OCTOBER 2016

STATE LAW

 California

Stanford University has made a decision to discontinue phone-a-thons. The dilemma, of course, is the financial results versus the antagonism from some potential donors for the unsolicited calls.

Connecticut

The Connecticut Supreme Court overturned a $12 million verdict against the Boy Scouts of America. This was the largest verdict of its kind that involved alleged child molestation. A new trial has been ordered.

According to published reports, Yale University owns half of the real estate in New Haven, Connecticut. The city is struggling to find ways to claim income from the University in order to support city services.

Commentary: Similar situations exist in other jurisdictions principally in the Northeast where nonprofit organizations may have exemptions from sales and use and/or property taxes.

Minnesota

Nonprofits in the twin cities are finding that they must boost their pay to compete with for-profit businesses for qualified employees. The state raised the minimum wage to $9.50 per hour, but many are finding that in order to attract workers they have to pay closer to $15 per hour, and some of the smaller organizations cannot afford to match that rate.

Missouri

The Associated Press reports that Gubernatorial Candidate, Eric Greitens, has denied that his campaign used the donor file from a charity he founded to help veterans solicit for money in his quest to become the next governor of the state. Use of the charity donor file for political purposes is a potential violation of federal laws.

New Jersey

The state recently sent out a notice to remind fundraisers and fundraising consultants about the restrictions on raising money in the state on behalf of law enforcement organizations whose membership is restricted to past or current law enforcement officers. New Jersey has a unique law that prohibits the use of membership cards, decals, badges, and the like, in conjunction with said fundraising.

Commentary: The above information is only a summary of the requirements. For the specifics, see N.J.S.A. § 45:17A-32(c)(6).

Three years ago the city of Princeton, New Jersey, brought a claim against Princeton University to end its real estate tax exemption on the basis that it was engaged in numerous for-profit ventures. After three years of litigation, The Wall Street Journal reports there has been a settlement. The University will pay $18.2 million over the next six years to end the case. The ruling did not include a decision regarding whether the exemption was valid or invalid.

New York

The New York Attorney General’s charities bureau has sent a letter to the Trump Foundation ordering that it cease and desist all solicitations in the state until it is in compliance with New York laws requiring registration and accounting.

The Wall Street Journal reports that the Clinton Foundation amended its filings in the state of New York to comply with the need to report income and expenses in greater detail.

South Carolina

The Catawba Indian tribe has applied for a new high stakes bingo parlor license in North Charleston. Bingo is popular means of fundraising for local charities who are opposing the application.

Utah

A challenge was filed in 2008 by American Charities for reasonable fundraising regulation and a series of other plaintiffs challenging the requirement that consultants need to register in the state on the basis of a lack of minimum contacts. The court most recently ruled that the association did not have standing because each case would be fact-specific. Another consultant in the case would have standing. It now appears that after nearly nine years of litigation, this case may be ripe for a decision.

 West Virginia

Trial has been set for several Berkley County residents who are accused of operating a fraudulent charity and diverting millions of dollars to bank accounts and business interests instead of designated charitable organizations. Unless settlement is reached, the trial will begin on or about November 15, 2016. Each of the defendants is charged with 15 counts of aiding and abetting mail fraud and 18 counts of aiding and abetting money laundering.

OTHER MATTERS

 Congressional Legislation

Just prior to recess, two congressmen introduced HR 6195. The bill would allow organizations that are tax exempt under section 501(c)(3) to make statements that relate to political campaigns so long as they are being made in the ordinary course of carrying out their tax-exempt purpose.

Commentary: The language in this legislation is purposefully vague which invites all kinds of misuse, mistrust, and opposition.

FTC Reversal

A prior Staff Opinion Letter exempted SoundBoard technology from the prohibitions on delivering a recorded message contained in the Federal Telemarketing Sales Rule. After conducting several meetings, the staff for the FTC has signaled that they intend to reverse their opinion which would leave the technology only available for exempted activities. A formal Staff Opinion has not yet been rendered. The drafted opinion provided for a six month transition period. Industry sources are opposed to this reversal, and believe more study is required.

Internal Revenue Service

On September 30th the IRS issued its “Tax Exempt & Government Entities FY 2017 Work Plan.” In doing so, it also published compliance results for the fiscal year 2016 and reported that nearly 5000 examinations took place. The primary focus of the examinations in the tax-exempt area dealt with operational issues and employment tax issues. In the briefing on the new work plan, the agency stressed that it strives to become more efficient as its resources continue to be diminished. It also reported that 28 organizations had their tax-exempt status revoked for not operating for a tax-exempt purpose while only six were revoked on the basis of inurement.

Postal Rates Going Up?

The Alliance of Nonprofit Mailers predicts that during the month of October, the postal service will announce changes in pricing. In its latest report, the agency said, “we expect, but do not know for sure, that the Postal Service will strive to avoid rate shock in 2017. They will, however, continue to make structural changes in the rates that they think necessary.”