Federal
CONGRESS.
Representative Phil Hare (D-IL) has introduced H.R. 4069, which would allow S corporations to take deductions for charitable contributions of inventory. The bill, if passed, would amend Section 170(e)(3)(A) of the Internal Revenue Code.
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Senate Bill 608 would carve out certain exceptions to the Consumer Product Safety Improvement Act of 2008. The legislation has unintended results by restricting the resale of children’s clothing and toys. As a result of new restrictions, families that depend upon resellers (thrift stores) were threatened with the loss of a source of economical clothing. The Consumer Product Safety Commission, in January 2009, exempted clothing made out of natural materials, and now Senate Bill 608 would make the exemption permanent. Charities seeking donated clothing and/or operating thrift stores will be directly affected if this legislation is not ultimately passed. (For information contact Errol Copilevitz at: .(JavaScript must be enabled to view this email address)
ESTATE TAX.
A bill has been introduced, and it is expected to pass, whereby the estate tax provisions of the Internal Revenue Code are suspended in 2010 and will be reinstated in 2011. Several trade organizations are urging law makers to keep the 45% rate and the $3.5 million exemption. It is generally believed that the presence of higher estate tax promotes charitable giving.
INTERNAL REVENUE SERVICE (IRS).
The standard mileage rate for 2010 will be 50 cents per mile for business miles driven. This is a slight reduction from last year.
U.S. SENATE.
Senate Finance Committee member, Charles Schumer (D-NY), has introduced Senate Bill 2794, which would provide tax incentives for the cost associated with donations of wild game meat.
State
ALABAMA.
The phenomena of bingo halls continues to grow. According to the New York Times, a strange alliance had developed between small town officials, gambling outfits and Alabama-based charities. These games were originally commenced on Indian reservation land, but have spread into small communities which have carved out exceptions when charities are the beneficiaries.
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The Houston County Commission (Dothan) has created regulations that require all “net revenue” from electronic bingo to be set aside for charitable or educational distribution. The debate now is just how the term will be defined. The intent is to prohibit the payment of consulting fees, compensation or salaries, but the reality is that it is possible to structure licensing and other forms of agreements that will accomplish indirectly that which cannot be done directly.
INDIANA.
In order to avoid a “sunset” provision on rules, the state has passed new legislation re-adopting the rules that govern the supervision of fundraising and fundraising consultants.
IOWA.
The Iowa Attorney General has recommended that the state amend its charitable solicitation law to require charities to register in the state. Registration fees will be $25.00 for charities with an income of less than $100,000 per year to $500 for charities with an income of $5,000,000 or more. The bill would also require direct mail firms to register as a “commercial fundraiser” and pay $100 per year. The bill is expected to be introduced in the next session of the legislator after the first of the year. The Attorney General is sponsoring the bill, and notes that Iowa is only one of ten states that does not require charities to register. The bill has been patterned on those existing in Hawaii and Colorado. In the conclusion of the supporting document offered by the Attorney General, he states, “Once the financial information is made public, the results should actually increase contributions to the best managed charities, and facilitate a more open giving environment.”
MAINE.
Churches which allegedly supported the veto of the right of same sex marriage in that state are being challenged by a same sex marriage advocacy group that is encouraging its supporters to report the churches to the Internal Revenue Service. (Editorial Note: Churches are in the same classification as charities as Section 501(c)(3) organizations, and they are generally prohibited from intervening in political campaigns. However, this limitation does not prohibit them from engaging in advocacy for or against issues).
MARYLAND.
The Mayor of Baltimore has been convicted of fraud. Unfortunately, the fraud centered around the misuse of cards collected for the city’s poor. She was found guilty of using the cards for her own personal use instead for the charitable organizations for which they were intended.
MINNESOTA.
As a result of an internet promotion called “Give To The Max Day,” Minnesota residents donated $14 million to charities in just twenty-four hours. According to the published report, fifty nonprofits raised more than $40,000 each through the on-line fundraising blitz, which took place on a designated website. Presumably, the primary beneficiaries were locally-based organizations.
MISSISSIPPI.
The Secretary of State has called for the Fine Arts Institute of Mississippi to be closed because the organization committed acts of fraud when officials provided false information during an audit by the Office of the Secretary of State. This follows a ruling by the Gaming Commission earlier in November revoking the charity’s bingo license.
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The state has introduced the use of a new annual financial report form, titled Form FS. It includes questions concerning allocations made between program service, fundraising, and management and general.
NEW YORK.
