- September 2010
- IRA Rollover Remains on Hold
- Estate Tax Bill Introduced by Senate
- Campaign-Finance Bill Stalls in Senate, Alleviating Advocacy Groups' Concerns
- Federal Government Awards $50 Million in First Set of Innovations Grants
- Supreme Court Decision Delivers Blow to Human-Rights and Aid Groups
- Supreme Court’s Ruling in College Case Could Impact Charities
- HHS Proposes HIPAA Regulations Changes Affecting Fundraising
- Religion-Based Groups Protest Restrictions in Bill
- Senator Wants More Disclosure by Non Profits about Donors
- Coalition Wants Charity Stipulation in Boston Hospital Deal
- States Seeks to Limit Nonprofit CEO Pay as Part of Budget-Cutting Efforts
- Two NY Charities Refuse to Return Gifts from Donor Convicted of Fraud
- Oregon Wants to Close Vets Charity Over Telemarketing Fees
- Florida Bars Fund Raising by Veterans Group
- NY Governor Signs Law to Limit Charitable Deductions for Wealthy
- Law Suit Claims Mismanagement Killed NY Hospital
- IRS Offers Small Charities ‘One-Time Relief’ Through Extended Deadline
- U.S. Postal Service Proposes Rate Increase
- All Pages
Financial Reform Act Protects Non Profits from Government Oversight
President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, which will create an independent Consumer Financial Protection Bureau housed within the Federal Reserve to prevent improper financial practices. The law will also give the Federal Reserve Bank the authority to regulate interchange fees on debit cards by ensuring that fees charged for debit card transactions are reasonable, which may impact charitable organizations receiving online donations.However, the final bill includes language that protects nonprofits from burdensome oversight by the proposed new agency. As recorded in the bill, the bureau does not have the authority to supervise or regulate “any activities related to the solicitation or making of voluntary contributions to tax-exempt organizations.”
IRA Rollover Remains on Hold
President Obama signed The American Jobs, Closing Tax Loopholes, and Preventing Outsourcing Act of 2010 (H.R.4213). Although the original bill included a one-year retroactive extension of the IRA charitable rollover, this provision was pulled after a second attempt to move to a final vote on the bill failed. The Senate is now unlikely to act on an IRA charitable rollover extension until later this fall.
Estate Tax Bill Introduced by Senate
U.S Senators Bernie Sanders (I-VT), Tom Harkin (D-IA) and Sheldon Whitehouse (D-RI) introduced the Responsible Estate Tax Act (H.R. 5764). The bill would permanently fix the estate tax by combining the 2009 exemption levels with progressive rates for larger estates, including a new billionaire’s surtax. The bill was referred to the House Committee on Ways and Means.
Campaign-Finance Bill Stalls in Senate, Alleviating Advocacy Groups’ Concerns
The Senate decided not to debate and vote on a controversial bill that is intended to lift the veil on who is paying for advertisements and other communications that could influence elections. Many advocacy groups had objected to a donor-disclosure provision in the bill. The measure was originally passed by the House of Representatives in response to a Supreme Court ruling.
The bill, known as the Disclose Act, would require corporations that issue political communications, including many advocacy groups organized under Section 501(c)(4) of the International Revenue Code, to reveal information about their donors. The Senate in the coming weeks could reconsiders its position on whether to debate and vote on the measure.
Federal Government Awards $50 Million in First Set of Innovations Grants
The Social Innovation Fund, a White House effort to pump millions of private and public dollars into projects that are effectively tackling pressing social problems, awarded its first round of grants totaling nearly $50-million. Among the biggest winners: job training and workforce-development programs.
The Corporation for National and Community Service, which operates the Social Innovation Fund, announced 11 grants—ranging in size from $2-million to $10-million each – to intermediary organizations, which will in-turn award money to nonprofit groups working in the areas of economic opportunity, youth development, and healthy habits. Both the grant makers and the nonprofit groups are required to provide matching funds, which so far total $74-million and are expected to exceed $150-million.
Note: Moving to defuse a growing controversy over how it awarded these SIF grants, the federal government has posted online the applications of the organizations which won the money, along with the ratings and comments they received.
Supreme Court Decision Delivers Blow to Human-Rights and Aid Groups
Human-rights and humanitarian organizations lost a Supreme Court case when the justices upheld a federal law that prohibits U.S. organizations from providing “material support” to designated terrorist groups. Some nonprofit groups had argued the law prevents them from engaging in peace-building work and jeopardizes aid in conflict zones.
The challenge was brought by the Humanitarian Law Project, a nonprofit organization in California that sought to provide training in conflict resolution to the Kurdistan Workers Party, which the U.S. government considers a terrorist group. A 1996 law that was revised under the Patriot Act made it a crime to provide “material support”—including services, training, expert advice, and personnel—to terrorist groups, even if the work has legal and peaceful goals.
In a 6-3 decision, the justices rejected the charity’s argument that the law violated their First and Fifth Amendment rights, Writing for the majority, Chief Justice John Roberts said that the government’s definition of ‘material support” was not unconstitutionally vague and did not deprive groups of their rights to freedom of speech and association.
