DECEMBER 2016

STATE LAW

Alabama

The state’s Ethics Commission has interpreted the state’s ethics law as restricting public officials and state employees, and their family members, from fundraising for charities and other organizations they support including public schools and universities. According to published reports, there are over 300,000 public officials and employees in the state and charities in the state are very concerned about this interpretation of the ethics rules. Efforts will be made to reverse the decision and allow individuals who would otherwise be disqualified to participate in any of their chosen philanthropic movements.

Arizona

Arizona was ranked last in the annual report that ranks states based on the generosity of its citizens.

Commentary: While Utah ranked number one, California, Arizona, and Texas all ranked in the bottom 10.

California

The San Francisco Chronicle has investigated a charity (Helpers Community, Inc., a 60 year old charity formed to help the mentally retarded) which was founded by a local socialite. According to the newspaper report, while amassing millions of dollars in assets and donations the $6 million charity spends most of its money compensating the founder of the charity and has pursued what the paper calls “questionable practices with scant oversight from the small board that includes its director . . . and her longtime friend.” According to the paper, an average of 5% of the annual income between 2003 and 2015 has gone to grants benefiting charitable organizations.

Massachusetts

The Attorney General’s Office has released its most recent report on the cost of fundraising in the state. According to the report, professional fundraisers raised more than $200 million in the state and their charitable clients retained $82 million.

Commentary: These reports always make it appear that everything the charity does not receive or retain is profit for the for-profit agency working with it. The reality is that had the charity, itself, raised the money, it would have had expenses just as the for-profit agency does.

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Standing is always an important matter. Students challenging the investment policies of the Harvard Endowment were found to lack standing by the Appeals Court of Massachusetts. 

Commentary:  In such cases the matter is best left in the hands of the State Attorney General.

Michigan

The Attorney General’s office has issued a cease and desist order and notice of an intended lawsuit against an operator of charity bins in the Detroit metropolitan area. The Attorney General asserts that registrations have not been maintained or completed and questions what portion of the proceeds, if any, are benefiting charitable organizations.

Mississippi

The Secretary of State may soon enact a new rule with reference to the granting of extensions. Most likely it will provide that the first IRS extension will automatically grant an extension for filing with the state. Any extension beyond that must have a significant and verifiable reason in order to be granted. Assuming the Secretary of State approves the rule, it will be open for public comment for 25 days.

New York

The Charitable Gaming Act of 2016 has been vetoed by Governor Cuomo. The legislation, had it been passed, would have allowed charities to use credit or debit cards for payment of charitable raffles and would have allowed the charities to conduct raffle ticket sales over the internet.  According to the Governor’s veto message, the bill is rejected because it would have violated the state’s Constitution. Under the New York Constitution, charitable gaming may be offered only where a municipality has voted to authorize it. The legislation would have allowed internet access in any municipality. Although vetoed, the Governor recognized the need to modernize the state gaming laws as they pertain to charitable fundraising and has directed his staff to work with the bill sponsors to create new legislation.

Pennsylvania

In a recent case, the state Supreme Court attempted to define what activities are allowable for a nonprofit organization that is incorporated under Pennsylvania’s Nonprofit Corporation Law. In its ruling, the court said that any such organization can engage in any activity so long as it is contemplated in the Articles of Incorporation and not otherwise prohibited by law. The court went on to say that, consistent with the foregoing, the activity must also bear some relationship to the stated purpose under which the organization was formed.  Zampogna v. Law Enforcement Health Benefits, 2016 Pa. LEXIS 2650.

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How can you get into trouble for examining dumpsters to recover discarded inventory that is subsequently donated to charitable organizations at no cost? The reality is, after being caught “dumpster diving” at a CVS store in Hershey, two men were charged with defiant trespassing, loitering, and prowling at night, all of which are misdemeanors. The two accused defendants have started raising money for a “dumpster divers’ defense fund” to pay for their expenses in the fight against the charges.

Rhode Island

After a twelve week trial, a jury unanimously found the founder of the Institute of International Sports guilty of eighteen counts of embezzlement, forgery, and obtaining money under false pretenses. The thirty year nonprofit was based out of the University of Rhode Island and its accomplishments were celebrated by Nobel Prize winners and others, including a former United States President. The suit was prosecuted by the Office of the Attorney General.

Virginia

The Attorney General’s Office announced settlement with a professional fundraiser for failing to file necessary reports after conducting a face-to-face fundraising campaign. The company was required to pay $2,500 in civil penalties and $1,500 in attorney fees.

OTHER MATTERS

The Future of the Estate Tax

The President-elect and the Speaker of the House have made it clear that one of their agenda items in the new administration will be to eliminate the estate tax. Currently, married couples have a $10.9 million tax exemption. Everything that exceeds that amount is subject to a 40% rate. Less than half of 1% of all estates in the United States are required to pay estate tax.  According to some published reports, elimination of the estate tax could cost the government more than $260 billion. There are two possibly detrimental results. First, the tax would act as a disincentive to people doing estate planning to leave money to charities. Second, it is feared that in order to replace the lost income, legislation will be enacted to limit the extent of the charitable deduction to tax payers. This too will act as a disincentive to be charitable.

Independent Sector

This key industry agency announced it has laid off one fourth of its work force.

Japan

This country’s parliament has joined South Korea, the United Kingdom, and other countries in approving a law that will allow cash in dormant bank accounts to be given to a newly formed nonprofit group focused on social issues. It is estimated that this will generate as much as $500 million per year which will make the new nonprofit one of the largest in Southeast Asia.

USPS

The increased price changes for mailing and shipping services will go into effect on January 22, 2017.