Friday, November 20, 2020

DAFs: Surge in Giving Amid Concerns, Proposals for Change at Federal & State Levels, Maybe New Regs Soon

Daf-report201007-1There has been a lot of news recently relating to the quickly growing universe of donor-advised funds. A recent analysis by the Chronicle of Philanthropy reports that eight of the nation's largest community foundations have seen giving from DAFs they oversee increase by 42% from March to April of this year. And a recent study by the Lilly Family School of Philanthropy (pictured)  finds that seven of ten nonprofits surveyed have received DAF grants, even as many nonprofit leaders expressed concerns relating to seeking and processing DAF gifts, especially relating to communicating with donors who give through a DAF.

Not surprisingly, the growth and spread of DAFs continues to attract proposals for increasing oversight of and rules for them. Last month the Chronicle of Philanthropy reported that billionaire John Arnold and law professor Ray Madoff have joined forces as part of their Initiative to Accelerate Charitable Giving to propose a set of federal tax law changes that would, among other goals, accelerate giving from DAFs. Push back was quick, including from the Philanthropy Roundtable.

At the same time, proposals related to DAFs are also being made at the state level. For example, members of the California legislature continue to pursue possible DAF-related bills, as detailed by Gene Takagi earlier this year. And a recent attempt in California to pass a bill (AB 2936) that would have established a state-law category of DAF sponsoring organizations failed in August, according to CalNonprofits. In Minnesota, a new report by the Minnesota Council of Nonprofits recommends that state law there be changed to "require charitable trusts transferring funds to a donor advised fund (DAF) to include in their annual trust filing with the office of the attorney general an itemized list of all grants and contributions made or approved for future payment during the year from that DAF."

Regardless of whether any of these proposals advance, we do know that Treasury is working on regulations relating to DAFs. As tweeted by Gene Takagi, Cindy Lott said at the NAAG/NASCO conference to expect some sort of DAF regulations in the next few months.

Finally, the Stanford Law School Policy Lab on Donor Advised Funds published Are Donor Advised Funds Good for Nonprofits? in the Stanford Social Innovation Review (SSIR). That article follows an earlier SSIR podcast on How Nonprofits Are Leveraging Donor-Advised Funds.

Lloyd Mayer

November 20, 2020 in Federal – Executive, In the News, State – Legislative, Studies and Reports | Permalink | Comments (0)

Conservation Easement Battles Continue in Congress, DOJ, IRS, and the Courts

ImageThere is some much continuing activity relating to to conservation easements that it is difficult to keep track of everything. Fortunately, fellow blogger Nancy McLaughlin (Utah) has recently updated her comprehensive summary of court decisions, Trying Times: Conservation Easements and Federal Tax law (Sept. 2020). It undoubtedly will need to be updated for many years, as just last month taxpayers filed at least 27 Tax Court petitions relating to claimed conservation easement deductions according to Tax Notes (subscription required).

The Department of Justice has also provided more information in its lawsuit against promoters of syndicated conservation easements, including identifying 42 additional such deals, again according to Tax Notes. The Internal Revenue Service this week issued a memo emphasizing the use of summons and summons enforcement in syndicated conservation easement cases, among others, and  Chief Counsel recently issued a Notice providing further guidance about the settlement of such cases. Finally, Senators Grassley, Daines, and Roberts recently reintroduced the Charitable Conservation Easement Program Integrity Act targeting abusive conservation easement arrangements.

Additional Coverage: Washington Post ("Wealth investors seem to be exploiting land-conservation breaks, and the Senate is taking notice").

Lloyd Mayer

November 20, 2020 in Federal – Executive, Federal – Judicial, Federal – Legislative, In the News | Permalink | Comments (0)

Thursday, November 19, 2020

COVID-19, Donations & Grants: Donations Up and Restrictions from Foundations Down

Download (1)A recent report indicates that donors are increasing their giving in response to the challenges of 2020, including the pandemic. The Association of Fundraising Professionals' Fundraising Effectiveness Project reports that charitable giving in the first half of 2020 increased by 7.5% over the first half of 2019, a sharp increase after a decline for the first quarter of 2020 as compared to the first quarter of 2019. The number of donors also increased, by 7.2%, with an increase of 12.6% in new donors offsetting a decline in new retained donors. Coverage: Chronicle of Philanthropy (subscription required).

