May 2011

In this issue:

  • The amendments to Hawaii’s charitable solicitation law have now been signed into law by the governor.
  • The proposed revisions to the Washington charitable solicitation law have passed both Houses and have been signed by the governor.
  • According to a published report, 79% of those surveyed expect to give at least what they gave in 2010 or more in 2011. Fifty-nine percent said “a good reputation” was a major factor in their decision.

Federal

INTERNAL REVENUE SERVICE (IRS).
At recent conferences representatives of the IRS indicated that they will continue to monitor supporting organizations, and will soon be seeking comments on how the agency can improve the IRS Form 990.

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At a recent tax-exempt program, a representative of the IRS indicated that practitioners should not expect any technical advice on the intermediate sanction rules of §4958 because, “. . . the determination of whether compensation is reasonable is heavily factual.”  Panelists in the program noted the constant reinforcement of the message of the threat of intermediate sanction prosecution, and there was a lack of published technical advice or statistics to guide those in the industry.

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The IRS has issued a release confirming it has contacted major donors to political advocacy organizations to advise them they may be subject to an assessment of gift taxes.  This is the first time in recent memory that the IRS has looked to enforce the rule.

POTENTIAL CHANGE IN POLICY.
The Wall Street Journal reported that the federal government’s ethics office is proposing an exemption to conflict-of-interest laws that would allow federal employees to sit on the boards of nonprofit organizations.  The proposed rule change is now in the Federal register with the public being invited to comment.

UNITED STATES POSTAL SERVICE (USPS).
The Alliance of Nonprofit Mailers reported that the USPS has issued a customer support ruling that will help resolve a growing problem involving nonprofit mail being rejected by postal employees over identification issues.  The report goes on to explain that in some instances postmasters have refused mail when the name shown as the return address is not identical to the actual name of the authorized nonprofit organization.

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On another note, it has been announced that Gerry Lease is retiring after 42 years. Gerry has worked with the nonprofit community and has been a great resource to the community and this law firm.  The USPS will be losing one of its most knowledgeable people.  Congratulations to Gerry on his retirement.


State

ARIZONA.
A gathering of billionaire philanthropists took place in Tucson earlier this month.  A meeting was held at a Tucson resort by invitation only.  The criteria for attendance being that a person had to be a billionaire who has pledged to give away at least half of his/her wealth.  The media was banned from attending.

CALIFORNIA.
A charity, which has attracted a number of celebrities, has come under IRS scrutiny.  The heart of the inquiry is The Kabbalah Centre based in Los Angeles.  The Centre is believed to have assets of more than $260 million and use of those assets is now in question.

FLORIDA.
The St. Petersburg Times reported: “A conservative billionaire who opposes government meddling in business has bought a rare commodity: the right to interfere in faculty hiring of a publicly funded university.”

Comment: It is a rare circumstance when a major donor is given managerial discretion in such basic matters as the hiring of employees.  In this case it is college professors, but one could easily see a comparable thing happening with a publicly funded charity.  It is a trend to be resisted.

HAWAII.
The amendments to the state’s charitable solicitation law have now been signed into law by the governor.  There are a number of changes, but the general theme is to provide the Office of the Attorney General with additional authority in its enforcement over charitable solicitation activities within the state.  The amendments also include the submission of IRS Form 990T to the Office of the Attorney General, and reduce some filing fees.

ILLINOIS.
According to the Chicago Tribune, charity poker games are all the rage.  The games are legal under the state’s law provided professionals are not involved.  However, a survey by the newspaper indicates a large degree of non-compliance which is now beginning to be addressed by state enforcement activities.

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The General Assembly of the state requires major museums to offer free days once a week throughout the term of the year.  New legislation has now been passed that will end the free ride for out-of-state visitors.  As further evidence of the tough economy, museums were successful in getting new legislation which allows them to charge out-of-state visitors to Chicago’s major museums, even on days when Illinois residents are allowed free entry.

INDIANA.
For good reason, House Bill 1390 seems to be dead.  The bill was introduced in January, but has been stalled in committee.  The bill provides for the necessity of a point-of-solicitation disclosure of administrative costs by certain charities.  The bill would appear to be directly in contrast to the mandates of the United States Supreme Court on several occasions.

KENTUCKY.
According to a published report Congressman Hal Rogers (R-KY) has helped to direct more than $36 million in federal funds since the year 2000 to a web of nonprofits he created in Kentucky.  The report asserts that Rogers’ family members, as well as current and former aids, donors and business associates have benefitted from the establishment and operation of these nonprofits.

