2.08.2017

Nonprofit Wednesdays: Keeping Your Family Foundation in Compliance

by Elizabeth Minnigh

The 2016 election cycle made front page news of certain failures in compliance by both the Bill, Hillary & Chelsea Clinton Foundation and The Donald J. Trump Foundation. Every new year brings new goals and, for every family with a family foundation, one goal for 2017 should be ensuring that your foundation is in full compliance with applicable state and federal rules. Many family foundations operate without the benefit of professional staff, and try to minimize administrative expenses by limiting use of outside professionals such as accountants and attorneys. Without professional oversight, however, it is not uncommon for a foundation to fall out of strict compliance with one or more rules over time. Below is a summary of the common steps needed to keep your foundation in compliance.
1. Give Contemporaneous, Written Acknowledgements to All Donors, Including Yourself.
As odd as it may seem, even a charitable contribution of $250 to an individual’s own family foundation must be substantiated by a contemporaneous, written acknowledgment that contains the following information:
  • Name of the organization; 
  • Amount of cash contribution; 
  • Description (but not value) of non-cash contribution; 
  • Statement that no goods or services were provided by the organization, if that is the case; 
  • Description and good faith estimate of the value of goods or services, if any, that the organization provided in return for the contribution; and 
  • Statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible benefits, if that was the case.
In order to be considered contemporaneous for 2016 contributions, a written acknowledgment should be prepared and delivered no later than April 15, 2017. In future years, the foundation should set up procedures, such as calendar alerts, to ensure these acknowledgements are provided annually. Most public charities make it a practice to send their written acknowledgements by January 31st of each year. The donor should retain the contemporaneous, written acknowledgment in his or her files until the statute of limitations has run on the return claiming the contribution (generally, three years from date of filing but may be six years in certain circumstances).
2. Review Your Recordkeeping.
Family foundations should consider whether to adopt a document retention policy so that the foundation has consistent record keeping practices. Smaller foundations that elect not to adopt a formal document retention policy should take an inventory of their records and ensure they have the following documents at a minimum:
  • A copy of its Form 1023, Application for Recognition of Exemption Under §501(c)(3) of the Internal Revenue Code, including all attachments thereto; 
  • A copy of the foundation’s IRS determination letter; 
  • Copies of Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation, as filed; and 
  • Such permanent books of account or records as are sufficient to establish its items of gross income, receipts and disbursements, and to substantiate the information required for its annual Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation, for any years where the statute of limitations has not yet run (generally, three years from date of filing but may be six years in certain circumstances).
3. Maintain List of Foundation Managers and Disqualified Persons.
Section 4941 of the Internal Revenue Code imposes a series of taxes on disqualified persons and foundation managers who engage in certain types of prohibited “self-dealing” transactions with a private foundation. The term “self-dealing” includes:
  • Direct or indirect sale, exchange or leasing of property between the private foundation and disqualified persons; 
  • Lending of money or other extension of credit between a private foundation and a disqualified person; 
  • Furnishing of goods, services or facilities between a private foundation and a disqualified person; 
  • Payment of compensation by a private foundation to a disqualified person, unless such compensation is compensation for personal services and is reasonable and not excessive; 
  • Transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a private foundation; and 
  • An agreement by a private foundation to make any payment of money or other property to a government official during the period of his or her government service.
To ensure that the family foundation is able to identify potential self-dealing issues before they happen, the foundation should maintain a list of foundation managers and disqualified persons and review that list annually, making any updates as necessary.
  • “Foundation managers” include any officer, director or trustee of a private foundation (or any individual having powers or responsibilities similar to those of officers, directors or trustees).
  • “Disqualified persons” includes substantial contributors to the foundation and foundation managers, as well as members of the family of disqualified persons and entities in which disqualified person or family members hold a sufficient interest (20% or 35%, depending on the type of entity).
    • A substantial contributor includes any person who contributed or bequeathed a total amount of more than $5,000 to the private foundation if the amount is more than 2% of the total contributions and bequests received by the foundation from its creation up through the close of the tax year of the foundation in which the contribution or bequest is received from that person. For a private foundation formed as a trust, a substantial contributor includes the creator of the trust regardless of the amount he or she contributed. As a general rule, once a person is a substantial contributor to a private foundation that person remains a substantial contributor. 
    • Members of the family are confined to spouses, ancestors, children, grandchildren and great-grandchildren, as well as the spouses of children, grandchildren and great-grandchildren.
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2.06.2017

