Charity Governance

IRS NEEDS TO SHUT OUT THE JIM BUNNING FOUNDATION: WILL SENATOR GRASSLEY PLAY HARDBALL WITH HIS REPUBLICAN COLLEAGUE?

DATELINE: June 16, 2009, Chicago

Jim Bunning may be a United States Senator, but that does not mean that he is above the law.  Based on a report appearing in the Hill, the IRS should revoke the tax-exempt status of the Jim Bunning Foundation.  Reid Wilson, Bunning Makes $20K From Baseball Signings (June 12, 2009).  According to the article, Bunning is prohibited from selling his autograph because of Senate ethics rules.  In an apparent attempt to steal home base, Bunning created a charitable foundation.  Senate ethics rules reportedly permit the foundation to sell the baseballs that Bunning autographs and donates to the foundation.   That’s a story by itself.

According to the  2008-Form 990-EZ filed by the foundation, Bunning was paid...

"WERE [SIC] AN EDUCATIONAL INSTITUTION:" SHOULD THE IRS REVOKE LIBERTY UNIVERSITY’S TAX-EXEMPT STATUS?

DATELINE: May 24, 2009, Chicago

Well, well, well.  Everyone seems to wait for Memorial Day weekend to release explosive news.  North Korea literally set off a nuclear explosion in an underground test.  Now Liberty University has detonated its own bombshell.  It has decided that a student Democratic club will no longer be officially recognized as a university club. The club still will be permitted to meet on campus, but it no longer will be eligible for university funding and it can no longer use the university name, according to a May 25, 2009 press release from Jerry Falwell, Jr., the university’s Chancellor and President.  The Democratic club received an e-mail announcing the decision on May 15, 2009.  Anita Kumar, Liberty U. Drops Democratic Club: Party's Views Conflicts with Those of College, Administrators Say, Washington Post (May 23, 2009).

Unfortunately the press release does not discuss the status of the university’s Republican club, but we will assume for purposes of this post that there is one and that it continues to be recognized as an official club.  This assumption is supported by a report by an ABC News affiliate that the Republican club's status is untouched.  Jeremy Mills, University Rejects LU Democrat Club, ABC News--WSET-TV (May 22, 2009).  If Chancellor Falwell would like to challenge this assumption, he should issue a press release that lays all the salient facts out.  

Not surprisingly, there already is speculation whether the IRS will...

NONPROFITS WITH FOREIGN BANK ACCOUNTS SHOULD FILE FBAR IF THEY DON’T WANT TO BE FUBAR

DATELINE:  May 10, 2009, Chicago

We just got back from the ABA Tax Section meeting in Washington, D.C. where we spent many hours ensconced deep in the bowels of the Hyatt Regency.  No air, no light.  What a way to spend two days.

We did hear a number of interesting presentations.  Most notably, three of the presentations covered something called FBAR.  Be forewarned, tax-exempt entities should be worried about FBAR, and sooner than latter.  The critical filing deadline, which is independent of the filing deadline for the Form 990, is...

STROM SENDS A WARNING TO READERS: REMIT NONPROFIT TRUST FUND TAXES (PAYROLL TAXES) FIRST

DATELINE:  February 24, 2009, Chicago

In one article, Stephanie Strom nicely confirmed what we’ve been hearing for several months.  The recession has hit the nonprofit world.  Strom’s article, Charities Seek Bankruptcy Protection, appeared in last Friday’s New York Times (Feb. 19, 2009).  Strom, with her meticulous eye for detail, points to one bankruptcy and one liquidation after another to paint a bleak picture.  Many nonprofit executives, wading through Strom’s mini obituaries, may miss...

HOSPITALS ARE TAX-EXEMPT, NOT PEOPLE: LESSONS FROM THE IRS FINAL HOSPITAL STUDY

DATELINE: February 12, 2009, Chicago

Today, the IRS released the long awaited Hospital Compliance Final Report.   Coming in at 191 pages, it represents a massive undertaking by the agency.  Much of it focuses on the controversial subject of charity care and community benefit.  We will leave those sections to those who are more versed in that important topic.  We turn our attention to page 122 of the report, which focuses on one of Senator Charles Grassley’s favorite topics.  The IRS based its study on a questionnaire sent to 544 nonprofit hospitals and results from audits of 20 hospitals that responded to the survey and were then selected for audit--not much of a reward for voluntary compliance.