According to the latest report from the New York Attorney General’s Office regarding telemarketing in the state, in 2008 telemarketers raised $204.8 million on behalf of forty-four charities. Of that amount the charities received, on average, 39.5% of the money. (Editorial Note: This report is pejoratively titled “Pennies for Charity, Where Your Money Goes.” It is highly critical of telemarketing activities. The reality, as most understand, is that telemarketing is interactive and generally risk free. In spite of numerous U.S. Supreme Court holdings, these types of reports continue to ignore the overall benefit of fundraising activities when conducted in a proper manner.)
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The state has filed a lawsuit against the United Homeless Organization, which claims to represent the homeless in the City of New York. In addition to alleging the use of organizational funds for personal purposes, the suit also alleges abuse of the tax-exempt status of the organization. Another unusual allegation is that the group licensed its name, trademark and logo on such things a coin depository jugs for a set fee, which allowed the licensee to retain all of the money above the fee amount. The suit was filed in state court in Manhattan and seeks a court order barring the organization from continuing to solicit, as well as a freeze on its assets.
NORTH CAROLINA.
The state is apparently going through a review of organizations which are otherwise exempt from registration. Mailings have been sent to a number of these organizations with an extensive questionnaire for the state to reevaluate their status as exempt.
OHIO.
The City of Cleveland recently received a report prepared by a consultant with recommendations on how to address its budgetary problems. The most controversial provision being that the city charge an annual fee to tax-exempt institutions. The report speculates that the fee could generate at least $5 million per year. Universities, museums and tax-exempt hospitals would be effected the most.
PENNSYLVANIA.
The City of Pittsburgh is home to 100,000 college students who are using city services without contributing to the local tax base. As a result, the city has come up with a proposal to levy a 1% tax on tuition. Opponents note that many students receive partial scholarship help and do not have the additional resources necessary to meet an increased burden on education.
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Two state legislators are introducing legislation that would impose fees on tax-exempt property owners, such as universities and hospitals. The proposal would exempt the first 50,000 square feet of nonprofit buildings, but the property would be assessed $100 for each additional 1,000 square feet of floor space. A similar measure introduced last year expired.
VIRGINIA.
The Virginia Department of Agriculture and Consumer Services sent out an official caution, noting that a foundation supposedly headed by the now famous “Gate Crashers” was not registered nor granted appropriate tax-exempt status. In the spring of this year, the organization hosted a polo match between the United States and Italy that featured performances by entertainers, all to benefit the Journey for the Cure Foundation, which was run by Salahi to raise money for childhood diseases.
WEST VIRGINIA.
The state’s Ethics Commission will again consider new restrictions on public safety fundraising at a hearing scheduled for January 14, 2010.
WISCONSIN.
On December 2, 2009, the State Supreme Court heard oral argument in the matter of Milwaukee Symphony v. The Department of Revenue. The issue is whether the admission receipts on the orchestra’s ticket sales are subject to the state’s tax on “sales of admissions to amusement, athletic, entertainment, or recreational events.” The symphony is incorporated in Wisconsin as a nonprofit corporation and enjoys tax-exempt status as a charity. (Editorial Note: This will be an interesting case to follow as government becomes more and more aggressive in seeking new sources of income).
Other
ALLIANCE OF NONPROFIT MAILERS.
This important trade organization gave the “Board of Directors Award” on December 1st to Postmaster General Jack Potter for his efforts in keeping postal rates stable in 2010.
BETTER BUSINESS BUREAU.
This important “watchdog” agency is the first to realize the increasing challenge of fundraising that is now being faced by the industry. The agency has modified its standard on allowable fundraising cost from 35% of contributions to 45% for fiscal years ending in 2008 through 2010.
HOLIDAY GIVING.
According to a survey commissioned by World Vision, giving over the holidays is expected to be down. Only 38% of American said they are more likely to give a charitable gift as a holiday present, as compared to 49% last year. The survey was conducted by Harris Interactive.
CANADA.
A controversial paper has been released by the C.D. Howe Institute proposing that the regulation of charities in Canada be taken away from Canada Revenue Agency and replaced with a “Charities Council” modeled somewhat after the Charities Commission in the U.K. One argument made in support is that the regulation of charities is directly at odds with the CRA’s mandate to protect the tax base because the nature of charities is to reduce the tax base through donation credits.
RUSSIA.
The New York Times reported that Russian President Medvedev is liberalizing the restrictions as to encourage a growth of the nonprofit sector in his country. He was quoted as saying, “Our main goal is to support the authority of nonprofit groups in society, and the attraction to this sector of more talented people and philanthropic resources.”
UNITED KINGDOM.
The publication, Third Sector, reporting a study conducted by Cass Business School, said a recommendation was made that the government pass a rule forcing grant-making foundations to give away at least 5% of their wealth each year. The report speculates that the charitable sector would receive up to £1,000,000 more in grants each year if such a rule was currently in place.