October 2015


On October 8, 2015, a representative of the IRS, speaking at a conference, spoke about the high cost for tax-exempt organizations to seek a letter ruling.  The fee was raised to $28,000, which prevents many organizations from seeking the determination.  According to the announcement that was made at the conference, tax-exempt organizations that want to request an IRS letter ruling, but are reluctant to pay, may request a conference prior to seeking a ruling to determine whether the request would be appropriate.
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In Letter Ruling 201541013, the IRS revoked a charitable organization’s tax-exempt status because the organization’s net earnings inured to the benefit of its founder and president, and operated primarily to benefit the private interest of the founder’s telemarketing business.  

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Under the current law, donors who contribute $250 or more are required to obtain a receipt from the charitable organization in order to substantiate their donation for their tax return.  Without it, the IRS has ruled the deduction is not permissible.  That may be changing.  Recently, the IRS issued a proposed regulation in which the donor’s obligation to substantiate the contribution may be satisfied if the charity (donee) files a return with the IRS listing the donations it has received.  Sounds simple, but it is not.  Under the proposed regulation the return would have to list information about the donor that includes his/her name and address, as well as the donor’s taxpayer identification number and the amount of cash, or a description of the non-cash items that were contributed.  (Comment: The necessity of obtaining a receipt from the charity instead of being able to use the cancelled check as proof of the donation has always puzzled us.  This new proposal, at first glance, seems donor friendly, but in reality it is not.  It will require more work by the charity, with the donor giving up information which he/she may or may not want to share).


A Michigan man was recently sentenced in federal court in Anchorage to 13 years in prison for crimes including stealing money through fake charitable organizations.  The defendant created two businesses, United States Disabled Veterans and United States Handicapped-Disadvantage Services, claiming to sell products for donations, and that the donations helped the organizations to employ the handicapped.

The 2016 Waste Management Phoenix Open takes place every year in January, but has already reached a milestone.  Through its charitable arm, the Thunderbirds announced that they have broken the $100 million mark raised for Arizona charities.
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Two years ago, 19 Granite Mountain Hotshot firefighters lost their lives while battling the Yarnell Hill fire.  Donations poured in from all over the world, but now the president of the Prescott Firefighters Charity said that organizations had used the tragedy to enrich themselves.  In an article published in a Tucson newspaper, the president of the organization called upon the Wildland Firefighters Foundation of Boise, Idaho, to share a bigger part of the $3 million they raised in the name of the tragedy.  He also pointed out that golf tournaments held in Prescott and Tucson, after all expenses, yielded only $2,000 to the organization.

Two individuals were arraigned in district court in Pensacola after a federal grand jury returned an indictment charging them with conspiracy and mail fraud.  The indictment alleged that between December 2008 and May 2012, the two defendants ran Children and Family Services, Inc. (later called Children’s Charitable Services), a telemarketing company that solicited charitable donations by telephone from offices in the state.  Allegedly, the defendants instructed the employees to falsely tell potential donors living in other states that the employees were volunteers, and that the proceeds helped children in the state where the potential donor lived.  The pair allegedly raised more than $1.2 million.

The online registration system has been modified to allow paid preparers to authenticate the annual financial reports that have been submitted.  This, of course, is a much appreciated step forward in the process.

The president of United Mid Coast Charities was sentenced earlier this month to four years incarceration after pleading guilty to mail and tax fraud.  The case revolved around $4.6 million in funds that supposedly was for charity, but went to personal expenses.  These were federal charges as a result of the use of the mail and for filing a false income tax return.  In addition to his sentence he must pay full restitution.

A Lansing paper reported that the state has accused the owners of a golf course of acting like a casino in accepting money for hosting charity gaming parties in the facility’s clubhouse.  The Michigan Gambling Control Board said it discovered illegal payments between the facility and the supplier, with formal action to stop all future activities being instituted.

According to an articles published in the Star Tribune, the Car Donation Foundation, a nonprofit based in Minnesota, collected millions of dollars worth of vehicles nationwide by misleading the public by claiming the vehicles were being donated to Make-A-Wish Foundation, when in fact less than a quarter of the donated amount actually went to the organization.  In a compliance report prepared by the Minnesota Attorney General’s Office, the Car Donation Foundation is accused of paying nearly $36 million to two for-profit corporations owned by the executives who founded and managed the Car Donation Foundation.

Senior Attorney Jessica Leigh Long has announced the publication of the amended rules for charities regulation by the Secretary of State.  (Comment: Our firm, through Nathan Thomas, former Mississippi state regulator, was allowed to provide input.  We thank the Office of the Secretary of State for the opportunity to do so).

A body was found in a clothing deposit bin in Pemberton Township.  Authorities said the victim apparently got his head trapped in a heavy-top bin.  Police speculate that the victim was a transient looking for clothing or things of value.  The bin is operated by Planet Aid.

The New York Times reported that sixteen different art institutions in Manhattan are in the process of raising more then $3 billion for projects.  No doubt the aggressiveness of this campaign will put a strain on development efforts by others in the city.
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A state judge in Cooperstown ordered that a pet hospice be dissolved, and that the CEO be permanently barred from taking in rescue animals.  The facility was once supported by Oprah Winfrey and other celebrities.  The CEO is charged with misusing more than $3 million for personal use.

Hagerstown repealed its outright ban on unattended clothing bins, and replaced it with an ordinance requiring licensing and imposing certain restrictions.

A major event promoter in Seattle (City Guru) is under siege with its owner now in court.  The planner put on a number of special events, all designed to benefit charities, but in fact no monies went into the coffers of any charity.  Vendors and employees also were not paid.  Additionally, a number of local and national charities that were said to have benefitted did not.


The Wall Street Journal reported that Citizens for Responsibility and Ethics in Washington, a watchdog group, has filed a complaint with the IRS that a nonprofit organization’s ad featuring a republican presidential candidate, Marco Rubio, violates the tax rules prohibiting engaging in political activities.

This is critically important case is currently pending before the United States Supreme Court on a Writ of Certiorari.  At issue in this case is the authority of the State of California (and subsequently New York) requiring, as part of the registration of charitable organizations the filing of Schedule B of the IRS Form 990 that lists major donors.  Previously such filings were not required.  The State of California took the position that filing Schedule B be required in order to protect the government’s interest, to ascertain who is supporting organizations that might be engaged in political-type activity.  The Ninth Circuit Court of Appeals agreed with the State of California.  A number of amicus briefs on behalf of the petitioner have been filed, but the latest one is perhaps the most unusual.  The States of Arizona, Michigan, and South Carolina have filed an amicus brief in support of the Writ of Certiorari sought by petitioner.  In their summary of argument, the states opposing California state: “The decision of the Ninth Circuit Court of Appeals squarely conflicts with the rulings of this Court and the decisions of other courts of appeal.  This amicus brief focuses on two major flaws with that ruling.”

Gilbert Gaul has published a new book titled “The Unlikely Charity Known As College Football.”  The idea for the book arose when Gilbert Gaul’s mother wasgiven the opportunity to upgrade her seats as a season ticket holder for Penn State football by making a tax deductible gift.  According to Mr. Gaul this is not an isolated circumstance.  He estimates that as much as half a billion dollars each year is paid for seat licenses, for which contributors take a charitable deduction.  An earlier attempt by the IRS to eliminate the deductibility of same was met with strong opposition from football-strong states’ senatorial representation.

According to a new report from the Center on Nonprofits and Philanthropy at the Urban Institute, charities are losing donors.  The survey said that for every $100 in new donations, charities are losing $95 in lapsed or reduced donations.