Tuesday, April 1, 2014

The Internet of Things and the Coming Dominance of the Nonprofit Society

As a follow up to a recent post discussing Jeremy Rifkin's theory regarding the decline of the capitalist economy and the rise of the sharing economy (moderated by nonprofits), I thought I would post this discussion of the theory on a recent episode of the Diane Rehm show.  (Audio Player required).  On second thought, I now kinda think the reports of the death of capitalism and the birth of the sharing economy are greatly exaggerated.


April 1, 2014 in In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, March 27, 2014

World Vision Reverses Decision: Won't Recognize Employee Same-Sex Marriage

On Monday, Christian relief organization World Vision announced that its employee conduct manual  would no longer define marriage as being between a man and a woman.  According to a report from the Religious News Service, the organization's U.S. branch would henceforth recognize same-sex marriage as being within the norms of "abstinence before marriage and fidelity in marriage" discussed in World Vision's conduct code for its 1,100 employees. 

In a letter to employees issued on Monday, World Vision President Rich Stearns stated that the organization was not endorsing same-sex marriage, but had "chosen to defer to the authority of local churches on this issue."

In an interview with Christianity Today, Stearns said that the organization's board was "overwhelmingly in favor" of the change.  However, he stressed that the decision was not driven by theology.  He added: "There is no lawsuit threatening us.  There is no employee group lobbying us.  This is simply a decision about whether or not you are eligible for employment at World Vision U.S., based on a single issue, and nothing more."

Today's NonProfitTimes is reporting that just two days after making its big announcement, World Vision reversed it.  In a letter to supporters yesterday, Stearns and Chairman of the World Vision U.S. Board, Jim Bere, announced that the organization was reversing its recent decision to change its "national employment policy."

According to the "Dear friends" letter sent to the organization's "trusted partners,"

The board acknowledged they made a mistake and chose to revert our longstanding conduct policy requiring sexual abstinence for all single employees and faithfulness within the Biblical covenant of marriage between a man and a woman.

Speaking directly to the organization's "trustred partners," Stearns and Bere stated: "We have listened to you and want to say thank you and to humbly ask for your forgiveness."

The initial decision was greeted with both criticism and support.  The reversal has drawn the same types of responses.  One skeptic posted the following comment on World Vision's Facebook page: "I can see that your board has got its priorities right -- money talked, and you not only listened, you obeyed."

That may not be necessarily true.  It is highly probable that upon prayerful reconsideration of its "new policy" and heated discusions concerning the change, the World Vision board reversed itself.  Either decision would be popular with some, unpopular with others.  In the final analysis, World Vision must do what it believes best helps the organization achieve its mission.




March 27, 2014 in Current Affairs, In the News, Religion | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 25, 2014

Foundations Offer Grants, Prizes, Fellowships -- Issue New Requests For Proposals

Today's Philanthropy News Digest is reporting that three Foundations have over the last three days issued new Requests for Proposals (RFPs): 

The National Art Education Foundation, the philanthropic arm of the National Art Education Association (NAEA), is seeking applications for its 2014 Art Educator grants.  Through the grant program, the Foundation will award grants of up to $10,000 to NAEA members for programs that support classroom-based art education.  Only NAEA members are eligible to receive the awards.  The deadline for submitting an application is October 1, 2014.

Meanwhile, the Chicago-based Harpo Foundation is inviting applications for its 2014 Emerging Artist Fellowship.  Under this program, one emerging artist will receive a one-month residency at the Santa Fe Art Institute in Santa Fe, New Mexico.  The application deadline is July 5, 2014.

Finally, the Vilcek Foundation is inviting applications for the 2015 Vilcek Prize for Creative Promise in Fashion.  This program will actually award three prizes of $50,000 each to young, foreign born fashion professionals living and working in the United States who demonstrate outstanding early achievement. The foundation encourages designers, stylists, make-up/hair artists, image makers (including fashion photography, film, animation, and illustration), curators, and writers to apply.  The application deadline is June 10, 2014.  




