Practice Management

The Panel on the Nonprofit Sector, a collaboration of leaders of America's charitable organizations, presented its final report to Sens. Chuck Grassley, R-Iowa, and Max Baucus, D-Mont., chairman and ranking member of the Senate Finance Committee.The report contains more than 120 actions to be taken by charitable organizations, Congress and the Internal Revenue Service, which together would strengthen the sector's transparency, governance and accountability.If implemented, these recommendations would be the most sweeping changes to the operation and regulation of charities and foundations in three decades.Among its proposals, the panel recommended that:-- Charitable organizations adopt audit procedures and policies on travel expenses, conflicts of interest and whistleblower protection.-- Audits be required of charitable organizations with annual revenue of $1 million or more.-- Non-cash contributions support charitable causes, rather than providing improper tax deductions for donors.-- Penalties be strengthened on board members who approve and executives who receive excessive compensation."The panel report will inform the committee and its work, particularly in the important areas of governance and transparency," said Grassley. "I recognize, though, that the IRS is the one that must shoulder the burden of enforcing the law and so we will certainly look to Commissioner [Mark] Everson and his staff, as well as the Treasury, for their judgment on reforms, particularly in addressing the abusive situations that the commissioner highlighted with such candor in his April letter to the committee. My time line is to have legislation this summer for Finance Committee members to be able to review, and then to have the committee mark up legislation soon after that."

The Internal Revenue Service said that tuition paid for two children who have been diagnosed as having disabilities caused by medical conditions including dyslexia to attend school now qualify as medical care expenses deductible under Section 213(a). The children take part in the school's program of special education, which is designed to enable them to deal with their medical handicaps and move on to study at a mainstream school. However, Ltr. Rul. 200521003 points out that overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided.

Richard J. Morgante and Pamela G. Watson have been named to the top two posts in the Wage and Investment Division, the Internal Revenue Service unit that serves most individual taxpayers. Morgante, currently the division's deputy commissioner, will move up to W&I commissioner, and Watson, now the division's compliance director,will succeed him as W&I's second highest executive. Both appointments will take effect in early July. Morgante succeeds Henry Lamar, who is retiring after 34 years with the IRS, the last two as W&I commissioner."Rich and Pam make a strong team, and their leadership and experience will help us effectively serve taxpayers and enforce the law," said IRS Commissioner Mark W. Everson. Based in Atlanta, W&I has processing and customer service responsibility for virtually all taxpayers, processing approximately 175 million paper and electronic returns for individuals and businesses last year, answering 67.3 million automated and assistor calls, and serving over 7 million customers face-to-face.

FINANCE COMMITTEE TAKES AIM AT AMT: A bipartisan coalition of members of the U.S. Senate Finance Committee, including chairman Charles Grassley, R-Iowa; ranking member Max Baucus, D-Mont.; Ron Wyden, D-Ore.; and Jon Kyl, R-Ariz., have introduced legislation to repeal the alternative minimum tax.The Individual Alternative Minimum Tax Repeal Act of 2005 would amend the Internal Revenue Code to end the AMT beginning in the 2006 tax year.

The revised Circular 230 Rules of Practice Before the Internal Revenue Service are in full force starting June 20, 2005. The revised rules are a reaction to practitioner complicity in - or at least acquiescence to - abusive tax techniques within the period ranging roughly between 1996 and 2003.

Southwest regional firm Weaver and Tidwell LLP has strengthened its construction niche practice with the merger of Dallas-based CPA firm Brehm & Co. LLP.

Since its first meeting in February, the president's Advisory Panel on Federal Tax Reform has heard testimony and statements from more than 80 witnesses, and examined everything from the philosophical underpinnings and history of our current tax system, to the economic impact of potential tax systems.

In a victory for accounting firm BDO Seidman, a federal appeals court judge reversed a district court decision and ruled this week that a group of investors can't sue BDO Seidman over the sale of an illegal tax shelter, and instead must arbitrate their claim.

The President's Advisory Panel on Tax Reform will get an additional two months to complete its work.

Cartesis Group, a business performance management software provider, has signed an agreement to acquire INEA Corp., a Toronto-based supplier of enterprise software.