MAY 2015


The Center for Competitive Politics challenged California’s position, that as a condition to filing a charity had to disclose its major donors by provding Schedule B to Form 990..  The plaintiff contended that the disclosure requirements violated its First Amendment rights of freedom of association, seeking an injunction to prevent the state from enforcing the requirement.  The injunction was denied and now a federal appeals court has upheld that decision.  (Comment: While California has given assurances that the information will be redacted from the Form 990 and placed in a “non-public file,” there is no guarantee against errors.  The danger is that the highly confidential and proprietary information will ultimately leak into the public domain.  Controversial organizations cherish the privacy of their supporters, and this decision presents a significant challenge.  The organization has indicated that it plans to appeal, and it would make a great case before the United States Supreme Court).

The Des Moines Register reports that more than 6,000 Iowa-based charities have lost their tax-exempt status for missing the annual information return filing deadlines with the Internal Revenue Service.  Several years ago, the rules were changed requiring all organizations, regardless of size, to file an annual Form 990, 990-EZ or 990-N.  Failure to do so for three consecutive years results in revocation of tax exemption.
One of the highlights of downtown Minneapolis is the Nickollett Mall.  Now the city has issued a special property tax assessment to help pay for $50 million of renovation of this tourist attraction.  The assessment is being made on churches and other nonprofits, which are objecting to the assessment, claiming it violates the state’s Constitution that prohibits the imposition of property tax on tax-exempt organizations.  Current law provides that those who are otherwise exempt from real estate tax are liable for special assessments for such things as improvements of streets and sidewalks.  The nonprofits are arguing the assessment goes beyond basic repair and involves discretionary costs.  
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After months of failed negotiations, the Office of the Attorney General filed a lawsuit against TVI, Inc., d/b/a Savers, and Apogee Retail, LLC charging the entity with a series of violations of the Minnesota charitable solicitation law.  A 48-page Complaint accuses the company, which is engaged in the business of recycling usable goods to benefit its charitable clients, with misleading solicitations, and more importantly, allegations that the company was acting as a professional solicitor without being registered to do so.  

The St. Louis Cardinals have filed a lawsuit against a local nonprofit alleging the nonprofit committed fraud by scalping thousands of game tickets that were intended to be used to support youth baseball.  The organization, with the most enticing name: “The Extraordinary Gentlemen” run the Louis and Clark Baseball League and were allotted 3,500 tickets in 2014 at a discounted price through the Cardinals’ charity program.  According to the Cardinals the tickets were not to be sold above face value, but representatives of the nonprofit claim that the Cardinals knew they were selling them above face value.  The Cardinals organization is seeking to recover more than $40,000 as a result of the nonprofit “scalping” the tickets.

The state Attorney General explained to a state senator that legislation being considered by lawmakers to allow a property tax for fraternal beneficiary societies cannot be interpreted to exempt all of a fraternal society’s property regardless of the charitable use or affect a fraternal society’s liability for sales and use tax.  

Assembly Bill 50 continues to be modified as a result of the impact of the private sector.  The legislation, when completed, will have comprehensive registration and disclosure requirements for those engaged in charitable fundraising in Nevada.

The State Center for Nonprofits presented a workshop on April 28, 2015, titled “Guarding Against Fraud and Embezzlement.”  The purpose of the workshop was to enable executives, board members, and legal counsel to better detect and prevent fraud before it happens.  (Comment: Programs like this are critical as more stories about embezzlement or misuse of charitable funds abound).

If passed, Senate Bill 385, which matches up with Assembly Bill 7213, would add additional disclosures for those conducting fundraising in the state.

Secretary of State, Elaine Marshall, has sent requests to organizations served by her agency to respond to a survey.  The request to participate in the survey is accompanied with the representation that the agency will use the results to help it become more responsive to the needs of those it serves.  (Comment: It is rather unusual when a regulatory agency, as it pertains to charitable solicitations and registrations, solicits input from those it regulates.  Well done!).

