In this issue:
- The IRS released its new Form 1023-EZ, which is captioned "Streamlined Applications for Recognition of Exemption Under § 501(c)(3) of the Internal Revenue Code."
- In Michigan, the State Gambling Control Board has notified the Joint Legislative Rules Committee of its decision to withdraw proposed new rules to rein in the charitable gambling industry in the state.
- In Tennessee, earlier this month new legislation was signed into law reducing the fees charged across the board to charities, professional fundraisers and fundraising consultants. The fee for professional fundraisers is reduced from $800 to $250, and the fee for fundraising consultants is reduced from $250 to $100. Fees charged charities based upon their gross annual revenue have been reduced by approximately 20%.
INTERNAL REVENUE SERVICE (IRS)
The IRS has announced the reorganization of the legal team in its Tax-Exempt and Government Entities Division. This division acts as an umbrella unit for the office that oversees the handling of applications for nonprofit organizations to obtain tax-exempt status.
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The IRS released its new Form 1023-EZ, which is captioned “Streamlined Applications for Recognition of Exemption Under § 501(c)(3) of the Internal Revenue Code.” Currently, the potential use of the new streamlined form is limited to churches, hospitals, colleges, universities, and supporting organizations. However, there has been an indication by the IRS that the limitations on use may be reexamined in the near future.
COMBINED FEDERAL CAMPAIGN
Earlier this month the Office of Personnel Management issued new regulations to overhaul the administration of the Combined Federal Campaign. The new rules eliminate cash donations in favor of online giving, and require charities to pay fees for the administrative cost of the program. Critics of the changes say the focus should be on reinvigorating the “in-the-work-place” campaign rather than the financial efficiency of the campaign as administered by OPM.
A woman was arrested for selling a fraudulent coupon book using unauthorized coupons from businesses, as well as appropriating the name of a sponsoring charity. Her deception was discovered when a child that was being paid by her to solicit contributions approached the director of the organization whose name was being wrongfully used.
The Colorado Department of Revenue issued a publication explaining the operation of the state’s sales tax-exemption for charitable organizations. The publication notes that these exemptions do not apply to sales tax collected locally by home-rule cities. Those jurisdictions and their tax regulations are separate and apart from the state rule. The document was released on April 4, 2014.
According to the Chicago Times, the Office of the Attorney General is investigating the foundation started by the late entertainer, Bernie Mac. The charity is run by the entertainer’s widow, and questions have arisen about expenditures for program service.
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The Chicago Tribune reported that a former top staff member from Mayor Daly’s administration has pled guilty to misappropriating nearly $92,000 from two charities to which he was affiliated. Comment: Once again, charities and politics do not mix.
The legislature has adopted proposed amendments to the State Constitution which, if approved by voters, would allow charities to operate raffles in the state. The amendment, if passed, will be similar to one passed in the State of Missouri, which reserves the right to operate raffles exclusively to charitable organizations.
Initially, legislation was introduced that would repeal registration requirements for charities and fundraising consultants. On April 10, 2014, amended legislation was signed into law by the governor. Registration requirements for charities was put back into the bill, but the registration requirement for fundraising consultants was deleted.
House Bill 1352 is on its way through the legislature. This Bill will create a charitable enforcement fund that will be funded by filing fees paid by professional fundraisers, fundraising counsel and charities. The fund will be designated for use by the Office of the Secretary of State in conjunction with the Office of the Attorney General to enforce the charitable registration and solicitation statutes in the state. The fees for professional fundraisers and fundraising counsel will increase by $50 for each, with those monies designated for the charitable enforcement fund.
Comment: It is expected the Bill will pass and give the Office of the Secretary of State, through the Office of the Attorney General, the resources it may have lacked in the past to enforce its charitable solicitation and charitable registration laws.
Attorney General Martha Coakley’s state political committee will turn over more than $17,000 to charity as part of an agreement with campaign finance regulators, who found violations of state law by using federal U.S. senate funds for state political activities.
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Normally, the areas of excessive benefits and private inurement are reserved to the Internal Revenue Service. In what may be one of the first of its kind, the Massachusetts Attorney General’s Office has sued the former president of a small college based in Massachusetts. The lawsuit alleges excessive compensation and the squandering of millions of dollars on condos, cars, and other material goods. Among the allegations is the assertion that the college president paid himself a bonus and falsified records of a board meeting approving same. The case filed in late April seeks restitution for the college.
The State Gambling Control Board has notified the Joint Legislative Rules Committee of its decision to withdraw proposed new rules to rein in the charitable gambling industry in the state.
