Week in Insights: Nonprofits Shouldn’t Define Charity Too Loosely

The Maryland Tax Court has spoken. If you live in it, it’s a home—not a showroom or a museum. And it certainly isn’t exempt from property tax.

A recent dispute centered on a house in Baltimore County built by a nonprofit that specializes in repurposing salvaged building materials. The taxpayer argued that the home was a living demonstration of reuse, a site for training, and a locus of community engagement.

In reality, the founder and his wife lived there full-time and hosted community events less than once a month.

The nonprofit contended that the house’s use as a residence was secondary to its other roles. But under Maryland law, a nonprofit property qualifies for exemption only if it’s used exclusively for a charitable purpose. The tax court concluded the house is “first and foremost a private home.”

The taxpayer in this case is far from the first to engage in creative tax reasoning. For instance, a 2001 US Tax Court ruling involved a South Carolina scrapyard that deducted $300 of cat food as a business expense. The owners argued that cats drawn in by the food kept rats and snakes off the property—and tax court let it slide.

So what’s the difference?

Intent and use. The scrapyard owners’ deduction was practical, considering the cost of cat food a necessary business expenditure. The Maryland taxpayer hoped to use the premise of charity to shield a private residence from property tax rules entirely.

The Maryland ruling isn’t anti-nonprofit; it’s protective of tax exemption status. Rigorous scrutiny is essential to keep the tax system credible.

When exemptions are stretched to cover personal residences, everyone loses—especially nonprofits that play by the rules. In matters of tax policy, you don’t get breaks just because you slap on a good story.

—Andrew Leahey

Homes near the Chesapeake Bay in Centreville, Md.

Photographer: Jim Watson/AFP via Getty Images

Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts examined the impact of recent Corporate Transparency Act developments, the introduction of transferable renewable energy tax credits, and more.

The Exchange—It’s where great ideas on tax and accounting intersect.

Insights

Corporate Transparency Act’s Wild Ride Shows No Sign of Slowing

Stinson attorneys Marc Weintraub and Zachary Taylor say businesses should brace for ongoing legal, regulatory, and legislative battles over the Corporate Transparency Act.

Ending UK Non-Dom Tax Breaks Boosts Fairness, Threatens Growth

Vialto Partners’ Conor Tobin examines how the UK’s non-dom reform and inheritance tax proposals prioritize tax fairness and short-term revenue at the possible expense of long-term economic growth.

Renewable Energy Tax Credit Transfers Are a Securities Conundrum

Stinson’s Harry Teichman and Marshall Kelner say the introduction of renewable energy tax credits prompts questions on creditor rights, as well as on the credits’ vulnerability.

Singapore Focuses on Growth With New Tax Incentives for Investors

Crowe’s Sivakumar Saravan says multinational enterprises should assess the range of opportunities offered by the new corporate tax measures in Singapore’s 2025 budget.

SEC, Watchdog Must Rethink Their Approach to US Audit Standards

Pennsylvania Institute of Certified Public Accountants’ Allison Henry says it’s time for federal regulations that support the integrity of public company audits.

Bitcoin-Backed Loans May Be a Boon for Tax-Advantaged Liquidity

Attorney Ari Good says crypto owners who don’t want to sell may consider borrowing against their holdings to avoid incurring capital gains taxes.

US-Canada Tariff Threats Require Diplomacy Despite Small Numbers

Université du Québec professor Brigitte Alepin says the US’ potential tariffs on Canadian imports are mostly “symbolic” on their own but warrant caution from Canada to ensure the trade conflict doesn’t intensify.

Spanish Transfer Pricing Ruling Gives Guidance for MNEs in Audits

DLA Piper’s César Salagaray Scarpa, Carlos Espinosa Martinez, and Juan Pablo Osman Moreno, explain the impact of a recent decision emphasizing essential principles in transfer pricing audits, and look at how multinationals can respond in light of the court’s ruling.

Standing Up to Trump Is Good for Big Law’s Business. No, Really

Albany Law professor Ray Brescia says Paul Weiss’s agreement with President Donald Trump may send a message that the law firm won’t zealously advocate for their clients against the US government.

Paul Weiss Associates, It’s Time to Reflect on Why You’re Lawyers

UW School of Law’s Eric Schnapper says Paul Weiss’ early-career lawyers must decide whether the firm’s deal with the Trump administration is compatible with their reasons for entering the profession.

Columnist Corner

Technically Speaking design by Jonathan Hurtarte/Bloomberg Tax

California’s disclosure rules for corporate tax-sharing agreements won’t reduce such deals’ negative impact on local tax revenue unless they are capped, Andrew Leahey argues in his latest Technically Speaking column.

“No city should be allowed to give away an unlimited share of its tax base to land a company’s business,” Andrew writes, adding that lawmakers also should reform tax-sharing deals to require that companies and municipalities direct the funds toward tangible, local benefits. Read More

News Roundup

Supreme Court Hands IRS Win Over Bankruptcy Trustee Clawback

The IRS triumphed over a liquidating trustee at the US Supreme Court after a long-fought battle over payments that a transportation company made before it filed for bankruptcy.

New Treasury Beneficial Ownership Rule Defangs Transparency Law

A revised reporting rule by the Financial Crimes Enforcement Network renders almost useless the intended database of company ownership information that aimed to combat money laundering and other crimes, tax practitioners said.

IRS Yanks Data Security Guidance for State Revenue Agencies

The IRS has removed guidance from its website that directs state, local, and tribal governments on their data security responsibilities when handling federal tax information, raising questions for some revenue directors about the federal agency’s objectives.

Big Four Firms Roll Out AI That Can Handle Routine Tasks Solo

The next generation of artificial intelligence has arrived at the Big Four firms, promising to upend the core work of their legions of accountants and business consultants.

The letters “AI” on a laptop screen.

Photographer: Kirill Kudryavtsev/AFP via Getty Images

Tax Management International Journal

What Windfall Elimination Provision Repeal Means for US Expats

The repeal of the Windfall Elimination Provision is one of the most significant Social Security reforms in decades and a long-awaited reform for Americans with foreign pensions, says Arielle Tucker.

How Can GenAI Improve My Transfer Pricing Process?

KPMG practitioners analyze some of the challenges and opportunities that firms should consider when deciding whether to use GenAI in the transfer pricing process.

Career Moves

Cassady Brewer joined Carlton Fields as a shareholder in its business transactions practice in Atlanta.

If you’re changing jobs or being promoted, send your submission to TaxMoves@bloombergindustry.com for consideration.