March 25, 2014 in Current Affairs, In the News, Other | Permalink | Comments (0) | TrackBack (0)

Monday, February 24, 2014

Why Are The US Olympic Committee [College Sports; Nonprofit Hospitals] Tax-Exempt?

In a recent column in Forbes, Howard Gleckman asked why the US Olympic Committee is tax-exempt.  After all, he notes, "The law says tax exempt status is granted to groups that 'foster national or international amateur sports competition.' But do the hyper-marketed modern games even remotely fit the ideal of amateur sports?"  A bit later, he follows with the observation that  "By almost any standard, [the USOC] is a commercial enterprise. It exists primarily to help organize a bi-annual made-for-TV entertainment extravaganza.  Yes, it provides some support for athletes (though surprisingly little). But its real business is marketing itself and playing its part in a two-week orgy of athletic commercialization."

Welcome, Howard, to the modern world of charitable tax-exemption.  Substitute "college sports" in the quotations above and you would have an equally accurate description.  And it would hardly be inaccurate to say "By almost any standard, private nonprofit hospitals are commercial enterprises." (And at least some research universities may be heading in that direction).  So what might we do about the commercialization of the modern charity?

One thing we could do is take the "primary purpose" rule seriously and apply it with an honest recognition of the way certain organizations operate in the modern world.  A charity is supposed to engage in activities that "primarily" futher a charitable purpose.   Does anyone really believe that a typical private nonprofit hospital "primarily" pursues a charitable purpose?  I certainly don't - private nonprofit hospitals' primary mission is to provide the highest-quality health care they can for a fee.  That's an admirable mission, one I heartily support, and one that our nonprofit hospitals mostly excel at; but it is in no way, shape or form "charitable."   I could say the same thing about the Olympics or college athletics - these activities, whatever their origins, are hardly about "amateur" athletics any more.  The Olympics are a showcase for pros at their sports (men's hockey, anyone?) and big-time college athletics (Division I men's basketball and FBS football) are nothing more than minor leagues for the pros.

I don't know why it is so hard for tax policy to recognize that activities change over time, and things that may once have been charitable might not be today.  Nonprofit hospitals were unquestionably charities in the 1800's, when they were essentially homeless shelters staffed by religious volunteers.  That model no longer exists.  The Olympics were at one time truly about amateur athletics, just as college sports at the enactment of the UBIT in 1950 mostly involved real student-athletes.   No longer.  Things change, but we refuse as a policy matter to re-examine charitable exemptions in light of changed circumstances.  From time to time there have been proposals to require charities to "re-qualify" for exemption every so often (every 5 years, or 7 years or 10 years, for example).  But these proposals won't "get it right" if we don't update our views about whether certain activities are charitable or not.

So, Howard, I have an answer to your question: analytical inertia.  Our views of charitable activities seem frozen in time.  Until we get over it, commercial activities will continue to dominate certain "charities" that are not charities at all.

John Colombo



February 24, 2014 in In the News, Sports | Permalink | Comments (0) | TrackBack (0)

Friday, February 7, 2014

501(c)(4) Developments: Another Hearing, Controversial Proposed Regs, Cryptic Legislation, and More

IRSAccording to TaxProf Blog we are now 274 days into the firestorm that erupted in the wake of Lois Lerner's acknowledgment last May that the IRS had used inappropriate criteria for selecting certain 501(c)(4) applications for additional scrutiny.   The resulting controversy not only continues, but it has recently been renewed by another congressional hearing, controversial proposed regulations that are taking hits from both the left and the right, and cryptic legislation that may - or may not - change how and whether the IRS can enforce the existing limits on political activity by tax-exempt organizations.

