January 2014

In this issue:

  • The Atlas of Giving of Dallas, Texas, issued its report for 2012, concluding that charitable giving was up almost 13% in 2013 over 2012.
  • In an article, the Deseret News quoted a recent study which found that 73% of charitable giving goes to faith-based organizations, whether they are actual churches or nonprofits that have a religious identity.
  • A reminder to professional fundraisers based in New Mexico that registrations in the state have to now be completed online.

Federal

FBI REVIEW.
An investigation by the FBI has resulted in a tentative finding that Internal Revenue Service officials committed no crimes in the agency’s extended scrutiny of politically conservative nonprofit organizations.

INTERNAL REVENUE SERVICE (IRS).
Revenue Procedure 2014-11 sets forth new options for nonprofit organizations that have had their tax-exempt status revoked.

UNITED STATES POSTAL SERVICE (USPS).
Nonprofit bulk mail, like all other forms of mail under the new postal rate, will suffer a 6% increase. Experts in the field speculate that higher mailing costs will reduce mail volume across the board.  Nonprofits will have to mail smarter with less room for error in donor acquisition. Keep in mind, this increase was not the total package sought by the USPS. Expect the agency to take legal action to obtain additional increases in order to close the deficit.

Comment: Increasing rates because volume is down seems counterproductive.  Few people will mail as the cost increases, thereby continuing to increase the deficit.  The postal system needs restructuring.  The impact to be felt by nonprofit mailers will be significant.

State

ARIZONA.
On January 1, 2014, a new ordinance went into effect in Phoenix requiring charity bin owners to obtain a permit from the state.  As of the middle of January, only one operator applied.  It is estimated that there are at least 70 unattended clothing bins in the Phoenix area.

CONNECTICUT.
A charity formed after the shooting massacre at Sandy Hook elementary school has been unable to account for more than $70,000 raised through marathon running.

Comment: How sad is this?  Charities spring up overnight to give to help when tragedies occur, but without the infrastructure and professionalism which you hope would be available.

ILLINOIS.
Once again, the Chicago Tribune recently wrote a story about professional athletes who establish charitable foundations with the best of intentions, but with a real lack of understanding of how to operate.  In this instance, the newspaper examined tax records and financial records, and found that on many occasions these charities, founded by well-known athletes, tend to fall short of industry best practices for spending and operation.

KENTUCKY.
A bill was introduced that would expand the forced disclosure requirements for professional fundraisers soliciting on behalf of charitable organizations.  In addition to the existing requirement of disclosing their name and that they are a paid fundraiser, the bill requires fundraisers to disclose their telephone number and email address prior to orally requesting a contribution or when requesting a contribution in writing.  The bill also requires that forced disclosures be placed on a sign or label on receptacles placed or maintained by professional fundraisers used for collecting contributions in the form of clothing, household items and other non-cash items.

MARYLAND.
A federal judge has ordered that a Renoir painting, which was stolen from a Baltimore museum more than half a century ago, be returned.  The painting ended up in the possession of a woman who claimed to have bought it at a West Virginia flea market.

MICHIGAN.
The ongoing struggle to enact new legislation to tighten charitable gambling rules has ended with a compromise.  In lieu of new legislation, the parties agreed to more strict regulation of charitable poker rooms.  A number of state-based nonprofit organizations are dependent on revenue generated by charity-sponsored poker rooms.  The new regulations reduce the number of representatives of a charity who have to be present, and increases the number of nights the charity can conduct poker room activities.

MISSISSIPPI.
Senate Bill 2083 has been introduced putting the state’s filing and reporting requirements on a four-year cycle.  It would also create specifications of what must be in contracts between fundraisers and their charitable clients.

Comment: It is not clear from this legislation how the four-year cycle would work, but it would require a four-year filing with significant details.  This would at least give the state, as well as prospective donors, a larger picture to review when considering a donation.

MISSOURI.
The Department of Revenue has opined that a charitable trust, which contracts with a third party to run its gift shop and online store, would not be required to collect and remit sales tax under the management agreement.  Likewise, third-party purchases of items for sale at the gift shop and online store would also be exempt from sales tax.

NEBRASKA.
Five Omaha companies announced they will combine to donate $500 to Peyton Manning’s charitable foundation each time, as the Denver Broncos’ quarterback, he says “Omaha.”

NEVADA.
Forms for the new charitable registration are now available online at the Nevada Secretary of State’s Office.

Comment: The state’s movement to requiring registration reduces the states which do not require registration to an even smaller number.

NEW HAMPSHIRE.
According to a published report, new legislation that would eliminate business tax exemptions for some of the state’s nonprofits is only targeted at hospitals, colleges, and large nonprofit organizations.  The proposed change in the state’s Business Enterprise Tax would tax nonprofits that receive more than $2 million annually in revenue.

