Charity Governance

On Book Leave

April 3, 2013

Jack Siegel has not been updating his blog because he has been writing a book during the last year and half.  He has about 2 months worth of work to go and a 700-page manuscript.  The book is unrelated to nonprofit law and governance, but Jack continues to be involved in nonprofit issues.

 

JACK SIEGEL SUBMITS COMMENTS TO NEW JERSEY REGULATOR

DATELINE: July 26, 2011, Chicago

Jack Siegel submitted comments today to the New Jersey Division of Consumer Affairs Charities Registration Unit on a proposal designed to encourage those contributing funds to charity to restrict them to particular programs.  Although the Division has shown some willingness to cut back the rule, as written, the rule would preclude a charity from using any funds earmarked for specific programs to cover fundraising and administrative expenses.  As Jack points out in his comment, the proposal is counterproductive.  Regulators should not be showing a preference for restricted gifts over unrestricted ones, nor should regulators make it difficult for charities to recover legitimate administrative or fundraising expenses.

For a copy of Jack's comment letter, click here.

FUZZY THINKING IN NEW JERSEY: THE LATEST ROUND OF PROPOSED FUNDRAISING LEGISLATION

DATELINE: July 15, 2011, Chicago

The New Jersey Division of Consumer Affairs Charitable Registration Unit has offered a proposal that demonstrates the problem with the law: Too many proposed laws and regulations address problems that either don't exist or don't need to be solved through another rule.

Under the New Jersey proposal, a charity that solicits funds for two or more programs would be required to tell donors that they have the option to designate how the funds are allocated among the programs.  As currently written and as described in explanatory comments, the proposed regulation would prevent the charity from using any portion of an earmarked contribution for...

SUZANNE GARMENT AND LESLIE LENKOWSKY GET IT VERY WRONG

DATELINE: June 23, 2011, Chicago

Suzanne Garment and Leslie Lenkowsky are well-known and respected people, and rightfully so.  But their op-ed piece in today's Wall Street Journal--The IRS's Charity Purge--is simply wrong.  The two are troubled by the IRS's recent announcement that somewhere around 275,000 nonprofit organizations have lost their tax-exemption for failing to file a tax return for three consecutive years.

Early on in the article, Garment and Lenkowsky acknowledge that Congress' decision to enact the Pension Protection Act of 2006 is the genesis of the perceived problem.  The PPA added a provision requiring all tax-exempt organizations to file a tax return.  The congressional penalty for failure to file for a three-year period was loss of exemption.  Congress was warned at the time...

THE ELEVENTH DEADLY SIN: CONGRESSIONAL MEDDLING IN IRS EXAMINATIONS

DATELINE: June 20, 2011, Chicago

House Ways and Means Chairman Dave Camp decided to flex his muscles when he wrote to IRS Commissioner Douglas Shulman demanding information about the IRS employees who decided to assert gift tax on contributions to Section 501(c)(4) organizations.  We have always thought that the law did not support imposition of gift tax on these contributions, while acknowledging that there is an issue.  Most knowledgeable tax practitioners have viewed imposition of the tax as a possibility.

So now we have Chairman Camp...

THE SEVENTH CIRCUIT'S POSNER OFFERS A DECISION THAT SHOULD BE READ BY EVERY NATIONAL ORGANIZATION WITH STATE AND LOCAL AFFILIATES

DATELINE: June 1, 2011, Chicago

Judge Richard Posner issued what is an important legal decision for any national nonprofit that licenses or otherwise makes its name available to local affiliates.  This particular dispute was between the Girl Scouts of Manitou Council (located in Wisconsin) and the Girls Scouts of the United States of America.  The crux of the matter centered on efforts by the National Girl Scouts to...

MASSACHUSETTS SENATE SEEKS TO NATIONALIZE NONPROFIT ASSETS

UPDATE JUNE 1, 2011, Chicago

Yesterday we posted on legislation (the budget) that passed the Massachusetts Senate on a fast track basis.  This legislation was brought to our attention by members of the Massachusetts bar.  A staff member of the Massachusetts Legislature confirmed that the legislation we were reviewing had been adopted by the Senate.  That confirmation was consistent with what was published on the Massachusetts Legislature's web site.