House Economic Growth, Job Creation and Regulatory Affairs Subcommittee Hearing

Yesterday a subcommittee of the Committee on Oversight & Government Reform held a hearing where the witnesses uniformly blasted the executive branch's handling of the controversy.  Their views were not a surprise, given they are all individuals who have been vocal in their criticism of how the Obama administration has handled this situation.  The subcommittee also invited DOJ trial attorney Barbara Bosserman, who is leading the DOJ's investigation into this matter, to testify, but she chose not to do so.  Despite its one-sided nature, the hearing illustrates that the continuing drumbeat of criticism is not fading away, and is unlikely to do so given . . .

Controversial Proposed Regulations

While I and others have commented that one likely consequences of this mess is that the IRS will be gun shy for some time, particularly when it comes to enforcing the limits on political activity by tax-exempt organizations, the Treasury Department as a whole cannot be criticized for a lack of boldness.  The regulations it proposed in late November to redefine what would be considered political activity (or rather "candidate-related political activity") for 501(c)(4) organizations have already generated over 22,000 comments, and the deadline for submitting comments is not until the end of this month.  While many comments have been supportive in part, most appear to give mixed reviews. 

Some of the most detailed and thoughtful comments to date include the ACLU Comments and the Center for Competitive Politics Comments (which appear on a webpage also gathering some other comments, including ones focused on the paperwork burden imposed by the proposed regulations).  Other groups working on commetns that likely will be worth the read are the ABA Tax Section, the Alliance for Justice, Independent Sector, and a coalition that is being spearheaded by Cleta Mitchell (Foley & Lardner) and John Pomeranz (Harmon, Curran, Spielberg & Eisenberg).   The Bright Lines Project has also created a model comment that any organization or individual can customize and and then submit.   Finally, Rep. Dave Camp has introduced legislation that woudl block finalization of the proposed regulations for a year.

Cryptic Legislation

Buried in the recently enacted omnibus spending bill were 68 words that may - or may not - change how and whether the IRS can enforce the current and future limits on political activity by tax-exempt organizations.  As reported by Mother Jones, Public Law 113-76 included in the section relating to the Internal Revenue Service the following provisions:

SEC. 107. None of the funds made available under this Act may be used by the Internal Revenue Service to target citizens of the United States for exercising any right guaranteed under the First Amendment to the Constitution of the United States.

SEC. 108. None of the funds made available in this Act may be used by the Internal Revenue Service to target groups for regulatory scrutiny based on their ideological beliefs.

Given that the legislation did not repeal the limits on political activity found in section 501(c)(3) and the relevant charitable contribution provisions, nor did it explicitly address the current interpretation of section 501(c)(4) and other exemption provisions relating to political activity, to say the effect of these two provisions is unclear is to put it mildly.  What is not unclear, however, is that these provision will provide an additional arrow for groups that challenge the IRS in court for denying exemption or examining them allegedly because of their political activity, so the courts will almost certainly need to resolve the actual effect of these provisions.

Other Matters

Tax Analysts recently forced the IRS to release thousands of pages of internal training materials for the exempt organizations determiniations unit.  Included in the materials was a "Lesson Plan" on section 501(c)(4) organizations.

News outlets, and particularly the Washington Post, continue to publish accounts of how the Koch brothers created and funded a network of primarily tax-exempt organizations to further their political goals in previous election cycles.  Recent articles include "Koch-Backed Political Coalition, Designed to Shield Donors, Raised $400 Million in 2012" and "A Rare Look Inside the Koch Brothers Political Empire".

There are a bevy of new leaders with in the Tax-Exempt/Government Entities Division at the IRS, including Sunita Lough (Commissioner, TE/GE), Donna Hansberry (Deputy Commissioner, TE/GE), Tammy Ripperda (Director, Exempt Organizations Division), and Robert Malone (Acting Director, Exempt Organizations Rulings & Agreements).  They join continuing EO Division leaders Melaney Partner (Director, Exempt Organizations Customer Education & Outreach) and Nanette Downing (Director, Exempt Organizations Examinations).

