Joint Ventures Involving Tax-Exempt Organizations 2020 Cumulative Supplement

A comprehensive, revised, and expanded guide covering tax-exempt organizations engaging in joint ventures

Joint Ventures Involving Tax-Exempt Organizations: 2020 Cumulative Supplement, Fourth Edition examines the liability of, and consequences to, exempt organizations participating in joint ventures with for-profit and other tax-exempt entities. This authoritative guide provides unbridled access to relevant IRC provisions, Treasury regulations, IRS rulings, and pertinent judicial decisions and legislative developments that impact exempt organizations involved in joint ventures.

• Features in depth analysis of the IRS's requirements for structuring joint ventures to protect a nonprofit's exemption as well as to minimize UBIT
• Includes sample models, checklists, and numerous citations to Internal Revenue Code sections, Treasury Regulations, case law, and IRS rulings
• Presents models, guidelines, and suggestions for structuring joint ventures and minimizing the risk of audit
• Contains detailed coverage of: new Internal Revenue Code requirements impacting charitable hospitals including Section 501(r) and related provisions; university ventures, revised Form 990, with a focus on nonprofits engaged in joint ventures; the IRS's emphasis on good governance practices; international activities by nonprofits; and a comprehensive examination of the New Market Tax Credits and Low Income Housing Tax Credits arena

Written by a noted expert in the field, Joint Ventures Involving Tax-Exempt Organizations: 2020 Cumulative Supplement, Fourth Edition is the most in-depth discussion of this critical topic.

MICHAEL I. SANDERS 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. He is also an adjunct professor at The George Washington University Law School and Georgetown University Law Center. He was recently honored in 2010 by The George Washington University Law School for his 35 years of teaching.

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 (Revised) 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 Foundation’s Activities That Limit Excess Business Holdings 4

§ 1.24 Other Developments (Revised) 4

Chapter 2: Taxation of Charitable Organizations 7

§ 2.1 Introduction (Revised) 7

§ 2.2 Categories of Exempt Organizations (Revised) 13

§ 2.3 § 501(c)(3) Organizations: Statutory Requirements 17

§ 2.4 Charitable Organizations: General Requirements 18

§ 2.6 Application for Exemption 18

§ 2.7 Governance 25

§ 2.8 Form 990: Reporting and Disclosure Requirements (Revised) 26

§ 2.10 The IRS Audit 28

§ 2.11 Charitable Contributions (Revised) 31

Chapter 3: Taxation of Partnerships and Joint Ventures 39

§ 3.1 Scope of Chapter 39

§ 3.3 Classification as a Partnership 42

§ 3.4 Alternatives to Partnerships 42

§ 3.7 Formation of Partnership 42

§ 3.8 Tax Basis in Partnership Interest 43

§ 3.9 Partnership Operations 43

§ 3.11 Sale or Other Disposition of Assets or Interests 44

§ 3.12 Other Tax Issues 45

Chapter 4: Overview: Joint Ventures Involving Exempt Organizations 51

§ 4.1 Introduction 51

§ 4.2 Exempt Organization as General Partner: A Historical Perspective 52

§ 4.6 Revenue Ruling 2004-51 and Ancillary Joint Ventures 54

§ 4.9 Conversions from Exempt to For-Profit and from For-Profit to Exempt Entities 54

§ 4.10 Analysis of a Virtual Joint Venture 54

Chapter 5: Private Benefit, Private Inurement, and Excess Benefit Transactions 57

§ 5.1 What Are Private Inurement and Private Benefit? 57

§ 5.2 Transactions in Which Private Benefit or Inurement May Occur 59

§ 5.3 Profit-Making Activities as Indicia of Nonexempt Purpose 61

§ 5.4 Intermediate Sanctions (Revised) 61

§ 5.7 State Activity with Respect to Insider Transactions 69

Chapter 6: Engaging in a Joint Venture: The Choices 71

§ 6.1 Introduction 71

§ 6.2 LLCs (Revised) 72

§ 6.3 Use of a For-Profit Subsidiary as Participant in a Joint Venture (Revised) 73

