Fundraising & Nonprofit Report
The Fundraising & Nonprofit Report is published monthly. We give you up-to-date information about the most pressing legal issues related to fundraising and nonprofit organizations.
August 2010
In this issue:
- Unless changed, after December 31, 2011, organizations will be required to file a Form 1099 MISC for payments totaling $600 or more made to for-profit entities.
- Make no mistake the Iowa Attorney General will once again be seeking burdensome new legislation for charitable fundraising in the state.
- The Governor is expected to sign Senate Bill 2117 into law amending the charitable solicitation law.
Federal
INTERNAL REVENUE SERVICE (IRS).
According to BLOOMBERG, the IRS found in a survey sent to 400 colleges and universities that about one-third of those who responded were not filing forms detailing their taxable income, even though many of them operated businesses unrelated to teaching and research. The survey allegedly led to the audit of Harvard University and more than 30 other colleges.
* * * * *
Unless changed, after December 31, 2011, organizations will be required to file a Form 1099 MISC for payments totaling $600 or more made to for-profit entities. This enormous burden is now being given a second look by Congress and hopefully will be deleted. It comes about as a result of the health reform Act as an income producing measure.
SENATE FINANCE COMMITTEE.
The Committee has challenged the board of a major youth organization to account for its investments offshore and in private equity firms, while local affiliates throughout the nation are closing their doors due to lack of funding.
State
ALABAMA.
The state’s charitable bingo law is again coming under attack in this election year. One of the bingo casinos advertises how much it gives away to charities, but up until now has been able to keep its books and records separate. However, a federal lawsuit opened up the casinos’ books, which grossed more than $503 million over five years and donated less than 1% to the charities. Other casinos have similar experiences. Now political candidates are campaigning for a change in the law and more full disclosure.
CALIFORNIA.
Assembly Bill 918, requiring disclosures to be placed on unattended clothing bins has passed and is being signed into law. Unattended clothing bins operated by for-profit entities on behalf of nonprofits will be required to provide written disclosures as mandated by the statute. The statute further makes it clear that cities and counties can place more restrictive requirements on the bins. (Editorial Note: This is just another in a long stream of legislative proposals dealing with unattended clothing bins requiring point-of-solicitation disclosures.)
CONNECTICUT.
The New York Times reported that the Connecticut Attorney General has started an investigation involving two charities run by a local resident who formed the charities after his daughter died in 2009 of leukemia.
According to the article neither charity registered with the state, and there has been no accountability for the donations received. The investigation was commenced after the Times disclosed the individual at issue had a long legal history that included a number of lawsuits and investigations pertaining to financial misconduct.
FLORIDA.
According to published reports, Ruth Madoff, the wife of Bernie Madoff, is seeking redemption in south Florida where she now lives, by delivering meals to the home bound.
ILLINOIS.
The owner of storage facility is about to auction off the contents of seven units that were rented by former governor Rod Blagojevich for non-payment of the rental fees, which are more than a year past due. The storage owner has promised that the proceeds will go to Children’s Memorial Hospital. Among the items is a life-size statue of Elvis Presley.
* * * * *
The Chicago Tribune has run still another story about the dilemma in various suburbs about regulating roadway solicitation. A number of suburban areas have either restricted, or are looking at restricting, and/or requiring permits before allowing firemen and others to go into roadways to solicit.
IOWA.
Make no mistake the Iowa Attorney General will once again be seeking burdensome new legislation for charitable fundraising in the state. To give impetuous to the legislation, the office has stepped up its enforcement proceedings and has been involved with at least four separate fundraising companies over alleged misrepresentations. In the last session of the legislature, the Attorney General’s attempt to get new legislation was not successful, and he has vowed to try again.
MASSACHUSETTS.
The Governor is expected to sign Senate Bill 2117 into law amending the charitable solicitation law. There are a number of changes, including procedural safeguards for charities and fundraisers in the event of administrative registration deficiency. It also changes provisions applicable to commercial co-venturers. The law will also include significant fee increases charged all registrants. Once signed into law the bill will go into effect at the end of the year.
* * * * *
Long-time Assistant Attorney General Sandra Cardone has announced she is leaving the office on August 17, 2010. Her experience in the Division of Public Charities will be missed.
MISSOURI.
An appellate court upheld the jury decision denying the claim of a charitable organization in a malpractice action against its auditing firm. The essence of the allegation was that the auditing firm was negligent for not catching discrepancies in the organization’s gifts-in-kind accounting. The organization was sued by a state for filing inaccurate financial reports. The court, in part, pointed to the standard audit letters which make it clear that it is ultimately the responsibility of the organization for its financial statements and information provided. The alleged error in instructions was not found to be a harmful error.
NEW HAMPSHIRE.
The Attorney General’s Office has opened an investigation into the state chapter of the U.S. Navy Veterans’ Association after attorneys general in four other states have shut the organization down.
