Federal
INTERNAL REVENUE SERVICE (IRS)
The IRS announced its annual changes affecting charitable deductions when charities provide low-cost premiums to contributors in fundraising campaigns. The IRS said a charity can now tell a donor that gifts are fully deductible if the donor gave $48 or more and received a premium worth $9.60 or less. The other measurement is whether the premium is worth more than 2% of the amount of the contribution, or $96, whichever is less.
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Rev. Proc 2010-9 and 2010-2 provide guidance on procedures for the issuance of determination letters and rulings on the exempt status under Section 501. They also deal with modification and revocation changes, which became effective January 11, 2009.
State
ARIZONA
HB 2037 was introduced in to the January session of the Arizona Legislature containing changes to the Arizona Solicitation of Funds for Charitable Purposes Act. There are two noteworthy changes. First, the Act currently requires charities to renew in September of each year regardless of when the organization filed an initial registration. This resulted in impractical and duplicative filings, e.g., if a filing was done in July a renewal would have to be submitted in September. The proposed bill would rectify this problem requiring filing in September following the calendar year an initial registration was filed. The second change relates to late fees. The proposed bill would allow the Secretary of State to impose a $25 late fee without allowing for a 30 day grace period following notification, as is currently required in the statute.
CALIFORNIA
Organizations have started receiving letters from the state noting delinquency in filing. The Office of the Attorney General is now going back to 2003 to determine whether there are deficiencies in previous filings, and if so, notifying charities that they are delinquent. In some cases, as noted, some of the missing forms are 6 or 7 years old. The California statutes prohibit fundraisers from raising money on behalf of charitable organizations if their registrations are not in compliance. If you are a charitable organization and you are concerned about your status with California, you can go to the state’s website and check out your own registration status.
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A federal appeals court in Sacramento has ruled that California charities cannot use electronic bingo machines. The ruling reverses a lower court ruling granting a preliminary injunction against the prohibited state gambling regulators and Sacramento County from enforcing the ban. The ruling does not affect the ability of charities to conduct “live call” bingo in the state.
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According to a report in the San Francisco Chronicle, The Yosemite Association and the Yosemite Fund , two nonprofit organizations that provide private financial support and educational programs in Yosemite National Park, have decided to merge.
IDAHO
A former Harvard professor, a candidate for the governorship, is focusing on the wide range of tax-exemptions available in the state. He is campaigning on a platform to give voters the opportunity to decide which, if any, of the tax exemptions should be maintained. The argument is that by narrowing the tax exemptions, the overall tax rate could be reduced.
MASSACHUSETTS
Last month the Attorney General’s Office issued its report on telefunding activities. The report noted there are 22,000 registered charities and 77 professional solicitors registered within the state. The total amount raised by professional solicitors was more than $291 million, with the charitable organizations receiving $120,672,00.
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According to the Boston Globe, the Boston Foundation mistakenly overstated the funds it manages on behalf of some 900 hundred donors by a total of $30 million this past summer. The discovery was made in a routine audit, and prompted a letter bearing the bad news to be sent to the donors. Authorities attributed the mistake to an accounting error.
MINNESOTA
According to a report published in the Star Tribune, some of the largest charitable foundations in the Twin City area have filed a lawsuit against Wells Fargo & Co., whereby the charities retained Wells Fargo to lend securities the charities own to Wall Street as an opportunity to earn some extra revenue. The lawsuit alleges that the bank violated the very conservative principles that bank’s top executives had preached publicly. Tens of millions of dollars are at stake, and the effect will be felt throughout the Twin City area by many charities, which rely on such foundations as the Minneapolis Foundation for grants.
NEW JERSEY
A.B. 1481 would exempt certain volunteer emergency service organization from paying registration filing fees for charitable solicitations. We expect the bill to pass.
NEW YORK
The Attorney General has obtained a court injunction ordering the United Homeless Organization to remove its sidewalk donation tables, pending the outcome of a lawsuit. The state has accused the organization of not being operated for tax-exempt purposes.
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A federal judge ordered $2 million to be split between five women’s charities in New York. These are some of the proceeds from a class action settlement brought against a number of modeling agencies for price fixing.
NORTH CAROLINA
The Secretary of State has issued a report indicating that charities licensed by the state collected about $42.6 million more in the fiscal year that ended in June 2008 than in the previous year.
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Polly Laubinger has left her position with the Solicitation Licensing Branch. No replacement has been named.
OHIO
The Ohio Attorney General announced the commencement of a financial fraud investigation against a northern Ohio homeless shelter. The inquiry arose as a result of questions concerning the shelter’s door-to-door solicitation.
