Tuesday, November 29, 2016

Michigan Attorney General Attempts to Shut Down Roadside Charity Drives

Several well-established nonprofit organizations in Michigan found their longstanding holiday fundraising dri11-27-15-LOCAL-‘Fill-the-Boot’-photo-1-1024x683ves put on ice by the Michigan Attorney General.  Media reports several planned fundraisers—such as fire fighters’ “fill the boot” drive for Muscular Dystrophy Association, or the Old Newsboys annual fundraiser—have already been shut down based on the Michigan Attorney General’s aggressive (and potentially unconstitutional) interpretation of a traffic law, while other organizations are worried about the potential consequences.  

In a formal opinion, AG Schuette concluded that a state statute prohibiting the disruption of traffic prohibited solicitation of donations in or near roadways.  In car-dependent Michigan, this is potentially a big deal that could make it harder for many nonprofits to reach their audiences using methods they have used for decades.

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November 29, 2016 in State – Executive | Permalink | Comments (0)

Friday, November 18, 2016

FTC & NASCO Conference on Charitable Solicitations Announced for March 2017

The Federal Trade Commission & National Association of State Charities Officials announced earlier this week "Give & Take: Consumers, Contributions, and Charity", a conference exploring consumer protection issues and charitable solicitations will take place in Washington DC on March 21, 2017. Comments, research, original papers and participation are sought with submission deadline of February 17, 2017. Topics sought include: How Are Donor Solicitations Evolving in the Digital Age? What Do Donors Expect When They Contribute? What Information About Charities Do Donors Find Helpful? Discovering and Reporting Possible Deceptive Charitable Solicitations: When do Donors Act? How are Consumer Purchasing Choices Influenced by Promises of Charitable Support or Social Benefit? What are Best Practices in Terms of Charitable Solicitations, Information and Accuracy?

For more information, see https://www.ftc.gov/news-events/events-calendar/2017/03/give-take-consumers-contributions-charity?utm_source=govdelivery. 

Lloyd Mayer

November 18, 2016 in Conferences, Federal – Executive, State – Executive | Permalink | Comments (0)

Tuesday, November 15, 2016

AGs in Action: Hospital Ordered to Pay $2.1 Million for Charity Care; Veterans Charity Shut Down

As has been documented in this space many times, state attorneys general continue to play a pivotal role in ensuring that charitable nonprofit organizations continue to fulfill the promise of their charitable label.

Logo (2)For example, earlier this fall The Fresno Bee reported that the California Attorney General denied a request from Saint Agnes Medical Center to reduce the amount of charity care it provides and instead ordered the nonprofit hospital to pay $2.1 million to other community nonprofit organizations that provide direct health-care services. The request was an attempt by the hospital to reduce the $7 million in charity care it is required to provide annually pursuant to a three-year old agreement with the AG's office. The hospital only provided $4.9 million in charity care in 2015, however. To make up the deficit, the AG ordered the hospital to pay $2.1 million to other tax-exempt entities that provide direct health care services in the hospital's service area by no later than October 31, 2016. While the hospital reportedly was considering its options for challenging the AG order, there are no news stories or other public reports indicating that it did so before the October 31st deadline.

DownloadAnd just last week, the New York Attorney General  announced a settlement with the National Vietnam Veterans Foundation and two of its officers to end that purported charity's operations. The founder and president of the nonprofit, who is himself a veteran and an attorney with the U.S. Department of Vetranss Affairs, admitted that 90% of donations were paid to fundraisers, that contributors were deceived about the use of funds raised, and that he used nonprofit funds for personal expenses. In addition to the organization dissolving, he and another officer agreed to be permanently banned nationwide from handing charitable assets. CNN originally reported problems at the organization last May.