Business Legal Advice Monday: Tax basis: The key to reducing gain on sale or deducting asset purchases

by Steve Gorin


This article discusses key ideas used in reducing or eliminating gain subject to tax when you sell an interest in your business or when your business sells part or all its assets. These ideas can also possibly help those who buy or inherit a business obtain better tax write-offs.
Suppose you buy stock for $10 and sell it for $50. The sale generates a $40 gain, the excess of the $50 sale price over your $10 purchase price. Your $10 purchase price is referred to as your tax “basis.” However, if you die holding this stock, its basis will increase to the $50 date-of-death value. This increase and other basis increases are referred to as “basis step-up.”
Suppose you pay $25,000 for a piece of equipment. You might be able to write off part to all of the purchase price in the first year. The equipment’s tax basis starts at $25,000, but then is zero when it’s fully written off. Whatever you write off reduces the equipment’s basis, eventually to zero. The reduced basis is referred to as “adjusted basis,” as contrasted with the purchase price, which is the property’s “original basis.” Generally, I will be referring to adjusted basis when I refer to basis.
Suppose you form a corporation. You invest $100,000 in equipment, which is then written off, so that the equipment’s basis is now zero. Your basis in your stock in the corporation is referred to as your “outside basis,” and the corporation’s basis in its equipment is referred to as its “inside basis.” When you sell the stock for $150,000, the buyer’s stock will have a $150,000 basis, but the equipment’s basis will remain zero. Thus, outside basis will be $150,000, and inside basis will be zero.
The buyer would prefer to have a higher basis as the result of the purchase, so that the buyer can write off the equipment. In other words, the buyer wants an inside basis step-up. For this reason and for nontax reasons, a buyer may prefer to buy assets instead of stock. However, a special election may be available to treat the stock sale as an asset sale, followed by the shareholders disposing of the stock in a liquidation. This treatment is available only if at least 80% of the stock is sold.
For the rest of the article click here or below the break.

2.03.2017

Entertainment Friday: Football Stories

In anticipation for Super Bowl Sunday, today's theme covers football related legal news.

Why Roger Goodell Might Be Glad The Super Bowl Is Not Competing With An eSports Event … Yet by Kevin Braig


In a recent column, Sports Business Journal media reporter John Ourand predicted the Super Bowl 51 audience will decline 5 percent from the 111.9 million people who watched Denver upset Carolina in Super Bowl 50.  If his prediction is accurate, it will be consistent with the trends that NFL broadcaster endured during the regular season and playoffs.  NFL ratings tumbled about 14 percent during the first half of the 2016 NFL regular season and reportedly finished down 8 percent from 2015.  In addition, seven of the 10 playoff games played to date have drawn fewer viewers than they did in 2015.
On the other hand, more and more viewers have been tuning in to watch eSports competitors battle for prize money in games like League of Legends and Counter-Strike: Global Offensive.  In late January, more than 1 million viewers tuned in on Twitch to watch the CS:GO ELEAGUE major grand finals in which Astralis defeated Virtus Pro.  According to Twitch, the audience broke the Twitch’s previous record of concurrent live viewers on a single channel.  In addition, the grand finals were contested in front of a packed house at Atlanta’s Fox Theatre.
With ratings for eSports programming growing, the ESL Gaming Network announced on February 1, 2017 that it had hired television executive and innovator David Hill to launch a premium eSports production service that will be called Esports by Hill.  Hill is best known for spearheading the launch of FOX Sports.  Hill’s noteworthy digital achievements include developing the game scores and time remaining box (Fox Box), the NFL first down graphic line, and the NHL’s glowing hockey puck.
There may be some connection between the growing audience for eSports programming and the declining NFL audience.  On October 16, 2016, Fox Business reported that a survey conducted by market research company Newzoo found that 76% of eSports enthusiasts claim their interest in professional gaming interferes with the time they would have spent watching sports on television.
Houston is a “No Drone Zone” for Super Bowl LI by J.G. Harrington, Anne Swanson

As has been the case the last several years, the FAA has announced that flights by drones will again be prohibited in a wide area around NRG Stadium in Houston, the site of Super Bowl LI on February 5.  The “no drone zone” extends for 34.5 miles around the stadium.  The “no drone zone” goes live at 4:00 pm and ends at 11:59 pm CT.  The FAA also has produced a YouTube video on the restrictions.