Lloyd Mayer

February 7, 2014 in Federal – Executive, Federal – Legislative, In the News | Permalink | Comments (1) | TrackBack (0)

Thursday, February 6, 2014

Why a $173 Tax Bill Threatens Land Trusts Nationwide

NEFFBoth the Boston Globe and the Wall Street Journal report that a dispute in Massachusetts over a $172.87 property tax bill could undermine tax exemption for millions of acres held by land trusts nationwide.  At immediate stake is the tax status of 120 acres of woodland owned by the New England Forestry Foundation.  The bigger issue is whether merely preserving land for public use is sufficiently in the public interest to justify exempting them from property tax under applicable state and local laws, or whether instead some level of actively encouraging public use or otherwise providing public benefit is also required.  Both property tax assessors for cash-strapped jurisdictions and nonprofit land trusts are closingly following the case.  The Massachusetts Supreme Judicial Court heard arguments last month, and similar cases are working their way through the courts in a number of other states. 

Lloyd Mayer

February 6, 2014 in In the News, State – Judicial | Permalink | Comments (0) | TrackBack (0)

Too Close Ties to Business Cost Foundation $7.7 Million

Lg-pfOver two years ago we noted that the Pearson Foundation, the charitable arm of major educational publisher Pearson, had allegedly paid for international trips by state education commissioners whose states did business with Pearson.    The NY Times recently reported that the Foundation has now had to pay $7.7 million to resolve an inquiry by New York Attorney General Eric Schneiderman into whether the Foundation had been inappropriately aiding its for-profit counterpart.  The funds will primarily go to 100Kin10, an effort to train more teachers in high-demand subject areas.  The Foundation also agreed to program and governance changes to reduce its ties to Pearson.  

According to the AG's press release, the inquiry focused not only on the international trips but also on whether the Foundation had been developing course materials aligned to the Common Core that Pearson then intended to sell commercially.  After the inquiry began, the Foundation sold the partially developed courses to Pearson for $15.1 million.  For its part, the Foundation's press release states that the Foundation fully cooperated with the investigation and always acted with the best intentions and in compliance with the law, but recognized that "there were times when the governance of the Foundation and its relationship with Pearson could have been clearer and more transparent."

Lloyd Mayer

February 6, 2014 in In the News, State – Executive | Permalink | Comments (0) | TrackBack (0)

The Decline of Britain's Not-for-Profit Mutual Banks

200px-Nationwide.svgThe Economist reports that Britain's mutually owned, not-for-profit banks are increasingly converting to shareholder owned, for-profit institutions or collapsing.  These "building societies," which dominated the residential mortgage market in the 1970s, have suffered from a variety of ailments, including poor management, high-risk lending, and a push for demutualization.  Interestingly, the Economist appears to regret this development, noting the continuing success of Nationwide Building Society and commenting that "The model is worth preserving. Mutuals have tended to offer better customer service; on average, they generate fewer complaints than other lenders. The fate of British mutuals notwithstanding, studies by the Bundesbank and the IMF suggest that, overall, mutual banks are more stable than their more commercial counterparts."

Lloyd Mayer

February 6, 2014 in In the News, International | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 29, 2014

Nonprofits Praise President's Call for Foundations' Support of Children, African-American Men

Writing in today's Chronicle of Philanthropy, Alex Daniels reports that the nonprofit community is praising President Obama's pitch in last night's State of the Union address seeking to get foundations more involved in supporting education for young children and increased economic opportunities for young African-American men.

However, nonprofit leaders are maintaining that charities cannot be expected to solve those problems alone.  Rather, they claim, Congress must follow through with increased spending in those areas. 

Diana Aviv, president of Independent Sector (a national nonprofit asociation), stated: "The sector's capacity and resources are dwarfed by the might of the federal government.  The best we can do is fill in the gaps."

According to Ms. Aviv, the president's push for an increased minimum wage, pay equality for women, and early-childhood education should be welcomed by nonprofit groups that work in those causes.