The IRS reported that the average and median salary paid to the top management official was...

THROWING ELBOWS: DID SENATOR GRASSLEY AND EDUCAP KILL THE DASCHLE NOMINATION?

DATELINE: February 4, 2009, Chicago

We disagree with Monday’s statement from Senator Max Baucus, the chairman of the Senate Finance Committee, regarding former Senator Tom Dashcle’s nomination to head the Department of Health and Human Services.  Baucus threw his support behind the nomination despite Daschle’s tax problems.  At least Baucus took a public position.

Senator Charles Grassley, the ranking member of the Senate Finance Committee, remained largely and mysteriously silent.  Silence is uncharacteristic of Grassley, a well-known populist.  But Grassley may have been holding all the cards….

TIME FOR SENATOR GRASSLEY TO SEND FORMER SENATOR TOM DASCHLE PACKING

DATELINE: February 2, 2009, Chicago

We’ve been following former Senate Majority Leader Senator Daschle’s tax problems closely.  We don’t want to be too pious, but we are sick and tired of the lax compliance effort undertaken by our public official wannabes.  First there was Timothy Geitner and the employment taxes.  Now it is Daschle, who is President Obama's nominee to head up the Department of Health and Human Services.  Daschle failed to report $225,256 in income attributable to the use of a car and driver provided by a private-equity firm that Daschle apparently provided services to.  What has been less publicized is Daschle's failure to report $83,333 in consulting services income.  That one is...

ILLINOIS AND CHICAGO POLITICS ADVERSELY AFFECT CHICAGO CHRISTIAN INDUSTRIAL LEAGUE: MISSION BECOMES SECONDARYAS FAMILY AND CRONIES FEED AT THE TROUGH

DATELINE: January 27, 2009, Chicago

Politician got on his jogging shoes
He must be running for office, got no time to lose
He been suckin' the blood out of the genius of generosity
       Bob Dylan, Summer Days from Love and Theft.

Governor Blagojevich has been on a media barnstorm the last several days.  Meanwhile back at the farm, the Illinois Senate continues with the trial that will inevitably result in Blago’s removal from office.  Lost in the excitement is what appears to be political cronyism at both the State of Illinois and City of Chicago levels.  This time the cronyism is affecting a 100-year old charity that aids the homeless.  Given this year’s brutal winter, the homeless sure do need the help of the Chicago Christian Industrial League.

NBCChicago reported last week that Patti Blagojevich was feeding

THE ANSWER IS: THE EXCISE TAX ON JEOPARDY INVESTMENTS; THE QUESTION: WHAT SHOULD SOME FOUNDATIONS THAT INVESTED WITH MADOFF BE WORRIED ABOUT?

DATELINE: January 8, 2009, Chicago

Any lawyer whose law practice focuses on business corporations knows that business corporations effectively subject to different regulatory regimes.  Closely-held corporations are subject to minimal regulation under state business corporation laws.  The owners can select directors, make major decisions, and pay compensation largely as they see fit.  On the other hand, large publicly-traded corporation are subject to lots of regulation and disclosure requirements thanks to federal securities laws.

By and large, state nonprofit laws and regulation of charity do not draw a distinction between private foundations—the equivalent of closely-held business corporations—and the large brand-name charities.   Federal tax law, however, does draw a sharp distinction, but one that is far different than the one drawn between closely-held and publicly-traded business corporations.  Under Chapter 42 of the Internal Revenue Code, private foundations (including family foundations) are subject to far...

IRS REVOKES GRANTMAKER’S 501(c)(3) STATUS BECAUSE ITS OVERHEAD WAS TOO HIGH: WHERE IS THE LINE BETWEEN EXEMPT AND TAXABLE FOUNDATIONS?

DATELINE:   December 23, 2008, Chicago

On September 16, 2008, the IRS threw down the gauntlet when it released Determination Letter 200851031, which was made available to the public last Friday.  The revocation of exempt status contains two helpful lessons for exempt organizations.  But of far greater importance, the ruling looks...