Supreme Court’s Ruling in College Case Could Impact Charities
The Supreme Court ruled in Hastings Christian Fellowship v. Martinez that a university can force any club to let a person join, even if he totally disagrees with its purposes. And as a member, he can launch a hostile takeover.
This may not have a good result for the principle of freedom of association, because it fails to recognize that for nonprofit groups to be effective in championing unpopular views, they often need to place restrictions on who can join their organizations.
The Supreme Court case grew out of a refusal by the Hastings College of the Law at the University of California to recognize a chapter of the Christian Legal Society, a national organization that has sought to create affiliates on many campuses. Like many colleges, Hastings requires student organizations to obtain official recognition before they can receive the institution’s support for their activities. It also requires those organizations to adhere to a nondiscrimination policy. Hastings interprets nondiscrimination to mean that a group must accept all comers,” admitting any student who wants to join.
That became a problem for the Christian Legal Society, which requires its members to sign a statement of faith” that affirms their theological views. When the Christian Legal Society chapter sought recognition from Hastings, it also asked for an exemption from college’s nondiscrimination policy. Otherwise, the society said, the college would violate the organization’s First Amendment freedom of association by forcing the group to include members who do not share its most fundamental views. Hastings denied the exemption, so the society sued.
Ruth Bader Ginsburg said, writing for the majority, that this was not a simple mater of “expressive association.” Instead, the case was governed by what is called the limited public forum” doctrine, which permits colleges, universities, and other institutions—including those, like Hastings, that receive government money—to restrict First Amendment rights if they have a valid reason to do so. The court held that Hastings had valid reasons, including the encouragement of “tolerance, cooperation, and learning among students.”
Justice Ginsburg and her colleagues reasoned, the Hastings policy was not biased toward particular points of view. As long as the policy was applied evenhandedly, regardless of a group’s viewpoint, the “accept all comers” rule was an acceptable restriction on the First Amendment.
HHS Proposes HIPAA Regulations Changes Affecting Fundraising
The Department of Health and Human Services, Office for Civil Rights announced proposed modifications to the HIPAA Rules to strengthen privacy and security protection of health information and to improve the workability and effectiveness of HIPAA Rules. These included:
-Opt-out language must be on each fundraising communication sent;
-It must be easy for individuals to opt-out (toll-free #, e-mail);
-Opting out can’t impact future treatment or payment for care;
-Fundraisers’ must abide by opt-out requests and remove individuals from future communications (vs. making “reasonable effort’
HHSproposes that fundraisers be provided access to information beyond demographic data—pecifically department and outcomes data.
Notice of Privacy Practices
HHS proposes that covered entities/hospitals include in their notice of privacy practice, notice that individuals have the right to opt-out receiving fundraising communication.
More than 100 religion-based non profits are protesting a provision in pending legislation that would prohibit them from receiving federal money if they consider a job applicant’s religion when hiring. The provision is in legislation to reauthorize the Substance Abuse and Mental Health Services Administration, which makes grants to non profit social service organizations.
The debate over federal funding of programs operated by non profits with religious affiliations, dates back to the Clinton Administration, when it became part of a welfare overhaul. Organizations are not allowed to discriminate against clients based on religion, but are allowed to exercise their religious beliefs in hiring and other aspects of their operations.
Senator Wants More Disclosure by Non Profits about Donors
Each quarter the National Alliance on Mental Illness posts the names of all corporations and foundations that gave the charity more than $5,000; the specific amount given and how the money was spent. The Alliance started posting such details last year after Senator Charles Grassley of Iowa, the senior Republican on the Finance Committee, began to investigate its financial ties to the pharmaceutical industry.
Now Senator Grassley is turning his attention to additional non profit medical groups. He has made it clear that he would like them to follow the Alliance’s lead because these organizations “have a lot of influence over public policy and the people rely on their leadership, so there is a strong case for disclosure and the accountability that results.”
Specifically, Grassley has asked these medical groups how much money they received from pharmaceutical, medical device and insurance companies from 2006 to 2009, who the companies were; how the money was used; and how much outside income their top executives and board members receive.
While the current investigation is focused on medical issues, it could have implications for all charities that receive donations from businesses in areas that overlap their non profit missions. Grassley’s investigation challenges the concept, protected by law, that charities have discretion over how much to reveal to the public about their donors.
Coalition Wants Charity Stipulation in Boston Hospital Deal
A coalition of consumer, community, and heath-care groups is urging Massachusetts to impose additional conditions on a planned sale of a nonprofit chain of Catholic hospitals to the private-equity firm Cerberus Capital Management.
Among the proposals is a stipulation that Cerberus create a charitable foundation to pay for health programs in areas served by the six Caritas Christi Health Care facilities, which would become for-profit businesses if the sale is approved by state regulators. Cerberus opposes the charity conditions, as well as a demand that it stretch the period during which it pledges not to sell the Caritas hospitals from three years after the takeover to five or six years.
