Saturday, December 15, 2007

Statistics and More

The National Center for Charitable Statistics contains a treasure trove of statistics on the nonprofit sector.  Stats can be useful for reminding one's Dean why nonprofit courses matter.  For example in the US summary, the total number of public 501(c)(3) charities increased 68.7% from 1996 to 2006 and the number of private foundations increased 86.9% during that same period.  Stats on each state are available as well.

sng

December 15, 2007 in Other | Permalink | Comments (0) | TrackBack (0)

Will Retired Boomers Volunteer?

The Urban Institute has issued research briefs addressing volunteerism among older adults.  The research briefs use data from the Health and Retirement Survey.

Will Retiring Boomers Form a New Army of Volunteers? by Sheila R. Zedlewski uses the data to show that a significant number of retirees begin volunteering after they retire.  As the boomers reach retirement age, charities should benefit.

Are We Taking Full Advantage of Older Adults' Potential, by Sheila R. Zedlewski and Barbara Butrica, notes that in 2004 more than 10 million healthy adults did not work or volunteer.  That group represents an untapped source of volunteers.

Volunteer Transitions among Older Americans, and Retaining Older Volunteers Is Key to Meeting Future Volunteer Needs, by Barbara Butrica, Richard W. Johnson, and Sheila R. Zedlewski, both examine entries into and exits from volunteering by adults from age 55 to 65 and note the importance of developing retention strategies. 

sng

December 15, 2007 in Paper Presentations and Seminars | Permalink | Comments (0) | TrackBack (0)

Prison and Restitution for Charity Directors

A federal judge sentenced a father and son team to prison terms and restitution payments of more than $39 million.  The pair had run the National School Fitness Foundation as a ponzi scheme.  The foundation sold sports equipment to 350 school districts around the country, promising that grants would be available to pay off the cost of the equipment.  Early participants in the program were repaid with money from school districts that bought the equipment later.  Cameron J. Lewis and his father, J. Tyron Lewis, paid themselves $1.4 million shortly before the foundation went bankrupt.  The Lewises were convicted of mail, wire, and bank fraud, conspiracy to launder funds, and 13 counts of money laundering.

sng

December 15, 2007 in Federal – Judicial | Permalink | Comments (0) | TrackBack (0)

IRS Revokes Exemption - 3 Years After AG Dissolves Charity

Although the wheels of justice may grind slowly, sometimes justice does prevail.  In 2004 the California Attorney General discovered that money from the San Francisco Neighbors Resource Center was being used for a political campaign.  The charity had received a state grant of $492, 500 in 2001 to build a community center.  The SRFRC never built the center and instead funneled significant amounts of money to the campaign of California Secretary of State Kevin Shelley.  The AG determined that various amounts had been paid to several different people for "project management," consultant services," and "development fees."  The people who received the money had performed no services and within a short time before or after receiving the money, made donations in comparable amounts to Shelley's campaign.  After the AG began to investigate, the board agreed to dissolve, but even then the AG needed to push the board.  That push happened in 2004 (see petition by AG for court supervision of winding up and dissolution of SFNRC).  The IRS finally announced its revocation of the organizations's exempt status on November 30, 2007 (reported by Peter Panepento writing in Philanthropy.com).

sng

December 15, 2007 in Federal – Executive, State – Executive | Permalink | Comments (1) | TrackBack (0)

Friday, December 14, 2007

IG Report Claims Tax Exempt Division's Inadequate Management Cost $40 million in Potential Savings

In a sharply worded December 11, 2007 report, the Treasury Department Inspector General claims that inadequate management and inefficient use of resources within the Tax Exempt and Government Entities (TE/GE) Division will cost taxpayers nearly $40 million in expected savings.  Here is an excerpt:

The cost of TEDS Release 2 may exceed the reduced monetary benefits delivered

TEDS Release 2 may be completed with significantly reduced system capabilities and benefits.The June 2004 TEDS Release 2 Business Case documented 16 high-level system capabilities costing $46 million that would deliver benefits of $58 million. This Business Case was updated in August 2004 to document estimated benefits of $73.1 million. However, after work began on Release 2, the TE/GE Division project team incurred delays in delivering benefits (e.g., 4 system capabilities were deleted, some system capabilities have been only partially delivered, and 5 system capabilities have been delayed by up to 2 years). An additional 8 capabilities were added, but the February 2007 TEDS Release 2 Business Case documents the System is now expected to deliver only $33.5 million (less than one-half) of the $73.1 million August 2004 expected benefits.

dkj

December 14, 2007 in Federal – Executive, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

IRS to Increase Audits of tax exempt organizations in 2008

According to Reuters News Agency, the Internal Revenue Service said on Thursday [December 13, 2007] it will audit more tax-exempt organizations in 2008 as well as start a new compliance program to help groups maintain their tax-exempt status. The IRS's Exempt Organizations division said the tax agency wants to determine how many employers comply with employment tax laws and that the investigation will include tax-exempt groups and government agencies. The division's director, Lois Lerner, told a news conference on Thursday that the agency will also audit charitable donations next year.

For the full story see here.

dkj

December 14, 2007 in In the News | Permalink | Comments (0) | TrackBack (0)

Veterans' Charities Accused of Shortchanging Troops

A front page story in the Washington Post yesterday reported that many veterans charities were engaged in "woefully inefficient" spending on veterans, including those wounded in Iraq or Afghanistan.  One organization, according to the article, used only 1 cent of every dollar collected to help wounded veterans.  Another paid its founder and his wife more than $500,000 in compensation.  Needless to say, these kinds of disclosures and scandals are not good for the charitable sector.  The House Committee on Oversight and Government Reform sought testimony on this issue yesterday from the following people:

  • The Honorable Charles Grassley, United States Senator
  • Ed Edmundson, Father of a wounded veteran
  • Bonnie Carroll, Executive Director, Tragedy Assistance Program for Survivors
  • Tracy L. McCurdy, Director, Pennsylvania Bureau of Charitable Organizations
  • Daniel Borochoff, President, American Institute of Philanthropy
  • Bennett Weiner, Chief Operating Officer, Better Business Bureau
  • Robert M. Friend, President, American Veterans Coalition
  • Pamela L. Seman, Executive Director, Disabled Veterans Association
  • Roger Chapin, President, Help Hospitalized Veterans, Inc. and Coalition to Support America’s Heroes Foundation

Testimony transcripts are available online (scroll down to bottom of the page).  Chairman Henry Waxman's statement is also available online.

dkj

December 14, 2007 in In the News | Permalink | Comments (0) | TrackBack (0)

Minnesota Supreme Court Says "Charity" Requires Free or Reduced Charge Goods or Services

In Under the Rainbow Child Care Center, Inc. v. County of Goodhue, (December 6, 2007) the Minnesota Supreme Court ruled that an organization cannot be considered "charitable" under the Article X, Section I of the Minnesota State Constitution unless it provides free or reduced cost goods or services, stating:

It is, thus, inherent in the concept of charity that there is a gift—that is, the services, goods, or whatever is conceived as the charitable benefit must be provided to the recipients of the charity without requiring them to pay full value for it.  Nevertheless, the expanded legal definition of charity that has evolved in the context of tax exemptions does not require that the charitable benefit be provided to all recipients entirely free of charge.  Therefore, the third North Star factor has been refined to require that the charity be provided “free of charge, or at considerably reduced rates.”  Cmty. Mem’l Home, 573 N.W.2d at 87 (emphasis added).  And the “considerably reduced rates” requirement has been described as meaning “considerably less than market value or cost.”  Id.