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A state court granted a preliminary injunction to St. Vincent de Paul Society and two other charities that sued a for-profit entity, which was interfering with their relationship with landowners who had allowed them to place unattended clothing bins on their properties. The lawsuit alleged the for-profit entity removed the bins without adequate notice and destroyed them and the contents inside them.
The Office of the Secretary will move from its current location on April 29, 2014. The new location will be at Capital Towers, 125 South Congress Street, Jackson, Mississippi.
An appellate court reversed a state court decision that set aside the ouster of two directors of a nonprofit corporation. The two directors sued the remaining five members of the board. The appellate court found that the corporation itself was an indispensable party and had to be joined.
Comment: The case will continue once the lawsuit is amended and the corporation is included. Thereafter, it will be determined based upon the propriety of the actions taken in accordance with the bylaws and state’s nonprofit law. See Harness v. Richardson, Ct. of App., Missouri Southern District, Div. 2.
The Wall Street Journal reported that the United Charities building, which is jointly owned by three anti-poverty organizations, is on the market for more than $100 million. The building has served the three charities since 1892. They recently decided that now is the time to “cash in” and sell the property.
A Nassau County State Supreme Court Judge (trial court) ruled that the Governor’s Department of Health overstepped its boundaries in attempting to cap salaries for nonprofit executives at $199,000 for those organizations receiving state funding. The attempt to cap nonprofit executive salaries was initiated by Governor Cuomo.
Comment: The concept of capping salaries of charities that receive state funding is a new one. The decision will now have to be made by the New York Attorney General’s Office that represented the agency in this case of whether to take an appeal. As noted, this was a trial court decision.
According to a published report, an industrial museum planned for Bethlehem is now under investigation by the attorney general. The issue being: what happened to the $17 million in donations that were received for the construction of the museum?
Earlier this month new legislation was signed into law reducing the fees charged across the board to charities, professional fundraisers and fundraising consultants. The fee for professional fundraisers is reduced from $800 to $250, and the fee for fundraising consultants is reduced from $250 to $100. Fees charged charities based upon their gross annual revenue have been reduced by approximately 20%.
Comment: It is an unusual occurrence when states reduce their fees. No explanation was given for this action.
The Office of the Attorney General has filed a lawsuit against a veterans organization and four of its principals charging them with unlawfully soliciting contributions, and misrepresenting to Texas residents that donations would benefit local veterans in need. One of the programs offered was a housing program, from which the attorney general claims the individuals involved with the organization personally profited.
Since 1906, fraternity and sorority houses in the state have been exempt from the imposition of property tax. Senate Bill 221 would cancel that exemption and college students that will be affected are petitioning the legislature to stop proceeding with the Bill. According to a published report, there are only ten such properties in the entire state.
The USA Today reported that conservative-based Patrick Henry Center for Individual Liberty has lost its tax-exempt status. Representatives of the IRS indicated that the action was taken as a result of the organization’s, “pattern of deliberate and consistent intervention in political campaigns.”
The Department of Financial Institutions has sent notice to professional fundraisers of a change in the bond forms to be used when filing for a registration or renewal.
Comment: On November 1, 2013, the regulation of professional fundraisers was transferred from the Department of Safety and Professional Services to the Department of Financial Institutions, which utilizes a different kind of form.
DEVELOPMENT DIRECTOR SALARIES
In its April 24, 2014 edition, the Chronicle of Philanthropy wrote about the escalating salaries of in-house fundraisers. The article noted the wide gap, and that at the top there are those making close to $1 million annually.
This important trade association has announced that Thomas Benton has been named as interim CEO and Jane Bergan as the interim president.
INTERNATIONAL MEETING OF REGULATORS
Seven participants connected to the British Commonwealth met in Melbourne, Australia in early April. The event was hosted by the Australian Charities and Not-For-Profit Commission, which was the seventh such meeting of the group that comes together to discuss hot-button issues and problems being faced in their respective countries.
ONLINE GIVING REPORT
Mashable, a tech-news site, reported that online donations were up by 14% in 2013. The new estimate is that $325 million was given to nonprofits online.
Comment: The growth in online giving is a continuing trend as the American public transitions to different mediums of support. An online presence for charitable organizations is both important and necessary.
The public day session at the National Association of Attorneys General and National Association State Charity Officials conference will take place on Monday, October 6, 2014 at the Regency Washington on Capitol Hill.
PREDICTION FOR 2014
According to the Chronicle of Philanthropy, seven out of ten nonprofits are expecting their donations to increase in 2014. This optimism is apparently based on the fact that 2013 was the first good year since the recession.
Comment: We can only hope they are correct.