In this issue:
Federal
INTERNAL REVENUE SERVICE (IRS).
Speaking in late June at Georgetown’s conference on tax exempt organizations, Sarah Hull Ingram, Commissioner of Tax Exempt and Government Entities, made it clear the IRS would continue its current push to promote good governance. She said, in part, AWhile both state regulation and sector regulation are important. . .they do not get the IRS off the hook. ( To read Ms. Ingram’s full remarks go to the IRS website at: http://www.irs.gov/charities).
UNITED STATES POSTAL SERVICE (USPS).
The Alliance of Nonprofit Mailers reported that a Gallup Poll indicated that the public is supportive of the postal service solving its financial problems. Nearly two-thirds of those polled supported the concept of reducing delivery days, as well as reducing postal operations to five days a week. Ninety-five percent of those responding affirmed the importance of maintaining the USPS.
State
ALABAMA.
Birmingham’s new ordinance allowing bingo, and some cases Abig money A bingo-type games, is now in effect and the city is being deluged with applications for permits. The application process includes an opportunity to seek a permit for more than one kind of activity. Apparently, there can be up to 500 electronic machines in a licensed facility.
CALIFORNIA.
Assembly Bill 918 has been modified to increase the amount of disclosures that must be displayed on collection boxes and bins for salvageable personal property. In addition to the disclosures, there must also be a written consent form from the owner or lessee of the property that complies with certain mandated provisions.
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This state is one of the very few that allows actual raffles. Prizes are unlimited, but there are certain criteria which must be met, including the application and the receipt of a raffle license. Recently, The Ronald McDonald House charities of San Diego announced the winner of $1.3 million in a raffle contest. In this case, the San Diego Union Tribune reported that the organization’s paperwork was not in place, but was allowed to cure by subsequent action. For details on California-based raffles, please contact our firm.
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State charitable organizations that are depending upon state financing may now be receiving IOUs in lieu of cash. A financial emergency was declared in California on July 1, 2009 after the legislature failed to agree on a budget.
DELAWARE.
H.B. 248 has been introduced that would create registration requirements for charities, professional fundraisers and fundraising counsel. Delaware is one of the few states remaining which does not have some form of registration.
GEORGIA.
According to a study conducted by the Center of Philanthropy at Indiana University, Georgia individuals, foundations and corporations donated $6.7 billion in 2007. Atlanta households gave more than the statewide average, contributing an average of $2,492 per household. The study said 55% went to religious causes, followed by public society benefit organizations.
ILLINOIS.
A doctor who was involved in the corruption investigation of the former governor of the state was sentenced to eighteen months incarceration for hiding $3 million of income. The source of the money was from a charitable organization for which the doctor gave promissory notes. The notes were then sold to a foreign business man who forgave them as a favor.
INDIANA.
The publication, Indiana Gives, issued by the Center of Philanthropy, Indiana University, said the state’s individual charitable giving has not kept pace with inflation.
MINNESOTA.
The state’s charitable organization registration statement and annual report forms have been combined into one form. The legislature has also amended the Minnesota statutes, raising the audit threshold from $350,000 to $750,000. Also, extension requests should be made electronically.
MISSOURI.
The Department of Revenue has issued a ruling that a nonprofit’s special event entertainment ticket sales are subject to sales tax because the shows compete with other commercial entertainment venues and are not solely a charitable function. (In contrast, see Indiana).
NEW YORK.
After a surrogate court judge ruled in February that trustees for the Leona M. and Harry B. Helmsley Charitable Trust had sole authority to decide which charities benefitted from the Trust, distributions were made in late June. The estate distributed 53 charitable grants, the bulk of which went to New York City hospitals for medical research. Initially, all of the funds were to go to dog-related organizations. Instead, only $1 million went to animal and dog charities, while $136 million went to medical charities, as reported by the Associated Press.
OHIO.
The Pincham Initiative Resource Center in Youngstown has turned down proceeds generated from a special event. Youngstown hosted its second annual pub crawl for revelers who wanted to get a jump start on the holiday. Money generated was to go to the organization; however, representatives of the organization said while they appreciated the gesture they would not be accepting donations from an event that revolved around alcohol.
RHODE ISLAND.
As of July 1, 2009, filing fees will increase. The fees for charities will go from $75 to $90. The fees for fundraisers and fundraising counsel will go from $200 to $240.
TEXAS.
