November 2011

In this issue:

  • State wide nonprofit association formed in West Virginia.
  • Dayton Daily News reports that donations by Ohio residents earning $200,000 or more fell 37.3% in 2009 compared to 2008
  • In New Hampshire, the new director of the Register of Charitable Trusts is Anthony Blenkinsop.
  • The House Committee on Government Oversight and Government Reform has taken another shot at eliminating the discounted nonprofit standard mail rate.

Attorneys' Comments
Read additional comments related to this newsletter.


The IRS announced that it has closed approximately thirty college and university examinations.  The examinations were initiated to focus on the issue of unrelated business income and executive compensation.  Results of the examinations have not yet been released.
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Notice 2011-72 confirms that the IRS will treat the value of an employer-provided cell phone as excludable from personal income.  This is regardless of the extent of personal use so long as the cell phone is being provided primarily for business reasons.  An example would be the necessity of having the cell phone to talk to management or other stakeholders during non-normal business office hours.

The House Committee on Government Oversight and Government Reform has taken another shot at eliminating the discounted nonprofit standard mail rate.  The committee voted to amend Section 403 of the Postal Reform Act. Under the revised Section 403, the current discount rate would remain in effect for three years with a gradual phase-out until it is eliminated by 2023.  However, Senator Scott Brown (R-MA) and Senator Susan Collins (R-ME) joined with Senators Thomas Carper (D-DE) and Joseph Leiberman (I-CT) to introduce new legislation on a non-partisan basis that would preserve the nonprofit postal rate.

Comment: This legislation is critical.  The nonprofit postal rate is, on average, 26% less than what commercial mailers are required to pay.  Tony Conway, Executive Director of the Alliance of Nonprofit Mailers (one of the leaders on behalf of the nonprofit community), predicts this fight will drag on well into 2012.


The first indictment on the scandal that surrounded the tax-exempt Fiesta Bowl has been formalized.  The former CEO of the tax-exempt organization has been charged with filing false income returns, and also faces possible federal campaign financing conspiracy charges over allegations she solicited campaign contributions from Bowl employees for state, federal and local candidates.  The investigation continues and others may subsequently be named.

People for the Ethical Treatment of Animals filed a lawsuit in federal court in San Diego, listing five killer whales as plaintiffs.  The lawsuit alleges the whales are being held in captivity in violation of the Thirteenth Amendment, to-wit: possessive ban on slavery.
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Fifty years ago, the City of San Francisco got the novel idea of putting a small surcharge on every hotel bill to fund the city’s art programs.  Now most of the major cities have started adding surcharges to hotel bills (always better to tax people from out of town), but few used the surcharge for such charitable purposes.  The tax has been a major source of support for the arts in the city.

In a case of repeat performance, the authorities are seeking a man who has been soliciting local businesses in the Tampa area on behalf of police and law enforcement organizations that he does not represent.  The same individual was arrested in 2010 under identical circumstances.

A former state law maker was sentenced earlier this month to more than seven years in federal prison for her role in a plot to pocket hundreds of thousands of dollars earmarked for charitable and educational programs.  The charities in question were tax-payer funded organizations, most of which centered around former Congressman William Jefferson and his alleged illegal activities.

More than seventy ex-employees of a major St. Louis social services charity, which closed its doors, filed suit over unpaid wages, taxes and health premiums.  The president of the charity’s board acknowledged that payments had not been made because “money ran out.”  He said the board had agreed to start liquidating assets to meet the required payments.

The new director of the Register of Charitable Trusts is Anthony Blenkinsop. We welcome him to the community.  Incidentally, the agency has reported that they have been adding 100 charities per month for registration for almost a year.  This list includes both national and local organizations, and represents a substantial increase over the historical rate.

The Division of Consumer Affairs has released its updated list of “New Jersey’s Top Ten Most Inquired-About Charities.”  The list is compiled by tallying the organizations most inquired about during the months of July and August 2011.  Given the context of how the list is selected, presence on the list is not necessarily a negative thing.  This year, the list features a number of veterans’ organizations.

The News and Observer has raised questions about a Raleigh-based charity which collects shoes for low- income local children and international disaster relief.  The founder and executive director has a troubled history.  According to the article, the board recently resigned over her accepting a $4,000 loan from one of the purchasers of the excess shoe inventory.  The founder’s past history of drug abuse and criminal convictions has cast a shadow over the future viability of which, to this point, has been a relatively successful organization.

