Federal
INTERNAL REVENUE SERVICE (IRS).
The training materials on governance are now available on the website of the IRS. This is particularly relevant, given the revisions to the new IRS Form 990.
U.S. SUPREME COURT.
A nonprofit produced an anti-Hilary Clinton documentary. The question arose whether it was a form of political activity, subject to regulation by the Federal Election Commission, or simply an expression of freedom of speech by the organization. This case was previously argued before the Court, but was continued to the Fall Term. New oral arguments will take place on September 9, 2009.
State
ALABAMA.
The new electronic bingo law had its first session in court. The Walker County Sheriff asked that eight electronic bingo halls be shut down for operating twenty-four hours a day. In lieu thereof, the state court enjoined them from operating more than ten hours per day.
ARIZONA.
The Court of Appeals for the Ninth Circuit has affirmed a district court decision holding that the sale of annuities by the Mid-America Foundation was a form of “Ponzi” scheme, and as a result was subject to regulation as an investment contract under federal securities law.
CALIFORNIA.
A nonprofit working with the developmentally disabled, which is funded in large part by the state, had a $500,000 surplus. It has now been disclosed that the surplus was used to pay bonuses to 350 employees. Critics and elected officials argue the money should have been spent to protect services essential to people with autism and cerebral palsy, or be returned to the deficit ridden state.
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The Attorney General has expressed an interest in a charity bearing the name of the former Hewlett Packard CEO, Carly Fiorina. The issue is whether the charity is a private foundation and/or is required to register with the state. Representatives of the charity said it is not a private foundation and is not required to register. The Attorney General’s Office said it will conduct an inquiry to make a determination.
COLORADO.
Two individuals who registered fictitious charities and collected more than $95,000 from residents of the state have pleaded guilty to violating the Colorado Organized Crime Control Act and committing charities fraud, which are both felonies, and they could face up to sixteen years in prison.
FLORIDA.
Then state has become aggressive with imposing fines for late financial reports from fundraisers.
GEORGIA.
A state-based foundation went to the Sun Trust Bank for assistance with its investment program. The bank invested the funds ($8 million) in a complex type of security. The market for the securities evaporated and now the foundation is suing the bank. The foundation alleges that the bank represented the securities were a “safe conservative investment and cash equivalent that would produce a better return than money markets with minimal risk and no loss of liquidity.”
ILLINOIS.
A Chicago-based environmental group has come under fire as a result of its clothing bin program. According to a published report it uses only 1% on program activities according to its Form 990. The director of the organization took a different view maintaining that the agency publishing the criticism failed to consider that the organization is not a fundraising charity, but one that deals with providing environmental services and education. The donated clothing is sold and the funds are used for environmental projects.
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The Center for Age Prevention registered as an Illinois charity with the Attorney General’s Office to solicit donations in the state. Within a year the registration had lapsed and ultimately the Secretary of State dissolved the corporation. Nineteen years later the charity, which had continued to operate outside of Illinois, filed for reinstatement. Prior to ever perfecting reinstatement, it began to raise funds in Illinois on interactive websites and with advertisements in state newspapers. Now the Attorney General has sued the organization claiming information on its application for reinstatement was incorrect and for soliciting without being registered. (Illinois v. Center for Age Prevention).
MASSACHUSETTS.
Licensed games of chance must pay a designated charity 35% of the gross income received. The money has become substantial through the operation of “poker rooms.” Now the state is looking at the possibility of legalizing slot machines, which would create additional revenues for charitable organizations in the state.
MINNESOTA.
A Muslim Congressman’s (the only Muslim in Congress) pilgrimage to Mecca was funded by an Islamic charity. He categorized the trip as a religious mission in spite of criticism.
MISSOURI.
According to a report from the Kansas City Community Foundation, giving in Kansas City is doing well. The report indicates that between 1997 and 2007, individual giving increased by a whopping 128%, as compared to the national average of only 30%.
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The Court of Appeals for the Eighth Circuit has affirmed a trial court decision granting a permanent injunction and restitution against three individuals who registered a series of fictitious names and collected money for a veterans’ charity that did not exist.
NEW JERSEY.
The state has sent letters to registered charities using professional fundraisers, indicating that the state will be supplementing its online information by posting additional information on its website concerning campaigns conducted between January 2008 and June 2009.
