MAY 2016



The Inquisitr reports that a Wall Street whistleblower is claiming irregularities associated with The Clinton Foundation. According to financial advisor, Charles Ortel, The Clinton Foundation has never had to comply with legal requirements to verify their financial claims with independent accountants and acts in violation of state charitable solicitation registration and recording requirements.


Assembly Bill 2855, which has been called a “warning label” requirement for charity websites is under continuing scrutiny. Numerous organizations have opposed the bill and other industry organizations are working with the sponsor to reform the bill so it is more consistent with industry standards and can realistically be complied with by those affected.

District of Columbia

The Washington Post reports that a District of Columbia nonprofit organization that receives millions of tax payer dollars each year is bankrupt and will be dissolved to cover debts from exorbitant spending on and by staff, including the misuse of organization credit cards. As a result, the organization voted in private to close the fund. The remaining proceeds will go to after-school programs.


Senate Bill 2812 amends the Charitable Solicitation Law in a number of ways. Among the proposed changes would be to increase the point of solicitation disclosures required of a professional fundraiser and increase the penalties for late filings. It would also increase the ability of the Attorney General’s Office to monitor commercial co-ventures, and gives the Attorney General the right to issue an order to cease and desist to commercial co-ventures that are not properly conducted or registered. The statute also creates amendments that make it clear that those who work with charities to secure grants are not acting as fundraising consultants.


The Cook County State Attorney’s Office has served a subpoena on an individual who operates a beauty pageant and sells advertising and tickets to the pageant with the added representation that a portion of the proceeds will go to a local hospital. The hospital has never received any money and there is concern that the money has been misused.


Questions continue over the money that was allegedly raised by Donald Trump in lieu of his participation in the candidate debate. CNN has raised all kinds of questions. It appears now, according to published reports, that the amount raised was far less than $6 million and, to date, little if any of the money raised has been distributed to veteran organizations.

Commentary: The question still remains: where is the Iowa Attorney General’s Office in this situation?


House Bill 4180 would impose more requirements on those who use the telephone for solicitation. The only exemption is for telephone calls made by bona fide employees or volunteers on behalf of tax exempt organizations. Otherwise, the statute will require a series of disclosures.

Senate Bill 2246 would impose content requirements for contracts involving professional solicitors, commercial co-ventures and charitable organizations. It would also require telephone fundraisers to maintain recordings of calls for a period of 180 days. The punitive section on this statute is also of grave concern. It allows the Attorney General to initiate a proceeding, “relating to a knowing violation or threatened knowing violation ....” It goes on to provide for an injunction and civil penalty of up to $10,000 for each knowing violation but not less than $1,500 for a willful and knowing violation. Most worrisome, it also creates a private right of action for individuals who receive more than one unsolicited telephone call within a 12 month period.

The Lowell Sun wrote that Massachusetts nonprofit workers earned some of the highest wages in the country based on information they obtained from the Bureau of Labor Statistics.


The State Attorney General initially filed an order to cease and desist and is now filing a lawsuit against a national firefighter organization. The claims (among many) are that the organization misrepresented how it was using its funds.


A report published by The Morning Call states that the splintered board of The Hershey Trust (one of the nation’s richest charities) has spent $3.6 million on legal fees to investigate claims of possible wrongdoing by its own members. This disclosure comes as a result of an internal letter from the Board’s Chief Compliance Officer and past executive. One investigation dealt with possible insider trading in Hershey Company stock, while another investigation sought to determine whether the former chairman acted properly in hiring his own son as an intern for the summer. In both cases, after spending the $3.6 million, the board approved reports which stated that there was no wrongdoing.


The USA Today recently ran a story about the difficulties that Livestrong organization has faced since the adverse publicity surrounding its founder Lance Armstrong. The organization has had three different Chief Executive Officers and its financial support continues to be a significant challenge.


Donor List Debate

Among recent developments is an editorial that appeared in The Wall Street Journal in May. The editorial discussed the attempts by the Attorney Generals in both California and New York to require Schedule B (major donors) to be filed with their states as part of the charitable registration process. The lists are already required to be filed with the IRS Form 990. Illinois Republican Peter Roskam’s bill to stop the IRS from collecting donor details of tax exempt groups passed the Ways and Means Committee in late April. In closing the editorial, The Wall Street Journal said, “[t]he real progressive interest in donor disclosure is to use the information as a political weapon. Leaked selectively, donor lists suppress the speech of political rivals.”

Overtime Rules to Change

New rules pertaining to eligibility for overtime payment will go into effect on December 1, 2016. The threshold for employees eligible for time and a half payment for hours worked over 40 per week is going to be almost doubled to $47,476. There are also specific exemptions for nonprofit organizations who provide “comp time” for their employees to offset excessive hours worked provided the comp time is given within restricted periods of time.

Commentary: If you need help understanding these rules, please feel free to contact us.

United States Congress

The House Ways and Means Committee has already held a markup session during which they passed the Preventing IRS Abuse and Protecting Free Speech Act (H.R. 5053) out of committee. The bill, sponsored by Congressman Peter Roskam (R-IL), would, in effect, prohibit the Secretary of Treasury from requiring 501(c) organizations to disclose any donor identifying information on their annual tax return.

Commentary: This legislation is to protect the anonymity of donors to 501(c) organizations. There is a dividing line here as compared to those who support charities versus those who support advocacy organizations. This possible legislation exists in tandem with the case in California over the requirement of that state to require the filing of Schedule B with the IRS Form 990 for charitable registration.


An early May report from the alliance of nonprofit mailers noted that nonprofits generate one in 10 pieces of mail being delivered by the USPS. In 2015 12.6 billion pieces of Nonprofit Standard Mail were handled by the USPS. The total volume of all mail in 2015 was 154 billion pieces.

World News

It should come as no surprise that Canadian authorities are warning residents to be careful when solicited by charities claiming to help the victims of the tragedy in Fort McMurray.

It turns out that The Panamanian Law Firm, at the center of a global investigation, advised some clients that they could cloche their money in foundations that named prominent international charities as beneficiaries. However, according to published reports, there is no indication that any of the money went to these charitable organizations.

In late April, the legislature in China passed controversial new laws putting further limitations on foreign nonprofit organizations.

Vancouver, British Columbia and surrounding cities are considering regulation of the growing number of for-profit operators of freestanding clothing donation bins.