We’ve seen it coming for quite some time: Rep. Charles Rangel (D-NY), the former head of the powerful Ways and Means Committee, has been hit with 13 ethics violations, including those stemming from tax issues. Stay tuned for more info.Similar Posts:

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The star of “Rush Hour” (and its lucrative sequels), Chris Tucker, has made headlines for something other than acting these days. According to TMZ, the actor was slapped with liens from IRS for more than $11.5 million in unpaid federal taxes. That total represents liabilities for the years 2001, 2002, 2004, 2005 and 2006. Tucker was liened $3.5 million by the state of California for unpaid taxes over the same time frame.

Most of the IRS liabilities are linked to the tax years 2001 and 2002; 2001 was the same year that Tucker was reportedly paid $20 million for his work in “Rush Hour 2.” Tucker received another big paycheck for his last big movie project, “Rush Hour 3″ – he reportedly received a $25 million paycheck for that film.

Unlike Nicolas Cage, who was very vocal about his financial problems, citing management issues, Tucker hasn’t yet publicly commented on his tax woes. Similar Posts:

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I can’t believe that folks are already talking about back to school… With all of the snow this year, I feel like my kids just got out of school! But my niece is reporting that she’s starting next week (early, I know) and my inbox is filled with emails from Lands End reminding me to buy school uniforms. I’m getting the feeling that back to school is coming whether we all like it or not.

A number of back to school-related tax pieces have also hit the blogosphere in recent days. Here’s a quick rundown of some that might interest you:

• Forbes blogs sales tax holidays – Coming Up: Tax-Free August Shopping – Forbes.com

• Georgia said no to its sales tax holiday this back to school season – Georgia Nixes Back to School Holiday – Walletpop.com
• More tax free back to school shopping – States with Tax-Free Back-to-School Shopping – Best Colleges Online.net
• Sales Tax Holidays 2010 (comprehensive list) – Sales Tax Holidays 2010 – Don’t Mess With Taxes

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The whole of Massachusetts – nay, the world – can issue a collective sigh of relief now: Yachtgate has finally come to an end. Senator John F. Kerry (D-MA) has announced that he will “voluntarily” pay $500,000 to the Massachusetts Department of Revenue for the use of his yacht.

Kerry’s luxury yacht is reportedly worth $7 million (yes, the mind reels, doesn’t it?). The Massachusetts state Senator created quite a controversy when it surfaced that he had been docking the yacht in Rhode Island, not in Massachusetts. Rhode Island does not have a sales and use tax on boats, while Massachusetts does. Under Massachusetts law, residents who buy boats out of state but use them in the Bay State must pay use tax. The tax is worth 6.25% of the value of the yacht. There is an additional $70,000 annual excise tax due if the yacht is docked in a Massachusetts port.

Sen. Kerry denies that he was trying to avoid tax in his home state. His spokesman has advised that the boat was designed and purchased from a Rhode Island company, which was where Kerry intended to keep the boat. The boat was registered in March 2010 in Newport, Rhode Island.

Despite Kerry’s assertions, the Massachusetts Department of Revenue had been making noise about launching an investigation into whether Kerry was using the boat in his home state. Kerry’s “voluntary” payment of the taxes means that no investigation will be conducted.

As for the boat? My, she was yar.Similar Posts:

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Smaller charities, meaning those that have annual gross receipts of less than $25,000, may be at risk this year of losing their tax-exempt status. Under a 2006 law, those charities were required to file a form 990-N (sometimes called an e-postcard) with IRS each year. Failing to file for three years in a row results in an automatic loss of status.

These new requirements mean that 2010 is the first year that many charities are at risk of losing their tax-exempt status. Under the new law, returns should have been filed for 2007, 2008 and 2009. The latter would have been filed in 2010. Tens of thousands of charities either were unaware of the new law (which is what I found at my office) or did not know whether it applied to them. As a result, the May 15 filing deadline came and went, leaving many charities at risk.