Lloyd Mayer

November 15, 2016 in In the News, State – Executive | Permalink | Comments (0)

NAAG/NASCO Conference Materials Available

Logo-naagFor readers who were not able to attend last month's National Association of Attorneys General/National Association of State Charitable Officials Conference, the conference materials are available here. Here was the conference's agenda:

Non-Traditional Models of Philanthropy

Presenter:

  • Richard Feiner, Director of Corporate and Foundation Relations, Weill Cornell Medicine

Donor Advised Funds, Endowments and Donor Restrictions

Presenter:

 

  • David Shevlin, Partner, Simpson Thatcher

 

Corporate Governance - Top Ten Issues

Presenter:

  • Michael Peregrine,  Partner, McDermott, Will and Emery LLP

Board Education: Top 10 Ways to Get Investigated and How Board Education Can Help Prevent It

Presenters:

  • Vernetta Walker, Vice President for Programs and Chief Governance Officer, BoardSource
  • James Joseph, Partner, Arnold & Porter LLP
  • Janet Kleinfelter, Deputy Attorney General, Office of the Attorney General of Tennessee

New Tools for the Nonprofit Sector

Presenters:

  • James Sheehan, Chief of Charities Bureau, Office of the Attorney General of New York
  • Amanda Broun, Vice President of Programs and Practice, Independent Sector
  • Meghan Biss, Senior Technical Advisor to the Director, Exempt Organizations, IRS
  • Miguel A. Barbosa, Co-Founder & CEO, citizenaudit.org

CyberSecurity/Data Privacy Issues

Presenters:

  • Paul Luehr, Managing Director and Chief Policy Officer, Stroz Friedberg
  • Abigail Stempsen, Assistant Attorney General, Office of the Attorney General of Nebraska
  • Alissa Gardenswartz, Deputy Attorney General, Office of the Attorney General of Colorado

Multistate Litigation: Cancer Fund of America

Presenters:

  • Tracy Thorleifson, Attorney, Federal Trade Commission
  • Michael Foerster, Senior Deputy Attorney General, Office of the Attorney General of Pennsylvania

NAAG Charities Committee: Meet the Attorneys General

Presenter:

  • Cindy Lott, Program Director, Nonprofit Management Program, Columbia University School of Professional Studies

Lloyd Mayer

November 15, 2016 in Conferences, State – Executive | Permalink | Comments (0)

Sunday, November 6, 2016

Charitable Solicitation Reporting and the Clinton & Trump Foundations

James_FishmanJames Fishman (Pace) has the written the following commentary (posted with his permission) on recent news stories relating to charitable solicitation reporting issues involving the Bill, Hillary & Chelsea Clinton Foundation and the Donald J. Trump Foundation:

In a pallid imitation of David Farenthold’s  work in the Washington Post on the Trump Foundation, a Scripps News investigation has reported that charity regulators in Mississippi cited the Clinton Foundation for three years beginning in 2001 for failure to register to solicit funds in that state, and the charity did not disclose those instances to some other states as required. 

 

While the Clinton Foundation justifiably can be criticized for inattention to possible conflicts of interest as well as a lack of concern with good nonprofit governance norms, a failure to register in one state for several years followed by the Foundation’s failure to mention it some years later in other states’ annual filing forms are minor infractions equivalent to reporting someone was issued a traffic ticket for parking fifteen inches from the curb, instead of twelve as required by an ordinance.

 

Almost all of the states require registration in order for a charity to solicit funds. This is accompanied by a requirement of filing a financial report at the end of the year. The registration process is simplified in that almost forty states accept a unified filing statement, which means the charity has to fill out one form and can submit it to all states in which it will try to raise funds. This task is usually done by firms that specialize in fundraising registration and compliance services. The financial reports are likely prepared by the charity’s accountants, who may have no knowledge of the registration process. The charity may not know that a mistake was made in one state, and neither would the accountant. And, as the story indicates, the charity officials who sign the forms may rely on others to prepare them and so not catch inconsistencies between them.

 

Professor Linda Sugin of Fordham inspected the Trump Foundation’s 990-PF and wrote in a New York Times op-ed piece that there were misstatements made in answering questions whether the foundation engaged in any self-dealing or political activities. That form was likely prepared and filed by Mr. Trump’s accountants, who had little knowledge, like everyone else, of what the Foundation’s activities really were. (The Trump Foundation is registered as a private foundation. Despite its name the Clinton Foundation is a public charity.) So, as was likely the case here with the Clinton Foundation and its charitable solicitation filings, those reporting failures probably reflect more a lack of communication than intentional errors.

 

Failures of registration by charities to solicit funds are common as many small and new charities are unaware of the requirement. Even larger and more sophisticated charities often make mistakes when completing the many state forms; while a growing number of states accept the unified filing statement, many require additional, state-specific information. When such failures occur, the state’s attorney general or other responsible official will contact the charity, give a period of time to correct the failure, perhaps impose a minor fine, and that’s the end of the situation. Repeated violations may lead to somewhat larger fines, but absent evidence of fraud on the public or other substantive legal violations that is as far it usually goes, although on occasion an attorney general will order a charity to stop soliciting in their state until the filing failures are corrected.

