Joint Ventures Involving Tax-Exempt Organizations, 2023 Supplement

Preface xi

Acknowledgments xv

Chapter 1: Introduction: Joint Ventures Involving Exempt Organizations 1

§ 1.4 University Joint Ventures 1

§ 1.5 Low-Income Housing and New Markets Tax Credit Joint Ventures 1

§ 1.6 Conservation Joint Ventures 2

§ 1.8 Rev. Rul. 98-15 and Joint Venture Structure 2

§ 1.10 Ancillary Joint Ventures: Rev. Rul. 2004-51 2

§ 1.14 The Exempt Organization as a Lender or Ground Lessor 2

§ 1.15 Partnership Taxation 3

§ 1.17 Use of a Subsidiary as a Participant in a Joint Venture 3

§ 1.22 Limitation on Private Foundations’ Activities That Limit Excess Business Holdings 4

§ 1.24 Other Developments 4

Chapter 2: Taxation of Charitable Organizations 9

§ 2.1 Introduction 9

§ 2.2 Categories of Exempt Organizations 15

§ 2.3 § 501(c)(3) Organizations: Statutory Requirements (Revised) 19

§ 2.4 Charitable Organizations: General Requirements 25

§ 2.5 Categories of Charitable Organizations (Revised) 26

§ 2.6 Application for Exemption 30

§ 2.7 Governance 40

§ 2.8 Form 990: Reporting and Disclosure Requirements 41

§ 2.9 Redesigned Form 990 44

§ 2.10 The IRS Audit 44

§ 2.11 Charitable Contributions 49

Chapter 3: Taxation of Partnerships and Joint Ventures 61

§ 3.1 Scope of Chapter 61

§ 3.3 Classification as a Partnership (Revised) 64

§ 3.4 Alternatives to Partnerships 77

§ 3.7 Formation of Partnership 77

§ 3.8 Tax Basis in Partnership Interest 78

§ 3.9 Partnership Operations 79

§ 3.10 Partnership Distributions to Partners 79

§ 3.11 Sale or Other Disposition of Assets or Interests 80

§ 3.12 Other Tax Issues 80

Chapter 4: Overview: Joint Ventures Involving Exempt Organizations 85

§ 4.1 Introduction 85

§ 4.2 Exempt Organization as General Partner: A Historical Perspective 86

§ 4.6 Revenue Ruling 2004-51 and Ancillary Joint Ventures 88

§ 4.9 Conversions from Exempt to For-Profit and from For-Profit to Exempt Entities 88

§ 4.10 Analysis of a Virtual Joint Venture 89

Chapter 5: Private Benefit, Private Inurement, and Excess Benefit Transactions 91

§ 5.1 What Are Private Inurement and Private Benefit? 91

§ 5.2 Transactions in Which Private Benefit or Inurement May Occur 93

§ 5.3 Profit-Making Activities as Indicia of Nonexempt Purpose 94

§ 5.4 Intermediate Sanctions 95

§ 5.7 State Activity with Respect to Insider Transactions 105

Chapter 6: Engaging in a Joint Venture: The Choices 107

§ 6.1 Introduction 107

§ 6.2 LLCs 108

§ 6.3 Use of a For-Profit Subsidiary as Participant in a Joint Venture (Revised) 109

§ 6.5 Private Foundations and Program-Related Investments (Revised) 121

§ 6.6 Nonprofits and Bonds 125

§ 6.7 Exploring Alternative Structures (Revised) 127

§ 6.8 Other Approaches (Revised) 131

Chapter 7: Exempt Organizations as Accommodating Parties in Tax Shelter Transactions 145

§ 7.2 Prevention of Abusive Tax Shelters (Revised) 145

§ 7.3 Excise Taxes and Penalties 146

Chapter 8: The Unrelated Business Income Tax 147

§ 8.1 Introduction 147

§ 8.3 General Rule 148

§ 8.4 Statutory Exceptions to UBIT 149

§ 8.5 Modifications to UBIT 150

§ 8.7 Calculation of UBIT 150

Chapter 9: Debt-Financed Income 167

§ 9.1 Introduction 167

§ 9.2 Debt-Financed Property 167

§ 9.3 The §514(c)(9) Exception (Revised) 168

§ 9.6 The Final Regulations 169

Chapter 10: Limitation on Excess Business Holdings 171

§ 10.1 Introduction (Revised) 171

§ 10.2 Excess Business Holdings: General Rules (Revised) 171

§ 10.3 Tax Imposed 175

§ 10.4 Exclusions 176

Chapter 11: Impact on Taxable Joint Ventures: Tax-Exempt Entity Leasing Rules (Revised) 181

§ 11.3 Internal Revenue Code § 168(h) 181

§ 11.5 Restrictions on Tax-Exempt Use Property (New) 181

Chapter 12: Health Care Entities in Joint Ventures 187

§ 12.1 Overview 187

§ 12.2 Classifications of Joint Ventures 188

§ 12.3 Tax Analysis 189

§ 12.4 Other Health Care Industry Issues 191

§ 12.5 Preserving the 50/50 Joint Venture 192

§ 12.9 Government Scrutiny 192

§ 12.11 The Patient Protection and Affordable Care Act of 2010: § 501(r) and Other Statutory Changes Impacting Nonprofit Hospitals 193

§ 12.12 The Patient Protection and Affordable Care Act of 2010: ACOs and Co-Ops: New Joint Venture Health Care Entities 196

Chapter 13: Low-Income Housing, New Markets, Rehabilitation, and Other Tax Credit Programs 197

§ 13.2 Nonprofit-Sponsored LIHTC Project 197

§ 13.3 Low-Income Housing Tax Credit 198

§ 13.4 Historic Investment Tax Credit 202

§ 13.6 New Markets Tax Credits (Revised) 212

§ 13.10 The Energy Tax Credits 227

§ 13.11 The Opportunity Zone Funds: New Section 1400Z-1 and Section 1400Z-2 (Revised) 229

§13.12 The Inflation Reduction Act (New) 295

Appendix 13B 303

Chapter 14: Joint Ventures with Universities 319

§ 14.1 Introduction 319

§ 14.3 Colleges and Universities IRS Compliance Initiative 325

§ 14.5 Faculty Participation in Research Joint Ventures 326

§ 14.6 Nonresearch Joint Venture Arrangements 328

§ 14.7 Modes of Participation by Universities in Joint Ventures (Revised) 329

Chapter 15: Business Leagues Engaged in Joint Ventures 343

§ 15.1 Overview 343

§ 15.2 The Five-Prong Test 344

§ 15.3 Unrelated Business Income Tax 345

Chapter 16: Conservation Organizations in Joint Ventures 347

§ 16.1 Overview 347

§ 16.2 Conservation and Environmental Protection as a Charitable or Educational Purpose: Public and Private Benefit 347

§ 16.3 Conservation Gifts and § 170(h) Contributions (Revised) 348

§ 16.7 Emerging Issues 376

Chapter 17: International Joint Ventures 377

§ 17.5 General Grantmaking Rules 377

§ 17.11 Application of Foreign Tax Treaties 379

Chapter 19: Debt Restructuring and Asset Protection Issues 381

§ 19.1 Introduction 381

§ 19.2 Overview of Bankruptcy 381

§ 19.3 The Estate and the Automatic Stay 382

§ 19.4 Case Administration 383

§ 19.5 Chapter Plan 384

§ 19.6 Discharge 385

§ 19.7 Special Issues: Consequences of Debt Reduction 385

Index 387