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The Courier Journal wrote an article on the eve of the Kentucky Derby talking about how little money filters through to charities from major high dollar special events that take place throughout Louisville leading up to “Running for the Roses.”  In some cases as little as $5,000 was actually netted for the charitable purposes.

MAINE.
There is legislation pending to amend the charitable solicitation law.  There are a number of new provisions, although the bill has not yet been passed.  One of the more interesting provisions requires an applicant whose prior license was not renewed or was terminated and now seeks reinstatement to provide, along with the application, an annual fundraising activity report for the most recent calendar year in which the applicant conducted charitable solicitation activity within the United States.

Comment: This is peculiar, given that it is not limited to Maine.

The bill would also change the title of the agency to the “Office of Professional Occupation Regulation.”

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Another less likely proposal is H.B. 1151, which requires a professional solicitor who receives more than 25% of the solicited donations to disclose same to a prospective donor.

MONTANA.
As a result of a national media story, the Attorney General has announced that he will commence an inquiry into the use of charitable assets of a Bozeman international charity.  The charity has a history of providing schools for girls in Afghanistan and Pakistan.

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The most recent development in the Central Asia Institute matter is a class action lawsuit filed by three Montana donors.

NEVADA.
SB 99 would require certain grant writing services to register with the Director of the Department of Business and Industry.  The Director would publish a list of registered grant writing services on the Internet website maintained by the Director.  In addition, the bill requires grant writing services to provide certain statements to a buyer before the execution of a contract for grant writing services and further requires certain mandatory language to be contained in any contract for grant writing services.


NEW YORK.
The Attorney General announced plans to reform laws that he called “cumbersome” that burden charities in the state.

Comment: The focus of these changes will be the state’s nonprofit law which, at best, is difficult to work with.  We do not know at this time whether it will involve any modification of the state’s charitable solicitation laws.

 

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A lower court has denied a request by three animal welfare groups to reopen the case regarding the charitable trust originally established by Leona Helmsley for the care of animals.  Through previous court action some of the distributions were altered and now the animal groups believe they have not received a proportionate amount as intended.  An appeal of the lower court decision has been indicated.

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The Wall Street Journal reported that there is strong opposition from the city council to a proposal to charge charities a fee for trash removal.

OKLAHOMA.
Tulsa University has added a new program which allows students to add a certificate in nonprofit management to their degree through course work and volunteer requirements.  To obtain the certificate, students study how business concepts apply in a nonprofit context, and learn the basic elements of building and operating a nonprofit organization.

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The billionaire founder of the Hobby Lobby store chain has been sued by the founders of Feed the Children charity.  Just when you thought all the lawsuits that could have been filed have been filed, we learned there is one more.  The lawsuit alleges that David Green and his family improperly influenced the board of Feed the Children in an attempt for his family to take over the leadership of the charity.  The attorney for the Green family dismissed the lawsuit in unkind terms.

OREGON.
A Portland paper reported that a series of blue bins have popped up around Oregon labeled “Books for Charity.”  The paper reported, however, that charities may not truly be the beneficiary.  According to the paper’s investigation, the bins are run by a for-profit company which then donates some amount to nonprofits.

RHODE ISLAND.
The new mayor of Providence is following the lead of the mayor of Boston and targeting major tax-exempt hospitals and universities with a request to make partial payments in lieu of property tax.  The mayor claims the city will be in financial jeopardy without assistance from these major institutions.

TENNESSEE.
Last November a chancery court in Nashville ruled that Fisk University could sell a share of its art collection.  The Attorney General’s Office has filed an appeal with the court to challenge the ruling.  The Attorney General argues that by allowing the university to sell its collection in part other donors will be discouraged to give to Tennessee schools and museums for fear their wishes might be ignored.

WASHINGTON.
The proposed revisions to the state’s charitable solicitation law have passed both Houses and have been signed by the governor.  The new law will go into effect on July 22, 2011.  Some of the highlighted changes include the fact that while social security numbers and financial account information may still be required as part of a charity’s registration, that information will not be a matter of public record.  There is a new obligation on all registrants to advise the Office of the Secretary of State of any change in the information provided in the registration process within 30 days.  There is also a time limitation on the Office of the Secretary of State to approve registrations of 20 days.  Other changes include the necessity of providing more detailed information as part of the registration and reporting process.
Other

OPTIMISM FOR 2011.
According to a published report, Cygnus Applied Research, a Chicago fundraising consulting firm, released results of its survey of 3,500 donors as to their intention to make contributions in 2011.  According to the results, 79% of those surveyed expect to give at least what they gave in 2010 or more in 2011.  Fifty-nine percent said “a good reputation” was a major factor in their decision.