May 16, 2009
International NGOs Welcome New Laos Law Allowing Local NGOs to Register and Operate as Independent Entitites
International aid groups have welcomed a decision by the Lao government to allow local NGOs to register and operate as independent entities for the first time. By November 2009, Lao citizens will be able to apply to form NGOs after the Decree on Associations was signed by Prime Minister Bouasone Bouphavanh and announced on May 11th. The decree will be effective within 180 days.
Two or more people can now establish a local NGO under the new law, which “provides a guideline for Lao officials as they consider applications,” a UN statement said. The decree provides a clear legal framework for membership-based groups, in contrast with a more ad hoc registration process, which often depended on connections. Although international NGOs can do much in the country, local NGOs were often more attuned to the local culture, as well as needs at the community level, according to Luke Stephens, country director of the Irish-based NGO Concern Worldwide.
There are currently more than 100 local organisations of various types now working in Laos, but not centrally registered, in addition to some 80 INGOs. According to the UN Development Program, landlocked Laos is one of the poorest and least developed countries in the world today. Approximately 33% of its almost 7 million inhabitants live under the national poverty line of US$1 a day.
May 15, 2009
JCT Staff on "The Value of Tax Exemption for Tax-Exempt Hospitals"
As part of the background materials it prepared for this week's Senate Finance Committee roundtable on health care financing, the Staff of the Joint Committee included a section on tax-exempt hospitals (starting on page 39). It notes that its best estimate of the value of federal tax benefits in 2002 was $6.1 billion, but that figure carried with it a substantial level of uncertainty for a variety of reasons. More importantly, the inclusion of this topic in these materials indicates that the current debate over the community benefits provided by nonprofit hospitals is likely to be overshadowed and perhaps swallowed up by the larger healthcare reform discussion.
New Form 990 Filing Day
Today is the deadline for filing the new Form 990for tax-exempt organizations with a calendar fiscal year (and that were above the revenue/asset filing thresholds for 2008). While many organizations will undoubtedly take advantage of the ability to receive an automatic 3-month extension by filing Form 8868, today will likely see the first big group of filings for the redesigned Form 990. The IRS has made available both a a list of filing tips relating to executive compensation, as well as a Form 990 Preparation Checklist. There are also numerous articles focusing on particular parts of the new form in publications such as the Exempt Organizations Tax Review, Taxation of Exempts (full disclosure: I am the co-editor-in-chief of this publication), and other tax and nonprofit publications, and further information is available from a wide variety of sources including GuideStar, regional nonprofit associations, and various exempt organization practitioners.
Mixed Picture on the Accountability of International Nonprofit Groups
Two recent reports on the accountability of international organizations, including nonprofits, reveal a mixed picture with respect to transparency and responsiveness. The One World Trust issued its 2008 Global Accountability Report on the transparency, participation of external stakeholders, evaluation capabilities, and responsiveness to complaints of major nongovernmental, intergovernmental, and corporate international organizations. It found that while many organizations, including many NGOs, performed well with respect to these various measures, there was still room for substantial improvement. The Humanitarian Accountability Partnership issued its 2008 Humanitarian Accountability Report, which drew on the One World Trust report but then goes into greater depth regarding the accountability of nongovernmental and intergovernmental organizations that deal with humanitarian disasters.
May 14, 2009
IRS Finds No Prohibited Political Activity by Foundation Funded by Texas Governor Perry Supporters
The Dallas Morning News reports the Internal Revenue Service has ruled that a foundation which funded the Texas Restoration Project did not violate the prohibition against charities intervening in political campaigns when it sponsored closed-door "Pastors' Policy Briefings" in 2005. The Project sought to create a network of evangelical pastors to encourage voter registration and promote a conservative moral agenda. According to the article, the IRS found that church congregations were told to vote their values but not for specific candidates and so the Project's foundation-funded efforts did not violate the prohibition. A press release from the Liberty Legal Institute, which represented the event organizers, identified the entity involved as the Niemoller Foundation, and the Dallas Morning News article reports that the Foundation was funded largely by four supporters of Texas Governor Rick Perry. The Texas Freedom Network, which in early 2008 filed a complaint with the IRS against the Foundation, expressed concern that the ruling would encourage the funneling of campaign funds through churches.
Additional coverage is available form the Washington Times, which speculates that the ruling will help Gov. Perry in his expected Republican primary contest against Senator Kay Bailey Hutchison in 2010.
Banned Islamic Charity Reemerges to Help Refugees in Swat
Both the Guardian and the Independent report that a charity previously declared a terrorist organization by the United Nations Security Council because of its ties to the organization that allegedly trained the Mumbai, India gunmen is running an extensive aid effort in Swat for refugees from the Pakistani government-Taliban fighting in that region. The Falah-i-Insaniat Foundation is reportedly offering food, medical care and transport to villagers fleeing the Mardan district of Pakistan. The Foundation's leader, who previously headed the now banned charity, stated that the Foundation has fed 53,000 people in 24-hour kitchens in roadside camps and schools and is building two tented camps for 3,000 displaced families who are unable to find other housing. The terrorist organization, identified in one article as Lashkar-e-Taiba, is most widely known for having apparently trained the 10 gunmen involved in the Mumbai, India attacks last November. In the wake of those attacks, the United Nations Security Council also declared the relief wing - Jamaat-ud-Dawa - a terrorist organization.