The Chronicle's report continues:

In the speech, Obama called for foundations’ assistance to work on a plan to “help more young men of color facing tough odds stay on track and reach their full potential.”

The W.K. Kellogg Foundation welcomed that focus and said it was working with 25 community foundations in Mississippi to promote help young black men complete their education and find jobs.

Mr. Obama also said he would convene a coalition of philanthropists, elected officials, and business leaders to develop strategies to improve early-childhood education.

The prospect of such a coalition was “pretty exciting,” according to Kris Perry, executive director at the First Five Years Fund, which supports pre-kindergarten education, but she said she needed to learn more about how it would work.

Ms. Perry noted that it was the second straight year Obama has pushed for a greater emphasis on the subject in his State of the Union address. Last year, his call for increased funding for programs like Head Start that provide schooling for young children fell victim to across-the-board budget cuts that reduced the program’s budget by 5.3 percent.

“Even though there was a commitment on [Obama’s] part, the government came to a grinding halt,” Ms. Perry said.

Ms. Perry is confident that President Obama’s emphasis on early-childhood education can result in additional funding, even in an era of tight budgets and political gridlock.

“Early-childhood education is on the top, top, top of everybody’s must-do policy list,” she said. “It’s a wonderful opportunity for the parties to come together and agree on something.”

I agree with the nonprofit leaders.  While the nonprofits will play their part, Congress must step up to the plate and provide more funding for these initiatives.



January 29, 2014 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Kellogg Foundation Commits $40 Million to Rescuing Detroit

Both the Detroit Free Press and the Detroit News are reporting that the W.K. Kellogg Foundation on Tuesday committed $40 million to a philanthropic fund to help resolve Detroit's bankruptcy.  Kellogg thus joins nine other national and local foundations in the unprecedented municipal rescue effort. 

Kellog's pledge is the third-largest to the now-$370 million fund aimed at shrinking Detroit's multibillion-dollar pension liability and shileding masterpieces at the Detroit Institute of Arts from possible sale to satisfy creditors.  The Ford and Kresge foundations have promised $125 million and $100 million, respectively.



January 29, 2014 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 28, 2014

Nonprofits Eye State of the Union Address

With tonight's State of the Union address just a few hours away, nonprofit organizations are wondering what news -- good or bad -- they will receive from President Obama.  Writing in today's Nonprofit Quarterly, Rick Cohen reviews the already-delivered State of State speeches of 2014 and ponders whether "these state addresses presage anything that nonprofits might hear in President Obama's State of the Union."

Meanwhile, the Miami Herald is reporting that the nonprofit group, One Miami, is organizing a watch party for the president's address.  The event will be attended by nonprofit groups in South Florida.  The groups are hoping President Obama will address immigration reform and the minimum wage in his speech.  They also hope to find out what the president will propose to deal with the nation's growing income gap.




January 28, 2014 in Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, December 26, 2013

Happy Holidays, Tax Style

With a big red floppy hat tip to the TaxProf Blog, this Forbes article  brings tax geekiness to admirable new heights, as a tax lawyer tries to distract her children on Christmas Eve with a discussion of St. Nick's Form 1040-NR.    Do read the whole thing, but for our purposes here on the Nonprofit Prof Blog, here's the fun part:

The kids are pretty sure – and I agree – that Santa doesn’t intend to operate as a for profit business. But he likely doesn’t meet the criteria to be tax exempt under section 501(c)(3) of the Internal Revenue Code. By default, that would make his venture for profit for purposes of IRS (whether he wants to make money or not) and therefore, taxable.

Even if Santa’s toy distribution scheme were to be classed as a non-profit, there may be other unrelated trade or business income… As noted earlier, my house isn’t sure where Santa gets his money. Clearly, he isn’t paid for his services though my kids question the value of cookies and milk left out for him (that is, as my seven year old noted, a LOT of cookies). Since we’ve seen a lot of Santa merchandise in stores, we’ve worked out that we think he gets some licensing revenue for his own image and also for Rudolph – kind of like Pixar does for Lightning McQueen and Buzz Lightyear. That income would be taxable to the extent that it’s not offset with expenses. So, assuming all of this, what’s deductible?