* * * * *
The Attorney General announced that he is investigating compensation among nonprofit hospital executives.
NEW YORK.
The New York Philharmonic’s tax returns showed a decline of $6 million, but nevertheless, its music director was paid $3.3 million in his final year. The Philharmonic also reported a net loss of assets of nearly $41 million as a result of the decline in value of its endowment.
* * * * *
By press time, the state may have joined the majority of other states in adopting the Uniform Prudent Management of Institutional Funds Act. The Act deals with circumstances that allow charities to use endowments under certain circumstances in a “prudent manner.” For information on UPMIFA, feel free to contact Errol Copilevitz of this law firm.
* * * * *
Legislation will soon go into effect that would limit the deductibility of charitable contributions for the state’s wealthiest taxpayers. Under a new legislative proposal, the deduction for taxpayers who earn more than $10 million annually would be limited on their state returns for charitable contributions to only 25% (this is figure down from the current 50%). (Editorial Note: This is a trend which other states that are cash strapped will most likely begin to consider. It is a dangerous trend for the nonprofit community.)
NORTH CAROLINA.
The state’s law requires fundraising consultants to disclose the residential address of the principals of fundraising consultant firms. That requirement has been objected to by Mark Fitzgibbons of American Target Advertising. The dispute was highlighted in the recent edition of the Non Profit Times. The same requirement is found in several other states, most of which will accept business addresses. Mr. Fitzgibbons raises the issue of safety concern for registrants. He has urged the state to change the law.
OKLAHOMA.
An evangelical group, Reclaiming Oklahoma for Christ, has once again been accused by Americans United For Separation of Church and State for violating federal law by promoting a political candidate’s campaign rally. Representatives of the organization denied that they have engaged in any improper conduct.
* * * * *
The saga in Oklahoma involving Feed the Children continues. Now the organization has fired the daughter of the founder, who initially helped lead the revolution against her father. In addition, the organization has entered into a settlement with two accountants that were previously fired, who alleged that the organization owed over $1 million to the state of Oklahoma on back tax purchases. They were fired last September because they allegedly reported the delinquency to the Tax Commission. The terms of the settlement have not been disclosed.
SOUTH CAROLINA.
The new deputy general counsel in the Charitable Solicitation Licensing Section is Shannon A. Wiley. She has replaced Teresa Shealy.
TEXAS.
A Dallas news story on August 3, 2010, raised the question for discussion as to whether churches, synagogues and other places of worship, as nonprofits, should also be required to disclose salaries. The well written article contained arguments both pro and con for a discussion that may or may not take root.
UTAH.
The state has fined an operator of a vending machine program $3,000 for using the name of a charity without permission to do so and for failing to register.
VERMONT.
According to a published report, legislation is being considered that would limit salaries paid by nonprofit groups that have contracts with the state.
VIRGINIA.
The Attorney General announced that he will give away the $55,000 in campaign funds to veteran charities across the state, bowing to months of pressure over the acceptance of funds from the U.S. Navy Veterans Association, which has been the subject of investigation by the IRS and numerous states.
Other
CHARITY NAVIGATOR.
This private “watchdog” has announced it will soon be digging deeper. In the near future, accountability and transparency will be additional measures of evaluation employed by the agency. Expect to see a checklist of whether a charity meets certain standards which Charity Navigator chooses to impose. (If you wish to learn more go to the Charity Navigator website).
CORPORATE GIVING.
According to a very recently released survey by USA Today and Chronicle of Philanthropy, while corporate profits are slowly on the rebound, the pattern of reduced giving will stay in place for the foreseeable future.
INDEPENDENT SECTOR CALLS FOR REINSTATEMENT OF THE ESTATE TAX.
Diana Aviv, President and CEO of Independent Sector, the nation’s largest umbrella group for nonprofits, has stated, “Permanent repeal of the estate tax could result in the loss of $1 trillion in tax revenue over 10 years. She is urging the reinstatement of the estate tax to the 2009 levels to encourage charitable giving. As many readers know, the estate tax expired at the end of 2009 and is scheduled to return on January 1, 2011, with only a $1 million exemption.
ONLINE GIVING.
The Blackbaud Index of Online Giving reports online revenue trends of more than 1,700 nonprofit organizations. There is room for optimism. The most recent report said that online revenue increased by 23% for the three months ending May 2010, as compared to the same period in 2009.
WALL STREET JOURNAL.
On August 5, 2010, the newspaper ran a story titled, “Charity Brawl: Nonprofits are not so generous when a name is at stake.”
UNITED KINGDOM.
H.M. Revenue and Customs has issued new definitions of charities which go into effect on August 20, 2010, which extends tax relief and exemptions for its citizens for charitable donations to eligible organizations in Iceland and Norway.
Subscribe to Newsletters