Earlier this month federal agents in Birmingham arrested the former CEO of a nonprofit, whose mission was serving the poor and homeless, on 112 charges including bank fraud, money laundering and conspiracy. The amount of money is believed to have exceeded $14 million over the time its was misappropriated. Most of the money was in the form of federal grant funds.
In late January, the State Supreme Court voted to prohibit state judges from belonging to nonprofit organizations that practice discrimination. The decision comes after a vigorous debate, with little doubt that it is aimed at Boy Scouts of America. There is now mounting pressure on the organization to change its policy.
Channel 9 TV in Denver reported that the founder of a fake charity, “Boobies Rock!” has been sentenced to an additional six months incarceration for contempt of court. According to a published report, Adam Shryock violated a court order in July 2013 of not engaging in any form of charitable fundraising activity.
The president of a charity created to help people with down syndrome has been arrested on a charge of using the organization’s assets for her own expenses. Over a period of four years, she allegedly received about $110,000 in goods, services and payments. The board members claimed to have no knowledge since she was the only one responsible for handling the money. (Comment: This is a classic case on of the total lack of poor governance. How can you serve on a board of directors, and for four years have no idea of the mishandling of funds? Notwithstanding, this is not a charity that made the Tampa Bay Times list of the 50 worst charities, and it was located right in their backyard).
Senate Bill 1067 would authorize the Office of the Attorney General to require electronic financial reporting by professional solicitors, impose a penalty fee for late filing of financial reports by professional solicitors, and clarifies exemption from registration requirements. If the legislation passes, exemptions may also be required to be filed electronically.
Senate Bill 227 has been introduced that will eliminate virtually all exemptions from the state’s do-not-call law. In addition to eliminating exemptions for calls made by charities, it would also delete the exemption for relators, banks, and insurance agents. So far the bill has not attracted a co-sponsor or much support.
House Bill 91, if it makes it to the Senate, would update the statutes for charitable gaming by increasing nonprofits’ chances for successful fundraising in the future. The bill would allow charities to host fundraisers up to eight times a year instead of the current four, and would include banquets as one of the activities qualifying as a charity fundraising event, but organizations may hold no more than one of the eight allowed per week. The bill also allows minors to play bingo for non-cash prizes if accompanied by an adult.
The move to limit property tax exemptions for nonprofits in the state is gathering steam. Currently, it is being debated in legislative committees. The proposal would remove property tax exemptions for nonprofits with assets of more than $500,000. Nonprofits with assets in excess of that amount would be subject to one-half of the real estate tax assessment on their properties. (Comment: This is an important issue being fought in a small state (by population). There has been a growing movement to eliminate real estate exemptions as the quest for funds by local and statement governments continues to gather momentum. If Maine is successful, you can expect other states to look at similar initiatives).
The Center on Wealth and Philanthropy at Boston College will close this summer according to a report in the Boston Globe. The Center was founded in 1970, and was an authority on giving by the wealthy.
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The nomination of Boston to host an upcoming Olympics is causing some concern to the nonprofit community. The Boston Globe reported that leaders in the nonprofit community fear the private funding that will be needed to support the Olympic bid, and hosting, will result in detraction of those monies that otherwise would be going to local nonprofit organizations.
Last year, Wounded Warrior Project advised Missouri authorities that an individual was raising money in the name of the organization in the St. Louis area, but was not authorized to do so, and was not turning the funds over to the organization. The defendant has been sentenced to seven years incarceration for stealing funds. In addition, the Office of the Attorney General filed a civil suit, which resulted in an injunction against the individual from ever raising funds for charitable organizations.
A suburban New York lawyer pled guilty in early February to embezzling nearly $2 million from a nonprofit Staten Island graveyard. He could face from 3 to 9 years in prison when he is sentenced in April.
The Humane Society of the United States (HSUS) has filed a lawsuit challenging the authority of the Office of the Attorney General to conduct an ongoing, wide-ranging investigation of its activities in the state. The investigation for information from HSUS began in February 2014 as a result of its fundraising practices, and the organization complied. The organization has been in conflict with the Oklahoma Farm Bureau for some time over HSUS’ pro-animal initiatives. Then again in July 2014, the Office of the Attorney General requested even more information, which went well beyond the scope of inquiry into fundraising practices. HSUS claimed confidentiality of some records, but the Office of the Attorney General refused to enter into a non-disclosure agreement. The lawsuit charges that the Attorney General has gone beyond his scope of authority, and that the investigation is politically motivated. (Stay tuned. This promises to be a good one).