So here's my question, would Santa's operations qualify for Section 501(c)(3) status?  I mean, clearly he could structure his licensing revenue as a royalty exempt from UBIT and even drop it into a for profit sub if need be.  I don't really see an inurement or a private benefit issue - surely, all good kids in the world constitute a charitable class.   He's not been lobbying as far as I know, so barring a big political endorsement, I'm not seeing the issue.  So does Santa just need good nonprofit counsel?

Merry Christmas (a day late) to all who celebrate, and a joyous New Year to all. 




December 26, 2013 in Current Affairs, Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, December 5, 2013

A Nasdaq for Nonprofits?

In a New York Times DealBook column, Andrew Ross Sorkin explores an interesting idea put forward by Lindsay Beck: is there a way to harness financial instruments to dramatically increasing funding resources for nonprofits.  Ms. Beck, who has a Wharton M.B.A. and founded a successful charity that aided female cancer survivors with pregnancy, has pursued the idea with a number of investment banks.  Based on the article, much work still has to be done to make it a reality and it is far from clear that the idea will prove to be a viable and successful one, but it and the other innovative financing ideas discussed in the column raise a host of intersting issues.  For example, what bodies of laws govern such instructions - federal and state securities laws, state charitable soliciation laws, both?  What remedies would aggrieved "investors" have?  What monitoring would be required or advisable?  Nevertheless, it is an interesting idea.

Lloyd Mayer

December 5, 2013 in In the News | Permalink | Comments (1) | TrackBack (0)

AP: "Law Shields Churches, Leaves Pensions Unprotected"

SitelogoThis story was a little while ago, but the Associated Press reported how the fact that church pension plans are exempt from many laws that normally regulate such plans has left many employees of church-affiliated entities, including hospitals, with little recourse when pension funds are severely underfunded.  This exemption includes not being covered by federal Pension Benefit Guaranty Corporation and not being subject to the Employee Retirement Income Security Act, or ERISA.  Based on the article, it appears this issue has been a particular problem at a number of Catholic-affiliated hospitals.

Lloyd Mayer

December 5, 2013 in Church and State, In the News | Permalink | Comments (0) | TrackBack (0)

More Reactions to the Proposed 501(c)(4) Political Activity Regs

IRSAdditional coverage includes editorials from the Investor's Business Daily, the L.A. Times and the Washington Post and reports in Mother Jones  and the Nonprofit Quarterly.

Lloyd Mayer

December 5, 2013 in Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 4, 2013

Federal District Court Strikes Down Minister Housing Allowance as Unconstitutional

Clergy Housing Allowance no border_medA federal District Court in Wisconsin has struck down the exclusion from gross income for vcertain housing allowances provided to "ministers of the Gospel" by Internal Revenue Code § 107 as a violation of the Establishment Clause.  As previously discussed here, the same court is also considering challenges to the church exemption from Form 990 filing and the alleged lack of IRS enforcement against churches for violating the political campaign intervention the prohibition.  As John Colombo has detailed in this space, the key question in all of these cases - including in the almost certain government appeal of the housing allowance decision - will be whether the plaintiffs have standing to even bring these claims.  For reasons Professor Colombo details, it is unlikely that they do.  As a commentator to the TaxProf Blog post on this story noted, the judge in the housing allowance case also previously ruled that the National Day of Prayer presidential proclamation was unconstitutional, only to have that case dismissed on appeal for lack of standing.  Nevertheless, this case and the other challenges are currently still alive and proceeding, although news reports state the judge has stayed her decision on the housing allowance pending appeal.

Media Coverage:  ForbesHuffington Post; see also the stories linked to in the above TaxProf Blog post.