 

The Trump Foundation, which failed to register anywhere, including its home state of New York, was ordered by New York Attorney General Eric Schneiderman to halt fundraising in New York until it registered, which it later promised to do.  What was unique was that the failure to register was the subject of a press release, perhaps the first one ever issued for such an infraction. See Joseph Mead’s post in the Nonprofit Law Prof Blog. Whether the high profile nature of the Trump Foundation may have justified this step, unusual as it was, could certainly be debated.

 

Given the size and scope of the Clinton Foundation’s activities, not to speak of some legitimate issues for journalistic inquiry, are such inconsequential miscues worthy of the Scripps’ investigative reporters? One the many great things about the election finally taking place will be that the media can return to its normal stable of non-news stories. Kim Kardashian can’t wait.

 Lloyd Mayer

November 6, 2016 in In the News, State – Executive | Permalink | Comments (0)

Tuesday, October 4, 2016

New York AG issues Notice of Violation to Trump Foundation for Failing to Register before Soliciting Donations

Late last week (and widely reported yesterday), New York Attorney General Eric Schneiderman issued an order (with a press release) to the Trump Foundation directing it to cease soliciting donations until it complies with state registration requirements.  Attorny_General_Eric_T_SchneidermanNew York is one of all but a handful of states require that charities planning to ask for donations in their state (under various circumstances) register with the state.  Under these laws, charities are typically required to disclose some basic information about the charity, such as the percentage of raised funds that go to fundraising expenses, and the expenses charged by any professional fundraisers hired.  For charities that raise funds from multiple states, registration can be an onerous burden, and there has long been a push to streamline multi-state registration to make compliance easier for nonprofits. Yet this is an unusual case, as I'll explain below the break.

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October 4, 2016 in Current Affairs, State – Executive | Permalink | Comments (0)

Monday, August 29, 2016

Add Morgantown, West Virginia to the PILOT list

Big news from Monongalia County, West Virginia  (and I don't mean its party school ranking of number 2... ), but add West Virginia University to the list of charitable institutions making PILOT (payment in lieu of taxes) payments.  WVU has done a significant amount of development in downtown Morgantown (yes, we have a downtown...) through private-public partnerships.   As a result, a good deal of private property has gone off the tax rolls in this standard issue university town. 

Of course, the issue of PILOTs has received a significant amount of discussion as of late (including on this website), as strapped state and local communities look for alternative sources of revenue.  For more information, I strongly recommend starting with the Urban Institute website, which has a number of studies on PILOT issues (many of which are authored or co-authored by Evelyn Brody.)  In that regard, this really shouldn't be much in the way of new ground... but...

Lets make a deal

(I am totally dating myself here...)


What I find interesting is that WVU is a public university.   I've been searching on the interwebz (to no avail) for more information on how many public institutions - presumably, universities and hospitals - have agreed to PILOTs.  (Anyone have any info?  I found this helpful article by Langley, Kenyon and Bailin from the Lincoln Institute of Land Policy, circa 2012, that has a number of appendices - a very quick review doesn't seem to show any public institutions.)   Part of the rationale for a private nonprofit to enter into a PILOT agreement and voluntarily pay not-taxes is that the alternative could be much, much worse.  If a government changes the applicable laws granting nonprofit property tax exemption, the nonprofit will have little control over what happens next, so the devil you know and negotiate is probably better than what is behind Door Number 2.  

I would think that with a public university, that calculus would be much, much different.   After all, a public university is branch of government, it seems as if it would be much more difficult to muck with the property tax exemption for the University itself - both legally and politically.  According to the press release from WVU, its 50 year payment agreement applies only to "private commercial establishments operating on University property for activities that are not a critical part of or integral to serving the academic needs of students."  Therefore, while there may be limits on the ability to change the University's tax exemption, query how much play actually exists with attacking the property tax exemption for the University's leased property?   (see section 10 versus sections 14 or 17, for example).

