Charity Governance

THE C STREET CENTER: WHERE IS SENATOR GRASSLEY AND HIS SENATE INQUIRY?

DATELINE: February 24, 2010, Chicago

The folks in the EO division of the IRS must be unhappy today.  From their standpoint, the worst of all possible worlds have collided—religion, politics and taxes.  That vortex scares the hell out of IRS officials.  Bad enough to be forced to define what a church or religion is, now add politicians to the mix, particularly...

JUST CURIOUS: WHO SPONSORED THE MARTIN LUTHER KING BREAKFAST IN BOSTON?

DATELINE: January 18, 2009, Chicago

Like the rest of the nation, we have been watching the Massachusetts Senate race closely.  So we were intrigued today by the Martin Luther King Breakfast held first thing this morning at the Hynes Convention Center in Boston.  

Democratic hopeful Martha Coakley was seated at the head table and permitted to make a speech, which turned political when she asked attendees to send her to the Senate.  Republican hopeful Scott Brown was not seated at the head table, nor was he permitted to make a speech.  ABC News Center 5 in Boston  reports that the committee sponsoring the breakfast claims that Coakley was invited to speak in her capacity as Massachusetts Attorney General.

Regardless of whether the committee is a Section 501(c)(3) organization, the committee's failure to extend an invitation to Brown to speak strikes as unfair play. However, if the committee, any of its members, or any sponsors of the breakfast are Section 501(c)(3) organizations, we believe questions exist as to whether these organizations engaged in a prohibited campaign intervention.  Given the proximity to tomorrow's election, a good case can be made that this was a prohibited intervention.  

Given the importance of this election to the nation, we hope the IRS will open an investigation.  In the event an intervention is determined to have occurred, we believe the only appropriate course of action is the revocation of tax exemption of those Section 501(c)(3) organizations who were involved.

NATIONAL TAXPAYER ADVOCATE SHOULD ADVOCATE FOR MORE CONGRESSIONAL FUNDING BEFORE ADVOCATING TO INCREASE THE IRS’S WORK LOAD

DATELINE: January 11, 2010, Chicago

On December 31, 2009, the National Taxpayer Advocate, Nina E. Olson, released her annual report to Congress for 2009—we can only wonder whether Ms. Olson files her own tax return on April 15th given the release date of the report.  All kidding aside, we look forward to this report each year because it contains lots of provocative ideas about tax administration, making it a good read.

This year, Olson recommends increased efforts on the part of IRS officials in the Tax Exempt/Governmental Entities division of the IRS to reach out to tax-exempt groups.  In particular, Olson is concerned about smaller organizations, which constitute a majority of the over 1.8 million tax-exempt organizations.  She acknowledges the IRS’s efforts to develop web-based information tools for these organizations, but refers to this effort as a “one-size-fits-all” approach.  She refers to staffing levels in EO outreach as “inadequate” and calls for greater IRS presence in local communities.  She also recommends that the IRS conduct research into the information needs of this community so that the IRS can tailor its efforts to help small nonprofits better understand their reporting responsibilities.

We have a couple of observations that reveal our fundamental...

PULLING BACK THE CURTAIN: IRS AUDIT CHECK SHEET

DATELINE: December 14, 2009, Chicago 

The IRS recently issued a Governance Check Sheet and a Governance Guide Sheet for completing the Check Sheet.  The Check Sheet is to be completed by IRS agents during audits of tax-exempt organizations. As its name suggests, the check sheet focuses on the organization’s governance.  This can be taken as an indication that the IRS is not backing off its focus on nonprofit governance.  This is not surprising given the fact that IRS officials have said that a well governed organization is more likely to be a tax-compliant organization. 

Although a good portion of the checklist focuses on factual matters that are now answered by the Form 990, the Check Sheet and guidelines suggest that agents will be asking for...

