Could the IRS disallow Ice Bucket Challenge charitable contributions?
Unless you’ve been living under a rock, you’ve probably heard of – or participated in – the ALS Ice Bucket Challenge.
I was challenged earlier this week by my brother, and my 7-year-old daughter was challenged by my niece. On Monday night, we poured a bucket of water filled with ice cubes on our heads, and I challenged three other people to do the same in the next 24 hours or donate money to ALSA.org. My wife and I also made a donation to the ALS Association.
It’s a great cause, even if you don’t know someone who’s been afflicted with this horrible disease. I lost my aunt to ALS four years ago.
Anyway, Forbes tax policy contributor Toni Nitti wrote a column on Wednesday about a concept called “donative intent.” Its presence is necessary in order for any contribution to rise to the level of a good tax donation, he noted.
The US Tax Court clarified the concept of donative intent in Estate of O.J. Wardwell, 35 T.C. 443, when it said of a purported donation, “If a payment proceeds primarily from the incentive of anticipated benefit to the payor beyond the satisfaction which flows from the performance of a generous act, it is not a contribution or gift.”
“So let’s say you were challenged via social media to either take the Ice Bucket Challenge or contribute to ALS,” Nitti wrote. “Assume further that you are unable or unwilling to get cold and wet, and choose instead to donate to ALS. Do you possess the necessary donative intent if you otherwise wouldn’t have contributed to the cause and are doing it merely to avoid being publicly chastised by your Facebook friends? Did you make the donation with the anticipation of receiving the benefit of, you know … not having to dump a freezing bucket of water on your head?
“OK, rest easy; the IRS isn’t coming after your ALS donation,” he continued. “While the principle of donative intent is very real, in recent years, the courts have tied this principle to a ‘quid pro quo test,’ which states that in order for a donation to lack donative intent, the donor must anticipate receiving a financial benefit from the contribution commensurate with the value the donor transferred to the charity. Because an ice bucket dodger has received no financial benefit, but rather merely a physical one, the contribution is (should be) immune to attack. Plus, I think I’ve read somewhere that the IRS is dealing with a bit of a public perception problem these days, so attacking contributions to a horrible disease is probably not in its best interest.”
Job guarantee: Davenport employment program for accounting students heavy on details
Davenport University will offer up to three semesters of free classes and career guidance for accounting students who fail to land a job six months after graduation, under a program announced on Wednesday, wrote Brian McVicar of MLive.com.
The pilot program, which administrators have dubbed an employment guarantee, is Davenport’s way of standing behind its programs and showing that “accountability is more than just words,” said President Richard Pappas.
“It’s a backing up of what we believe are excellent programs at Davenport University,” he said, according to the article. “This just shows that we have confidence in our faculty and in our curriculum, and we know that the jobs are there but we need to have our students as competitive as possible.”
To participate, students must sign an agreement and meet 10 detailed requirements, which include graduating with a 3.0 GPA, completing an internship, and conducting an extensive job search, McVicar wrote.
One requirement, for instance, requires students to start their job search no later than two semesters prior to graduation. Students would also be required to show that they’ve sent resumes and cover letters to at least 50 employers “spanning geographic markets and industry sectors.”
Students unable to find a job in Michigan would be expected to look in neighboring states before qualifying for the additional education, according to the article.
Bank of America agrees to nearly $17 billion settlement
Kevin McCoy and Kevin Johnson of the USA Todayreported that Bank of America has agreed to pay nearly $17 billion to settle federal and state allegations it sold risky, mortgage-backed securities to investors before the national financial crisis, a person familiar with the matter said on Wednesday.
The settlement, the largest in history between the federal government and a single company, is expected to be unveiled as soon as Thursday, said the person, who spoke on condition of anonymity.
The tentative deal is expected to include billions to the US Justice Department and several states, with billions more going to reduce mortgage payments for struggling homeowners and other consumer relief, McCoy and Johnson wrote.
The settlement marks the latest in a series of Justice Department legal actions focused on financial institutions whose marketing and sale of risky mortgage-backed securities contributed to a real estate market collapse amid the 2008 financial crisis.
For Bank of America, the record-breaking settlement significantly boosts the more than $60 billion that the Charlotte, North Carolina-based bank has already spent to resolve legal issues stemming from the financial crisis. No other US bank has spent more, McCoy and Johnson noted.
Ryan backs more robust air strikes to turn back ISIS
In an interview with Bloomberg Television on Wednesday, Rep. Paul Ryan (R-WI) talked about supporting more bombings in the Middle East to fight Islamic militants, his stance on immigration, and taxes.
Ryan, who was promoting his new book, The Way Forward: Renewing the American Idea, said he opposed capping charitable tax deductions. He also endorsed a plan from House Ways and Means Committee Chairman Dave Camp (R-MI) to reduce the size of home mortgages on which interest could be deducted to $500,000 from $1 million, according to an article from Michael C. Bender of Bloomberg.
“It ought to be a middle-class tax break, not something for higher-income earners,” Ryan said of limiting the mortgage deduction, which he noted would continue to be used to protect a second-home mortgage, according to the article.
Camp’s mortgage proposal was part of a broader effort to revamp the US tax code that has stalled. Ryan, a leading candidate to replace the retiring Camp on the Ways and Means panel next year, said in his book that the chairman’s plan was a “good start for the conversation” about taxes, though it “isn’t perfect,” Bender wrote.