Lloyd Mayer

December 4, 2013 in Church and State, Federal – Judicial, In the News | Permalink | Comments (1) | TrackBack (0)

Problems with Some Charities Founded by Wisconsin Athletes

0903090001_14_13_350The Green Bay Press Gazette reports that a review of 51 active or recently closed charities tied to Wisconsin athletes and professional teams revealed a mix of compliance and noncompliance with IRS filing requirements, a broad range of fundraising costs and revenues, and other issues.  For example, six of the charities have lost their tax-exempt status for failing to file the required annual return (Form 990) and several charities reported less than two-thirds of revenues going toward charitable activities (as low as 18 percent in one case), although in some cases that low percentage may reflect an intentional plan to build up reserves for a particular, future charitable purpose.  The charities ranged in size from several with over a million dollars in annual revenue to 16 active charities with less than $50,000 in annual revenue.  As noted in the story and detailed in separate USA Today report, the most prominent set of concerns may belong to the LeRoy Butler Foundation, which is currently the subejct of an IRS and federal grand jury investigation apparently stemming from its multi-year failure to file IRS returns and payments of "appearance fees" and provision of other benefits to its namesake.  Overall, these reports appear to reveal a broad range of typical charity successes and failures among this subset of charities.

Lloyd Mayer

December 4, 2013 in Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

U.S. Navy Veterans Association Former Head Guilty of 23 Counts; Faces Minimum of 10 Years in Prison

Usnva_sealThe Tampa Bay Times reports that an Ohio jury has found John Donald Cody guilty of 23 counts of fraud, money laundering and theft relating to his role as head of the U.S. Navy Veterans Association.  As previously detailed in this space, the Association was a sham charity that Cody ran under the stolen name of Bobby Thompson and used to raise over $100 million before being exposed in 2010 by the newspaper (then named the St. Petersburg Times).  Sentencing is scheduled for mid-December.  Prosecutors have already obtained a guilty plea from one other person involved in the scam, who is now serving five years in an Ohio prison, and they have stated they plan to indict the lawyer they alleged also helped.

Lloyd Mayer

December 4, 2013 in In the News, State – Judicial | Permalink | Comments (0) | TrackBack (0)

Friday, November 29, 2013

Washington Post: New Rules Bring Both Clarity and Confusion

I'll admit it: I've been closely following the release of the proposed new Treasury regulations governing political advocacy of 501(c)(4) organizations.  Today's Washington Post asserts that the new rules bring both clarity and confusion to a broken system.  The Post's article begins by acknowleding that the rules governing the political activities of nonprofit advocacy groups is "an area of the tax code that has been crying out for greater clarity."  According to the newspaper, while the "proposed regulation unvieled Tuesday by the Treasury Department draws the boundaries clearly," they "instantly kicked off intense debate about whether the lines are in the right place."

According to the Post,

One phrase in the official notice summed up the imperfect nature of the exercise.  The new rules, the department said, "may be both more restrictive and more permissive than the current approach."

Notwithstanding the apparent confusion, the Post acknowledges what we all know: the system was broken and needed to be fixed.







November 29, 2013 in Current Affairs, Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

Nonprofit Sector Reacts to Proposed Political Activity Rules for Tax-Exempt Organizations

Earlier this week, we blogged about the proposed new political activity rules for tax-exempt organizations proposed by the U.S. Department of the Treasury and the Internal Revenue Service.  The NonProfitTimes is reporting that the proposed rules are drawing sharp criticism from some members of the nonprofit sector.

As an initial matter, we note that the rules specifically target 501(c)(4) organizations and political lobbying and activism.  However, the Times notes that the proposed rules can also apply to 501(c)(3) groups.  For example, under the proposed regulations, activities that will be counted as political activity include voter registration drives, nonpartisan voter guides and events such as debates at which candidates appear.  Section 501(c)(3) groups sometimes organize these activities.


