August/September 2015


Senate Bill 24 has been signed into law.  The affect of the law is to require public charities that are exempt from sales, use and lodging tax to obtain an annual certificate of exemption from the Department of Revenue, and to file information reports with that department.

The senate unanimously approved amendments to Assembly Bill 556.  The Bill will now go to Governor Brown for signature.  The Bill was favorably impacted by the industry.
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The Associated Press discovered that the state agency responsible for distributing charitable donations made by California taxpayer failed to allocate $10 million of the $35 million collected for 29 different charitable organizations since 2005.  A California state senator who heads the Governance and Finance Committee has pledged to investigate.  Here, however, is the issue.  Money that is not allocated within a specific period of time goes to the general fund.  Thus, the intent of California donors to have money reach charities may have found themselves supporting government.
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According to the Los Angeles Times, the California Campaign Watchdog agency adopted a new requirement that nonprofit groups that contribute through a federal political action committee to support or oppose ballot measures or candidates in the state, must disclose the names of their donors.  (You will no doubt recall other legislation where California Attorney General required charities to file Schedule B from their IRS Form 990, listing their major donors.  Charities challenged that requirement and lost, but the case has been appealed).
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The Los Angeles Times reported that Prime Health Care sued the California Attorney General, Kamala Harris, over the restrictions she sought to impose as a condition to approving the sale of nonprofit hospitals to the company.  The lawsuit accuses her of not being impartial and protecting an influential labor union which opposed the sale.

According to The Washington Post, the secret service ordered 700 parents and children out of Lafayette Square Park (across from the White House).  The children and their parents were there for a “Cure Fest for Childhood Cancer,” and the expulsion disrupted their plans for a candlelight vigil to raise awareness and seek research funding to cure childhood cancer.  Now the secret service and other agencies are tripping over themselves to apologize.

The founder of the Homeless Helping Homeless has announced that the organization will be closing down.  This Tampa area organization has been the subject of code enforcement proceedings because of the temporary shelters the organization created.  Perhaps even more serious, there was a search warrant executed with a probable cause affidavit, indicating that authorities were searching for evidence of violation of state law in storing vehicles, as well as scheming to deefraud.

The Department of Revenue issued a statement on September 15, 2015, explaining that while charitable organizations are exempt from state use tax when purchasing items in furtherance of their purposes, they are not exempt from paying excise tax.

The executive director of two medically-based organizations has pled guilty in federal court to embezzling $2 million.  Authorities stated the individual diverted payments to the nonprofits to his personal accounts.

House Bill 4862 was introduced in the legislature on September 2015 that would transfer the issuance of licensing and maintaining collection bins for certain reusable or recyclable materials to local communities.  The Bill, in effect, mandates that local communities allow the placement of the bins, provided a series of requirements are met.

On September 15, 2015, the Secretary of State held an online focus review of the new charity online filing system, and representatives of our firm participated.  (Comment: It is always nice when those who regulate ask for input and participation from the community in which they work.  It often results in a much more effective system for everyone).

A reminder that the new registration law goes into effect on October 1, 2015.

Heather Black has left her position as Director of the State’s Solicitation Licensing Division.  At this time no replacement has been identified.  Heather Black has gone to work for the United Way of North Carolina, and we wish her every success.

If you ever want an example of government squeeze on exemptions provided to tax-exempt organizations, here is a good one.  In this case the Ohio Board of Tax Appeals concluded that the first floor of a fraternal organization’s lodge building, which is leased to a public library, is not exempt from property tax because the lodge does not use the area for its meeting or administration.  The logic of the government is that the exemption was given to the lodge for meetings and administration, but instead it leased the first floor.  However, leasing the first floor to a public library, meets the test for an exempt activity.  Nevertheless, the Board found the lodge was subject to property tax on the first floor of the building.

A state senator, who was the former CEO of the Better Business Bureau office in Tulsa, Oklahoma, pled guilty to embezzling $1.8 million.  In addition, the agency sued the former CEO alleging the embezzlement was to fund a lavish lifestyle and his gaming habits.  
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The Oklahoman reported that Feed the Children (no stranger to litigation) is being sued for slander by a Texas man.  The attorneys for the charity said the lawsuit is part of a plan to take control of the organization through intimidation, harassment, deception, and spurious litigation.  The lawsuit contained certain written demands made by the plaintiff, after the attorneys for the charity supposedly made certain comments about the plaintiff to employees of the organization.  The lawsuit alleges the charity is being terribly mismanaged, among other things.  Stay tuned for details.

More than a year ago, the state passed legislation that would disqualify charitable organizations that spend less than 30% on program service from offering a deduction under Oregon state income tax.  The state has now begun to enforce this law by issuing letters to charitable organizations that are subject to a “disqualification order.”  The notice allows an organization to either withdraw its registration or have 60 days from the date of notification to request, in writing, a hearing.  (Comment: There is a constitutionality issue here because of the elimination of the state law tax deduction based upon the cost of fundraising.  It is a true clash of free speech versus government providing an inducement).

The State Department of Revenue has updated its guidance on franchise and excise tax requirements, clarifying exemptions for nonprofit organizations. ( See the Tax Guide, dated August 2015).


Starting in the 2017 filing season, charities will be able to get an automatic six-month extension for filing the IRS Form 990.  Until the new rule goes into effect, charities will have to continue filing twice in order to get a full six-month extension.

The Center for Competitive Politics has petitioned the United States Supreme Court to review the decision of the Ninth Circuit Court of Appeals, affirming the denial of the petitioner’s request for a preliminary injunction.  The organization sought an injunction to enjoin the State of California from requiring it to disclose names and contributions of significant donors that are listed on its Form 990, Schedule B.  The state has taken the position that charities must disclose Schedule B to the state as a condition to registration.  The petition has now been supported by an amicus brief filed on behalf of numerous nonprofit organizations.  (Comment: This case is particularly important to advocacy organizations and organizations dealing with controversial social issues.  Hopefully the Supreme Court will take this appeal).  


According to a column written by Jeb Bush that appeared in The Wall Street Journal, if elected president he would promote a tax plan that, while maintaining deductions for charitable giving, would cap the deduction available to wealthy donors.
The annual conference of the National Association of Attorneys General and National Association of State Charity Officials, which is partially open to the private sector, will be held on October 6, 2015, in the Washington, D.C. area.  

The firm is please to announce the addition of Ashley Morgan to our legal team.  Ashley has been working
as a clerk during her law school career.


Government has issued new guidance for charities titled, “Meeting the Charity Test,” which is aimed at accountants who advise prospective and current charities, as well as charity trustees.  According to the new guide an organization fails the test of being a charity if any of the governing documents allow money to be applied to non-charitable uses, or allows government ministers to direct or control the activities, or authorizes political activity.

Under a new authority to be granted by the government, the Charity Commission is being given the authority to remove “extremist” trustees from charities.  (Comment:  No doubt this is aimed at hate mongers in Islamic mosques in England and Wales.