The dissent argued that the 4-3 majority dilutes the concept of "charity" by focusing exclusively on the charity's funding mechanisms. 

dkj

December 14, 2007 in State – Judicial | Permalink | Comments (0) | TrackBack (0)

Senate Enacts New Rules For 501(c)(3) and Privately Sponsored Travel

Senators Senators recently adopted new rules governing the extent to which Senators and staffers may accept paid travel and related expenses from 501(c)(3)'s and other private entities.  Get a copy of the rules here: Download senate501c3rules.pdf .  Among other requirements, Senators and staffers must certify that there is an "adequate connection" between the senate travelor's duties and the travel, the travel relates to the legislative or policy interest or the Senate (boy, that should be hard to prove!), and the trip's length and itinerary is consistent with the Senate's official purpose (another impossible burden!).  501(c)(3)'s can sponsor 3 day domestic and 7 day foreign travel even if they employ paid lobbyists or foreign agents.  Thanks to Steven Sholk for passing this on to the Nonprofit BLOG.

dkj

December 14, 2007 in Federal – Legislative | Permalink | Comments (0) | TrackBack (0)

Thursday, December 13, 2007

FBI and IRS Investigating Big Al

The New York Daily News reported today that the FBI and IRS is investigating Reverend Al Sharpton for, among other things, comingling funds from his nonprofit organization National Action Network, with his personal funds.  DOJ served 'wake-up" subpoenas on several NAN employees this morning.  Big Al says DOJ is only trying to get back at him for exposing their slow response to federal civil rights violations. 

Alsharpton

dkj

December 13, 2007 in Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

Online Giving

Both the New York Times and Forbes Magazine have articles out today regarding the increasing use of the internet for fundraising.  The Forbes Magazine article has a very nice slide show describing the "most and least efficient big charities" in terms of amount of raised funds spent directly on charitable causes rather than overhead and the like.  Both articles emphasize the use of the internet to engage in some "Obama" like fundraising -- lots of small donations from lots and lots of people, rather than large donations from a relative few people.  I don't have time to check now, but does anybody know of any guidance for nonprofit organizations soliciting funds via the internet?  Must the organization register under every state's charitable solicitation act?  The Forbes article also contains a link to "online giving resources" that seeks to connect nonprofits to fundraisers specializing in internet solicitations.

dkj

December 13, 2007 in In the News | Permalink | Comments (0) | TrackBack (0)

What Exactly is "Lobbying" Anyway?

Lloyd H. Mayer has posted What is This Lobbying That We are So Worried About"This paper thoroughly explores the myriad definitions of "lobbying" under federal law and then proposes a single definition.  Its stuff like this that exemplifies the value of law professors.  Here is the Table of Contents:

Introduction ..................................................................... 3

I. Current Law................................................................... 7

A. "Lobbying" Regulated ....................................................... 8

1. Taxing Lobbying ............................................................. 9

2. Disclosing Lobbying ........................................................ 11

3. Limiting Lobbyists .......................................................... 12

4. Conclusion ................................................................... 14

B. Why Regulate Lobbying? ................................................... 14

1. Why Tax Lobbying?.......................................................... 16

2. Why Disclose Lobbying? .................................................... 21

3. Why Limit Lobbyists? ....................................................... 22

4. Conclusion .................................................................... 23

C. "Lobbying" Defined .......................................................... 24

1. Lobbying Defined by Government  Action .. .............................. 25

2. Lobbying Defined by Government Actor ................................... 27

3. Loybbing Defined by Government Actor and Actor ....................... 28

4. Exceptions .................................................................... 30

D. Conclusion .................................................................... 33

II. Interest Group Influence .................................................... 34

A. How Interest Groups Influence Government Actions .................... 35

1. The Legislative Branch ...................................................... 37

2. The Executive Branch ....................................................... 40

3. The Judicial Branch........................................................... 43

4. Conclusion ..................................................................... 44

B. The Relative Influence of Different Types of Interest Groups .......... 46

C. Desirable versus Undesirable Influence .................................... 51

III. Defining "Lobbying" .......................................................... 55

A. A Single Definition? ........................................................... 55

1. Do Different Rules Require Different Definitions? ........................ 56

2. Do Different Interest Groups Require Different Definitions? ............ 58

B. Focusing on the Action or the Actor? ....................................... 60

C. Which Actors? ................................................................. 62

1. Which Federal Government Actors? ........................................ 62

2. Which State, Local, and Foreign Government Actors? ................... 65

D. What about the Grassroots? ................................................. 68

E. Exceptions ..................................................................... 72

Conclusion ......................................................................... 74