§ 6.5 Private Foundations and Program-Related Investments 80

§ 6.6 Nonprofits and Bonds 84

§ 6.7 Exploring Alternative Structures (Revised) 87

§ 6.8 Other Approaches (Revised) 88

Chapter 7: Exempt Organizations as Accommodating Parties in Tax Shelter Transactions 93

§ 7.2 Prevention of Abusive Tax Shelters 93

§ 7.3 Excise Taxes and Penalties 94

Chapter 8: The Unrelated Business Income Tax 95

§ 8.1 Introduction 95

§ 8.3 General Rule 96

§ 8.4 Statutory Exceptions to UBIT 97

§ 8.5 Modifications to UBIT 98

§ 8.7 Calculation of UBIT (Revised) 98

Chapter 9: Debt-Financed Income 113

§ 9.1 Introduction 113

§ 9.2 Debt-Financed Property 113

§ 9.6 The Final Regulations 114

Chapter 10: Limitation on Excess Business Holdings 117

§ 10.1 Introduction 117

§ 10.2 Excess Business Holdings: General Rules 117

§ 10.3 Tax Imposed 119

§ 10.4 Exclusions 119

Chapter 12: Healthcare Entities in Joint Ventures 123

§ 12.1 Overview (Revised) 123

§ 12.2 Classifications of Joint Ventures 124

§ 12.3 Tax Analysis 125

§ 12.4 Other Healthcare Industry Issues 127

§ 12.5 Preserving the 50/50 Joint Venture 128

§ 12.9 Government Scrutiny 128

§ 12.11 The Patient Protection and Affordable Care Act of 2010: § 501(r) and Other Statutory Changes Impacting Nonprofit Hospitals 129

§ 12.12 The Patient Protection and Affordable Care Act of 2010: ACOs and Co-Ops: New Joint Venture Healthcare Entities 132

Chapter 13: Low-Income Housing, New Markets, Rehabilitation, and Other Tax Credit Programs 133

§ 13.2 Nonprofit-Sponsored LIHTC Project 133

§ 13.3 Low-Income Housing Tax Credit (Revised) 134

§ 13.4 Historic Investment Tax Credit (Revised) 136

§ 13.6 New Markets Tax Credits (Revised) 146

§ 13.10 The Energy Tax Credits 161

§ 13.11 The Opportunity Zone Funds: New Section 1400Z-1 and Section 1400Z-2 (Revised) 163

Appendix 13B 211

Chapter 14: Joint Ventures with Universities 229

§ 14.1 Introduction (Revised) 229

§ 14.3 Colleges and Universities IRS Compliance Initiative 233

§ 14.5 Faculty Participation in Research Joint Ventures (Revised) 234

§ 14.6 Nonresearch Joint Venture Arrangements 237

§ 14.7 Modes of Participation by Universities in Joint Ventures (Revised) 238

Chapter 15: Business Leagues Engaged in Joint Ventures 243

§ 15.1 Overview (Revised) 243

§ 15.2 The Five-Prong Test 244

§ 15.3 Unrelated Business Income Tax 244

Chapter 16: Conservation Organizations in Joint Ventures 245

§ 16.1 Overview 245

§ 16.2 Conservation and Environmental Protection as a Charitable or Educational Purpose: Public and Private Benefit 245

§ 16.3 Conservation Gifts and § 170(h) Contributions (Revised) 246

§ 16.7 Emerging Issues 264

Chapter 17: International Joint Ventures 267

§ 17.5 General Grantmaking Rules 267

§ 17.11 Application of Foreign Tax Treaties 268

Chapter 19: Debt Restructuring and Asset Protection Issues 271

§ 19.1 Introduction (Revised) 271

§ 19.2 Overview of Bankruptcy (Revised) 271

§ 19.3 The Estate and the Automatic Stay (Revised) 272

§ 19.4 Case Administration (Revised) 273

§ 19.5 Chapter 11 Plan (Revised) 274

§ 19.6 Discharge 275

§ 19.7 Special Issues: Consequences of Debt Reduction (New) 275

Index 277

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