New Penalties For Taxexempt Entities And Managers

On May 17, 2006, President Bush signed into law the Tax Increase Prevention and Reconciliation Act ("TIPRA" or "the Act"). TIPRA, combined with existing laws, is poised to inflict potentially devastating penalties on the tax-exempt world. TIPRA's new disclosure and participation provisions for "prohibited" transactions present many serious, potential pitfalls for tax-exempt entities and their managers.

TIPRA takes listed, confidential, and contractual protection transactions that are potentially abusive and "reportable" for all tax return filers and makes them "prohibited" transactions for nearly all tax-exempt entities. New disclosure requirements are imposed on parties (or their managers) for "prohibited" transactions involving tax-exempt entities. In addition, the Act imposes stiff new penalties on tax-exempt entities and "managers" (a term that includes directors and officers) that participate in or fail to report involvement in abusive or potentially