And according to a recent report from the Center for Effective Philanthropy, a survey of 236 foundations found that 66 percent had loosened or eliminated restrictions on existing grants since the pandemic began. A majority of respondents also reported that since the pandemic began they have reduced what is asked of grantees, made new grants as unrestricted as possible, and/or contributed to emergency funds. Coverage: Chronicle of Philanthropy (subscription required); The NonProfit Times.

Lloyd Mayer

November 19, 2020 in In the News, Studies and Reports | Permalink | Comments (0)

COVID-19 & Museums: Deaccessioning Disputes and Grim Projections

DownloadIt probably comes as no surprise that the pandemic is hitting museum finances particularly hard. Recognizing this fact and as reported by artnet, last spring the Association of Art Museum Directors temporarily loosened its guidelines on how members could use the proceeds of art sold from their collections. As artnet detailed, this led to a number of major museums announcing sales to shore up their finances.

But such moves risk controversy, as the Baltimore Museum of Art (pictured) found out. When it announced the sale of three paintings, including one by Andy Warhol, two trustees resigned in protest, two major donors reportedly decided to withhold $50 million in pledged funds, and criticism from other sources mounted, according to the Baltimore Sun. As that paper reported in a later story, this led to an emergency board meeting and cancellation of the sale only days before they were to occur.

Regardless of what particular museums do, the predictions for museums more generally are grim. The N.Y. Times reports that a new survey of 850 museum directors conducted in October found over half reporting their institutions had six months or less of financial operating reserves left, and that museums are overall operating at about a third of their capacity. Nearly one in three respondents said their institutions were at risk of permanent closure if additional funding was not found in the next 12 months.

Lloyd Mayer

November 19, 2020 in In the News | Permalink | Comments (0)

Tuesday, November 17, 2020

Election 2020: Post-Election Challenges and What the Election May Mean for Nonprofits

DownloadWith the fading but still heated allegations about the 2020 election came at least two legal issues for Internal Revenue Code section 501(c)(3) charities seeking to be involved in the post-election litigation. One issue is to what extent charities can be involved in that litigation and related public debate without engaging in political campaign intervention. The Bolder Advocacy Program at the Aliiance for Justice provides helpful guidance on this point. But the other, perhaps more surprising issue, was whether 501(c)(3) Project Veritas may have put its tax-exempt status at risk during its attempts to find evidence of voter fraud. Fellow blogger Sam Brunson unpacks this issue over at The Surly Subgroup, concluding that if Project Veritas broke the law by helping and encouraging perjury by a Pennsylvania postal worker it may indeed have placed its tax-exempt status at risk.

But the bigger issue for most nonprofits is how the election may directly affect them or the positions they support. Before the election, the Chronicle of Philanthropy noted that the announced Biden tax plan "would steer aid to the poor but could deter some wealthy donors from giving." And in the wake of the election, the Chronicle of Philanthropy has collected a roundup of stories about how it is likely to affect philanthropy more generally. The consensus appears to be that incremental change is likely, with charities supporting more progressive policies cautiously optimistic but expecting a lot of hard work ahead.

UPDATE: The Chronicle of Philanthropy also just published an article with this headline: "Biden Transition Team Signals Big Role for Nonprofits Throughout Government." While that article is behind a paywall, the NonProfit Times has a list of over 40 nonprofit leaders that are among the 257 members of Biden's Agency Review Teams.

Lloyd Mayer

November 17, 2020 in Federal – Judicial, In the News, State – Judicial | Permalink | Comments (0)

Election 2020: Pre-Election Walking Up To (and Over?) the 501(c)(3) Political Campaign Intervention Line

ImagesAs happens every election season, in the run-up to the 2020 election there were a flurry of news stories about Internal Revenue Code section 501(c)(3) charities pushing up against, and maybe pushing through, the political campaign intervention prohibition. With over 65 years of guidance from the IRS, as meticulously compiled by  Steven H. Sholk of Gibbons P.C., you would think just about every possible situation has been addressed, yet charities and candidates continue to come up with new ways of walking right up to, and maybe crossing, that line.

For example, in mid-October the Washington Post reported on a closed-door session of conservative activists, including leaders of a number of 501(c)(3)s, discussing electoral tactics from challenging mail-in ballots to ballot harvesting. The story quoted nonprofit experts  Roger Colinvaux and Marcus Owens as being concerned that the involvement of 501(c)(3) leaders raised questions about their organizations' compliance with the political campaign intervention prohibition. In response, some of those leaders stated they were not there on behalf of the groups they lead.

