Federal
INTERNAL REVENUE SERVICE (IRS).
The annual adjustment for low-cost articles has been made. The IRS advises that a charity can tell a donor the gifts are fully deductible if a donor gives $48 or more and received a premium worth $9.60, or less. Also released was donation information from the last available year, which was 2007. The average contribution claimed by taxpayers was $4,708, which was an increase over the previous year. (Editorial Note: This figure will go down in 2008 and 2009).
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At a recent conference, Chief Counsel of the IRS, William J. Wilkins, said that Congress should be aware of the high number of organizations that are being granted tax-exempt status. He said Congress should pay attention to the “phenomenon of nonprofits multiplying like rabbits.” He did not, however, specify any action that he would recommend.
UNITED STATES POSTAL SERVICE (USPS).
The USPS recently disclosed its preliminary financial information for November 2009. The number shows that the total operating revenue was $5.6 billion, which is 4.4% more than planned and 1% more than the same period in 2008. During the same period operating expenses were 3.4% less than the prior year.
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The Alliance of Nonprofit Mailers reported that the Postal Service’s Inspector General said the USPS has overpaid its Civil Service Retirement System pension fund by $75 billion. The Alliance said, “That means mailers have paid $75 billion more than necessary and the fund has apparently been used to pay the retirement costs of federal employees, not postal employees.”
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President Obama nominated Paul Stevens and Dennis J. Toner to be members of the Postal Service Board of Governors. They must now be confirmed by the Senate. The Board of Governors includes the Postmaster General, the Deputy Postmaster General and nine others.
State
ARIZONA
House Bill 2315 has been introduced that would put certain restrictions on attempts to raise money for veteran organizations in the state. The bill would require additional registration and disclosure requirements. The bill was introduced on January 14, 2010, and has been assigned to Committee. A similar piece of legislation was proposed in the 1998 session but did not pass.
CONNECTICUT
HB 5138 was introduced which proposes technical filing changes for charities, professional fundraisers, and fundraising consultants. The bill would delete the requirement that the state give notice of a filing deficiency in writing, presumably oral notice would be sufficient. With respect to extensions for filings, the bill removes the requirement that an extension must be granted, which begs the question as to whether the state will automatically grant extensions. The bill also removes the signature requirements for charity, professional fundraiser, and fundraising consultant applications and reports, and simply requires they must be certified as true and correct to the best of the person’s knowledge. The fact that the state added that notifications and material changes in information may be submitted in writing “or electronically” could be an indication of that state moving towards electronic filing.
IOWA
House Study Bill 687 is now in committee. If approved, it will be introduced as a bill. This Attorney General sponsored legislation would create an extensive charitable registration process, and confer additional authority on the Office of the Attorney General.
KANSAS
House Bill 2558 has been introduced to require additional disclosures by professional solicitors calling on behalf of charitable organizations. In addition to the normal disclosures, they would have to disclose the registration number as well as the name, address and telephone number of the charitable organization, and that a financial report is available from the Office of the Secretary of State. Legislation has also been introduced in the Senate and the House which would substantially overhaul the charitable solicitation law and give the office of the Attorney General additional authority.
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Legislators are reviewing current sales tax exemptions and are considering removing special treatment for churches and nonprofit organizations, among others. The House Taxation Committee is reviewing a bill that would remove $196 million in sales tax exemptions. The Kansas Advisory Council on Intergovernmental Relations, which proposed the repeal, indicates that the number of exemptions have tripled between 1985 and 2009to 96, and that the value of exemptions had grown from $3 billion in 2003 to $4.2 billion in 2009. It is unclear when the committee will send the bill to the House for debate.
MASSACHUSETTS
A spokesperson for Harvard University, one of the most well endowed institutions, is undergoing an IRS audit. (Editorial Note: Speculation leaves us to believe that part of the focus will be on the handling of the enormous endowment, and the use of its income to subsidize enrollment for needy students).
MICHIGAN
A charity has sued the estate of one of the owners of a former NBA Basketball franchise for failing to make a contingent gift. The estate is defending on the basis that the gift was contingent upon other matching gifts. Only $200,000 of the $5 million pledge has been paid to date. (Editorial Note: Arrangements such as these should be reduced to a well written agreement that contemplates the various contingencies and changes as to make the agreement legally enforceable).
MINNESOTA
H.B. 3017 and its Senate companion, S.B. 2413, would allow municipalities by resolution to permit municipal firefighters to solicit charitable contributions from motorists while on duty if (1) the solicitation is for a §501(c)(3) charity registered to solicit contributions; (2) the solicitation does not last longer than three days; and (3) the charity demonstrates proof of liability insurance.
