An attorney and spokesman for Naperville Rotary Charities is defending the charges against the group’s fundraiser raffle of a $1 million dream home or its cash equivalent claiming it is neither fraudulent nor illegal under Illinois law. The Charities were sued last month in Cook County Circuit Court by two men who claimed the group’s House of Dreams Raffle breaks Illinois law by selling tickets both online and outside of the permitted area. The lawsuit also alleges that no one has ever won the top prize in the 25 year existence of the raffle.
In one of the more impractical legislative proposals, House Bill 583 would require the Attorney General to create a website that lists charities that solicit in the Commonwealth and fail to meet the financial accountability standards recommended by the American Institute of Philanthropy (“AIP”). This would be based on a three year average, although information on the website would be updated annually. It would also include the 50 charitable organizations that fell farthest from the AIP’s charitable spending standards and contain a link to the AIP “CharityWatch” website.
Commentary: This would require an enormous amount of work by the Attorney General’s office that they likely do not want. In addition, it would require adopting the standards of another tax-exempt organization that has arbitrarily created its own standards. While it certainly has the right to establish its own standards, the question remains whether these arbitrary standards have any place in law.
The Portland Press Herald newspaper in Maine reports that the state’s largest environmental organization has now accused the Governor of waging a “smear campaign” and harassing its donors with a letter outlining what he claimed to be the group’s “job-crushing, and anti-business policies.” According to the report, the letter was sent to about 200 members of the Natural Resources Council of Maine saying that their policies undermine the state’s manufacturing base and impede growth of good paying jobs.
House Bill 4180 and Senate Bill 2246 cover much of the same ground and if either is passed, will change the law governing contracts and other conduct within the state for those who engage in charitable solicitation. The law pertaining to charitable solicitation will also require all of the money raised in the state to be used exclusively for charitable purposes.
Commentary: Ill-conceived and obviously unconstitutional legislation proposals like these may serve a political purpose but do not serve the process. Bad legislation originates with legislators that do not understand the industry or the law.
Former NBA player Kermit Washington was charged in Kansas City with fraud related to the use of funds he collected on behalf of the African charity he founded. The prosecution alleges, among other things, that he misused over $500,000. He pled not guilty.
The Attorney General has released the most recent addition of Pennies for Charity: Where Your Money Goes. It contains some hard to believe statistics. For example, it says that 94 private fundraisers charge 94 charities more in fees than they raise for the charity. On the opposite extreme, it shows that some charities received 100% or more of the money raised even though the services of a professional agency were involved.
Issues concerning the board of Hershey Trust continue. The Attorney General has indicated concern that the board’s expenses may have violated the 2013 agreement with the Commonwealth. According to a published report, board members were paid $6.9 million for services over the past three years. Also, the Attorney General’s office has requested the removal of the Trust chairwoman as well as the former chairman and the vice chairman now that the board has placed its Chief Compliance Officer and top in-house lawyer on administrative leave.
Commentary: The Trust operates a school for disadvantaged children, and has $12 billion in assets. The stories of fighting among the board are widespread. The attorney, who also acted as secretary of the board, was being compensated at the rate of $453,457 per year.
On June 15th the House of Representatives passed HR 5053 that prohibits the IRS from requiring tax exempt organizations to disclose donors of $5,000 or more. The bill has an uncertain future as both the Democratic Party and the President oppose the legislation.
There is good news in this year’s report. According to Giving USA, charitable giving topped $373 billion in 2015 which represents a 4% increase over the prior year.
The IRS has announced that it is now possible to access electronically filed 990s in bulk. This makes public access much easier.
Nonprofit Employee News
Some nonprofit employees who had been counting on the federal government’s Public Service Loan Forgiveness Program recently received word that they do not qualify, for reasons that remain unclear. It is suspected that the employers’ tax status may have something to do with it. The Program is designed to forgive student loans for qualified employees of certified nonprofit employers who work in public service for 10 years and make 120 qualifying loan payments in a designated period of time.
Private Museums Drawing Scrutiny
Senator Orrin Hatch, Chairman of the Senate Finance Committee, is asking the IRS to take a better look at private museums. The senator has expressed a concern that in some cases these museums are not providing the necessary “public benefit” that is consistent with their tax-exempt status.
The Alliance of Nonprofit Mailers is urging members to make comments on the proposed USPS reform legislation.
The necessity to create reform in the postal service is slowly gaining momentum. Representative Chaffetz, Chairman of the Committee on Oversight and Government Reform, held hearings in May. He is trying to craft a bill that will draw bipartisan support. No doubt the bill will also include the ability of the USPS to reinstate the 4.3% exigency rate increase that was recently rescinded.