At the more local level, in Kansas a state senate candidate included on his campaign signs not only that he had founded a church and thrift store, but also included the organization's logo. The candidate insisted that the sign was purely informational. But as I noted to the reporter who wrote the story, the problem is the inclusion of the group's logo, which constitutes the use of the charity's property for the candidate's benefit. And the story also reported appearances by the candidate at two churches, which did not provide his opponent with a similar opportunity to appear.

And of course there were other reports of more common but still problematic support of candidates. These included a Kansas state house candidate using mailing equipment owned by a church; his campaign reimbursed the church for the cost of that use, but it does not appear that the church made the equipment generally available for use by the public or other candidates on similar terms as required by IRS guidance. And a Catholic priest in Mississippi called then candidate Joe BIden "an embarrassment to Catholicism" from the pulpit in late October.

There is no indication that any of these events have led to adverse IRS attention, although of course the IRS has a number of years to pursue an audit or, in the case of the churches, a church tax inquiry.

Lloyd Mayer

November 17, 2020 in Church and State, In the News, Publications – Articles | Permalink | Comments (0)

Friday, November 13, 2020

Prairie View A&M University Receives $10 Million for Scholarships

A press release from Prairie View A&M University in Prairie View, Texas, has announced that a donor who wishes to remain anonymous has made a $10 million gift to the institution to fund scholarships for students struggling to complete their degrees during the pandemic.

The Panther Success Grants initiative will provide unrestricted funds to juniors and seniors impacted by the COVID-19 crisis, enabling them to remain enrolled and graduate on time. In-state, out-of-state, and international students all will be eligible to apply for a scholarship of up to $2,000 per semester and $4,000 per academic year — the average amount that Prairie View students with jobs contribute annually to their education. The university will give priority to students who are making satisfactory progress toward the completion of their degrees, as well as those whose finances and any financial aid they receive are insufficient to cover their college costs.

While enrollment at Prairie View is up slightly this fall, many students report that staying enrolled in school will be a challenge. University president, Ruth J. Simmons, opines that the scholarship assistance made possible by this gift "will be the critical difference in enabling these students to continue and complete their studies."

I certainly agree with Dr. Simmons and hope other anonymous donors will show up at more than a few more educational institutions.

Prof. Vaughn E. James, Texas Tech University School of Law  

 

November 13, 2020 in Current Affairs, In the News | Permalink | Comments (0)

Thursday, November 12, 2020

IRS Announces Tax Exempt and Government Entities Compliance Programs and Priorities

Following up on the announcement of its compliance programs in the Tax Exempt and Government Entities (TE/GE) FY2020 Program Letter the IRS has announced its intention to continue its compliance programs in FY2021 and to share information about new compliance priorities at the end of each quarter during the fiscal year. According to the IRS's announcement, the TE/GE Program protects the public interest by applying the tax law with integrity and fairness to all. To accomplish its mission, the IRS plans to deliver a compliance platform of six programs that together promote tax law compliance by tax-exempt and government entities. These programs are: 

  • Compliance Strategies - issues approved by the TE/GE Compliance Governance Board to identify, prioritize and allocate resources within the TE/GE filing population.
  • Data-Driven Approaches - data and queries based on quantitative criteria, used to identify the highest risk areas of noncompliance and focus on issues with the greatest impact.
  • Referrals, Claims and Other Casework - alleged noncompliance referrals from internal and external sources, and claims for refunds, credits or adjustments.
  • Compliance Contacts - address potential noncompliance through correspondence contacts known as “compliance checks” and “soft letters” to limit costs and taxpayer burden.
  • Determinations - letters issued to exempt organizations on exempt status, private foundation classification and other determinations related to exempt organizations and qualified retirement plans that meet legal and regulatory requirements.
  • Voluntary Compliance and Other Technical Programs – voluntary correction program to enable a plan sponsor (at any time before exam) to pay a fee and receive IRS approval for correction of plan failures. Other technical programs, including Knowledge Management, work to ensure the quality and consistency of technical positions, provide timely assistance to employees and preserve and share TE/GE’s knowledge base.

 The Service's 2021 priorities for scrutiny include Employee Plans: Participant Loans; Exempt Organizations: Excise Tax on Excess Compensation; Exempt Organizations, Federal, State and Local Government, and Indian Tribal Governments: Form W-2 and 1099-Misc to the Same Payee; and Tax-Exempt Bonds: Arbitrage Violations.

