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26 Prac. Tax Law. 1 (2011-2012)

handle is hein.ali/practax0026 and id is 1 raw text is: The Practical Tax Lawyer volume 26 I number 1 I fall 2011 Operating In Two Worlds: Tandem Structures In Social Enterprise Ingrid Mittermaier Joey Neugart 5 Tax-exempt status under Code section 501 (c)(3) is a popular choice for many social entrepreneurs. But operating as a for profit also has its advantages, so social entrepreneurs are questioning whether they have to choose only one entity. With correct planning, the entrepreneur can pursue a tan- dem structure, forming both a charitable nonprofit and a for profit that operate in a complimentary fashion to pur- sue the founder's goals. This article by Ingrid Mittermaier and Joey Neugart discusses the important considerations for anyone contemplating a tandem structure: furthering a charitable purpose, using caution when considering a pass- through entity or single-member LLC as the for profit entity, consider who will control each entity (and avoid 100 per- cent overlap between the nonprofit and for profit), keeping in mind special issues that arise when a charity holds a con- trolling share of the for profit's stock, and the need to keep the two entities separate, independent operations. Design Issues Related To Equity Compensation Plans Jane Jeffries Jones, Diane J. Fuchs, and Meredith P. Burbank 15 Equity compensation plans can go a long way in attract- ing and retaining valuable employees and important ser- vice providers. To establish the program most likely to meet the company's specific objectives and needs, the company must carefully consider the legal, accounting, tax and ad- ministrative implications of the potential plan. This article by Jane Jeffries Jones, Diane J. Fuchs, and Meredith P. Burbank highlights issues related to the grant of options and other forms of equity awards, including restricted stock awards (RSAs), restricted stock units (RSUs), stock apprecia- tion rights (SARs), performance awards and phantom stock awards, and how equity awards may be granted by non- corporate business entities, such as limited liability compa- nies or partnerships. Employer Stock Issues In Qualified Plans Gregory K. Brown 29 An ESOP is a qualified defined contribution retirement plan specifically designed to invest primarily in employer securi- ties. ERISA and the Internal Revenue Code of 1986 provide substantial tax incentives and planning opportunities for employers that sponsor ESOPs. Besides providing retire- ment benefits, ESOPs are attractive to employers for many reasons; but they have special characteristics and require- ments that distinguish them from other defined contribu- tion plans. In this article, Gregory K. Brown discusses the ESOP as a defined contribution plan, the details of special ESOP qualification requirements, and Code section 401(A) (28) diversification. Controlled Group, Affiliated Service Group, And Leased Employee Rules Cynthia A. Van Bogaert 45 The IRS controlled group and affiliated service group rules provide the foundation for identifying whether two or more employers need to be grouped together and treated as one employer for many benefit plan purposes. For example, cov- erage testing under Code section 410(b) applies these rules for determining which employees should be tested togeth- er. When determining which workers to include as employ- ees, Code section 414(n) includes leased employees This article by Cynthia A. Van Bogaert discusses the terminol- ogy used for employers groups, when the controlled group and affiliated service group rules are applied, the definition of a Code section 414(b) controlled group, trades or busi- nesses under common control, parent-subsidiary and other groups, exclusions, constructive ownership, special rules, and affiliated service groups, and more. To purchase the online version of this issue, go to www.ali-aba.ora and click on Articles and Forms Online Back issues, individual articles, and forms are also available there.

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