November 2015


The Commissioner of the IRS has announced the probability of the release of new regulations regarding the political activities of social welfare §501(c)(4) organizations.
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The tax-exempt status of an organization established to educate youth about the dangers of substance abuse was revoked because a substantial portion of the group’s activities was actually conducting bingo games, which does not further its exempt purpose.
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The IRS announced the agency will no longer process incomplete applications for tax-exempt status.  Presumably the applications will be returned to the applicant.

Texas republican Kevin Brady will be filling the vacancy created when Representative Paul Ryan was elected Speaker of the House of Representatives.  Mr. Brady will serve as Chairman of the House, Ways and Means Committee, which is a crucial committee for legislation affecting nonprofits.  He is generally seen to be most favorable to the nonprofit community.

In a recent speech, candidate Ben Carson promoted the elimination of deductions for charitable contributions.

The Alliance of Nonprofit Mailers reported that a senior USPS leader publicly committed to no general price increase for letters and flat mail in 2016 - good news indeed!

Firm News

Once again, this law firm has been named as one of the best law firms in the country by the national publication Best Lawyers in America. 


The Office of the Attorney General has shut down a veterans-charity scam. Three Phoenix telemarketing companies were ordered by the court to cease all operations as a result of a lawsuit filed by the Office of the Attorney General, alleging they bilked about $750,000 from senior citizens across the country through misrepresentation and false claims.  A stipulated consent judgment was entered into shortly after the filing.
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While serving as the regional director for the state PTA, a woman has been charged with embezzling over $200,000 from a cancer charity located in Phoenix.  Authorities allege that within six months of being hired, the defendant began using the charity’s credit cards to buy concert tickets, clothing and electronics, and that she continued such conduct for more than five years.
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Phoenix-based PetsMart Charities, Inc. announced it is laying off its entire workforce of 37 employees, but not closing its doors.  It will continue to donate funds to animal welfare efforts.  The move was announced as part of a restructuring of the organization.

The San Francisco Chronicle reported that the Office of the Attorney General has opened up an inquiry into the Fine Arts Museum in San Francisco as a result of a “whistle blower.”  Allegedly, the Museum made a $450,000 “gift” to an ailing ex-staffer without first receiving the required approval of the 46-member board of directors.  

The Associated Press reported that as legalization of marijuana matures, businesses are becoming more ingrained in their communities by donating cash and time to charities, which clearly is a sign that the stigma of selling a drug that remains illegal under federal law may be fading.  According to recent IRS information, Colorado residents donated $3.4 billion in charity in 2012, the last year that numbers were available.  According to the Colorado Association of Funders the state has nearly 30,000 nonprofits.

A state-employee charitable fund drive should, by definition, have a low cost of administration.  However, that apparently is not true.  An investigation by the Tallahassee Democrat found that the company administering the campaign received more than half of all funds donated.  This year the newspaper projects the company could get roughly two-thirds of the money donated by state workers.  State workers’ donations have gone down steadily from 2011.  As a result, a legislator said he plans to investigate the state’s handling of the campaign in the legislative session that begins in January 2016.  
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A Jacksonville ordinance barring charity donation bins has come under constitutional attack.  The lawsuit alleges that the ordinance violates the First Amendment rights of the charitable organization to seek donations to underwrite the cost of its program services.  The ordinance went into effect on August 1, 2015.  TheU.S. district court handling the case says the parties have been working together to settle the case and to create a constitutional regulation of the activity.

In a category of “you just cannot make this stuff up,” one of the most vocal critics of One Fund Boston, Inc.,  after the 2013 Marathon bombings, was charged with five counts of larceny and a single action of making a false claim.  The defendant received nearly $40,000 from One Fund Boston.  The receipt of these amounts are alleged to be theft because her story about suffering a traumatic brain injury during the second blast was a lie, according to an assistant district attorney.  

Since the Michigan Gaming Control Board, which regulates casinos, took over the regulation of charity poker proceeds to charities have gone down dramatically.  State-based charities acknowledged there has been abuse in the past, but believe the agency is now going too far.