Sounds like we have an interesting year ahead.

Prof. Vaughn E. James, Texas Tech University School of Law

 

 

  

November 12, 2020 in Current Affairs, In the News | Permalink | Comments (0)

Friday, October 30, 2020

Blurring the lines between the political and nonpolitical spheres

            With the presidential election less than a week away, politics is never far from anyone’s mind: that would seem to include organizations that, strictly speaking, are expected to avoid the political arena. The Falkirk Center, a subsidiary think tank of conservative private nonprofit Liberty University, recently featured an advertisement showing President Trump amid a closely-gathered group of people in the Oval Office, heads bowed in prayer. Alongside the picture appears text quoting Scripture and the phrase “Pray for our President.”

            The Falkirk Center is organized under Liberty University’s 501(c)(3) charter granting the group tax exemption: language used by the IRS unambiguously forbids such organizations from “directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.” To violate the IRS’ rule is a risky proposition for any tax-exempt organization, as its puts their tax exemption at risk: on the whole, however, it appears that the Falkirk Center’s advertisements fall on the right side of the tax code’s bright red line. An Inside Higher Ed piece reporting on the potential tax implications of the advertisements pointed to a statement by a Liberty spokesman stating that the Bible calls for believers to pray for kings and authority figures in order to secure peace for all, regardless of which political party that leader hails from. “[Expert] consensus,” says the article, “was that the ads push the envelope but probably don’t cross into being ‘functionally equivalent to express advocacy,’ which would make them electioneering and out of bounds for a 501(c)(3).” While Liberty University’s advertising practices may be safe from the IRS’ wrath, it has drawn sharp criticism from a number of academics and other nonprofits: to assess these viewpoints, see the Inside Higher Ed article analyzing the advertisement here.

David Brennen, Professor at the University of Kentucky College of Law

October 30, 2020 in Current Affairs, In the News, Religion | Permalink | Comments (0)

Wednesday, October 28, 2020

24th Western Conference on Tax Exempt Organizations - coming in December

From December 3rd through the 4th, Loyola Law School will be holding its annual Western Conference on Tax Exempt Organizations. Attendees will be able to learn about a wealth of pressing developments in tax law for tax exempt organizations from top tax experts with nationwide recognition.

For more information, see Loyola's posting of the event.

David Brennen, University of Kentucky College of Law

October 28, 2020 in Conferences, Current Affairs, In the News | Permalink | Comments (0)

Tuesday, October 27, 2020

IRS offers tax relief for the victims of California wildfires

Last week, the IRS continued to expand an important list which has been growing since late August: the tally of counties in California where taxpayers can, in light of the catastrophic wildfires that continue to ravage the state, claim a (temporary) reprieve from filing their taxes. On October 19th the IRS announced that “affected” taxpayers in Fresno, Los Angeles, Madera, Mendocino, Napa, San Bernadino, San Diego, Shasta, Siskiyou, and Sonoma have a delayed deadline of January 15th to file their taxes. This deadline applies to individual taxpayers as well as many businesses (including tax-exempt organizations), all of whom have likely been affected in some way by the natural disasters plaguing the area. Whether these measures, among other forms of disaster relief, will be enough to offset the damages caused by these events is another matter entirely: while the IRS adds in its statement that affected taxpayers, businesses, and nonprofit organizations “should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case,” a few month’s delay in filing taxes may be a small comfort to many taxpayers whose homes and livelihoods have been severely impacted or else completely destroyed. Taxpayers in counties affected by Californian wildfires should note that this particular deadline extension is one of many: the IRS has declared different extensions to reflect the multitude of different fires raging throughout the state.

For the Forbes story on this development, see https://www.forbes.com/sites/robertwood/2020/10/25/irs-tax-extension-to-jan-15-for-california-wildfire-victims/?ss=taxes#5125e70425bc

For the IRS official statement, see https://www.irs.gov/newsroom/irs-announces-tax-relief-for-september-california-wildfire-victims

By Professor David Brennen, University of Kentucky College of Law

October 27, 2020 in Current Affairs, In the News | Permalink | Comments (0)

Monday, October 26, 2020

IRS partners with non-profits to raise fraud awareness

    Last week the Internal Revenue Service joined with a coalition of charities and other not-for-profit organizations in raising awareness against frauds targeting the nonprofit sector in particular. The third International Charity Fraud Awareness Week, which took place between October 19th and the 23rd, provides resources regarding safety precautions, proper business practices, and recognition of potential fraud attempts to non-profit organizations both large and small. Given that many nonprofits are guided by an explicit mission to give aid to those in need, it is by no means novel that criminals seek to exploit that goodwill. However the issue is of particular vitality in a time when natural disasters and the COVID epidemic are causing suffering across the nation: people are more in need of help than ever. In aid of this cause, the IRS published a statement last week on its website directing tax-exempt organizations to several practical tools including tutorials, videos, webinars, COVID-specific resources.