NLRB General Counsel Concludes Division I Scholarship Football Players are Employees under Labor Law by Michael Bertoncini, Howard Bloom, Gregg Clifton, Patrick Egan, Paul Kelly, Monica Khetarpal, Robert Morsilli, Philip Rosen, Jonathan Spitz

Scholarship football players in Division I FBS private sector colleges and universities are employees under the National Labor Relations Act, National Labor Relations Board General Counsel Richard F. Griffin has concluded. Accordingly, he explained, the players have all of the rights and protections available to employees under the Act.

The determination is contained in “General Counsel’s Report on the Statutory Rights of University Faculty and Students in the Unfair Labor Practice Context,” Memorandum GC 17-01, to NLRB Regional Directors and others describing the office’s “prosecutorial position” when unfair labor practice charges are filed by or on behalf of certain college and university students, including the scholarship football players.


...Section 7 of the NLRA protects the rights of employees:
  • “to form, join or assist labor organizations,”
  • “to bargain collectively through representatives of their own choosing,” and
  • “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
The first two rights generally are familiar to managers, but the third right is not commonly known, although can be and, in recent years, has been broadly interpreted by the NLRB. It is a violation of the Act for an employer to take adverse action against an employee for engaging in Section 7 activity.
Protected concerted activity usually involves two or more employees banding together to improve their working conditions, or one employee acting as the spokesperson for other employees while seeking a common workplace improvement, or even one employee acting alone to achieve a change that would benefit other employees. For example, a player advocating for more water breaks for the team during a hot August practice can constitute protected concerted activity. It might be unlawful retaliation, in violation of the NLRA, for a coach to direct the player to run laps in response to the player’s request.
The General Counsel Memorandum casts a wide net, discussing more than student- athletes. According to the Memorandum, “students performing non-academic work who meet the common law test of performing services for and under the control of universities, in exchange for compensation, fall within the broad ambit of [NLRA’s definition of employee under] Section 2(3).” Thus, any student who receives compensation from the institution and performs services under the direction of an agent of the institution likely will find a receptive ear in this General Counsel when alleging that he or she engaged in protected concerted activity and was treated adversely as a consequence.
Universities and colleges should be mindful that any student performing service for the institution potentially may file an unfair labor practice charge over perceived retaliation for engaging in protected concerted activity. Training coaching staffs and managers in all departments about the scope of student rights under the NLRA, as well as reviewing student-athlete handbooks and employee handbooks for NLRA compliance, could help reduce an institution’s exposure in an unfair labor practice proceeding.
Jiminian Law PLLC is devoted to helping clients in all areas of business, copyrights, trademark, sports and entertainment law.  Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.

2.02.2017

Trademark Thursday: THE PROCESS of Joel Embiid's Trademarks

by Mari-Elise Paul and originally published in Mondaq 1.31.17


It seems my step-twins and Joel Embiid have something in common: they all love Shirley Temples. Embiid prefers his made with ginger ale and grenadine and allegedly drank as much as a pitcher a day while recovering from an injury.

Embiid's love of Shirley Temples is so strong that he decided to build a brand around it. Following the lead of Steph Curry and Jeremy Lin, last October Joel Embiid filed two trademark applications for his nickname THE PROCESS:
The applications were all filed on an intent to use basis for a variety of goods including apparel, cell phone cases, rubber bracelets, children's books, and pre-bottled Shirley Temples. I have no doubt that pre-bottled Shirley Temples will be a hit with kids.

A party with a bona fide intent to use a mark in commerce in connection with specific goods or services may file an application on the basis of intent to use. However, before the mark can be registered, the applicant must actually use the mark in commerce in connection with all the goods and services listed in the application. A declaration attesting to this use must be filed, as well as specimens showing use of the mark in connection with each class of goods and services. Any good or service not actually used by the applicant must be deleted from the application before the application proceeds to registration.

For the rest of the article, click here.

Jiminian Law PLLC is devoted to helping clients manage, protect, register, license, sell, grant and use their trademark(s) or defend it or themselves in matters of trademark infringement.  Regarding trademark management, it is always best to be pre-emptive with your business and implement a trademark strategy.  That is where I can come in. Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.

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