Can a nonprofit and a for profit, owned and run by the same Board, legally exist?
Full Question:
Answer:
Tax-exempt organizations, by definition, are exempt from federal income tax under various provisions of the Internal Revenue Code. However, some are directly involved in Abusive Tax Avoidance Transactions (ATATs). In addition, because they are tax-indifferent, tax-exempt organizations are, at times, used by for-profit entities as accommodation parties in these transactions. Identifying and responding to ATATs involving tax-exempt organizations is critical to the IRS objective of discouraging and deterring non-compliance within tax-exempt and government entities.
A "listed transaction" is a transaction that is the same as, or substantially similar to, one that the IRS has determined to be a tax avoidance transaction and identified by IRS notice or other form of published guidance. The parties who participate in listed transactions may be required to disclose the transaction as required by the regulations, register the transaction with the IRS, or maintain lists of investors in the transactions and provide the list to the IRS on request.
The IRS had identified the following transactions involving employee benefit plans as listed transactions:
-Deductions for Excess Life Insurance in a Section 412(i) or Other Defined Benefit Plan
-S Corporation ESOP Abuses: Certain Business Structures Held to Violate Code Section 409(p)
-S Corporation ESOP Abuse of Delayed Effective Date for Section 409(p)
-401(k) Accelerated Deductions
-Collectively Bargained Welfare Benefit Funds under Section 419A(f)(5)
-Certain Trust Arrangements Seeking to Qualify for Exemption from Section 419
-Abusive Roth IRA Transactions