The IRS has been working on a solution to the problem and had previously urged charities to file even if the returns were going to be late. Now the IRS has officially extended the deadline for 2009 forms 990-N to October 15, 2010. The IRS is also offering a Voluntary Compliance Program for charitable organizations that normally file a form 990-EZ. This relief does not extend to those large charities required to file a form 990 or to private foundations required to file a form 990-PF.

If your charitable organization needs assistance remaining compliant, I strongly urge you to contact your tax pro. This year, it’s more important than ever!Similar Posts:

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We do a lot of nonprofit and tax exempt work at my firm. People come into my office with all kinds of ideas for charitable organizations. I thought I’d heard it all – apparently, I hadn’t. The “Case of the Charitable Sperm Bank” has put an interesting twist on the types of charitable activities that taxpayers are willing to promote.

Here are the facts of the case: William C. Naylor, Jr. is a Washington state software engineer who holds a number of patents. My guess is, he’s a pretty smart cookie. In 2001, he contracted with a sperm bank to store and distribute his sperm to recipients of his choice. As part of the arrangement, he was required to pay the storage fees for the sperm. He was also able to choose the recipients of his apparently genius sperm.

At some point, Naylor decided to spread the wealth a bit. He incorporated Free Fertility Foundation, Inc., in California in order to provide sperm free of charge to women seeking to become pregnant through artificial insemination or in vitro fertilization. While the web site purports to offer a variety of sperm, there is currently one donor listed in the catalog:

fwcn02453 – scientific researcher; mathematics and computer expert; vice-president of company; straight A student in university; chess champion in high school; awards for academic excellence and athletics while child; 6 ft 1 inch tall; Caucasian 3/4 English 1/4 Scottish. Sperm vials available immediately with no wait.

That’s right. It’s Naylor. He’s sharing his own sperm with those less fortunate than himself because:

I derive meaning and happiness from believing that I am making the world a better place. Being a sperm donor is a way that I can help a few people to have children who otherwise could not. This makes more of a positive difference to the world than all of the inventions and scientific discoveries that I could ever create.

That may be a noble enough intention, depending on who you are. But it doesn’t rise to the level of providing a truly public benefit, as Naylor found out. In 2004, Naylor’s company made application to the IRS for tax-exempt status. The application was denied. While Free Fertility Foundation, Inc., claims that it promotes health by providing free health products and services, the IRS found that the operations do not promote health or otherwise serve a charitable purpose. In fact, the application process has very little to do with health. Naylor has a list of questions for potential beneficiaries; he scores and screens all of the questionnaires by hand to determine whether a potential recipient is qualified. As part of the selection process, Naylor gives special consideration to women “from families whose members have a track record of contributing to their communities” and women “with better education.”

Naylor’s qualifications for his sperm recipients means that the pool is a little smaller than it might otherwise be. In 2004, of 433 questionnaires received by the company, only 20 were granted sperm. In 2005, 386 questionnaires were received but only 4 women received sperm donations. In other words, over a two year period, only 24 women were found to have benefited from, er, the company.

While the Court found that “free provision of sperm may, under appropriate circumstances, be a charitable activity” (boys, the key wording here is “appropriate circumstances”), it also agreed with the IRS that “the class of petitioner’s beneficiaries is not sufficiently large to benefit the community as a whole.” The Tax Court found that the organization is “not operated exclusively for exempt purposes and therefore does not qualify for tax exemption pursuant to section 501(c)(3).” You can read the Tax Court’s opinion as a pdf here.