NEW JERSEY.
In a recently introduced bill, nonprofit corporations, associations, or organizations located in New Jersey which are regularly engaged in providing emergency medical care, rescue services, transport of patients, or fire protection services, including part-paid fire departments and fire districts and emergency service providers, would not be required to pay charitable registration filing fees.
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A bill has been introduced allowing a victim of terrorism to bring a civil action against: (1) any person, charitable organization or professional fundraiser that solicits, transports or otherwise provides material support or resources with the purpose or knowledge that such material support or resources will be used, in whole or in part, to aid, plan, prepare or carry out an act of terrorism or with the purpose or knowledge that same are to be given, in whole or in part, to a person or an organization that has committed or has the purpose to commit or has threatened to commit an act of terrorism; or (2)  is designated as a foreign terrorist organization by the United States Secretary of State under 8 U.S.C. 1189.

NEW MEXICO.
A reminder to professional fundraisers that registrations in the state have to now be completed online.

NEW YORK.
The Nonprofit Revitalization Act was signed into law by Governor Cuomo on December 18, 2013.  Most of the new provisions of the law will go into effect in July, 2014.  Certain governance provisions in the law apply only to nonprofit organizations domiciled in the state.  Other provisions apply to charities which register in the state to fund raise.
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The New York Attorney General announced the appointment of David Nachman, former Enforcement Section Chief, Charities Bureau, as Senior Enforcement Counsel.  His replacement is James G. Sheehan, who comes from outside of the office.  He previously acted as the Inspector General of Medicaid until 2012.

OKLAHOMA.
A Broken Arrow man has been charged with wire fraud and allegations that he induced his employer, The Williams Company, to contribute to a charity he created, then used more than $100,000 of the charity’s funds for his own use.  The fraud was unusual in that the accused allegedly falsified evidence of employees’ gifts to obtain matching gifts from the company.

OREGON.
A bill was introduced that expands and clarifies the attorney general’s ability to enforce the Charitable Trusts and Corporation Act, by increasing the monetary civil penalties the attorney general may impose, and allowing the attorney general to deny, revoke, place conditions on, or suspend a charitable organization’s registration after giving the organization written notice of the basis for same.  If the organization does not correct or otherwise ameliorate the violation or request an administrative hearing within 60 days of receipt of the notice, a civil penalty of not more than $2,000, can be assessed against the organization or its principals.  The attorney general may also order the organization to cease soliciting or accepting contributions until it has corrected the act or practice, or order the organization to submit or file additional information or documentation.

UTAH.
In an article, the Deseret News quoted a recent study which found that 73% of charitable giving goes to faith-based organizations, whether they are actual churches or nonprofits that have a religious identity.  Most interestingly, the article also revealed that more than a third of donors to faith-based organizations said they do not belong to an organized religion.

VERMONT.
A legislative panel recommended that a study be conducted to make major changes to the process of how nonprofits get real estate tax exemption in the state.  A part of the proposal would require applicants to obtain a certification to qualify.

Comment: Just another straw on the camel’s back as state governments seek ways to close loopholes in order to increase revenue.

WISCONSIN.
A new publication has been issued by the Wisconsin Department of Revenue explaining the standards of determining whether sales by nonprofit organizations qualify for occasional sales tax exemption.

Other
CHARITABLE GIVING IS UP!
The Atlas of Giving of Dallas, Texas, issued its report for 2012.  The report is based upon a formula which estimates charitable giving factoring in numerous aspects of the economy.  According to the report, charitable giving was up almost 13% in 2013 over 2012.  The report estimates that U.S. giving reached $416.4 billion.  Individual giving represented 75% of the universe of charitable giving, and human needs and disaster services was the third largest and fastest growing category.  Foundation giving was up 18.6% and corporate giving was up by $2 billion.

MULTISTATE REGISTRATION AND FILING PORTAL INITIATIVE.
The Multistate Registration and Filing Project, Inc., announced that it is accepting proposals to construct a website, the purpose of which will be to fulfill the mission of the Single Portal Initiative (SPI).  The SPI seeks to streamline and simplify the process whereby charitable organizations may comply with the requirements of the 37 states which register charities at one single online portal.  The pilot states include California, Illinois, Alaska, Colorado, Connecticut, Hawaii, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire and Tennessee.  These states will participate in the three-year pilot project to build and launch the unified registration system. The project’s goal is that all 37 states will enable registration and annual financial reporting by registered charities on the single portal website within five to ten years.  The problem with the project is reflected in the demand that, “The site’s construction will need to take into account a wide variety of variables including, but not limited to: the content of the various federal 990 reporting forms; the unique registration requirements of each participating state along with search and research functions to display the information.”  Having one functional registration web site that complies with all of the state laws regulating charitable registrations is unlikely practical.  While the Uniform Registration Statement (URS) attempted to streamline the registration process by using one form that could be filed in all states, it resulted in many states requiring additional forms and filings when the URS was completed and other filings to ensure compliance with the applicable state laws.

ONLINE GIVING REPORT.
According to a report published by the Chronicle of Philanthropy, online giving was up in 2013 by 16%.  Nearly $78 million was given online.  The growth of online giving continues to increase, albeit slowly.