Earlier this month the Dayton Daily News reported on the decline in contributions by some of the state’s wealthier citizens.  The report said that donations from those earning $200,000 or more fell 37.3% in 2009 compared to 2008.  The article also pointed out that individual donors account for more than 80% of giving in Ohio, and that Ohians donated 7% less in 2009 than in 2008.  The paper cited a report by the Ohio Grant Makers Forum.

The Attorney General’s Office issued a press release announcing the settlement of a lawsuit filed against an Oregon-based veterans’ organization.  The lawsuit involved misrepresentations of the program service, as well as allegations against the telefunding agency, which had previously been settled.  In the new settlement the organization agreed that in the future a full board will be required to review all scripts and written material provided to donors, and agreed not to approve solicitations that failed to describe the primary purpose for which donations will be used, or that are otherwise not accurate.  The organization will be required to adopt an annual budget and closely monitor travel requests and expenses, including board members.

The scandal involving Penn State University, of course, reaches into the charitable world.  The assistant coach at issue started a charity, which became aware of the troubling incidents several years ago.  The charity ended the individual’s contact with children, but never notified law enforcement officials.  The Attorney General’s office has now launched an investigation into the charity.

Comment: This whole sad situation does raise issues over the duty to report.  It sometimes can be a conflicting and difficult decision for a charitable organization to make.

The question of the authority of the state attorney general to settle the disputes involving the estate of the late singer, James Brown, is now being put to the test.  Two former officials of the estate were dismissed and are now claiming that the attorney general did not have the authority to take certain actions.  The attorney general responded by asserting the individuals were removed for cause.  Under the terms of the settlement, half of the singer’s estate will go to his charitable trust.

The Office of the Secretary of State has claimed that a telemarketing agency failed on numerous occasions to give proper disclosures.  An administrative fine has been levied in a unilateral procedure.  The telemarketing agency is filing an appeal.

An Amarillo newspaper profiled a religious-based organization’s history with registration violations in the Commonwealth of Pennsylvania.  The organization, according to the article, has raised money in Pennsylvania for a number of years, and most recently used a professional agency on its behalf without filing the necessary reports and contracts.  In defending itself, the organization pointed to the complicated process of maintaining registrations.  The article said last year the organization was fined more than $8,000 by the Commonwealth.

A new statewide nonprofit association has been formed with the goal of continuing the growth of the nonprofit sector in the state.  According to a published report, it is believed that one out of every ten jobs in the state are with nonprofits.  If that is accurate, then that is more than twice as many as in the entire mining industry.  The state was only one of four in the nation without a statewide nonprofit association until this organization was formed.

According to a report, internal financial records obtained by an independent “watchdog” agency show that a Wisconsin-based tax-exempt organization may have advanced significant sums of money for equipment and expenses when presidential candidate Cain was first organizing his campaign.  If so, the activity violates the organization’s tax-exempt status and subjects it to penalties and/or revocation.


The New York Times reported the death of William Aramony, former guiding force behind the evolvement of the United Way.  His career ended in scandal in 1992.
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Evelyn Lauder died of cancer at the age of 75.  As part of her cosmetic company programs, she developed the “pink ribbon” breast cancer awareness program or campaign that became an icon.

It is projected that for the year 2012, a donation of $49.50 to a charity that receives benefits with a cost of not more than $9.90 will be fully deductible.  The ceiling will be $99 or 2% of the amount of other contributions.

Comment: We were recently asked this very question with reference to charities providing gift cards to major donors.  The amount deductible is subject to these rules.  The same would apply in the case of a donation combination that allows the donor to participate in a major banquet.

Like here, charities in Australia have come under criticism concerning their cost of fundraising.  In some jurisdictions there is a legal requirement that at least 60% of the funds raised go to the charitable purpose.  Figures recently released indicate that there are 59,000 not-for-profits the government recognizes as “economically significant,” which contribute $43 billion to Australia’s gross domestic product.  The nonprofit community employs more than 8% of all Australians.

As a result of government budget cuts, the Charity Commission is looking at cutting staff and operations.  The chairwoman of the Charity Commission told a parliamentary committee the alternative would be to create a system of levying fees from the charities the Commission regulates.  The proposal would exempt charities with an income of less than £10,000 ($16,000).  Critics suggest that such an operation could result in a conflict of interest.

Comment: In the U.S. it is common for state agencies to charge charitable organizations and those who work with them filing fees in the appeal for public support.


The Fiesta Bowl and Tax-Exempt Status