December 13, 2007 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

“The IRS’s Role in an Evolving Charitable Sector”

Steven T. Miller, IRS Director of Tax Exempt and Governmenter Entities, recently gave a speech before the Council on Philanthropy that can be downloaded here:  Download IRSRoleEvolvingCharitableSector.pdf   Here is one of the more provocative parts of the speech:

Please understand that I am not saying that no valid differences exist between the non-profit and for-profit sectors. I am asking something more nuanced: to what degree has the non-profit sector drifted toward the commercial sector, and to what extent should it be taxed like the for-profit sector? And even where the exempt sector acknowledges unrelated commercial activity, why are so many organizations declaring losses on these endeavors? It seems as if the IRS needs to police this Drift Line.

dkj

December 13, 2007 in Federal – Executive | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 12, 2007

527 Organizations Gear Up For Presidential Campaign

The 527 organizations are coming!  According to a Boston Globe article yesterday, the Washington DC based "Club For Growth" has launched an ad against Arkansas Govenor Huckabee.  Other 527s are probably busy hiring all of  those out of work hollywood writers to get their own ads up and running.  At least we will have something other than those stupid reality shows to watch!  The Club for Growth believes in economic discipline, apparently, and will be holding its annual conference in the very posh Ritz-Carlton, Palm Beach from January 31 to February 2, 2008 where they will be discussing fiscal discipline, I'm sure.  Hey, I'm just sayin . . . 

dkj

December 12, 2007 in In the News | Permalink | Comments (0) | TrackBack (0)

Did Former IRS Commissioner Violate Private Inurement or Excess Benefit Prohibition?

Recent news reports state that the American Red Cross is conducting a "forensic audit" to "determine whether former IRS Commissioner Mark Everson used "any of the charity’s money was inappropriately as he romanced a married female subordinate who is now reportedly pregnant."  If so, of course, the venerable organization would need to consider whether to report the inappropriate use as an excess benefit transaction.  Technically, even if all he did was take his "main squeeze" to dinner and a hotel once or twice a month using his ARC credit card, that would consititute private inurement and an IRC 4958 excess benefit transaction, it seems to me.  There is no de minimus exception and this high profile story probably reminds nonprofits that they need to review their credit card use policies.  I'd suggest having recipients sign a form annually acknowledging that the card is for official business only.  Why, oh why, do we men do such stupid things?!  For more on ARC's dismissal of Everson -- who should have known better -- see here.

dkj

December 12, 2007 in In the News | Permalink | Comments (0) | TrackBack (0)

Russia Suspends British Nonprofit Organization

In a growing diplomatic dispute, Russia today "suspended" a British nonprofit organization, claiming violations of Russian law pertaining to the nonprofit organizations.  The Russian government asserts that the largely British government funded nonprofit organization has failed to properly register and pay taxes due.  The organization, comprised mostly of English teachers, disputes that claim.  For more on Russian nonprofit law, see Economic Constraints, Political Motives: Contemporary Russian Nonprofit Tax Law .

dkj

December 12, 2007 in International | Permalink | Comments (0) | TrackBack (0)

David Pozen Posts "We are All Entrepreneurs Now"

David Pozen, a Heyman Fellow at Yale Law School and a member of Senator Edward Kennedy's staff, recently posted "We Are All Entrepreneurs Now." (draft).  Wake Forest University Law School made a great decision to accept it for publication.  Here is the abstract from the draft:

A funny thing happened to the entrepreneur in legal, business, and social science scholarship. She strayed from her capitalist roots, took on more and more functions that have little to do with starting or running a business, and became wildly popular in the process. Nowadays, "social entrepreneurs" tackle civic problems through innovative methods, "policy entrepreneurs" promote new forms of government action, "norm entrepreneurs" seek to change the way society thinks or behaves, and "moral entrepreneurs" try to alter the boundaries of duty or compassion. "Ethnification entrepreneurs," "polarization entrepreneurs," and other newfangled spinoffs pursue more discrete objectives. Entrepreneurial rhetoric has never been so trendy or so plastic. This Article documents the proliferation of entrepreneurs in the American academic idiom, and it offers some reflections on the causes and consequences of this trend.