For the IRS’ published statement, see https://www.irs.gov/newsroom/irs-fights-fraud-aimed-at-charities-joins-international-awareness-week

 

By Professor David Brennen, University of Kentucky College of Law

October 26, 2020 in Conferences, Current Affairs, In the News | Permalink | Comments (0)

Wednesday, October 21, 2020

Nonprofit Recovery Slowing Significantly According to New Report

The Center for Civil Society Studies released a new report showing a seriously slowing of recovery of employment in the nonprofit space. I guess the good news is there still seems to be an overall recovery, but worrisome signs that the sector may sink back into employment loss.

From the report: "As part of our continued effort to track the ongoing impact of the coronavirus pandemic on nonprofit employment, we have analyzed data from the latest BLS Employment Situation Report to estimate nonprofit job losses through September 2020.
 
How did nonprofits fare in September?
Unfortunately, the month of September showed only a modest 2% recovery of nonprofit jobs compared to the situation we reported in August.1 The only major field that enjoyed a rebound of more than 10% overall was social assistance at 12.8%. What is more, September brought significant additional losses in the key field of education totaling nearly 50,000 jobs—a drop of 24% from August employment levels, as shown in Figure 1."

Philip Hackney

October 21, 2020 in Current Affairs, In the News | Permalink | Comments (0)

Monday, October 19, 2020

Fairbairn v. Fidelity implications for DAFs

Figured readers would be interested in this look by Brian Mittendorf at the implications for Donor Advised Funds of Fairbairn v. Fidelity that appears in HistPhil.org.

"One way the concern that commercial DAFs are donor-centric arises is in the competition between sponsoring organizations. The lawsuit alleges that Fidelity Charitable differentiated itself from other charitable options by its “superior ability to handle complex assets,” even stating in correspondence about the possibility of receiving a gift of one particular type of asset that “Vanguard can’t do this but we do it frequently.” The general public may think of competition among charities as focusing on who can best put gifts to charitable use. It turns out this is an antiquated notion: the intense competition centering on seamlessly receiving and converting complex assets for donors presents a stark contrast.

A related issue is that DAFs increasingly are vehicles that provide disposal options to donors for illiquid assets. In the Fairbairn case, the assets donated were technically liquid (they were publicly traded) but the size of the donation would threaten share price if it were a sale instead of a donation, an eventuality that formed the basis for the lawsuit. However, donating such assets permits a tax deduction for the value, even though an outright sale at that value would be problematic. "

And, "A final issue that surfaces in the Fairbairn case is that some DAF sponsors may implicitly or even explicitly be beholden to their commercial affiliates. Legally speaking, Fidelity Charitable is a distinct entity from Fidelity Investments; as is the case for Vanguard Charitable and Vanguard; and so on. Yet, the shared names and logos underscore a nontrivial affiliation. Critics have argued that the commercial DAFs invest funds heavily in their affiliated investment companies and, as such, generate substantial fees for them. This, in turn, could create incentives to retain funds in investments rather than distribute them to charitable endeavors. The allegations in the Fairbairn case are consistent with this fear."

Philip Hackney

 

October 19, 2020 in Current Affairs, Federal – Judicial, Federal – Legislative, In the News | Permalink | Comments (0)

Saturday, September 19, 2020

Nonprofits & Politics: Dark Money and Disclosure, FEC Chairman and the Johnson Amendment

DownloadIn the final lap for the 2020 general election, there have been three notable recent developments when it comes to nonprofits in politics and particularly their receipt of "dark money."

First, in CREW v. FEC the U.S. Court of Appeals for the D.C. Circuit affirmed a district court decision that struck down the FEC's narrow interpretation of a statute relating to public disclosure of contributor information when the recipient organization makes independent expenditures, as defined by federal election law. The FEC had taken the position that the statute only required disclosure if a contribution was earmarked to support a particular independent expenditure. The court concluded that this position contradicted the plain terms of the statute, which at a minimum required disclosure if a contribution was made to generally support independent expenditures. However, the court did not resolve whether the statute could be interpreted by the FEC to only require disclosure of contributions with this general intent or instead required disclosure of all contributions (above a modest threshold set by the statute) given to an organization that makes independent  expenditures. For further analysis, see the FEC summary. For coverage, see Politico. This ruling may be especially important as the use of so-called dark money increases on both sides of the aisle.

