Charitable Contributions

                The acknowledgment letter, which may be in the form of a thank you letter to you as the donor, should include the following information:

-          The name and address of the recipient of the donation;

-          The amount of a cash gift or, if not in cash, a description of the donation sufficient to identify the nature of the gift, and, if applicable.

-          A statement that no goods or services were provided by the recipient in return for the donation, or a description and good-faith estimate of the value of any goods and services that were provided by the recipient in return for the donation.

                As some donor taxpayers have discovered to their consternation, including some who have made very large donations, the timing of the receipt of the letter can be as important as its contents.  The rule to bear in mind is that you must obtain the acknowledgment letter by the date of the filing of the tax return for the year in which the charitable contribution was made.  You run the risk of being denied the deduction in assuming that it will suffice if the letter has been promised or will be received after the return has been filed but before you would ever hear from the IRS.

               

                Recently, the Chief Counsel for the IRS underscored the need for having the donation acknowledgment letter in hand (or in your email inbox) when you file your return in order to qualify for the deduction.  The federal Tax Code actually has a provision that states that the donor is not required to obtain an acknowledgment letter if the recipient organization itself files a return that meets applicable requirements and includes the required information about the gift.  Nonetheless, because no implementing regulations on this law have yet been issued, the Chief Counsel determined in a memorandum that a donor cannot take this route to claim the deduction.

                The takeaway lesson for donor taxpayers is to be sure that you receive your acknowledgment letters before you file, and don’t make the mistake of assuming that the IRS will cut you some slack if, for whatever reason, that deadline is missed.

U.S. SUPREME COURT: ARBITRATION IS THE NEW EMPLOYMENT LAW

The employment law component of the docket during the most recent term of the U.S. Supreme Court was dominated by decisions on arbitration. Some of the cases have the potential to affect large numbers of employers and employees.

Allocation of Power

            In the most significant of these decisions, the Court determined the allocation of decisionmaking powers under the Federal Arbitration Act (FAA), where an agreement to arbitrate includes an “agreement within the agreement,” delegating to the arbitrator the power to determine the enforceability of the arbitration agreement.

            If a party specifically challenges the enforceability of that particular “delegation” agreement, the district court considers the challenge before ordering compliance with the agreement. However, if a party challenges the enforceability of the agreement as a whole, such as by a contention that it is unconscionable, as in the case before the Court, that challenge is for the arbitrator. In other words, in the latter situation, the courts must give effect to the agreement according to the terms agreed upon by the parties, by putting the matter before the arbitrator.

            This is in keeping with the FAA’s general rule that agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” The Court also relied on its previous recognition that parties can agree to arbitrate “gateway” questions of “arbitrability,” such as whether the parties have agreed to arbitrate in the first place, or whether their agreement covers a particular controversy.

Contract Formation

            All was not lost for those predisposed to have courts, not arbitrators, decide as many employer‑employee disputes as possible. In another case, an employer sued an international union and a local union, alleging that the local’s strike breached a no‑strike clause in a collective bargaining agreement (CBA). The employer also alleged that the international union had engaged in tortious interference with a contract by promoting the strike and that both defendants were liable for claims under the federal Labor Management Relations Act.

            Resolution of the claims against the unions was affected by a dispute over the ratification date of the CBA, which contained an arbitration clause. The Court ruled that the dispute was a matter to be resolved by the federal district court, rather than by an arbitrator. The argument over the formation or existence date fell outside the scope of the arbitration clause, which was limited to claims “arising under” the CBA. The Court applied the prevailing general rule that where the matter at issue concerns contract formation, such a dispute is generally for the courts to decide. In addition, a court may order arbitration of a particular dispute only where the court is satisfied, as it was not in the case before the Court, that the parties had agreed to arbitrate that dispute.