The Tax Court was clearly trying not to judge whether the donation of Naylor’s own sperm was charitable on its own. I have a feeling if they had, a whole bunch of new charitable entrepreneurs would be, um, setting up shop. The real point of the case is that potential pool of charitable beneficiaries must be large enough to justify tax exemption and adding restrictions and other criteria necessarily limits the pool of beneficiaries. Whether those restrictions are fair or just isn’t the point – the Tax Court didn’t even get there in its analysis. The focus was, instead, on whether the final benefit to the public was enough. Despite Naylor’s claims about the good that his sperm can do in the world, the answer is no. The Tax Court did leave open the possibility that under the right circumstances, the answer could be different (hey Clooney, call me!).

Technorati Tags:
US Tax Court, charitable organization, Free Fertility Foundation v. Commissioner, sperm donation

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New York has a problem: there’s no budget. The budget was due on April 1. Almost four months later, the budget still sits on the table, with no resolution in sight. It has not put Governor Paterson in a good mood. Addressing the press, he said, “I know it’s summer and everyone is tired of this, but everyone is tired of this because they have acted unprofessionally. At this point, I’m not in the negotiating mood … until the job is done, I think the Legislature is delinquent.”

The legislature continues to stick its tongue right back out at Paterson. They’ve been called back into session by Paterson more than any other governor has called a legislature back in modern times. Out of apparent revenge, the legislature has held brief sessions without actually doing anything. The spring passed without any resolutions and then it was time for vacation. After the June break, legislators went back to doing what they do best: campaigning. Months later, New York still doesn’t have a budget. What they do have is a $9.2 billion deficit.

Since the legislature can’t seem to agree on anything, Paterson has tossed everything back on the table. Among the items that were previously rejected that are now back up for consideration: a tax on sugary drinks and allowing wine to be sold in grocery stores.

Senate Majority Leader John Sampson has said, “The Senate is ready to finalize a fair and responsible budget and looks forward to working with the governor and Assembly to get the job done.” Umm, New York, don’t hold your breath.Similar Posts:

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George Clooney isn’t a fan of Facebook. According to the UK media, Clooney reportedly remarked about the social media site, “I would rather have a prostate exam on live television by a guy with very cold hands than have a Facebook page.”

Apparently, Clooney isn’t alone. The Michigan Business School’s American Customer Satisfaction Index included Facebook in its regular survey of consumer satisfaction with companies this year. The results weren’t pretty. Facebook pulled a rank of 64 out of 100, which puts it in the bottom 5% of all private sector companies. What other companies pulled scores that low? Not even the IRS – their e-filers ranked them higher overall than Facebook. I guess that means that folks find it more pleasant to file and pay taxes than sort out Facebook’s privacy settings or figure out how ignore requests for Mafia Wars.

The final numbers indicated that a whopping 90% of federal government entities outscored Facebook in the survey. IRS managed to rack up an outstanding 73 out of 100, placing it lower than the Archives but above the State Department. You can read the complete results at Foresee Results – be forewarned that they’ll make you register (it’s free) to download the reports.

Facebook, for its part, acknowledged the survey by agreeing that they need to make improvements.

As for me, I don’t have the same hang-ups about Facebook as Clooney. There’s even a Facebook page for taxgirl – feel free to check it out. No prostate exam included.Similar Posts:

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Some super interesting reading from the New York Times… Of the wealthiest taxpayers — those with annual incomes of $10 million or more — seventeen included income from unemployment benefits, averaging $5,765 each. Read more:

Off the Charts – In 2008’s Downturn, Some Managed to Eke Out Millions

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I promised I would do a few giveaways mixed in with some trivia to celebrate my five year blogoversary. So here’s the next one:

In the beginning of the blog, I used a number of different platforms (Typepad, Blogspot, etc.). I eventually bought the domain taxgirl.com from another owner. A bit after I was up and running, I found out that my site was now unavailable to many readers because of a ban imposed by a particular company. Why was the site banned? I’m looking for the exact reason.

Guess as often as you like in the comments below (on the actual post, not on FB or email). The first person to answer correctly will win a amazon.com gift certificate worth $20. The order will be determined by the time stamp so if your guess gets held for moderation, don’t panic.

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