analysis: The Double-Prong Test and Rev. Rul. 98-15 352

§ 19.8 Nonprofit-Sponsored LIHTC Project 354

§ 19.9 Private Foundations as Members of LLCs 354

Chapter Twenty: Debt Restructuring and Asset Protection Issues 357

§ 20.1 Introduction 357

§ 20.2 Overview of Bankruptcy 361

§ 20.3 Automatic Stay 368

§ 20.4 Chapter 11 Plan of Reorganization 370

§ 20.5 Discharge 370

Index 371