Second, the states of New Jersey and New York quietly ended their lawsuit against the Department of Treasury seeking documents relating to the Revenue Procedure (2018-38), which initially eliminated reporting of information about significant contributors to the IRS for tax-exempt organizations other than section 501(c)(3) and 527s. That Revenue Procedure was struck down by a federal district court and eventually replaced by regulations. According to Tax Notes, the parties filed a stipulation of voluntary dismissal that provides the states are satisfied Treasury and the IRS have produced the documents requested.

Third and finally, the Washington Post reports the FEC Chairman said during an interview earlier this week that a 2017 executive order freed churches to endorse political candidates. This was in the context of criticizing Catholic church leaders for admonishing priests who appear to do exactly that. He apparently acknowledged that the so-called Johnson Amendment, which prohibits section 501(c)(3) organizations, including churches, from supporting or opposing any candidate for elected office, is still good law, but asserted that it was unlikely to be enforced. Regardless of your views regarding the wisdom or even constitutionality of the Johnson Amendment, it is a bit shocking to hear a public official and lawyer say it is okay to break the law because it probably won't be enforced against you. (Not to mention the executive order he relies upon does not actually prohibit such enforcement.)

Lloyd Mayer

September 19, 2020 in Federal – Judicial, In the News, Studies and Reports | Permalink | Comments (1)

Friday, September 18, 2020

The Missing IRS: States (NRA, Bremer Trustees, Outreach Calling) and DOJ (We Build the Wall, Teva) Step Up

DownloadI do not have data to back this up, but my impression is that in the past it was common to see state authorities and, more rarely, U.S. Attorney offices working closely with the IRS when investigating the activities of a tax-exempt nonprofit organization. However, it appears that recently the IRS is almost always absent from such investigations.

State Investigations: The New York Attorney General's lawsuit against the National Rifle Association and the District of Columbia Attorney General's lawsuit against the NRA Foundation are prominent examples of this apparent trend. While the N.Y. AG cited among the NRA's alleged failures a lack of compliance with IRS requirements, there is no indication that she coordinated her investigation or the filing of the lawsuit with that agency. But these are not the only recent examples.

The Minnesota Attorney General has moved to replace the trustees of the Otto Bremer Trust, a charitable trust and private foundation that owns bank Bremer Financial Corp. The basis for this move is alleged violations of the duty of loyalty by the current trustees. Presumably such violations would also be of interest to the IRS, especially since at least some of them also allegedly constituted violations of the self-dealing prohibition, but there is no indication in the news reports of the AG's actions or the lengthy memorandum filed by the AG in court that the IRS is involved. (And if the IRS had been involved, you would hope they would have corrected the AG's repeated use of "IRS Code" in that memorandum.)

It is perhaps more typical to see the IRS absent when the actions of for-profit telemarketers are at issue, as the Federal Trade Commission tends to take the lead for the federal government in such matters. This is illustrated by the recent case brought by the FTC and several state attorneys general to shut down Outreach Calling, Inc. and several other companies for having "allegedly scammed consumers out of millions of dollars." It should be noted that the Center for Public Integrity highlighted the questionable activities of Outreach Calling and individuals associated with it more than two and a-half years ago. But the involvement of the FTC when matters within its jurisdiction arise only emphasizes the IRS absence in matters squarely implicating federal tax laws as well as state charity laws.

Department of Justice Investigations: The IRS also appears absent from two recent investigations by the Department of Justice. The most prominent one involves criminal charges against former senior advisor to President Trump Steve Bannon and others associated with an Internal Revenue Code section 501(c)(4) nonprofit We Build the Wall, Inc., formed to fund the building of a border wall between the United States and Mexico. The investigation was pursued by the U.S. Attorney's Office for for the Southern District of New York. While the allegations relate to alleged lies made to donors about the use of the funds raised, some of the actual uses of those funds - compensation and payment for personal expenses - may have tax ramifications for both the organization and the individuals involved. Yet there is no indication in the indictment or otherwise that the IRS is involved. This is despite the fact that the U.S. Postal Inspection Service was involved in the arrest of Bannon, presumably because one of the charges is mail fraud.

