Charity Governance

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...

MORE THAN THE MISSISSIPPI IS OVERFLOWING ITS BANKS: AN IRS BACKWATER RISES UP OUT OF NOWHERE

DATELINE: May 13, 2011, Chicago

We have long heard exempt organization lawyers ask whether contributions to Section 501(c)(4) advocacy organizations are subject to the gift tax.  We knew there was some uncertainty, but our impression was that tax lawyers were probably comfortable advising clients on a reasoned basis that no gift tax applied to such contributions--although we have never read an opinion letter to a client on this issue.  At last week's ABA Tax Section meeting, we heard rumors at the exempt organization committee sessions that the IRS had now taken the position...

THREE CUPS OF TEA AND A CLASS ACTION LAWSUIT: DRINK THE TEA, DISMISS THE LAWSUIT

DATELINE: May 11, 2011, Chicago

Two Montana residents, Michele Reinhart and Jean Price have filed a lawsuit against Greg Mortenson, the author of Three Cups of Tea, and the Central Asia Institute alleging fraud on the part of both defendants and requesting that the lawsuit be certified as a class action.  Our initial reaction to the filing was that the claimed injury is a bunch of nonsense, but as we read the complaint, we realized the complaint raises some important issues.  Those issues don't change our initial reaction.

The federal district court judge who is assigned this lawsuit should...

NEW YORK POST REPORTER MISSES THE REAL STORY DUE TO THE APPARENT ALLURE OF LOBSTER, GOLF, AND EXEC COMP

DATELINE: April 12, 2011, Chicago

Heather Haddon of the New York Post certainly had a story to tell earlier this week.  Power of the Purse: Execs' Pay Shock (April 10, 2011).  She obviously knows about the power of the revised Form 990.  Haddon tells the story of an obscure New York nonprofit, The New York Independent Service Operator (NYSISO).  This organization manages high voltage lines and oversees the sale of electricity to utilities like Consolidated Edison.  According to NYSISO's 2009 Form 990, the executives and some of the directors look to be well compensated.  For somewhere between 12 and 14 hours of work each week, the directors receive reportable compensation ranging from...

A NAIVE PROPOSAL

DATELINE: April 5, 2011, Chicago

We are reading more and more proposals aimed at curtailing political speech, together with proposals that would make tax-exemption dependent on whether the organization is on the right side of the culture wars, wherever the right side might be.  But there is a basic problem with all of these proposals:  Whether an organization or a donor receives a desired tax treatment lies in the eyes of the beholder. 

Monday, David Callahan published an op-ed piece entitled Bringing Donors Out of the Shadows in the New York Times, espousing what he believes to be one antidote to money in politics: Require all nonprofit organizations engaging in any form of advocacy that touches the political realm to disclose donor names.  His proposal, regardless of whether...

THE NONPROFIT SCANDAL OF THE YEAR: THE FIESTA BOWL, PART I

DATELINE: March 31, 2011, Chicago

The likely winner of the coveted "Nonprofit Scandal of the Year" annual award is the Fiesta Bowl, which is the alter ego of four Section 501(c)(3) organizations--the Arizona College Football Champion, the Arizona Sports Foundation, Fiesta Events, and the Valley of the Sun Bowl Foundation-- acting in concert.  Pretty good feat given that it isn't even April. 

No doubt you've read the headlines.  The New York Times summed it up...

SENATOR GRASSLEY HUFFS AND PUFFS, BUT THE HOUSES OF WORSHIP ARE STILL STANDING

DATELINE: January 10, 2011, Chicago

In November 2007, Senator Charles Grassley stood at the door of six well-known ministries, demanding that they reveal their inner workings.  Unlike other charities that Senator Grassley has investigated, these were churches, protected by the imprimatur of the Constitution.  The question we and many others asked at the time was whether...

NATIONAL TAXPAYER ADVOCATE GETS ONE THING WRONG, BUT COMES OUT ON THE RIGHT SIDE OF TAX REFORM

DATELINE: January 7, 2011, Chicago

We have been perusing the National Taxpayer Advocate’s Annual Report to Congress.  Based on our experience over the last eight years, the Nina Olson, the Advocate, gets one thing wrong when she says “Few Americans would steal from a local charity.”  While we think in the grand scheme of things, the use of the word “few” is...

WE GET WE GET THE GOVERNMENT THAT WE FUND: U.S. NAVY VETERANS ASSOCIATION

DATELINE: January 3, 2011, Chicago

Over a month ago we read several articles about Bobby Thompson, the U.S. Navy Veterans Association, and allegations of a massive fraud.  We were initially attracted to the story, hoping to gain more insight into internal controls, but the facts offer few such insights.  Apparently the charity in question was a shell, used to defraud members of the public.  There has always been fraud and unfortunately there always will be fraud.  Rather than perpetuating a fraud against a charity from the inside, this scam was directed at the public

Jeff Testerman and John Martin of the St. Petersburg Times have written a lengthy article offering some reasons why the alleged fraud may have been so successful—purportedly raising $100 million.  Navy Vets Made an Unchecked Rise Into Elite Circles (December 27, 2010).  Much of what Testerman and Martin report is...