 

EWW

 

August 29, 2016 in Current Affairs, In the News, State – Executive | Permalink | Comments (0)

Wednesday, August 10, 2016

Think Tanks and Their Donors, or How to Get Unbiased Public Policy Research

Think TanksThe NY Times is running a series of articles on the influence donors, particularly large corporations, appear to have over research conducted by some prominent think tanks. As its front page articles on August 8th and August 9th detail, many researchers associated with think tanks are paid consultants or lobbyists for corporate clients, and many think tanks also receive contributions directly from corporations that have an interest in the research the think tank is conducting. Some of the think tanks identified have either admitted to lapses in oversight or adopted more stringent conflict of interest and disclosure policies, but it is not clear how widespread such admissions or changes are within the think tank community.

While in theory reaching research conclusions that are helpful to donors or clients could constitute providing prohibited private benefit on the part of the think tanks, which are generally tax-exempt under Internal Revenue Code section 501(c)(3), the connections detailed in the articles seem too tenuous to support such a claim. This is especially true given both that proving a solid link between a donation and research results is difficult and that the think tanks identified generally engage in a broad range of research projects, only a small portion of which may be tainted by donor influence. Similarly, while some think tanks then arrange for meetings or conferences centering on their research and attended by government policy makers that might constitute lobbying for federal tax purposes, most such events likely fall outside of the technical definition of lobbying and the few that may not are almost certainly within the limited amount of lobbying permitted for tax-exempt charitable organizations such as think tanks.

Nevertheless, the stories are troubling because they throw into question the ability of government policymakers to rely on such research, as noted by Senator Elizabeth Warren in a video the NY Times posted with these stories. In its regular Room for the Debate feature, the NY Times therefore invited a number of commentators to suggest possible ways to address the concerns raised in its stories. Suggestions ranged from greater transparency about possible conflicts (including a certification process), better internal procedures to ensure unbiased research results, greater skepticism regarding those results on the part of journalists and others who report or rely on those results, and a diversification of funding sources (including ensuring various governmental funding sources) to support such research. I frankly am skeptical of transparency, certification, and internal procedure improvement if only because it may be too difficult for busy lawmakers, much less journalists and other members of the public, to shift through various disclosures or to determine what certification schemes or particular think tanks are reliable. I believe the diversification of funding sources idea has more promise, particularly if there are (nonpartisan) ways for government agencies to provide such funding conditioned on accurate, unbiased results. Bottom line, this strikes me as not a narrow federal tax issue but a larger issue about how to incentivize truth telling in public policy research.

Lloyd Mayer

 

August 10, 2016 in Federal – Executive, Federal – Legislative, In the News, State – Executive, State – Legislative | Permalink | Comments (0)

Monday, June 20, 2016

State Attorneys General Urge Caution When Donating in Response to Orlando Massacre with UPDATE

Seal_of_the_Attorney_General_of_IndianaAnticipating an uptick in charitable giving, some state Attorneys General (e.g., Indiana and Ohio) urge caution before donating to charity, and supply the following tips:

  • Evaluate charities using information from AG offices, IRS filings, and other resources such as Charity Navigator* (UPDATE: see below) or Guidestar
  • Beware of sham charities & look-alike sites:  some appeals will use similar names to well-established nonprofits
  • Be cautious of newly-formed charities:  may lack the experience to properly or effectively handle donations
  • Investigate how your donation will be used:  look for destination of funds and what percentage will benefit specific charitable purpose
  • Stay away from crowdfunding or peer-to-peer fundraising:  state law typically prohibits soliciting donations on behalf of a charity without charity's prior consent

It is good to be prudent, but do these consumer alerts discourage charitable giving? Are there any tips that you would add or eliminate to the list? (Note that these "tips" go beyond law and offer the Attorney Generals' views on best practices for charity, without distinguishing between law and opinion, the latter of which might not be shared by everyone.)

Editor’s note: A national organization with broad knowledge about local operations of charitable organizations privately shared that Charity Navigator only rates a small number of nonprofits but many people don’t realize this and assume that if a nonprofit is not listed, it is not recommended. Additionally, Charity Navigator has itself acknowledged the downsides of analyzing overhead ratios as a method of rating a charity’s effectiveness, but continues to use a methodology that places emphasis on administrative costs. Consequently, the national organization recommends that donors ideally should get to know the nonprofit first-hand, and learn more by reading about the nonprofit on GuideStar.org.