AP: "Pennsylvania Supreme Court Eyes Grant Rules for Nonprofits"
The Associated Press reports that the Pennsylvania Supreme Court is considering whether nonprofits should be considered "businesses" for purposes of the state's Ethics Act. The specific issue before the court is whether a statutory requirement that directs government officials to avoid conflicts of interests relating to a business that they or an immediate family members is involved with would bar such officials from approving grants to nonprofit groups that employ a relative. On one side of the dispute is Governor Ed Rendell and two of his cabinet secretaries, who are arguing that this provision was only meant to reach for-profit entities and not nonprofits. On the other side is the State Ethics Commission that came to the opposite conclusion. The Governor's side previously won a split decision in the Commonwealth Court.
May 13, 2009
Obama Administration Budget Proposes Keeping Estate Tax at Current Level
Yesterday I blogged about the Administration's continued support for limiting the tax benefit for itemized deductions in its proposed fiscal year 2010 budget. The Chronicle of Philanthropy reports that the budget also assumes that the estate tax will be maintained at its current levels. More specifically, the Administration assumes the estate tax exemption amount will continue to be $3.5 million and the maximum estate tax rate will continue to be at 45 percent (the rate schedule starts at 18 percent).
Madoff Bankruptcy Trustee Sues Charity that Invested with Madoff
The Boston Globe reports that Trustee Irving Picard, who is overseeing the liquidation of Bernard Madoff's assets, has sued the Picower Foundation and several related entities that made nearly $7 billion by investing with Madoff. According to an earlier New York Times article, the Foundation was at one point the 71st largest foundation in the nation and funded programs to promote justice, equality, human dignity, and tolerance. It was forced to close its doors, however, when Madoff's Ponzi scheme collapsed. The lawsuit alleges that the foundation's founders, Jeffrey Picower and his wife Barbara, and the Foundation "knew or should have known that they were benefiting from fraudulent activity or, at a minimum failed to exercise reasonable due diligence." The suit is part of a larger effort by the Trustee to recoup money from successful Madoff investors, including those that withdrew funds before the collapse. For additional coverage, see this Fox News story. For a copy of the complaint, along with other court filings by the Trustee, see this court filings list (the complaint against the Picower Foundation is listed by its filing date of 05/12/2009).
WSJ: Donors Find Gift Annuities Can Stop Giving
The Wall Street Journal reports the many donors who created charitable gift annuities based in part on the ability to receive regular payments from the annuities during their retirement are receiving a rude shock as a result of the recent economic downturn. As charitable giving planners are well aware, a charitable gift annuity gives the donor a current charitable contribution deduction equal to the present value of the expected remainder value of the annuity, which will be transferred to one or more charities. Before that transfer occurs, however, the donor or her designee(s) receives regular payments during the remainder of her life. In theory, the charity is required to ensure these payments occur regardless of the vagaries of the economy. In reality, however, the payments can be interrupted by various economic-related events. For example, as the article highlights, donors who set up charitable gift annuities with the National Heritage Foundation found their payments stopped when that charity declared bankruptcy last January (as detailed in its press release). Also, even when a charity "reinsures" its charitable gift annuities with a insurance company to protect donors, the strength of that reinsurance depends on the financial status of that insurance company, which in turn may be vulnerable to economic downturns.
Most Corporate Foundations Expect to Cut Giving in 2009
The Foundation Center reports that in response to its annual forecasting survey 51 percent of corporate foundations stated they expect to decrease their giving in 2009, with over three-quarters of these foundations anticipating declines of more than 10 percent from 2008 levels. In 2008, corporate foundations gave approximately $4.4 billion. While only a small fraction of the estimated $300 billion in annual giving across the United States, such reductions may hit certain kinds of charitable efforts disproportionately. For example, the survey found that in 2007 20% of corporate foundation giving went to public affairs and social benefit programs (including civil rights, social action, community improvement and development, philanthropy and voluntarism, and public affairs), 19% went to human services, and 12% to arts and culture.
May 12, 2009
Obama Administration Continues to Push Limit on Charitable Contribution Deduction
The Chronicle of Philanthropy reports that the Obama administration has reiterated its support for capping the tax breaks that wealthy individuals receive for itemized deductions, including charitable donations. According to the report, the White House made detailed budget documents available last week that included the controversial cap. The "Green Book" recently released by Treasury, more formally known as the General Explanations of the Administration's Fiscal Year 2010 Revenue Proposals, also includes this limit of 28% on the tax value of itemized deductions, including the charitable contribution deduction (see pages 87-88). Previous coverage of this issue includes Harvard Economist Martin Feldstein's take on this issue and a summary of much of the debate the administration's proposal initially generated.
An earlier Chronicle of Philanthropy article provided an overview of other items in the President's budget that may be of interest to nonprofits, including funding for programs such as the Corporation for National and Community Services, HUD Community Block Grants, the National Endowment for the Arts, and the National Endowment for the Humanities.