IRS TAKES TAXPAYER CONFIDENTIALITY SERIOUSLY

DATELINE: December 9, 2009, Chicago

Several weeks ago, we stumbled across an IRS legal memorandum that indicates just how seriously the IRS takes taxpayer confidentiality in the exempt organization area. ILM 200942039 (released October 16, 2009)  The IRS had conducted an examination of an exempt organization that touched on the intermediate sanctions and excess benefits.  It decided to issue a “no-change” letter.  In that letter, the IRS planned to include advisory concerns that transactions between the organization and a disqualified person could potentially result in excess benefits and private inurement.   The organization’s representative wrote to the IRS, informing them that the organization was considering releasing the advisory, which would...

NEW JERSEY ATTORNEY GENERAL BRINGS LAWSUIT IN WHAT COULD TURN OUT TO BE THE NONPROFIT CASE OF THE YEAR--PART II

DATELINE: September 30, 2009, Chicago

Read Part I of New Jersey Attorney General Brings Lawsuit in What Could Turn Out To Be the Nonprofit Case of the Year

Train wrecks always make for great photographs, but train wrecks only serve a purpose if we learn from them.  If the allegations made by the New Jersey Attorney General against those running the Stevens Institute of Technology turn out to be true, Stevens will become one of the great train wrecks in nonprofit history.  Already the story offers...

NEW JERSEY ATTORNEY GENERAL BRINGS LAWSUIT IN WHAT COULD TURN OUT TO BE THE NONPROFIT CASE OF THE YEAR—PART I

DATELINE: September 29, 2009, Chicago

A little under two weeks ago, New Jersey Attorney General Anne Milgram filed sued against the trustees of the Stevens Institute of Technology, Harold J. Raveche, Lawrence Babbio, and unnamed John and Jane Does in what, if the allegations prove true, could prove to be the story of the year in the nonprofit world.  The 90-page complaint is sweeping in its allegations.  Raveche is the CEO and Babbio is the chairman of the board and a member of the executive committee.  While there have been incidents involving excess compensation, violations of the terms of restricted gifts, deception, failed investment management, and breach of the duty of care, we can't...

IF YOUR ORGANIZATION HAS SECOND THOUGHTS ABOUT FILING THAT COMPLICATED FORM 990, IT HAD BETTER THINK AGAIN

DATELINE: September 9, 2009, Chicago

Boy, that redesigned Form 990 sure is long and complicated.  Undoubtedly some exempt organizations have had second thoughts on completing parts of it, or even filing it at all.  They had better think again in light of a recent decision handed down by the United States District Court of New York—American Friends of Yeshivat Ohr Yerushalayim, Inc.,  v. U.S., 04-CV-1798 (July 29, 2009).

Admittedly, the American Friends is an extreme case, but it does hold some lessons.  The organization failed to timely file its Form 990 for the tax years ending June 30, 2000, 2001, and 2002.  The American Friends didn’t deny that it failed to file these returns on a timely basis, but sought abatement of the penalties for late filing.  The organization filed late returns for the 1996 and 1997 tax years.  The apparent excuse for the late filings for 1996 and 1997 was a...

PRO-LIFE IRS DETERMINATION CONTROVERSY A POSSIBLE PRECURSOR TO IRS AGENTS' APPROACH TO FORM 990 NONPROFIT GOVERNANCE QUESTIONS

DATELINE:  August 25, 2009, Chicago

For some people, the pro-life, right-to-choose debate is a hot-button issue.  For others, it isn’t even on radar screen.  Whether abortion rights brings your blood to a boil or not, you should be interested in a recent controversy over an IRS determination involving a pro-life group that was seeking Section 501(c)(3) status.  

The IRS initially balked at granting the Coalition for Life of Iowa (Coalition) tax-exempt status as a Section 501(c)(3) organization.  Based  on comments in the press and from a lawyer representing the organization, it appeared as if the IRS might deny granting exempt status.  What makes this case so interesting is that we get an inside look at the IRS determination process, thanks to the Thomas More Society’s decision to...

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...