April 2011

In this issue:

  • The FCC has proposed a ban on caller ID “spoofing.” The agency is soliciting written comments with a deadline of April 18, 2011. Our office has filed comments on behalf of our clients.
  • The USPS and the American Postal Workers’ Union may have settled their labor difficulties.
  • The Toronto Star reported that Revenue Canada has closed down the Organ Donation & Transplant Association of Canada for spending too much money on fundraising and administrative costs.


This agency has proposed a ban on caller ID “spoofing.”  The agency is soliciting written comments with a deadline of April 18, 2011.  Our office has filed comments on behalf of our clients.  If you would like a copy, contact Errol Copilevitz or Bill Raney.

The electronic filing system of the IRS has been breached according to Forbes.  Someone has pirated the names of defunct charities using a mail drop in Las Vegas.

1099 RELIEF.
Legislation has been passed that repeals the expanded IRS Form 1099 information reporting requirements.  Unless repealed, it would have put a significant burden on charities and agencies requiring them to issue 1099s to anyone who provided $600 or more of services.  This action is welcome.

The USPS and the American Postal Workers’ Union may have settled their labor difficulties.  Also making the news is the fact that the Postal Regulatory Commission on March 24, 2011, published is advisory opinion on the proposal to end Saturday mail delivery.  The USPS had posited that it would save $3.1 billion, but the PRC says that it would only save $1.7 billion.  The idea of stopping Saturday mail delivery is still in play.


According to the Chronicle of Philanthropy, residents of this state have pledged more than $1.5 million to nonprofits as part of a program the state instituted to encourage residents to give a portion of their state dividend check to a charity.  Well done. Read article.

As the result of a complaint to a local newspaper, the Fiesta Bowl, a tax-exempt § 501(c)(3) organization, is under attack.  Notwithstanding the fact the former state attorney general, who was hired last year to audit the performance of the organization, found no problems.  Now there are allegations of providing junkets and other benefits to politicians in violation of the organization’s tax-exempt status and state criminal law.  There is also an issue of excessive salaries and how money was spent by the organization.

Comment: How or why college bowl games are set up as tax-exempt § 501(c)(3) organizations is a mystery.  In this case, at least, it appears it was not operated as a charitable organization.

CALIFORNIA. The Commission that regulates solicitation in the San Francisco airport is about to make things tougher.  As a result of numerous complaints, there will be further restrictions on solicitations for financial support in the airport beginning this month. FLORIDA. A new policy is being implemented whereby the Department of Agriculture and Consumer Services will be calling entities approximately two weeks prior to registration deadlines in order to remind them of the necessity of compliance.  Those who don’t comply and register on time can expect another call asking if the solicitation is ongoing (for the purpose of considering an imposition of a penalty for conducting activities after registration expiration.) KENTUCKY. The state auditor has called for more transparency from the Dismas Charities, which provide halfway houses across the country, but has been the subject of criticism in the past for its spending and salaries.  The charity has received over $23 million over the past three years from the state of Kentucky. MASSACHUSETTS. House Bill 3251 would amend the point-of-solicitation disclosure currently required under the Commonwealth’s charitable solicitation law.  It would call for a number of disclosures that must be made at the beginning of any presentation by a professional solicitor or a commercial co-venturer.  These include disclosures of some items that have previously been found to be unconstitutional in other court decisions.   * * * * * The Attorney General is seeking legislation to give her authority to prohibit the payment of fees to board members of large Massachusetts health insurance companies.  According to the Boston Globe, some board members collect more than $80,000 a year for serving on boards.

Comment:  It is unusual for board members of charitable organizations to receive compensation, but it is not illegal.  Whether the government should have the authority to prohibit the practice is another question.

MICHIGAN. The issue of whether cause-related marketing heightens name recognition and, therefore, helps charities in their quest for donations was recently addressed by a study done for the University of Michigan’s Ross School of Business.  The study found that persons who buy products that are tied to charities often feel that they have already made their contribution and may not be nearly as susceptible to future appeals.

Comment: We tend to disagree.  Well considered cause-related marketing opportunities not only heighten name recognition, but they also bring funds to an organization free of fundraising cost.  This is the first study that has ever reached this conclusion./blockquote>   * * * * * The Office of the Attorney general has announced a new free online service that provides expanded information on charities and professional fundraisers who solicit in the state.  The searchable database is identified as: AGCharitySearch.  It is intended to assist prospective donors and help charities to monitor their annual registration requirements.) MINNESOTA. A freshman republican state senator has introduced legislation that would limit the ability of a nonprofit entity to receive state money if the same goods and services can be provided by another state agency or private for-profit entity.