OKLAHOMA
The struggle between Feed the Children and its founder, Larry Jones, continues to get worse and everyone is a loser. Jones sued the charity to get his job back and the charity has filed a counterclaim. New allegations include hiding pornography at the office, using charity staff for personal gain, as well as pocketing honorariums and travel money. This is, in many ways, a family dispute that is costing the family and the nonprofit community discomfort.
PENNSYLVANIA
In the December 2009 issue we reported that Pittsburgh had proposed levying a one percent tax on tuition payments to schools located in the city. According to a report in the Pittsburgh Post-Gazette, Mayor Luke Ravenstahl said they are abandoning the proposal in response to a pledge by nonprofit institutions to increase voluntary payments to put the city on a better financial basis.
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The Bureau of Trusts and Charitable Organizations has been without chief counsel for some time. That may be changing as former prosecutor, Steve Turner, may soon return to his old position.
SOUTH CAROLINA
The Charleston Salvation Army was the victim of a phony $25,000 check. Other local charities received bad checks from the same source, but had not cashed them. The Salvation Army used theirs for immediate supplies. Fortunately, donors in the area came to the rescue.
UTAH
A federal district court challenge brought by American Charities for Reasonable Fundraising Regulations and member fundraising consultants against the Director of the Utah Division of Consumer Protection, involving the requirement of registration by consultants which have no contact with the state goes forward. The state filed a motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. It was denied by the court. The issue in the case is simple. Can the state of Utah require a fundraising consultant, not located in the state of Utah and with no other contact with Utah, to register by the mere fact that it gives advice to a charity which solicits by direct mail for support in the state?
VERMONT
The Office of the Attorney General has issued a report titled, “Where Have All The Dollars Gone (2009)?,”which is described as an updated report on paid fundraising in Vermont for the period commencing July 1, 2006 through June 30, 2009. The report says that during this period 40 paid fundraisers initiated 676 campaigns in the state netting $8.4 million, with approximately two-thirds of that amount going to the cost of fundraising.
VIRGINIA
Like most states, Virginia requires a signed From 990 to be filed with the registration statement in order to make charitable appeals in the Commonwealth. Forms 990 are often signed electronically. If your organization’s Form 990 is signed electronically, Virginia will require an IRS acknowledgment of receipt. The Commonwealth requests that you black out the organization’s IRS PIN number prior to submitting the receipt. Additionally, Virginia charity regulators indicate that many Forms 990 have been submitted with responses to Part III, Statement of Program Service Accomplishments, that do not comply with the Instruction for Form 990 Return of Organization Exempt from Income Tax. The IRS instructions require program service accomplishments to be described through specific measurements such as clients served, days of care provided, number of sessions or events held, or publications issued. Virginia charity regulators caution that many organizations are not following the instructions and may be asked to file an amended 990 if they do not follow the instructions.
WEST VIRGINIA
HB 2120 would prohibit charities from soliciting contributions on public highways under the threat of criminal prosecution. This is part of the criminal code, not the charitable act.
Other
CHARITY GIFT CARDS
In December, the “watchdog” publication, Consumer Report, came out in opposition of the use of charity gift cards. It warned, “Avoid charity gift cards.” The report said that some charity gift cards charge as much $5.00 in handling fees, and went on to recommend that consumers write a check directly to their favorite charity.
FIRM NEWS
Errol Copilevitz spoke at a conference of nonprofit accountants and executives on the subject of the Uniform Prudent Management of Institutional Funds Act. This is a uniform law now enacted by a majority of the states.
GOODWILL SUES
Goodwill Industries International sued the owner of goodwill.com for alleged trademark infringement. The defendant purchased the name at an expired domain auction earlier in December 2009. As well as alleging trademark infringement, the suit also alleges unfair competition, violation of the Anti-Cyber Squatting and Protection Act, interference with prospective economic advantage, and unjust enrichment. Goodwill is seeking transfer of the domain name and economic damages. (Editorial Note: This case is not terribly dissimilar from the lawsuit we reported on in Nebraska in the October 2009 newsletter, in which this law firm represented the plaintiff and secured a major verdict over unjust enrichment and confusion over names).
CANADA
The Winter Olympics is scheduled to be held in Vancouver, B.C. in February, and the demand for housing is great. A nonprofit has been formed to accept listings at no charge of homes for rent. The only condition is that the owners of the homes must agree that if the homes are rented through the nonprofit, that they will donate one-half of the proceeds to support the homeless and the abused in Vancouver.
FRANCE
Six charities and their six leaders of American citizenship have been “indicted” for what is being called organized fraud by Parisian newspapers. According to the a published report, although these charities have raised tens of millions of Euros, investigators claim only a small portion of the money contributed has been used to serve the causes championed by the organizations. (Editorial Note: In most ways, this is about American organizations doing great quantities of direct mail and having high fundraising costs).