We are now hearing that something else may have superseded the amendment we wrote about.  This is the problem when legislators try to gain advantage by fast tracking legislation and do not hold hearings (at least that is what we have been told).   We have now spoken with someone who has spoken to a representative from the Senate Ways & Means Committee, who informed our source that Senate Amendments 204.2 and 209 have replaced Senate Amendment 204.  If that is true, it certainly is good news.  Amendment 204.2 provides as follows:

SECTION____. Notwithstanding any general or special law to the contrary the attorney general may review the compensation of any officer, director or senior manager acting in an executive capacity of a public charity required to be registered under section 8E and to file annual reports under section 8F to consider the appropriate compensation levels given the nature and mission of the public charity. In so doing, the attorney general may examine the compensation standards of not-for-profit public charities, both within the commonwealth and nationwide. For the purposes of this section, compensation shall include salary, bonus payments, incentive payments, deferred compensation, severance payments, below market rate loans, and the lease or rental of real estate, personal property or any vehicle. The attorney general shall report the findings of this review, which may include recommendations about excessive compensation, to the clerks of the senate and house of representatives of the great and general court by December 31, 2011.

On the other hand, Amendment 209 does place limits on board member compensation. In part, it provides:

b) No Massachusetts based public charity required to be registered under section 8E and to file annual reports under section 8F, shall provide compensation to any independent officer, director or trustee for service as such independent officer, director or trustee except with the approval of the Director in accordance with the provisions of this section.

“Massachusetts based public charity”, a public charity incorporated or otherwise organized in Massachusetts or, if incorporated or organized outside of Massachusetts, that primarily conducts its business in Massachusetts.

The definitional provision would seem to prevent Massachusetts charities from avoiding the provision by reincorporating outside of Massachusetts but leaving their operations in Massachusetts otherwise untouched.

Before commenting further on substance, we will wait to receive confirmation that this is the only amendment that passed--in another phone call our source was told all three amendments had passed.  

We offer no apologies.  When spokespeople for a legislative body are unable to tell a straight story, its their problem, not ours, particularly when legislators are working under cover of night, so to speak.  This is truly the story of the gang who couldn't shoot straight.  

P.S.  The language we did report on didn't come out of nowhere and you can bet, if not enacted now, that the language will still be on the computer, ready for resurrection at the next opportune time.

DATELINE: May 31, 2011, Chicago

You see that woman 
Who walks the street 
You see that police 
Upon his beat 
But when the Lord gets ready 
You gotta move 
You gotta move 

The Rolling Stones, You Gotta Move, on Sticky Fingers (originally penned by Mississippi Fred McDowell)

The Massachusetts State Senate approved legislation that would cap the pay of officers, directors acting in an executive capacity, and senior managers of Massachusetts nonprofits at $500,000 per annum if the organization receives more than $1,000,000 in gross revenues.  Compensation is defined as "salary, bonus payment, inventive payments, deferred compensation, severance payments, below-market rate loans, and the lease or rental of any vehicle."  The bill also prohibits a nonprofit from paying compensation to directors.

If finally signed into law, this legislation will pose all sorts of problems for larger universities, hospitals, cultural institutions, and other nonprofits.  Massachusetts residents will see a decline...

ENABLING MASSACHUSETTS ATTORNEY GENERAL MARTHA COAKLEY'S AND SENATOR MARK MONTIGNY'S EFFORTS TO DICTATE TO PRIVATE NONPROFIT ENTITIES

DATELINE: May 25, 2011, Chicago

Massachusetts Attorney General Martha Coakley knows best, which is why she and her minions in the Massachusetts State Legislature continue their crusade against compensating nonprofit directors.  Now her minions want to cap...

THE SKY MAY BE CHICKEN, BUT WE HAVE SOME EGG ON OUR FACES

DATELINE:  March 24, 2011, Chicago

Yesterday we had a little fun at the expense of the California Attorney General (see that post, reproduced below).  A friend of the blog pointed out that we had overlooked an important California statute that severely limits the California Attorney General's power to investigate, institute court proceedings against, and sanction organizations formed as California religious corporations. 

As was true yesterday, we have yet to see any evidence of wrongdoing on the part of Family Radio or its president, Harold Camping.  Yet, we believe the issues we raised yesterday are as...

DID LANCE ARMSTRONG DRINK MORE THAN THREE CUPS OF TEA?

DATELINE: May 23, 2011, Chicago

We are not regular viewers of 60 Minutes, but we just so happened to catch last night's broadcast, which raised serious questions as to whether Lance Armstrong, the winner of seven Tour de France races, broke the rules against the use of performance-enhancing  substances and treatments.   His former teammate, Tyler Hamilton, certainly indicated so in what was a gripping interview.  Armstrong has previously denied use of prohibited substances and treatments.  He has denied the allegations leveled against him by Hamilton and another former teammate, Floyd Landis.  As usual, we will give Armstrong the presumption of innocence until there is a final adjudication to the contrary. 

Although Armstrong undoubtedly hopes that these allegations will go away, that is unlikely.  There are reports of a...