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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
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.

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