MAY 2017

STATE LAW

California

The Associated Press reports that the new Attorney General announced his plans to target political nonprofit organizations that he claims mislead donors and influence campaigns.

Connecticut

According to published reports, the state legislature’s tax-writing panel is considering a measure that would repeal the sales tax exemption on goods and services sold to nonprofits. It is estimated that this provision saves Connecticut nonprofits more than $200,000,000 per year.

Commentary: This state, like many others, is in a deficit position and looking for ways to increase revenue without raising taxes. This is a short-sighted approach since many of the state-based nonprofit organizations provide social services that the government would otherwise have to provide.

Florida

According to a published report, a suit was filed in early April by an Orlando business man who was in a dispute with the office of the Attorney General over a commercial matter. As part of the settlement, the Attorney General wanted the commercial entity to make contributions to charities. It was later determined that the commercial entity was not in violation of the law and the enforcement action was dropped. The commercial entrepreneur, however, was so offended by what happened that he filed suit against the Attorney General, asking the court to make the Attorney General explain whether her office is ordering companies to make restitution payments to unregistered charities, as well as charities to which her office is connected.

Georgia

Two executives with Bank of America donated money to charities in Massachusetts and Georgia on condition they received a “consulting fee” (kickback). Three of the charities were located in the Atlanta area and were started by family members of the perpetrators. While the charities in Massachusetts spent the money that was donated appropriately, it is alleged that the principles in the Georgia charities did not, diverting funds to personal bank accounts. All of those involved are now facing a series of federal charges.

Massachusetts

House Bill 160 would require additional disclosures, not only by professional fundraisers, but also by commercial co-venturers. The legislation stretches the notion of improper compelled speech, particularly as this legislation would be applied to the sale of goods or services with the added inducement that a set portion of the proceeds will benefit a named charitable organization.

Commentary: The concept set forth in this piece of legislation would so burden cause-related marketing activities as to make it uninteresting or unworthy of participation by the commercial entity, thus depriving charities of increased name recognition and needed financial support.

Bloomberg reports that the head of Harvard’s Endowment Fund was paid $14.9 million in 2015. The director left after eighteen months. The fund lagged behind that of comparable institutions. The sum was seven times the amount paid to the president of the university.

Minnesota

The Attorney General’s office has turned over a 300 page report to the IRS providing its analysis of a nationwide car donation program that seeks donations to benefit children. The charity itself is located in New Jersey and is affiliated with the religious organization that is the primary beneficiary of its program service dollars. Among the assertions of the Attorney General’s office are that the charity misstates the amount of money that goes to its mission and lacks transparency.

Montana

An out-of-state musician was convicted of defrauding a Montana charity and, as a result, may be required to pay restitution to victims of similar schemes throughout the country according to a ruling of the Ninth U.S. Circuit Court of Appeals. The defendant misrepresented himself as a well-known artist and appeared at events in exchange for payment of all expenses and a portion of the proceeds to his nonexistent charitable organization. The defendant is being prosecuted under The Victim and Witness Protection Act which allows courts to order restitution for crimes involving a scheme to defraud. The federal prosecutors are now seeking over $70,000 in restitution.

Oklahoma

Efforts to eliminate or reduce itemized deductions from state income taxes continue. House Bill 2403 would have eliminated all deductions as a way to raise state government income but now excludes charitable donations. Pressure from the nonprofit community is credited for the exclusion.