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In a continuing and disturbing pattern, charities were implicated in the massive New Jersey crackdown on political corruption. The FBI reported that a number of religious-based charities were used to launder illegal income from several different sources.
NEW YORK.
Assembly Bill 812 provides options for the disposition of unused campaign funds. The law parallels the Federal Election Commission requirements, which provide for excess funds to be donated to charitable organizations or organizations that meet the qualifications of a § 501(c)(3) organization.
PENNSYLVANIA.
The Philadelphia Inquirer reported that “Citizens Alliance for Better Neighborhoods,” a south Philadelphia nonprofit established by a former state senator, has now reconstituted itself as a victim of fraud by the former senator and its former executive director. The organization is seeking restitution, including $2.1 million spent in the unsuccessful defense of the executive director in a criminal prosecution.
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The state ban on smoking in public places includes an exception for fundraisers conducted by charitable organizations under limited circumstances.
TEXAS.
A combination of community foundations and the Center for Nonprofit Management have created a website that profiles more than 400 north Texas nonprofit groups. It is hoped that individuals will be able to find organizations which fit their interests as to encourage their support.
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A constitutional challenge will be filed by our firm, challenging the various disclosure provisions in a new law pertaining to donated clothing and household goods.
WISCONSIN.
Senate Bill 31, which will allow charities to tap into their endowments, has been signed into law by the governor. Until now, most organizations were barred from spending from an endowment fund when the value dipped below the historical dollar amount - the original endowment. In the past they could spend interest, dividends or appreciation. The majority of nonprofits in Wisconsin favor the new law which, in effect, will allow them to invade the corpus of their endowments.
Other
ASSET ALLOCATION.
According to a recent survey by SEI’s Institutional Group, nonprofits are, at a significant rate, changing how they allocate their invested assets in recognition of the difficult economic times and the market’s volatility. Among the findings were that 75% of American nonprofits changed their ratio of allocations, and that 81% of the organizations surveyed said they had a loss of assets approaching 20% over the past year.
ESTATE OF MICHAEL JACKSON. The estate of the late singer is expected to generate millions of dollars over the next several years. The good news for charities is that according to reports, the trust may distribute as much as 20% of the gross income to the many charitable causes supported by Michael Jackson during his life time.
MSN.MONEY.
According to a blog on this website, Wal-Mart is now copying two of the most popular girl scout cookies. Apparently, the company is testing the knock offs in a limited release under the “Great Value” brand.
NEW YORK TIMES.
According to the New York Times, a trade association retained a lobbying firm in Washington, DC to oppose climate-change legislation. One of the tactics used was to send fake letters from non-existent charitable organizations to congresspersons. The lobbying firm said they fired the individual who came up with the scheme. (Good thinking).
RED CROSS DEFICIT.
ccording to the Washington Post, the American Red Cross has been able to reduce its deficit by nearly three-fourths. Gail McGovern, President and Chief Executive of the Red Cross, announced that the remaining deficit has been cut to $50 million from more than $209 million a year ago.
OTHER COUNTRIES.
CANADA.
New, far sweeping rules have been issued by the Charities Directorate, which is part of The Canada Revenue Agency, dealing with point-of-solicitation representations as well as the cost of fundraising. According to the Ottawa Star, investigations disclosed dozens of cases of charities lying to donors about how much of their donations go to good works, and about what their charity does. Most interestingly, the new regulations include presumptions concerning the cost of fundraising. Whether this will be the source of a challenge remains to be seen. For more information concerning the new regulations contact either Errol Copilevitz or Greg Lam of this firm.
INTERNATIONAL GIVING.
The “Third Sector” has published the results of a survey conducted by a social entrepreneur of more than ten thousand people in sixteen countries. The result found that individuals in Great Britain were more likely to give to charity than any other nation. More than 80% of those polled from Britain gave a gift to a charity in the preceding twelve months. In second place was Canada with 77%.
UNITED KINGDOM.
Golfer Colin Montgomerie made a claim for a refund from the Roy Castle Lung Foundation for approximately $270,000, which was raised at his wedding last year, after he asked his guests to give money instead of presents. The funds were supposed to go to building a cancer center in Glasgow to honor his mother. The Foundation decided not to go ahead with building and refused to return the money. The Charity Commission ruled in Colin Montgomerie’s favor, but the money has yet to be returned.