Charity Governance

AND WHILE WE ARE ON THE TOPIC OF TROUBLED TIMES: ANOTHER REASON WHY NONPROFIT DIRECTORS SHOULD INSIST THAT TRUST FUND TAXES BE PAID

DATELINE: November 12, 2008, Chicago

Last month the Seventh Circuit Court of Appeals affirmed a lower court decision holding the president of the board of directors of a nonprofit day center liable for the unremitted trust fund taxes.  One thing is certain in these troubled times, some organizations, including nonprofits, that are facing creditor demands for payment WILL decide to “borrow” the income taxes withheld from employee paychecks, together with the employee’s share of social security and Medicare taxes (collectively, trust fund taxes).  This borrowing will be in good faith and well-intentioned.  In the case of nonprofits, the person doing the borrowing will plan to repay the stealth loan from the U.S. Treasury with the proceeds of a promised donation or grant. 

Time will pass, the donation or grant will not materialize, the organization will file for bankruptcy, and eventually the IRS will show up, looking for the responsible person.  You see, even though the corporation has the obligation to remit the trust fund taxes to the IRS, Section 6672(a) of the Internal Revenue Code permits the IRS to pursue...

NETWORK FOR GOOD V. UNITED WAY OF THE BAY AREA: A CASE THAT HOLDS MANY LESSONS FOR CHARITIES AND THEIR BOARDS

DATELINE: October 22, 2007, Chicago

Last Friday (Oct. 19, 2007), the Superior Court for the County of San Francisco issued its tentative findings of fact and conclusions of law in Network for Good v. United Way of the Bay Area. Coming in at 87 pages, the opinion is not only too long, but it is treacherous going, relying on highly technical interpretations of accounting entries and presentations. It would be easy to dismiss this opinion as involving a unique set of facts that are unlikely to repeat themselves. That would be...

CHARITIES SHOULD MAKE SURE THEY HAVE ADEQUATE INSURANCE COVERAGE FOR VOLUNTEERS WHO USE CARS WHILE SERVING THE CHARITY: $17 MILLION FINAL VERDICT IN WISCONSIN

DATELINE: October 12, 2007

The Wisconsin Supreme Court effectively upheld a $17 million verdict against the Catholic Mutual Relief Society of Milwaukee and the Archdiocese of Milwaukee--the court was eqully divided so the appeals court's opinon was left to stand. The lawsuit stems from an automobile accident that resulted when Margaret Morse ran a red light, hitting a car driven by Hjalmer Heikkinen. The accident severely injured the then…