Governance of UK Charities Report Reveals Problems
A think tank reports (free registration required) that governance at United Kingdom charities is in trouble for several reasons. New Philanthropy Capital interviewed approximately 50 individuals with experience of being or working with trustees of charities other than grant-making charities and schools. It found several problem areas, including: nearly half of charities have board vacancies; nearly half of trustees are age 60 or older; few charities provide instruction for or performance reviews of trustees; and most beneficiaries, funders, and regulators pay little attention to governance issues. The report recommends increasing awareness among potential trustees that they can support charities by serving in this fashion, providing employees with a right to time off work for such service, creating a new body to improve education about the role of trustees, and urging particularly larger charities to institute regular board evaluations.
Canada Revokes Charity License for Children's Charity
The Toronto Star reports that the Canada Revenue Agency has revoked the charity license of the Children's Emergency Foundation for multiple violations of Canada's charity regulations. The Agency issued a press release announcing the revocation, and CEF has issued its own press release in response. According to the article, the alleged violations include participating in two tax shelter schemes through which donors claimed deductions for contributing pharmaceuticals valued at C$18.9 million and barley grass and rice valued at C$12.3 million, even though CEF netted less than C$25,000 as a result of these donations, failed to substantiate the value of the contributions, and never took physical possession of the supposedly donated goods. The Agency also accused CEF of failing to devote a preponderance of its resources to charitable activities, noting that of C$11.1 million in cash contributions only C$3.2 million went to charitable activities, with the remaining C$7.9 million used to pay fundraising and administrative fees.
May 11, 2009
IRS Political Activity Report Delayed
BNA's Daily Tax Report (subscription required) relates that Judith Kindell, the senior technical adviser to the director of the IRS Exempt Organizations Division (and an expert on the tax rules for nonprofit political activities), stated on Friday that the report on prohibited political activity by charities during the 2008 election has been delayed. The report, which the IRS originally intended to publish by March 31st, relates to the IRS' Political Activities Compliance Initiative activities during that cycle. According to the article, IRS officials attributed the delay to competing priorities and the need for multiple approvals of the report within the Treasury Department and the IRS. Ms. Kindell said the report will be available "soon," but qualified that comment by noting it was more likely to be "IRS soon" instead of "real-life soon."
UK Charity Commission Has 236 Pending Charity Abuse Cases
ThirdSector reports that a special Charity Commission unit established to investigate alleged abuse in English and Welsh charities, including fraud and financial irregularities, risks to vulnerable beneficiaries, and possible terrorist links, had 236 open cases as of March 31, 2009. While not named in the story, this unit appears to be the Intensive Casework Unit, which usually only becomes involved with cases with "serious abuse" or that are "highly sensitive, complex or high profile and/or present a serious risk to the charity or its beneficiaries." While these open cases represent a very small proportion of the over 187,000 charities registered with the Commission, they include cases where such measures as appointing of an interim manager or removal of trustees are under consideration.
Gates Foundation Announces 81 $100,000 Grants for Novel Health Initiatives and $73 Million to Help Small Farmers in Impoverished Countires
The Associated Press reported last week that the Bill and Melinda Gates Foundation has selected 81 unconventional health research projects from around the world for funding. The projects range from exploring using tomatoes to deliver antiviral drugs to researching whether magnets can help diagnose malaria. The Foundation in its press release announcing the grants said they represented the second found of the Foundation's Grand Challenges Explorations initiative, which awarded 104 grants in October 2008 in its first round. Researchers receiving the grants are located in 17 countries. The AP story also noted that the Foundation recently announced a $73 million, five-year program to develop drought-tolerant corn, to improve irrigation, and to support other programs to help small farmers in developing countries. Additional coverage of the latter program is available from a separate AP story published at Forbes.com.
Weekend Roundup: Charitable Donations In Hard Economic Times
News stories over the weekend covered a range of charitable donation topics. Besides appeals form continued charitable giving even in these hard economic times, including from New York City Mayor Michael Bloomberg, and reports of significant declines in donations from groups such as Oxfam, the stories included:
- The New York Times reported that charities continue to hold spring benefits but have generally scaled back these annual events to save costs and avoid appearing extravagant. For example, when the Food Allergy Initiative and City Harvest learned that they were holding their events at the same location on the same day, they arranged to share many of the same table arrangements and other decorations to reduce costs, while Guide Dogs for the Blind decided to forgo flashy events in large venues for smaller-scale benefits in donors' homes.
- In a separate story, the New York Times also reported that charities are increasingly taking part in for-profit sponsored contests that direct donations to winning charitable organizations. For example, Target has launched a Facebook page where Facebook members can vote for one of ten charities to receive $3 million from the company.
Internationally, the Associated Press reported that Venezuelan lawmakers are drafting a bill that would require all foreign donations for domestic nongovernmental organizations to be deposited in a government-controlled fund, from which distributions would be made only at the discretion of government officials. Leaders of Venezuelan NGOs criticized the bill as an attempt to silence critics of the President Hugo Chavez and legislators who support him.