This state, like many, has term limits for elected officials.  Recently The Oklahoman reported lawmakers and officials sometimes leave thousands in donations to charities.  The source of these donations are unused campaign funds that must be disposed of when the elected official’s term expires.  The paper noted, for example, that former Governor Brad Henry gave thousands of campaign fund dollars to help a series of local institutions.  His example has been followed by many other elected officials.  

Downtown Dallas is going to a zero tolerance policy on panhandling.  The city is putting up signs saying, “Keep the change. . .don’t support panhandling. . .give to a local charity.”  (Comment: Most big cities are plagued by professional panhandlers and this inventive campaign may reduce the amount of professional panhandlers on the streets).
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Professional sports teams in the state will be allowed to hold cash raffles for their favorite charities under legislation recently passed by the state senate.  The new law, which includes a constitutional amendment to a companion bill in the House, will mandate that half of the proceeds from the raffles have to go to charity.

Governor Shumlin-(D) has once again stated his opposition to plans being considered in the legislature to limit deductions for charitable giving.  In making his point, the Governor said that nonprofit and charitable organizations employ 14% of the state’s work force and contribute more than $5 billion a year to the economy.


Senate Bill 942 titled, “Fair Treatment for All Gifts Act,” has been introduced by Senate Finance Committee member Rob Portman (R-OH).  If passed, the legislation will allow a deduction for gifts to organizations that are tax exempt under §§501(c)(4), 501(c)(5) and 501(c)(6).  (Comment: We cannot imagine this legislation will have legs.  It will, however, be interesting to see whether it gets any consideration at all).

In late May the Federal Trade Commission and all 50 states filed a lawsuit in federal district court in Arizona alleging that four charities and a number of individuals were acting in violation of numerous laws and requirements.  The suit culminated from a long period of investigation and negotiations, with some of the named defendants having already reached resolution with the FTC and the states.  Prior to the filing of the lawsuit at least two of the charitable organizations have agreed to dissolve and turn their assets over to a receiver.

In Letter Ruling 2015-17010, the IRS revoked the tax-exempt status of an organization established to help hospitalized and homeless veterans because the organization failed to demonstrate that it operates exclusively for exempt purposes, and has made disbursements which appear to be private inurement.  The organization is currently under a deadline to appeal the decision.
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The publication “Accounting Today” reports that a site used to process tax forms for nonprofit organizations on behalf of the IRS suffered a data breach.  The site is operated by the Urban Institute’s National Center for Charitable Statistics.  Some users of the site claim that they were never notified.

The Department of Treasury is seeking public comment on proposed and/or continuing information concerning the contribution of motor vehicles, boats and airplanes.  Written comments must be received on or before July 6, 2015, and sent to: Christie Preston, Internal Revenue Service, Room 6129, 1111 Constitution Avenue NW, Washington, D.C. 20224.

The Postal Regulatory Commission has raised postal rates, effective on May 31, 2015.  The biggest impact will be on periodicals published by nonprofits.  A lesser impact will be felt on general nonprofit mail and postcards.   It is estimated that the increase for mailing and postcards will be 2%, while periodicals will suffer a rate increase of between 5% and 8%.  


The Muscular Dystrophy Association telethon is over as an annual event..  Officials of the organization announced the discontinuance of the Labor Day tradition.  (Comment:  The losing of this long-time staple is just further evidence of the changing landscape of donor support for our many charitable organizations).

Late last month the NFL announced it was giving up its tax-exempt status.  Although the League will now have to pay taxes on its income, it gains the privacy of not having to file an IRS Form 990.  Only the League office enjoyed tax-exempt status.  The individual teams did not.  

Nine thousand charities in the country have found their authority cancelled as a result of their failure to declare details of donations from abroad.  This step by the Indian government is intended to tighten surveillance of foreign funded non-government organizations in the country.  The ministry suspended the registration of Greenpeace India and froze its bank accounts saying the group had violated the law in a number of ways, including under-reporting funds it received from abroad.  The actions taken by the Indian government have been criticized by the U.S. ambassador.

According to a report by New Zealand Initiative, the government needs to urgently review the Charities Act and the one hundred year old rules around charitable purpose.  The report highlights the fact the larger charities in the country are making large profits and holding onto money, while the smaller charities are struggling and do not have the resources to deal with government and the requirements of the current Act.