The Greater Kansas City Community Foundation grabbed the top “Rising Star” ranking in the annual report published by the Chronicle of Philanthropy. The Foundation rose in ranking from number 499 in 1991 to 56th in 2015 in terms of annual support.  The leap in rank was the biggest among the 400 largest public charities reviewed.

Legislation was just signed by the governor postponing for a year one of the provisions of the Non-Profit Revitalization Act.  The law, which was to go into effect on January 1, 2016, would have prohibited an employee of a nonprofit organization from also acting as a chairperson of the board of directors.  The new effective date is January 1, 2017.  A sponsor of the legislation said that more time was needed to study the impact of this prohibition.
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The Office of the Attorney General has taken action against several local organizations and a business that was operating a clothing-drop program in parts of New York and Connecticut.  The allegations are that the operations were intended to look like charitable fundraising, but were actually a for-profit activity.  The fundraising was termed to be deceptive.  As part of the settlement, the owner of the commercial company will pay $50,000 in fines, and make donations totaling $650,000 to the New York Community Trust and Westchester County Foundation.  

While most cities have abandoned the regulation of charitable solicitations within their cities and relied upon statewide registration and regulation, Columbus has maintained its registration process.  The city most recently announced that the charitable solicitation license fee will be increased to $50 in January 2016.  

A successful Bend, Oregon business man is accused of declaring phony charitable donations of $3.2 million in stock to the University of Oregon and Stanford University, which netted him a sizeable tax refund.   The indictment alleges the individual filed a false income tax return.

Voters in the state approved legislation that authorizes professional sports teams’ charitable foundations to operate charitable raffles, including 50/50 electronic raffles during their home games.  (Comment: Similar activities are being conducted in other states, such as the State of Missouri).
The administration of the state charitable solicitation law was transferred to a financial agency.  Organizations have begun to receive “letters of reprimand” as a result of late filings.  The problem with the letters is that the content states that the entity has violated state law.  Many other states require charities that are found to have violated state law to report it on their registrations in other jurisdictions.  Likewise, a disclosure of the determination by the state that the law has been violated could impair the ability of charitable organizations to receive foundation or government grants.


As previously reported, an advocacy group challenged California’s new requirement of providing Schedule B to IRS Form 990 as part of the registration process.  Schedule B lists the top donors to charitable organizations.  A preliminary injunction was denied and the matter was appealed to the Court of Appeals for the Ninth Circuit, which upheld the trial court’s decision.  The plaintiff then filed a Writ of Certiorari to the United States Supreme Court.  This is, after all, a major First Amendment case.  Earlier this month, the Court denied the Writ of Certiorari, which means it will not hear the case.  The case will now go back to the trial court where the challenge will be continued on a “as applied basis,” which may be the stronger argument.  (Comment: This is a potentially very important First Amendment case.  There is significant case law that supports the proposition that donors to advocacy and unpopular groups are entitled to have anonymity.  Those associated with the case whom we have talked to have expressed optimism that they will be successful in challenging the requirement on the “as applied basis.”  In the case, the State of California has maintained that the information is necessary for the administration of the state’s law, and the security of the donors’ information will be protected.  As we know, there are no guarantees that information filed with the state will not somehow become available through leaks to the media or individuals.  Indeed, we have received unconfirmed reports that has already happened).

In the Twenty-Seventh Annual NPT Study, total revenue for the 100 organizations on the list was $75.4 billion.  This figure represents an increase of 3.6% from the previous year.  According to a report from Grant Thornton, charitable giving totaled more than $350 billion in 2014.  This figure represents roughly a 5% year-over-year increase.  It is the 5th year of growth according to the report.

According to a recent report issued by the Gallup companies titled,“World Giving Index 2015: A Global View of Giving Trends,” charitable giving worldwide grew.  Unfortunately that growth has not been felt in the United States.

Representative Todd Young (R-IN) and Representative Linda Sanchez (D-CA) have introduced HR 3917 which, the sponsors said, will simplify the vehicle donation deduction.  In introducing the Bill, the sponsors noted that vehicle donations to charitable organizations have declined by nearly 83% as a result of the legislation that limited deductions to $500.  The Bill is intended to raise the ease of substantiation from $500 to $2,500.