States Seeks to Limit Nonprofit CEO Pay as Part of Budget-Cutting Efforts
Several states are looking for ways to curb salaries for top executives at nonprofit organizations that receive government aid.
New Jersey’s recently passed budget includes a provision limiting pay for chief executives at charities the state hires to provide social services, part of a larger effort by the Governor to cut state salary cost. Vermont legislators are seeking ways to limit pay at large nonprofit groups with state contracts, and New Hampshire’s attorney general is investigating compensation for nonprofit hospitals’ chiefs.
Federal lawmakers are also exploring the issue, with Sen. Charles Grassley, Republican of Iowa, asking the Treasury Department to review regulations governing executive pay at tax-exempt organizations.
Two NY Charities Refuse to Return Gifts from Donor Convicted of Fraud
Two high-profile New York nonprofit institutions are resisting the federal government’s call to return donations from Hassan Nemazee, a business executive who has been convicted of fraud.
The Asia Society has held onto the more than $270,000 it received from the once-powerful businessman and Democratic Party donor who pleaded guilty in March to operating a $292-million Ponzi scheme. Also, the private Spence School has refused to return over $15,000 in gifts. In letters to the government, the institutions argued that they should not have to return donations that they did not know were the product of criminal activity and that the money has long since been spent.
Federal officials contend that the society, which listed $8 million in cash, according to its 2009 annual report, and the school, with an $85 million endowment, have ample resources to repay the gifts. Several other non profit beneficiaries, including Harvard and Brown universities and the Council on Foreign Relations, have forfeited the donated funds.
Oregon Wants to Close Vets Charity Over Telemarketing Fees
Oregon’s attorney general is seeking to shut down a nonprofit organization that awards honorary medals to veterans, saying most of the cash the group raises goes to a commercial telemarketer.
The state has sued Veterans of Oregon and the fund-raising company it works with, Associated Community Services in Michigan. The AG said solicitors for the charity told would-be donors their gifts would provide food, housing, and medical care for homeless and ill vets, but 80 percent of funds raised went to the telemarketing firm.
The Oregon Justice Department has sued two other military charities it claimed made similar false statements about how donations would be spent.
Florida Bars Fund Raising by Veterans Group
Florida has ordered a much-investigated Tampa veterans charity to stop fund raising immediately. The order issued by the state Department of Consumer Services alleges the U.S. Navy Veterans association’s to solicit donations was obtained by “knowingly providing false information.”
Six other states have opened probes of the association since an investigative report sparked questions over the charity’s fund raising, leadership, and ties to a political-action committee headed by its former development director
NY Governor Signs Law to Limit Charitable Deductions for Wealthy
The New York Governor signed into law legislation that applies to the approximately 3,500 New York taxpayers who earn more than $10 million annually and limits the deduction they can claim on their state tax returns to only 25 percent of their charitable contributions, rather than the current 50 percent.
This law is in effect for three years, including the current 2010 tax year. The charitable-deduction provision could generate up to $100-million revenue during the current fiscal year for the state, but NY nonprofit groups think the change will lead many wealthy people to give less money to charity.
Also the action in New York could set an example for other states that are looking for revenue during these tough economic times.
Law Suit Claims Mismanagement Killed NY Hospital
Former staff members and patients claim in a lawsuit that top executives at NY’s now defunct St. Vincent Hospital earned million dollar salaries and paid out $17 million more to management consultants as the city’s last Catholic hospital fell into bankruptcy this Spring, citing debts of $1 billion.
The suit seeks disclosure of the hospital’s fiscal records, a formal probe of its finances and a public hearing. The suit cites the hospital’s 2008 tax returns which lists $104 million in unspecified “other” expenses as evidence that hospital officials could have done more about the problem
IRS Offers Small Charities ‘One-Time Relief’ Through Extended Deadline
The Internal Revenue Services announced it will help thousands of small charities keep their tax-exempt status even if they missed their May 17th deadline for filing a new online form.
Congress passed a law in 2006 to help the IRS keep better track of active organizations of all sizes and figure out which charities, no longer exist. As part of the law, small organizations that never had to regularly file returns in the past – those with annual revenues of $25,000 or less -- must now each year file a new online return, called a Form 990-N or “e-postcard,” which requires basic information, such as the name of a principal officer and a mailing address.
Many thousands of small nonprofit groups risked losing their exemptions on May 17th, which marked the first three-year filing deadline for groups whose fiscal years end in December. The IRS said all small organizations that, by October 15th, fail to file returns will have their tax-exempt status revoked, and the tax agency will publish a list of those revoke organizations in early 2011. “Donors who contribute to at-risk organizations are protected until the final revocation list is published.”
U.S. Postal Service Proposes Rate Increase
Faced with plummeting mail volume, the U.S. Postal Service (USPS) announced in early July its proposal to increase postage pricing. Standard Mail letters would increase by approximately 5 percent, while flats would go up 5.1 percent. First Class mail would rise from 44 to 46 cents and First Class postcards would rise from 28 to 30 cents. The Postal Regulatory Commission (PRC) is expected to rule by October and new prices would take effect Jan.2, 2011, if approved.