Here’s what deal makers are reading on inversions this week
Earlier this month, M&A bankers, lawyers, and accountants were parsing every world of Harvard Law professor Stephen Shay’s suggestions on rewriting tax law. This week, Penn State University law professor Samuel C. Thompson Jr. is the man of the hour, Maureen Farrell wrote for Wall Street Journal MoneyBeat on Thursday.
In Tax Notes, Thompson, a veteran of the US Treasury Department, published a letter to the editor this week outlining what he believes is within the Treasury’s power to do to curb inversions. It follows up on a letter he sent to Treasury on August 12.
“M&A and tax attorneys are looking at his suggestions closely for clues to what they could see from the Treasury,” Farrell wrote. “Mr. Thompson’s focus is on changing one particular portion of the tax code – Section 385 – and builds upon what Mr. Shay suggested in his own Tax Notes article.
“Section 385 limits the amount of debt that a non-US company can deduct for interest it pays on its debt,” she continued. “The theory goes that if a non-US company couldn’t deduct interest on its debt, more companies would have few economic incentives to invert. In addition, Mr. Thompson said the Treasury could make changes to the tax code that would hit only inverted companies.”
AstraZeneca is tougher target for possible new Pfizer bid
Pfizer Inc. isn’t giving up on striking an overseas takeover to cut its tax rate and gain a new pipeline of drugs, even as the potential cost of acquiring AstraZeneca PLC rises, Oliver Staley, David Welch, and Manuel Baigorri of Bloombergreported on Thursday.
Pfizer abandoned a 69.5-billion-pound ($116 billion) effort to buy London-based AstraZeneca on May 26, and under UK takeover rules it can make the first steps toward a renewed bid next week, on August 26. While it weighs that approach, Pfizer also is looking at other possible targets, including Actavis PLC, said people familiar with the matter.
Executives at Pfizer prefer to strike a deal with AstraZeneca, and the US company isn’t likely to make a move on an alternative target anytime soon, said the people, who asked not to be identified discussing private information, according to the article. AstraZeneca’s board rejected Pfizer’s offers as too low.
Other companies that are large enough to serve as Pfizer targets under US tax rules include London-based GlazoSmithKline PLC and Laval, Quebec-based Valeant Pharmaceuticals International Inc.
Neither is an ideal target though, Staley, Welch, and Baigorri wrote. A bid for Glaxo would face even fiercer political opposition in the United Kingdom than Pfizer’s AstraZeneca bid, and Valeant is tangled in a hostile attempt to buy Allergan Inc. Pfizer is also sensitive to mounting political opposition to the so-called tax inversions, one person said, which may have the company approach any new deals cautiously.
An overseas tax domicile would give Pfizer a way to bring its more than $30 billion in offshore cash and investments back to the United States without being taxed, according to the article.
- Government assignment and financing of audits? The New York Times offers a poisoned bouquet (Re:Balance)
- Registration opens for September 9 webcast on the proposed 2015 GAAP Taxonomy (FASB)
- Troy Cardinal joins McGladrey as chief technology officer (McGladrey)
- Sikich welcomes Godbout and Sullivan (Sikich)
- Chief Information Officer Thomas Bayer to leave SEC (SEC)
- Alaska voters narrowly backing tax cut for oil industry (Reuters)
- Samsung told by Korean tax man to use Apple-topping cash (Bloomberg)
- Russia said near oil tax plan that may cost state $6.6 billion (Bloomberg)
- Don’t raise beer taxes (letter to the editor) (New York Times)
- How Scottish independence relates to larger tax fights (New York Times)
- Federal tax credits for plug-in hybrids, electric cars: What you need to know (Washington Post)
- Tax credits won’t lift economic growth (Wall Street Journal)
- Grappling with inversion-induced tax hits (Wall Street Journal)
- One downside of inversions: Higher tax bills for stockholders (TaxVox)
- What’s next for M&A now the bubble has burst? (Financial Times)
- Property tax corruption (American Thinker)
- The case for impeaching Lois Lerner and other lawbreakers at the IRS (Washington Examiner)
- An increase in fuel tax? It’s what Americans want and what the roads need (Forbes)
- Tax Court omits key sentence in ruling against taxpayer (Forbes)
- Congratulations, businesses! Your taxes are rising (Forbes)
- When payroll taxes pyramid it means penalties, even jail (Forbes)
- Abbott’s remarks on business tax spark confusion (Texas Tribune)
- Was Oregon’s tax incentive deal with Intel unnecessary? (Tax Analysts)
- Oregon deal to give Intel $3 billion in incentives draws fire (Tax Analysts)
- Using local cigarette taxes for schools is silly (Tax Analysts)
- S-corporation compensation revisited (Dinesen Tax Times)
- Map: The United States has one of the highest corporate tax rates in the world (Tax Foundation)
- Wolters Kluwer, CCH tax data chosen by IRS for 10th consecutive year to help millions file returns (Wolters Kluwer, CCH)
- LibraTax opens to the public: Company provides software to balance the bitcoin books (LibraTax)
About Jason Bramwell
Jason Bramwell is a staff writer and editor for AccountingWEB. He has nearly 20 years of experience in print and online media as a journalist and editor.