In a case a bit more removed from federal tax law, the Department of Justice's civil division has filed a False Claims Act complaint against two affiliated pharmaceutical companies, Teva Pharmaceutical USA Inc. and Teva Neuroscience Inc. relating to donations to charitable foundations. The allegations are that Teva used the foundations "as conduits to funnel kickbacks to Medicare patients." The announcement of the filing does not indicate any involvement by the IRS, including with respect to investigating the foundations involved. Coverage: Wall Street Journal. An earlier news story involving allegations of similar arrangements with other companies reported multi-million dollar payments to the federal government by the charities involved to resolve the claims against them, but again did not mention IRS involvement, nor did the DOJ announcement of that settlement.

Lloyd Mayer

September 18, 2020 in Federal – Executive, In the News, State – Executive | Permalink | Comments (0)

Thursday, September 17, 2020

Congress Update: Syndicated Conservation Easements, NRA, and Proposed Expansions of Above-the-Line Donation Deduction

Download (1)While Congress is not surprisingly slow to enact actual legislation during the run up to the 2020 general election, it has taken several other actions of interest to nonprofits:

More Slamming of Syndicated Conservation Easements: As the IRS continues its court battles and settlement program relating to syndicated conservation easements, the Senate Finance Committee released a lengthy bipartisan report criticizing these transactions. The introduction includes this passage:

The syndicated conservation-easement transactions examined in this report appear to be nothing more than retail tax shelters that let taxpayers buy tax deductions at the end of any given year, depending on how much income those taxpayers would like to shelter from the IRS, with no economic risk. Although the various offerings differ in their specifics, the general outcome is the same: for every dollar a taxpayer pays to a promoter to become an "investor" (or a "partner" or a "member") in a syndicated conservation-easement transaction, he or she commonly purchases a little more than four dollars' worth of tax deductions. For most taxpayers involved, this ultimately means that for every dollar paid to tax-shelter promoters, the taxpayers saved two dollars in taxes they did not pay.

Calls for IRS to Investigate the NRA: In the wake of the New York Attorney General seeking dissolution of the National Rifle Association, Democratic members of the House Ways & Means Committee have called for the IRS to also investigate the section 501(c)(4) organization and its related, section 501(c)(3) foundation. Of course it remains to be seen whether the IRS will do so, regardless of who wins the November presidential election. Additional coverage: Mother Jones (including a link to the letter).

Universal Giving Pandemic Response Act: A bipartisan group of nine Senators are sponsoring S.4032, which would expand in two ways the temporary above-the-line deduction for charitable contributions included in the CARES Act and codified in Internal Revenue Code section 62(a)(22). One expansion would be the amount, increasing it to half of the taxpayers standard deduction up from $300; the 2020 standard deduction is $12,400 for single taxpayers and $24,800 for married taxpayers filing jointly. The other would be the time window for contributions, extending it back from January 1, 2020 (for calendar year taxpayers) to January 1, 2019, with amended returns permitted for taxpayers who did not itemize their deductions in 2019. However, passage appears highly unlikely, especially with the apparent failure of new coronavirus relief legislation.

Lloyd Mayer

September 17, 2020 in Federal – Legislative, In the News | Permalink | Comments (0)

Thursday, September 10, 2020

Sale of Doris Day's Home to Bring Millions for Doris Day Animal Foundation

When singer, actress, and animal welfare activist Doris Day (born Doris Mary Anne Kappelhoff) died in May 2019 at the age of 97, she left almost all of her estate to the Doris Day Animal Foundation. Accordingly, the proceeds of the sale of Ms. Day's Monterey, CA, home -- listed recently for $7.4 million -- will go to the Foundation. The house sits on nine acres and includes a kitchen that Ms. Day dedicated to just cooking for her dogs.

Word of Ms. Day's pampering of rescued animals is legendary. As I have already noted, she cooked for dogs in a kitchen specially built for them. In an article published last week, the Wall Street Journal quoted people familiar with the situation saying that at some point, Ms. Day had as many as 50 dogs on the property. 

Ms. Day was well known for her animal rights work and fundraising for that cause. She founded the Doris Day Animal Foundation (DDAF) in 1978 as the Doris Day Pet Foundation with a mission to help animals and the people who love them. As a grant-giving charity, DDAF funds other 501(c)(3) organizations throughout the United States that directly care for and protect animals.