@JosephWMead

June 20, 2016 in Current Affairs, State – Executive | Permalink | Comments (2)

Friday, May 6, 2016

Property Tax Exemption Skirmishes Spread in New Jersey and Elsewhere

Img-location-morristown-detailAs has been covered in this space repeatedly (for example, with respect to Illinois and Maine), the combination of wealthy nonprofits, valuable real estate, and government budget pressures continues to lead to battles between those nonprofits and governments over property tax exemptions. New Jersey has become perhaps the most active battleground - NorthJersey.com reported last month that 26 of the state's 62 nonprofit hospitals are now embroiled in tax-court cases, building on a 2015 Tax Court of New Jersey ruling against Morristown Medical Center.  While earlier this year New Jersey Governor Chris Christie announced an agreement to freeze property tax assessments for nonprofit hospitals for two years in order to give a to-be-formed Property Tax Exemption Study Commission time to review the issue, the legislature has yet to act on the legislation needed to implement this proposal. Additional coverage: NJ.com. The hospital battles join the ongoing lawsuit by individual residents of Princeton, N.J. against Princeton University that a state trial judge has refused to dismiss (a decision now upheld earlier this year by a state appellate court). For recent coverage of that suit, see Bloomberg and Fortune

In related news, Gerard F. Anderson (John Hopkins) and Ge Bai (Washington & Lee) just published a study reporting that seven of the ten most profitable hospitals in the United States in 2013 were nonprofits. At the same time, they found more than half of the hospitals they studied (which included for-profit and public hospitals as well as nonprofits) incurred losses from patient care services and only 2.5 percent earned more than $2,475 per adjusted discharge. Here is the abstract for the study, which appears in HealthAffairs:

To identify the characteristics of the most profitable US hospitals, we examined the profitability of acute care hospitals in fiscal year 2013, measured as net income from patient care services per adjusted discharge. Based on Medicare Cost Reports and Final Rule Data, the median hospital lost $82 for each such discharge. Forty-five percent of hospitals were profitable, with 2.5 percent earning more than $2,475 per adjusted discharge. The ten most profitable hospitals, seven of which were nonprofit, each earned more than $163 million in total profits from patient care services. Hospitals with for-profit status, higher markups, system affiliation, or regional power, as well as those located in states with price regulation, tended to be more profitable than other hospitals. Hospitals that treated a higher proportion of Medicare patients, had higher expenditures per adjusted discharge, were located in counties with a high proportion of uninsured patients, or were located in states with a dominant insurer or greater health maintenance organization (HMO) penetration had lower profitability than hospitals that did not have these characteristics. These findings can inform policy reforms, while providing a baseline against which to measure the impact of any subsequent reforms.

Coverage: St. Louis Post-Dispatch/AP; Washington Post.

Lloyd Mayer

May 6, 2016 in In the News, Publications – Articles, State – Executive, State – Legislative | Permalink | Comments (0)

Tuesday, May 3, 2016

Targeting Religious Organization Tax Benefits, Religious Orgs Pushing Back, and the Scandal of the Month

City ChurchA flurry of litigation targets the tax benefits enjoyed by religious organizations and their ministers, including the parsonage allowance exclusion and property tax exemptions. At the same time, religious organizations are pushing back on government regulation by challenging the IRS enforcement of the political campaign intervention prohibition. And of course news outlets are continually searching for possible behavior by religious groups and sometimes finding it.

In the courts, the Freedom From Religion Foundation has refiled its complaint challenging on Establishment Clause and Due Process Clause grounds the parsonage allowance exclusion provided to ministers by Internal Revenue Code section 107. In an attempt to remedy the standing issue that doomed its earlier challenge, FFRF's new complaint asserts that it provides a housing allowance to its officers but solely because they are not ministers that allowance is subject to federal income tax. It remains to be seen whether these changed facts are sufficient to overcome the general prohibition on taxpayer standing, although the Seventh Circuit's earlier decision on this issue indicates they may be.

At the same time, the Massachusetts Supreme Court has taken up the question of what counts as sufficiently "religious" use of real property to qualify that property for tax exemption. Areas of the property at issue include a maintenance shed, a coffee shop, conference rooms, a religious bookstore, and part of a forest preserve. A recent Atlantic article (hat tip: Above the Law) details the possible significant ramifications of the case, both in Massachusetts and nationally, given the increasing financial pressure on local tax assessors to narrowly interpret property tax exemptions. Additional Coverage: WBUR.