Excessive compensation and failure to follow the bylaws of a foundation have resulted in an appellate court affirming a jury verdict ordering a private foundation executive to repay what the court determined to be excessive compensation. Salary increases were given without board review. In an unusual twist, the court held that the payment of unreasonable compensation was a violation of public policy. (Yeckel v. Abbott, Texas Court of Appeals, 3rd District).
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The subsequent direction of trusts and foundations was addressed by a new Texas law. The effect of the law is to ensure that donor intent is followed in what is known as Aorphan trusts.@ The new law requires judicial approval involving the attempt of an institution to move a trust out of state once the founder has passed away.
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Unless otherwise challenged, S.B. 776 will go into effect on September 1, 2009. The new Act will regulate the appeal for household goods by professionals working with charities. There are numerous point-of-solicitation disclosures that present substantial First Amendment concerns. (Our firm is reviewing the law for a possible constitutional challenge).
VIRGINIA.
The Fourth Circuit Court of Appeals has upheld the right of government to execute a search warrant based in part upon information found in a nonprofit’s Form 990. The case involves suspected terrorism. (Unus v. Cane, No. 072191).
WEST VIRGINIA.
Thrift stores operated in the state will be exempt from sales and use tax, so long as they have annual revenue from the sale of same of less than $40,000.
Other
AUSTRALIA.
A major fraud investigation has been initiated to examine the records of the Cancer Bowel Research Association, after being alerted to certain financial irregularities. The focus appears to be on remuneration and other unreported benefits for principals in the organization. The executive director, who seems to be at the center of the investigation, also employs his wife and her brother, as well as doing business with related parties. (Editorial Note: All of this seems vaguely familiar).
CANADA.
The Canada Revenue Agency has issued new controversial rules on charitable fundraising. More details will appear next month. Please contact Errol Copilevitz or Greg Lam of this firm if you have any questions.
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The Shrine Circus, complete with its animal and human performers will be able to perform in Newmarket in Ontario. Previously, the town council had prohibited the performance of animals in a circus. This was reversed when challenged in court, which ruled that no municipality had the legal authority to ban such performances.
RUSSIA.
New legislation has been proposed that would ease restrictions for about a third of Russia’s non-governmental nonprofit organizations according to a report in the New York Times. The relaxation of restrictions, however, would not apply to any group that receives foreign financing.
COLLEGIATE SPORTS GETS A PASS.
The Congressional Budget Office issued a report in May concerning the commercialization of collegiate athletic activities. The report primarily focuses on the two big revenue sports, to-wit: football and basketball. The conclusion of the report is that taxing the commercialized aspects of the athletic activities would not raise much revenue, A. . .because schools could shift revenue or costs between taxed and untaxed departments. . .leaving only the most commercial teams to be affected by the taxes on merchandising.@
COURT DECISION OF NOTE.
A recent decision by the United States District Court for the Southern District of New York may be a cause for concern. In the case a major donor to The Ronald Reagan Presidential Foundation sued the Foundation over the alleged misuse of his contributions. The Foundation defended by saying that it did not Ado business@ in the state of New York and that any such suit had to be brought in California. The Foundation has no employees or physical presence in the state of New York. The court, however, held that the donor did have standing to bring the suit in New York because the Foundation was registered as required in order to solicit in the state, and that social functions took place in New York where volunteers solicited donations. This led the court to conclude that in this instance, the Foundation had availed itself of the privileges of the state of New York sufficiently to grant jurisdiction in its courts over the subject matter. (Editorial Note: This case could be a bad precedent that would allow donors anywhere to file suit where they are domiciled against national charities over dissatisfaction as to the use of funds. Most likely this case will be appealed, and in any event the peculiar facts of the case may be its only saving grace).
DMA NONPROFIT FEDERATION.
This important trade association announced that effective July 1, 2009, Susan M. Loth, Director of Fundraising, Disabled American Veterans, will serve as chairperson and Geoffrey Peters, President, CDR Fundraising Group, will serve as vice chairman of the Federation’s Advisory Council. In additional Kyla Shawyer, Senior Vice President, Response Marketing & Development, Operation Smile, Karen Gleason, Mass Market CRM Lead, American Cancer Society, and Ken Dawson of InfoCision Management Corporation, have been named as new members to the Advisory Council.
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FIRM NEWS.
Partner, Mac Canter, has a new book titled The Weldon File, which will be published this month. It has received excellent reviews. For more information go to: http://www.maccanter.com/.