The NonProfit Times reports that Ms. Day formed the Doris Day Animal League (DDAL) in 1987. The League was a national, nonprofit citizens' lobbying organization whose overriding mission was to reduce the pain and suffering of animals through legislative initiatives, education, and programs to develop and enforce statutes and regulations protecting animals. In 1995, Ms. Day and DDAL founded Spay Day USA. It is now known as World Spay Day and is under the auspices of the Humane Society of the United States.

In 2007, DDAL merged with the Humane Society of the United States, and the Doris Day Pet Foundation evolved into the Doris Day Animal Foundation, with which Ms. Day was active until her death last year. The Foundation now stands to receive millions from Ms. Day's estate.

Now that's a heart-warming story -- not only for animal lovers but for all humanity.

Vaughn E. James 

 

September 10, 2020 in Current Affairs, In the News | Permalink | Comments (0)

Boston Celtics and Celtics Shamrock Foundation Commit $25 million for Racial Justice Initiatives

Organizations making pledges and commitments for social causes continue to be in the news. The latest to jump in: the Boston Celtics and Boston Celtics Shamrock Foundation have announced that the two organizations are making a ten-year, $25 million commitment to address racial injustice and inequities in the greater Boston area.

This commitment is itself part of a larger effort announced by the National Basketball Association in August. The Celtics' initiative will be termed The Boston Celtics United for Social Justice. According to today's Philanthropy News Digest, the initiative

includes $20 million in cash and $5 million in media and in-kind assets in support of both the NBA's efforts and local programs, with a focus on six areas identified by the organization in discussions with community leaders and players: equity in education, economic opportunity and empowerment, equity in health care, criminal justice and law enforcement, breaking down barriers and building bridges between communities, and voting and civic engagement.  

The Digest continues:

Planned projects under the initiative include creating an early-education center for low-income families; providing pro bono services to minority-owned businesses; assisting juvenile offenders through workforce development and academic completion opportunities; expanding The Playbook Initiative, the team's bias-prevention curriculum; and promoting voter registration and the importance of voting.

In discussing the initiative, Celtics forward, Jaylen Brown, stated, "Our goal is to have a direct impact now. We don't need to pacify the situation with empty gestures. We need to hold ourselves, the Celtics organization, and the City of Boston accountable. Monetary commitment is a great first step, but we need to commit to this process by creating a balance of short- and long-term change. The time is now."

I fervently agree.

Vaughn E. James 

September 10, 2020 in Current Affairs, In the News, Sports | Permalink | Comments (0)

Wednesday, September 9, 2020

Bank of America Announces $300 Million of $1 Billion Equity Pledge

Today's Philanthropy News Digest is reporting that as part of a four-year, $1 billion pledge announced in June to advance racial equality and economic opportunity, Bank of America has announced commitments totaling $300 million.

The commitments include support for initiatives across ninety-one U.S. and global markets in four areas: $25 million for jobs initiatives in Black and Latinx communities, $25 million in support of community outreach and initiatives, $50 million for direct equity investments to minority depository institutions (MDIs), and $200 million in proprietary equity investments in minority entrepreneurs, businesses, and funds.

According to the Digest,

The $25 million for jobs initiatives will support up-skilling and reskilling programs for African-American and Latinx students through partnerships with eleven community colleges and ten public historically black colleges and universities (HBCUs) and Hispanic-serving institutions (HSIs). Recipients include North Carolina A&T State University, Atlanta Technical College, Dallas College-El Centro Campus, and Arizona State University -- Downtown Phoenix. The $25 million in support of community outreach initiatives includes funding to address needs and provide personal protective equipment in underserved and minority communities disproportionately impacted by the current COVID-19 public health emergency. The $50 million for direct equity investments in MDIs -- which includes awards of capital to First Independence Corporation in Detroit, Liberty Financial Services, Inc. in New Orleans, and SCCB Financial Corp. (parent company of Optus Bank) in Columbia, South Carolina -- will provide support for small business lending, housing creation, neighborhood revitalization, and other banking activities. Details of the $200 million proprietary equity investments will be announced at a later date.  

According to Bank of America CEO Brian Moynihan, "These initial investments will address access to jobs and support for small businesses by creating more pathways to employment in communities of color and more support for minority entrepreneurs."

 

Vaughn E. James 

 

 

 

September 9, 2020 in Current Affairs, In the News | Permalink | Comments (0)