MISSISSIPPI
If Senate Bill 6930 passes, organizations that are otherwise exempt from charitable solicitation registration in the state will lose that exemption if they engage in charitable bingo. The legislation would allow the Secretary of State to suspend, revoke or deny a charity registration if the charity violates the Mississippi charitable bingo law. As previously reported, this is a hot topic in the state.
NEW JERSEY
Should Assembly Bill 1127 pass, those who use unattended containers to solicit donations will be under a number of additional requirements. The legislation was in response to an investigation into the Associated Humane Societies. The bill creates additional reporting, record keeping and disclosure provisions for unattended containers. These are described as “donation containers” and refer to the deposit of proceeds. Presumably, it is not intended to cover unattended clothing bins.
NEW YORK
The Attorney General’s Office has filed a lawsuit against a nonprofit organization, founded by an immigration activist, claiming the organization is making false claims and over charging for bogus services. The lawsuit alleges that the organization is exploiting millions of dollars from innocent victims.
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The state senate majority leader is the subject of an investigation by the New York Attorney General’s Office concerning whether his use of the nonprofit health clinics he controlled acted as a source of income for his personal and political use. The investigation seeks to compel the senator to comply with a nearly five month old subpoena, and alleges the state has found evidence of potential fraud.
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The Attorney General’s Office has filed four lawsuits attempting to shut down four professional fundraising companies located in New York. Each of the companies are accused of various filing violations and alleged misrepresentations. The press release stated that the Attorney General hired undercover workers who were employed by the defendants.
PENNSYLVANIA
Former state senator Fumo has won a minor victory in his ongoing struggle with the Office of the Attorney General. Among the many allegations brought against him is the claim that he breached his fiduciary duty to the organization he had started, but later allegedly abused. The Attorney General relied upon the state’s nonprofit law, but the court held that the nonprofit law only applied to officers and directors, and since Fumo was neither, it could not be applied to him.
RHODE ISLAND
In another application of the Uniform Prudent Management of Institutional Funds Act, a court in Rhode Island has refused to change the terms of an endowment fund. This case involved a Rhode Island hospital which could not produce the original documents setting forth its purpose. The court noted that without being able to review the terms and conditions of the endowment, it could not rule that those terms and conditions were obsolete. The gift was made some 60 years ago. (Editorial Note: Again as noted under “Michigan,” endowments and restricted gifts should be reduced to written agreements to avoid problems that may not be foreseen).
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House Bill 7255 has been introduced that would require commercial co-venture registration and reporting. The law would also require posting a $10,000 bond. (Laws like these are counter productive and could dissuade businesses from sharing a portion of their profits with charities).
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S.B. 2274 would authorize the Office of the Adjutant General to administer monetary contributions from donors to charities on behalf of the Rhode Island National Guard that benefit state military programs including, but not limited to, the Rhode Island National Guard Family Relief Fund and other Rhode Island National Guard family readiness groups. The Adjutant General can only accept donations specifically made out to relevant charitable groups. The bill prohibits the Adjutant General from soliciting any contributions.
TEXAS
Our office brought a constitutional challenge against legislation in Texas that mandated a point-of-solicitation disclosure for compensated persons or firms conducting appeals for donated clothing and household goods on behalf of nonprofit organizations. The extended disclosure required certain financial information, and that information be printed on clothing bins in English and Spanish in a specified type size. The same restrictions did not apply to major charitable organizations that use their own employees to conduct their appeals, collection and disposal of these items. According to the legislative history, the legislation was either sponsored and/or endorsed by Goodwill Industries. We filed the lawsuit in Federal District Court for the Northern District of Texas on behalf of Texas-based nonprofit organizations. Goodwill Industries filed an amicus brief in support of the validity of the statute. The federal district court has now ruled that the disclosure of the financial information as challenged is unconstitutional. The court cited Riley and invalidated major portions of the statute. (Editorial Note: Laws governing the solicitation and distribution of used clothing and unwanted household items are present in approximately seven states) To learn more about this case contact either Errol Copilevitz or Bill Raney of this firm.
WEST VIRGINIA
House Bill 2548 has been introduced that would create a new Telephone Solicitation of Consumer Act. The problem with the bill is the narrow exemption for calls made by or on behalf of nonprofit organizations. The exemptions only apply if the call is made by a volunteer or an employee of the charitable organization, and even then, the point of solicitation includes the requirement of immediate disclosure of the caller’s first and last name, as well as the name, address and telephone number of the charitable organization. (Editorial Note: We urge opposition and question the constitutionality of the immediate disclosure requirement).
Other
DMA
The Direct Marketing Association has named Robert Alan as Interim President and CEO.
UNITED KINGDOM
The “Third Sector Online” reports that based upon a poll of more than 2,000 selected residents, charitable giving was down almost 10% from 2008.