NOVEMBER 2017

STATE LAW

 California

The City of Oakland was sued by a recycling company that operated unattended donation collection boxes. In this case, the for-profit company owned the boxes but licensed the use of the logo of a charitable organization in return for a royalty payment. The City of Oakland ordinance made no distinction between for-profit receptacles and those operated by charitable organizations. The Ninth Circuit Court of Appeals held that the restrictions imposed by the City of Oakland were not content-based and the ordinance survived the constitutional challenge. The company has filed a writ of certiorari (a request for review) to the United States Supreme Court that cites cases that were won by our firm as a basis for the granting of the hearing. If the Supreme Court should decide to hear the case, it will be an important First Amendment case.

Illinois

The Attorney General announced a settlement led by Illinois and 23 other states to dissolve a charity known as VietNow which also operated under the name Veterans Now. The charity is being required to stop all operations and its assets are being distributed to other major veteran organizations. The allegations against the organization include its inability or refusal to use its resources in a proper manner.

Editorial Note: This was the organization that, in part, was involved with the fundraiser that resulted in the 2003 United States Supreme Court case, Madigan v. Telemarketing Associates.

Iowa

The Quad-City golf tournament that started in 1971 has now raised a total of $93.57 million for charity. The year 2017 was a record year when $12.27 million was raised with the money being distributed to 521 charities and nonprofit agencies in the Quad-City area, including a Riverbend food bank in Davenport and a children’s religious camp.

Editorial Note: This may be one of the largest golf tournament charity events in the country.

Massachusetts

The Commonwealth began offering specialty license plates in 1994 and they have brought in more than $96 million for various nonprofit groups according to a published report. The state reported that there are now 28 specialty license plates which raise money for a diverse array of causes. The specialty plates cost an additional $40 above normal registration fees. Of that amount, the state reports that in most cases $28 of the $40 goes to the associated charity or nonprofit organization.

The Berkshire Museum of Art announced it was intending to sell a portion of its collection to fund future operations. A suit was filed by three of Norman Rockwell’s sons to stop the sale of his art. Thereafter, the Attorney General entered the fray. An injunction against the sale was granted and now the matter is on appeal.

Puerto Rico

The tax code has been amended so that U.S. tax exemption is no longer recognized. In order to provide a deduction to a Puerto Rican donor, a charity must now qualify for tax exemption under the Puerto Rico Tax Code. An application must be submitted and approved. Our firm has successfully applied on behalf of a U.S. charity.

Tennessee

This is just a reminder that fundraising counsel doing business in the state are no longer required to register annually with the Division of Charitable Solicitation and no longer required to forward copies of contracts with charities or make any annual filings.

Wisconsin

In October, a United States district court declared § 107(2) of the Internal Revenue Code as unconstitutional. This is a provision that allows Ministers of the Gospel to exclude compensation designated as a housing allowance from their income. Using this section, churches have been able to provide tax free housing to their ordained ministers. According to a published report, government foregoes as much as $800 million in revenue, per year, as a result of the provision. Keep in mind that this is only a district court opinion and will, no doubt, be appealed and may someday reach the United States Supreme Court.

 

OTHER NEWS

Editorial on Tax Reform

At the time of publication, both the House and Senate are working on tax reform proposals. In both cases, there are approaches of concern. If tax reform is passed by Congress, the charitable community will suffer in some measurable part. If the estate tax exemption is raised from $5 million to $10 million as proposed, there will be far less incentive to consider bequests to charitable organizations during end-of-life planning. This is a critical time because of the aging population from the Baby Boomers. Another proposal is to do away with certain itemized tax deductions. If real estate taxes and mortgage interest becomes nondeductible, for example, then far fewer people will itemize their taxes. Those who itemize are far more likely to make charitable contributions than those who do not. The Senate proposal contains even more concerning provisions. It would change Section 512(b) of the Internal Revenue Code which exempts royalty income gained from a licensing arrangement by a charitable organization from unrelated business income tax. The effect of the change would be to tax income charities receive from commercial co-venture agreements with for-profit entities. Not only would the charities lose a measure of their income, in many instances they would also have to go to the additional expense of filing a 990T. Now is the time for the charitable community to be heard. Contact your Congressman and Senator and let them know of your concerns.

Firm News

Our law firm celebrated the 40th anniversary of its founding with a cocktail reception. The event was held at the Webster House, a nonprofit restored school from 1900. The event was attended by more than 100 guests.

Soundboard Appeal

Karen Donnelly, a partner with our firm, presented oral argument in an appeal before the United States Court of Appeals for the District of Columbia Circuit. The issue was the reversal of an FTC staff opinion that previously opined that Soundboard technology was not a prohibited “robocall.” This case has a significant First Amendment issue for tax exempt organizations.

The United Kingdom

The new director of the Charity Commission for England and Wales is going to ask the ministers to approve of a consultation setting out options for a levy early next year. She is seeking legal powers for a £7,000,000 ($9,266,880.00) per year levy to force charities to pay for a big expansion of the Commission’s services.

TCPA Decision

The United States District Court for the Northern District of Illinois granted summary judgment in favor of a professional fundraiser who had been sued by a consumer alleging violation of the Telephone Consumer Protection Act (TCPA). The consumer alleged a violation of the TCPA as a result of frequent calling by the telefunding agency and the charities while he was on the National Do-Not-Call Registry. The court ruling affirmed the exemption to calls made by or on behalf of tax exempt organizations from the National Do-Not-Call Registry.