Religious organizations are not solely on the defensive, however. The Alliance Defending Freedom, not satisfied with its increasingly popular Pulpit Freedom Sunday challenge to the Internal Revenue Code section 501(c)(3) prohibition's application to churches and other religious organizations, has now filed a Freedom of Information Act lawsuit to force the IRS to disclose its rules for investigating churches. ADF is basing its lawsuit on the disclosure by the IRS, in response to a FFRF lawsuit, that it was actively enforcing the prohibition as against churches. For a discussion of the bind ADF and FFRF are putting the IRS in, see this Surly Subgroup blogpost by Sam Brunson.

Finally, religious organizations continue to be fruitful sources for news outlets looking for scandals. Most recently, the City Church of New Orleans was the subject of a story by WWLTV detailing an ongoing state criminal investigation. The allegations against the church include both ones that are sadly familiar - financial mismanagement and use of church resources to benefit the private business interests of church leaders - and ones that are less common - lying to collect federal education grants and film tax credits. It remains to be seen, of course, whether these allegations are shown to be accurate or not.

Lloyd Mayer

 

May 3, 2016 in Federal – Judicial, In the News, Religion, State – Executive, State – Judicial | Permalink | Comments (0)

Tuesday, February 23, 2016

Ohio Restricts Government Funding to Planned Parenthood Affiliates

 PpThis weekend, Ohio joined the group of states that have “defunded” Planned Parenthood.  Ohio’s bill follows the model used by other states, and bans certain funding to go to any organization or affiliate that performs or promotes elective abortions. (Before the bill, there was no government funding of elective abortions.) “Affiliate” means any organization that shares common ownership or control, has a franchise agreement, or shares a trademark or brand name. Under this bill, an independently incorporated organization that, for example, licenses the Planned Parenthood logo would be precluded from participating in funding, even if it does not perform or promote elective abortions. Ohio’s restrictions apply to several specific programs, including the Violence Against Women Act and the Breast and Cervical Cancer Mortality Prevention Act. 

Against my better judgment, I’m wading into these treacherous waters because these bills pose interesting legal and theoretical issues about the ability of government condition the receipt of funding to nonprofits based on disagreement with the organizations’ ideology.

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February 23, 2016 in Current Affairs, State – Executive, State – Legislative | Permalink | Comments (0)

Monday, February 22, 2016

Pigs, Get Ready to Fly - The Multistate Registration Filing Portal Steps Closer to Becoming Reality

If you've ever been involved in helping  a charity comply with the various state solicitation registration requirements, then somewhere between swearing and tearing your hair out I'm sure you thought, "There has to be a better way!"  Shake your fist at the sky in despair no more!   It is with unbounded joy that I share part of a note I received from Bob Carlson of the Missouri Attorney's General Office, who has been actively involved for some time with NAAG and NASCO's efforts to develop a simplified filing process.   And lo...

The Multistate Registration Filing Portal, Inc. has released our Request for Information (RFI) regarding a Single Internet Registration Portal. ...   The RFI has been posted at http://mrfpinc.org/rfi/.  We welcome all comments and look forward to robust response to the RFI.  We also invite you to share it with anyone you believe may be interested. 

The MRFP will host a conference call on March 15, 2016 from 3:00 p.m. – 4:30 p.m. EST to provide additional background information and answer questions from the public about the registration process. Dial-in: (800) 232-9745; PIN: 3232959. Charities, their registration services providers, and any other interested parties are welcome to participate. ...

The RFI will remain open until April 1, 2016....   Our one-page project summary is still available at  http://mrfpinc.org/project-overview/

Seriously awesome work,  Bob and everyone involved with this process.   I am sure I speak for lots of folks when I say that we can't wait to see this become a reality!

