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Social Enterprise Alliance Member Teleconference

Social Enterprise Alliance Member Teleconference. RECENT IRS DEVELOPMENTS AFFECTING SOCIAL ENTERPRISE. By: Allen Bromberger Perlman & Perlman, LLP 41 Madison Avenue, Suite 4000 New York, NY 10010 (212) 889-0575. Perlman & Perlman, LLP. Historical background. Puritan roots of charity

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Social Enterprise Alliance Member Teleconference

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  1. Social Enterprise AllianceMember Teleconference

  2. RECENT IRS DEVELOPMENTS AFFECTING SOCIAL ENTERPRISE By: Allen Bromberger Perlman & Perlman, LLP 41 Madison Avenue, Suite 4000 New York, NY 10010 (212) 889-0575 Perlman & Perlman, LLP

  3. Historical background • Puritan roots of charity • Commerciality Doctrine • Important Cases allow nonprofits to engage in commerce. • Revenue Rulings 98-15 and 2004-51 • IRS looking closely at social ventures and relationships between 501(c)(3) and for-profit businesses, trying to figure out what the new standard should be. Perlman & Perlman, LLP

  4. Treasury Decision 9390 (March 2008) • Focus is now on private benefit. • “Benefit” does not have to be economic. • Benefit may be improper even if the terms are fair and reasonable to the nonprofit. • Examples are frightening. • Incidental benefit is OK • i. Qualitatively incidental • ii. Quantitatively incidental Perlman & Perlman, LLP

  5. Revised Form 990 • Requires expanded disclosures relating to commercial activities, governance, relationships with for-profit entities and many other topics. • Asks specifically about certain policies IRS wants charities to adopt. Perlman & Perlman, LLP

  6. Revised Form 990 Expanded Disclosures: • Joint ventures (details) • Compensation and benefits (includes “key employees”) • Revenue and expense from FR events • Board review of 990 • Conflicts, whistle-blowers • Public disclosure of information Perlman & Perlman, LLP

  7. Revised Form 990 Policies: • Conflicts of Interest • Board Review of 990 • Whistle-blower Protection • Document Retention and Destruction • Joint Venture Participation Perlman & Perlman, LLP

  8. Conclusion • IRS is looking very closely at nonprofits’ “business” practices. • Commercial enterprises must further the nonprofit’s purpose. • The nonprofit must have effective control over certain aspects of the enterprise. • No impermissible private benefit (intermediate sanctions). • UBIT Perlman & Perlman, LLP

  9. Thank YouSocial Enterprise Alliance1720 N St. NWWashington, DC 20036202-375-774www.se-alliance.org

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