Organizations classified as 501(c)(4) social welfare organizations are permitted to undertake political activity, so long as it does not constitute the group’s primary purpose. Nonpartisan activities such as voter registration drives currently are not counted against that threshold. The IRS uses a “facts and circumstances” determination on a case-by-case basis to decide whether a given group’s political activity is its primary purpose.

The facts and circumstances test [is] “all very specific to an organization,” according to Viveca Novak, editorial and communications director at the Center for Responsive Politics in Washington, D.C. “It is subjective and can be ambiguous. What the IRS is trying to do is just have some bright line rules.”

This does not satisfy some members of the nonprofit sector.  The NonProfitTimes reports that some sector members have labeled the proposed rules "an attack on First Amendment free speech rights." 

The report notes opposition from other sources:

Marcus Owens, the former director of the IRS Tax Exemption Division and now a lawyer at the Washington, D.C. firm Caplin and Drysdale, said, the proposed rule “eliminates some of the tax rule ambiguities and replaces them with election law ambiguities. There’s still a lot of uncertainty. There’s just different words describing that uncertainty.”

Owens believes the regulations go too far in restricting activities that, because of their nonpartisan nature, did not count as political acts. “It means that for groups like the League of Women Voters, which publishes voters’ guides, that won’t happen in all likelihood,” he said. “What we’ll be left with is biased guides from political groups. Instead of more objective presentation, the public is going to get bombarded with partisan communications.”

Some groups agree with Owens that the proposed regulations go too far, saying that they infringe on free speech. “These proposed new regulations put the First Amendment rights of Americans at even greater risk,” Jay Sekulow, chief counsel of the American Center for Law and Justice in Washington, D.C. said via a statement. “With this move, the Obama Administration opens a new front in its war against political dissent.”

Owens points out that some of the activities that the regulations call political activity, such as get-out-the-vote drives and issue communications, are permitted for 501(c)(3) charities and foundations, which are restricted entirely from political activity. “The Treasury has created a harsher rule,” he said. “They could have mimicked the standards private foundations have to adhere to but instead went with a shotgun approach that does a disservice to the public.”

Gary Bass, executive director of the Bauman Foundation in Washington, D.C., called the proposal “extremely troubling for those who believe in democratic practices.” He worries about the implications for 501(c)(3) groups: “If nonpartisan voter registration, get-out-the-vote, etc., are political for (c)4’s, how can they not be for (c)3’s?” he asked rhetorically.

Bass, like Owens, is critical of the proposal’s ambiguity. “Once again, nonprofits don’t know what they can do,” he said. “The first principle for a rule should be to encourage democratic practice while stifling abuses. This NPRM (notice of proposed rulemaking) abandons such a principle.”

Further, he said the proposed rules will have a chilling effect on foundation funding for nonpartisan civic engagement like voter registration. “Even if there is a legal pathway, it will scare the hell out of foundation legal counsel—and encourage foundations to stay out of this area of funding.”

Not all sector members are critical.  The Times reports that unlike Owens and Bass,

Other groups are more optimistic about the proposal. “The proposal is good for no other reason than it gets the ball rolling on a critical issue,” said Craig Holman, Ph.D., a government affairs lobbyist with the Washington, D.C. group Public Citizen. “It admirably attempts to offer some clarity in what nonprofit groups can and cannot do and reduces the discretion of the IRS in evaluating activities of nonprofits. Overall, it is a positive step by the Treasury Department.”

Fred Wertheimer, president of Democracy 21 in Washington, D.C., agreed. “Democracy 21 applauds the action taken today by the Treasury Department and the Internal Revenue Service to initiate a rulemaking to address the inadequate rules that have been used by the IRS to determine 501(c)4 tax-exempt status,” said Wertheimer in a statement.

Once the regulations are published in the Federal Register, the public will have at least 60 days to comment.


November 29, 2013 in Current Affairs, In the News, Television | Permalink | Comments (0) | TrackBack (0)