David has been unusually interested in nonprofit and tax exempt organizations since his early law school days -- I know because I have emails from him dating back a few years.  We will definitely hear more from him over the years. 

dkj

December 12, 2007 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 11, 2007

Nonprofit Hospitals Still Under Fire

The Cleveland Plain Dealer published a lengthy article last Sunday regarding the continuing scrutiny of nonprofit hospitals.  Here is just one critical snippet from the article:

“Those people need to pay some taxes. They are freeloading,” Maple Heights resident Ahmad Wasim said last week. “It’s not fair at all.” At a U.S. Senate hearing in October, testimony by Cleveland’s Dr. Ashwini Sehgal made Greater Cleveland’s health system ground zero for the national struggle between health-care profits and charity.

“Frankly, my impression in Cleveland is that the hospitals are focused on two lines. They’re focused on the bottom line — in other words what’s their revenues compared to expenses — and they’re focused on the skyline — in other words how many new buildings can they build as part of their medical complexes,” said Sehgal. He is a comedical director for the Cleveland Public Health Department but was not speaking for the agency when he testified."

Whatever happened to PILOTS (payments in lieu of taxes) that hospitals and universities voluntarily made to local governments to rebut arguments that large nonprofits were reaping more than they sowed?  One of the best reports on PILOTS I've seen was done in Ohio.  A July 2007 IRS report studied the amount of "community benefit" nonprofit hospitals provide.   

December 11, 2007 in In the News | Permalink | Comments (0) | TrackBack (0)

Mirkay Publishes Article on Discrimination by 501(c)(3)'s

Nicholas A. Mirkay recently published "Is it 'Charitable' to Discriminate?  The Necessary Transformation of Section 501(c)(3) Into the Gold Standard for Charities,"  (Lexis access required) 2007 Wisconsin Law Review 45.  Here is a snippet from the introduction:

Boy Scouts of America v. Dale  is perhaps the most renowned recent case involving discrimination by a charitable organization. In that case, a local council of the Boy Scouts of America expelled James  Dale, an assistant scoutmaster, after he publicly declared his homosexuality. The New Jersey Supreme Court determined that the Boy Scouts' revocation of Dale's membership violated the state's public-accommodations law, which prohibited discrimination on the basis of sexual orientation.  Adopting a divergent view, the United States Supreme Court concluded that the New Jersey law violated the Boy Scouts' First Amendment rights (specifically, the freedom of expressive association) and upheld the organization's right to exclude homosexuals from its membership. Aside from its foundation in the First Amendment, the Supreme Court's decision raised a fundamental issue that remains unanswered: should a charitable organization continue to enjoy the benefits of tax-exempt status if it engages in discrimination?

dkj

December 11, 2007 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Steven Sholk's Publishes Electioneering Guide for 501(c)(3)'s.

Steven Sholk, of Gibbons, P.C. has published a thoroughly comprehensive guide explaining the political and campaign acitivity do's and don'ts pertaining to 501(c)(3)'s.  Get it here:  Download Electioneering.pdf.  The most impressive thing about the document is that it includes as much detail about the Federal Election Campaign Act as it does the political activity limitations and prohibitions contained in the Tax Code.  A must read, I'd say, even for organizations that have no intention of ever getting involved in politics.  There are just so many ways an organization can find itself embroiled in some sort of political controversy -- especially during the increasingly long presidential campaigns. 

dkj

December 11, 2007 | Permalink | Comments (0) | TrackBack (0)