EWW

February 22, 2016 in Current Affairs, In the News, State – Executive, Web/Tech | Permalink | Comments (0)

Wednesday, February 3, 2016

Nagac: Religiosity and Tax Compliance

Kadir Nagac (Zirve University, Department of Economics) has posted "Religiosity and Tax Compliance" to SSRN:

The intention of this paper is to analyze religiosity as a factor that potentially affects tax compliance. Studies in the 90s have shown that the puzzle of tax compliance is "why so many individuals pay their taxes" and not "why people evade taxes". It has been noted that compliance cannot be explained entirely by the level of enforcement (Graetz and Wilde, 1985; Efflers, 1991). Countries set the levels of audit and penalty so low that most individuals would evade taxes, if they were rational, because it is unlikely that cheaters will be caught and penalized. Nevertheless, a high degree of compliance is observed. Therefore, studies that analyze a variety of factors other than detection and punishment are need. Religiosity can play an important role in determining one's tax compliance decision. I use religious adherence data from the American Religious Data Archive and reported income data from IRS to analyze independent effects of church adherence rates on tax compliance in the United States at the county-level. Tax compliance at the county-level is measured as discrepancy in reported income between IRS data and census data. Existing studies focus on effect of religiosity on tax fraud acceptability (tax morale), not the actual tax fraud or tax compliance behavior. To writer's knowledge, this study is the first study that analyzes the effect of religiosity on actual tax compliance behavior.

(Hat tip:  TaxProfBlog)

Nicholas Mirkay

February 3, 2016 in Federal – Executive, Publications – Articles, Religion, State – Executive | Permalink | Comments (0)

Celebrities' Foundations Need More Attention

As published in the Daily Tax Report, at the ABA Tax Section meeting last week, Andrew Morton, a partner at Handler Thayer LLP, opined that a good number of "high-profile charitable foundations" need substantially more oversight and legal assistance than they are currently receiving.  He clarified that the neglect of these organizations is not malicious or deliberate:  "Not because they are deliberately trying to manipulate the system, not because they're trying to do anything wrong, they just don't know. They don't get that a nonprofit is a corporation … it's a real thing. You have to take care of it.”  He explained that most of the problems that arise with such celebrity-affiliated foundations are due to a lack of written policies, such as conflict-of-interest and whistle-blower situations, and the lack of reporting those policies on the foundations' annual Forms 990.  In addition, these foundations are typically not aware of charitable registration requirements, which are governed by the states:  “501(c)(3) is an adjective—not a noun. You don't have a 501(c)(3). You have a state nonprofit corporation, which has been conferred tax-exempt status from the federal government,” he explained. “There are 51 jurisdictions that require compliance for nonprofits. The federal government has their requirements, but every state has a different landscape.”

 

Nicholas Mirkay

February 3, 2016 in Conferences, Federal – Executive, State – Executive | Permalink | Comments (0)

Monday, November 9, 2015

LA County Leads the Way on Reimbursing Indirect Costs

According to Nonprofit Quarterly, Los Angeles County has adopted new beneficial rules regarding payments to nonprofits that contract with the government to provide services, such as social service agencies.

Anyone who has worked with charities that contract with the government (or anyone else, for that matter) knows that it is often very difficult for a charity to be reimbursed for the indirect costs associated with programming, such as utilities.  At the end of last year, the Office of Management and Budget recently issued a "super circular" addressing indirect cost reimbursement, clarifying issues regarding the applicability of these rules to all federally-funded grants and contracts, and reiterinat that it is not appropriate for governmental agencies to request waivers of these rights. 

Of course OMB directives can only govern grants and contracts using federal funds - clearly, all federal contracts, but also state and local contracts to the extent they utilize federal funding.   Strictly state-funded (or local-funded) grants, however, are not covered by the OMB guidelines.   Thus, LA County's adoption of the standards is a big deal for local nonprofits, and hopefully sets a trend for other state and local jurisdictions.

H/t to Jennifer Chandler at the National Council of Nonprofits, which has been active in this area.

EWW

 

November 9, 2015 in Federal – Executive, State – Executive | Permalink | Comments (0)

Thursday, July 23, 2015

New York AG Files Fraud Suit Against Brooklyn Children's Charity

As reported by The New York Times, a charity fraud case in the New York court is a great teaching case reminiscent in part of United Cancer Council, except this case involves potentially both private benefit and private inurement.  The National Children's Leukemia Foundation, based in Brooklyn, is accused of paying more than 80% of the $9.75 million it raised from 2009 to 2013 in telemarketing and direct-mail fundraising campaigns.  In contrast, the Foundation only expended $57,451 in "direct cash assistance to leukemia patients" in the same time period.  The Foundation's "Make A Dream Come True" program, which arranged family trips and celebrity introductions to children with cancer, was primarily a phantom effort, with only $7,866 paid out prior to 2009 and nothing thereafter.  The Foundation's claims of maintaining a bone marrow registry and "banking stem cells" were admitted to be mostly false.