The Willamette Week News reported that once the fiancé of the current governor took a position with a nonprofit, state funding increased by eightfold. After serving in the position for less than a year, the funding was then cut back almost in its entirety. (Comment: Another classic example of nonprofits and politicians making bad bedfellows).
After pleading guilty, the wife of a navy SEAL was sentenced to eighteen months in prison for stealing more than $120,000 from the Navy SEAL Foundation.
The Office of the Attorney General has announced a settlement with a professional telemarketing firm and the Washington Fraternal Order of Police. The fundraising campaign was conducted to raise funds for a memorial, indirectly reflecting on the tragic events of the loss of four officers in the Lakewood, Washington area. The general allegation was that the callers were not properly identifying themselves as professional fundraisers, and indirectly misrepresented how the money would be used. The state claimed that most of the money was going to the cost of fundraising. A settlement was entered into prior to filing of a lawsuit.
A by-partisan pair of senators introduced a bill that would require the IRS to give nonprofit organizations more notice before revoking their tax-exempt status. If an organization does not file for three consecutive years, its exempt status is revoked. This legislation would require additional notice to those who fall through the cracks for lack of knowledge of certain requirements. In introducing the legislation, the sponsors noted that it hits small unsophisticated organizations disproportionately hard.
FEDERAL ENFORCEMENT ACTION.
A major veterans organization entered into agreements to have mortgage brokers offer refinancing opportunities to its members. In exchange, the veterans organization was to receive a financial payment for each veteran who signed up for a new mortgage. However, what apparently seemed like a good idea violates federal laws pertaining to same. The Consumer Financial Protection Bureau announced the entry into a consent judgment with a non-bank mortgage lender for illegally marketing services with an unnamed veterans organization in violation of the RESPA. The issue being that federal mortgages under the United States Code prohibits kickbacks on unearned fees from referrals. While the veterans groups was not named as part of the enforcement action it could have been.
INTERNAL REVENUE SERVICE (IRS).
According to IRS figures, it has received over 18,000 applications under the new Form 1023-EZ. The figure represents more than 50% of all applications received during the period in question. Those using the EZ form are reportedly receiving their tax determination letters on average within 60 days of submission.
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The IRS is engaging in some re-alignment of those divisions that deal with exempt organizations. Reportedly, the IRS will transfer 16 employees to the IRS Office of Chief Counsel. The divisions formerly known as EO Technical and EO Guidance will no longer exist. EO Determinations will now work with the Chief Counsel as needed on determination matters.
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The IRS has released Publication 4302, titled “A Charity’s Guide to Vehicle Donation,” and provides general guidelines for organizations operation a vehicle donation program, and how it might affect the tax-exempt status of the organization, as well as what income may or may not be tax deductible, etc.
IRS LOSES COURT CASE.
A lawsuit was filed by public.resource.org. asking the court to order the Internal Revenue Service to produce Form 990 in a machine-readable format. A federal judge ruled in the U.S. District Court of Northern California in favor of the request and has given the IRS sixty days to produce the forms. The IRS defended the request by saying the agency was overburdened, and is under significant financial distress. (The initial request was a Freedom of Information Act request for the returns of nine charities that had filed electronically. The implication of the case is obviously much broader).
TAX-EXEMPT STATUS AND SPORTS.
Last year Senator Cory Booker (D-NJ) introduced legislation that would end the exemption of ten pro-sports leagues. The bill will be reintroduced in the next session of Congress. It is projected that if the sports leagues lose their tax-exempt status, it would produce over $100 million over a decade. More than 425,000 people have signed an online petition started by a New Orleans woman who seeks to repeal the NFL’s tax-exempt status. The Commissioner of the NFL earns $44 million a year, which drew criticism from Ken Berger, president and CEO of Charity Navigator, who said compensation as large as Goodell’s does not belong in the nonprofit realm. The NFL is a nonprofit trade association under § 501(c)(6) of the Internal Revenue Code. Incidentally, the National Basketball Association and major league baseball have both given up their nonprofit status. (Comment: You can expect to see continued pressure on the NFL it give up its tax-exempt status. Its best defense is its overwhelming popularity).
ATLAS GIVING REPORT,
Total charitable giving in 2014 increased 9.3% on a year-over-year basis, reaching an estimated $456.73 billion. The report also said that individuals accounted for 74% of total giving in 2014, which also was an increase.
CAR DONATION PROGRAMS.
The IRS has issued Notice 2005-44, which addresses the issue of deductibility of charitable donations of vehicles. The IRS is seeking public comment, which must be submitted prior to April 6, 2015.