Comment: The bill, at best, is unusual and is not likely to find traction.
NEVADA. A strange ending to a strange lawsuit.  Donors of a donor advised fund have sued the fund for not using the money appropriately.  Both the trial court and the Nevada Supreme Court agreed that the operators of the donor advised fund had breached their fiduciary duty, but provided no remedy for the original donors. NORTH CAROLINA. The Winston-Salem Journal reported that the sponsor of a bill that would prohibit charities from receiving state money if their administrative costs exceed 15% of their budget has withdrawn the proposed legislation.   * * * * * Senate Bill 51 has been signed into law and will go into effect on July 1, 2011.  The bill broadens the educational institution and foundation exemption from registration to engage in charitable solicitation.  The exemption provision is broadened to include, “any organization with a membership that is composed solely of twenty or more educational institutions.”   NORTH DAKOTA. House Bill 1313 has passed both the House and Senate.  This bill would allow cities to permit firefighters to solicit charitable contributions from motorists provided certain conditions are met, to-wit: the charity must be a tax-exempt § 501(c)(3) organization, and the period of solicitation must be limited to a period of three days during a calendar year, and the charity must provide liability insurance.   * * * * * A compromise has been reached regarding the tax assessed on charitable gambling proceeds.  There will now be a flat rate of 1% on the proceeds. OREGON. The controversial legislation sponsored by the Attorney General to limit deductibility on state income tax returns for charities not meeting percentage expenditure thresholds has passed the Senate. PENNSYLVANIA. Before the legal battle could get heated up it was withdrawn.  Robert Ruiz, a former Hershey trustee, has dropped his lawsuit claiming that the trust misused millions of dollars intended for the benefit of children it serves.  He attributed his decision to his failing health and expressed hope that the state Attorney General’s Office would continue to investigate.   * * * * * A federal judge recently ruled that restrictions by Pennsylvania schools violated the First Amendment rights of students to wear a charity bracelet promoting breast cancer awareness. SOUTH CAROLINA. The Attorney General has issued an opinion that prohibits the state from making grants to non-government agencies.
Comment: This could cripple the delivery of social services by the state-based nonprofits.
SOUTH DAKOTA. On July 1, 2011, a new law goes into effect that allows individuals to make contributions to a state fund.  The fly in the ointment is that there is already a legal opinion saying the state must honor donor intent.  The fund will be managed by the South Dakota Community Foundation. If this is successful, you can expect other states to consider also creating endowment funds to defray the cost of government.
Comment:  Donations to the state would be tax deductible and such a program would, in some ways, compete with some of the social service charities in the various jurisdictions.

TEXAS. The Dallas Museum of Art and the former president of the University of Texas Southwestern Medical Center have been named in a federal lawsuit that alleges a conspiracy to divert hundreds of millions of dollars from the state of socialite Wendy Reeves.  Heirs to the fortune are seeking the return of money that was allegedly and improperly diverted to the Dallas Museum of Art.

VIRGINIA. The Washington Post reported that an animal rights group is trying to buy the former home of football star, Michael Vick, where he bred pit bulls for fighting.  The group wants to use the facilities to rescue dogs.

Other CHARITABLE DONATIONS. The threat over the loss of deductibility for charitable donations is to be taken seriously.  It could slip by as part of a massive across the board tax reform to address the national deficit.  Write your senators and congresspersons. CONGRATULATIONS TO WOUNDED WARRIOR PROJECT. According to the Non Profit Times, Wounded Warrior Project, located in Jacksonville, Florida, was named the best nonprofit to work for in 2011.  The selection was based upon approximately 100,000 e-mails asking employees to rate various organizations.  Employee surveys were handled online. FIRM NEWS. Greg Lam was recently a presenter at the DMA Critical Issues Conference.  Errol Copilevitz will be a presenter at the Texas Society of Certified Public Accountants conference in May in Dallas. INDEPENDENT SECTOR. On March 22, 2011, Independent Sector delivered the sad news that the founder of the largest umbrella group of charitable organizations passed away.  Brian O’Connell co-founded Independent Sector and served as its president from 1980-1995.  His loss is one that the entire community will feel. PAY CONTROVERSY. According to USA Today, the Candies Foundation paid Bristol Palin $332,500 for recording PSAs on behalf of the Foundation.  The Foundation’s goal is to prevent teen pregnancy and defended the payment based upon the plays the PSAs garnered.  According to the report, $262,500 was for 15 to 20 days of work during 2009. CANADA. The Toronto Star reported that Revenue Canada has closed down the Organ Donation and Transplant Association of Canada for spending too much money on fundraising and administrative costs. Read article.