Reeking of private inurement, the Foundation was essentially a one-person operation, operated from the founder's basement.  The founder extracted a $595,000 salary and $600,000 deferred compensation from 2009 to 2013, along with a future pension.  The court petition also accuses the founder of using Foundation funds for personal expenses, including house renovations.  A lack of board oversight and internal accounting controls appear to have contributed to the founder's ability to control both operations and raised funds.  In addition, the Foundation transferred $655,000 to an Israeli research foundation created by the Foundation's founder.

Nicholas Mirkay

July 23, 2015 in In the News, State – Executive | Permalink | Comments (0)

Thursday, May 14, 2015

NY AG Attempts to Head Off Financial Troubles at Cooper Union (College)

Cooper UnionIn an apparent pro-active effort to engage with a charitable nonprofit before it collapses, the Wall Street Journal and the NY Times report that Attorney General Eric T. Schneiderman has sent inquiries to board members of the Cooper Union for the Advance of Science and Art, asking about management of the college's endowment and transactions relating to the Chrysler Building, the land under which the college owns.  The attention comes at least in part because of the college's decision in 2014 to begin charging undergraduate tuition, allegedly in order to avoid insolvency.  The ongoing investigation has threatened the tenure of the college's president, although his position may already been at risk given apparent tensions between him and the board chairman.  According to these various news reports, the potential issues center around possible financial mismanagement, including a failure to sufficient diversity investment holdings and questionable loan terms related to a new building, and lack of transparency, including with respect to regulators.  Stay tuned.

Lloyd Mayer

May 14, 2015 in In the News, State – Executive | Permalink | Comments (0) | TrackBack (0)

Thursday, March 19, 2015

Six Nonprofit Hospitals at Risk as Deal to Buy Them Collapses

1374572730_DCHSThe Los Angeles Times reports that a proposed plan for a for-profit company to buy six struggling nonprofit hospitals has collapsed. As detailed in the article, the buyer, Prime Healthcare Services, is blaming California Attorney General Kamala Harris for imposing "impossible" conditions on the purchase, while the AG claims the buyer previously indicated it was fine with the conditions. Those conditions on the proposed $843 million sale included requiring the buyer to keep five of the hospitals open for at least 10 years, maintaining the same level of charity care as before the purchase, and apparently numerous other requirements described in a 78-page document. Regardless of whom is to blame, the Daughters of Charity Health System that owns the hospitals is now saying "[e]very option is on the table, including bankruptcy" given that the System is losing $10 million per month. Before the deal collapsed the System filed a lawsuit against a major union and a private equity firm for allegedly interfering in the sale agreement, according to the San Francisco Business Times.

Additional Coverage: Nonprofit QuarterlyLA Times Editorial; Sacramento Bee.

Lloyd Mayer

March 19, 2015 in In the News, State – Executive | Permalink | Comments (0) | TrackBack (0)

Stateline: Should Nonprofits Have to Pay Taxes?

Logo-statelineAs often reported here, an increasing number of states and localities are challenging the property and other tax exemptions of nonprofits within their jurisdictions.  Some of the most notable recent developments have been in Maine, where the governor's budget proposal includes a tax on "large" nonprofit organizations in the state, and Pennsylvania, where a state constitutional amendment that would shift control over the standard for exemption to the state legislature is working its way through the amendment process.  Along these lines, the Stateline news project of the Pew Charitable Trusts recently published a article titled "Should Nonprofits Have to Pay Taxes?" that provides an overview of recent developments in this area. Besides discussing the the situations in Maine and Pennsylvania, it also discusses developments in Ohio, Vermont, and New York, as well as providing a chart showing the number of federally tax-exempt nonprofits in each state and their assets. Of course those assets include both assets on which the owning nonprofit does pay tax (because no available exemption applies) and also assets that are not subject to property or similar state and local taxes regardless of what type of entity owns them (e.g., investment assets).

Lloyd Mayer 

March 19, 2015 in In the News, State – Executive, State – Legislative | Permalink | Comments (0) | TrackBack (0)