Charity Governance

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...

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...

NCAA PRESIDENT TALKS OUT OF BOTH SIDES OF HIS MOUTH--THE FIESTA BOWL SCANDAL--PART III

DATELINE: April 1, 2011, Chicago

In commenting on the Fiesta Bowl scandal, NCAA President Mark Emmert in his annual State of the NCAA/College Athletics address yesterday said,"You can't indict the entire bowl system because of what's gone out there".  Mark Blaudschun, Emmert Says Fiesta Scandal A Warning, Boston Globe (April 1, 2011). Emmert then continued:

My hope is that it will also serve as a warning shot that every community that runs a bowl game makes sure they’re doing the oversight compliance and due diligence to make sure their bowl games are well run. We have reason to believe that’s not the case.

The Final Four Questions... 

SENATOR GRASSLEY’S LATEST PROPOSAL IS A CLUNKER: KEEP THE PROHIBITION ON CAMPAIGN INTERVENTIONS

DEADLINE: January 13, 2011, Chicago

Buried deep in the staff memo accompanying Senator Grassley’s January 6, 2011 press release is one of the...

TIME TO PULL SOME EXEMPTIONS: PULPIT FREEDOM SUNDAY THREATENS OUR VOLUNTARY TAX SYSTEM

DATELINE: September 27, 2010, Chicago

Yesterday’s Chicago Tribune had a fascinating story on one Reginald McNeil, a Chicago pickpocket who has been arrested 79 times, according to the Tribune. Duaa Eldib, Profile of a Pickpocket: For Victims of a Longtime Thief, Pickpocketing is Not Petty (September 26, 2010)--some of those arrests apparently are for possession of drugs rather than pickpocketing and not all have resulted in convictions.  McNeil was just 17 years old when he was first arrested 26 years ago.  The Tribune interview with McNeil took place in the Statesville Correctional Center located in Crest Hill Illinois, where McNeil is being held following his August arrest, once again for pickpocketing, this time allegedly in the Loop (Dearborn and Madison).

The Tribune story is a...

IS NEW YORK ATTORNEY GENERAL ANDREW CUOMO READY TO REDUCE WASTEFUL GOVERNMENT SPENDING?

DATELINE: September 20, 2010, Chicago

Here is a story that should make Gary Snyder's (author of Nonprofits on the Brink) hair burst into flames: The New York Post reported last week on the board of a New York charity that is out to lunch, albeit a very expensive lunch.  Joseph Goldstein and David Seifman, Vito Lopez-Backed Charity Led by the Clueless (September 16, 2010).  The charity in question is the Ridgewood Bushwick Senior Citizens Council.  Now you ask:  How much money could be at stake when it comes to a senior citizens council?  According to a follow-up by the Post, the organization has received “at least...

SENATOR GRASSLEY, CAN WE INTRODUCE YOU TO YOUR COLLEAGUE, REPRESENTATIVE JOE BACA?

DATELINE: September 7, 2010, Chicago

In our November 2006 article, The Wild, the Innocent, and the E Street Shuffle, we identified three ways politicians use charities for their own purposes.  One was providing a vehicle for powerful interests to buy access.  A second was to use the charity as a form of patronage.  In an appendix to the article, we identified 57 cases of how politicians use charities to those and what we consider other inappropriate ends.  Over the ensuing four years, we have seen plenty of other cases.  In Saturday’s New York Times, Eric Lipton adds more examples to the list.  Congressional Charities Pulling in Corporate Cash (Sept. 5, 2010).

Senator Grassley is quite concerned about how charity executive supposedly abuse charities through compensation packages that the senator believes are too generous.  It is time that Senator Grassley focuses on...

NONPROFITS USED AS A VEIL FOR EARMARKS: WILL STATE ATTORNEYS GENERAL OR THE IRS TAKE A LOOK?

DATELINE:   July 5, 2010, Chicago

Those pesky earmarks.  Everybody thought congressional rule changes would end one avenue on the road to congressional waste.  However, the quest for campaign contributions appears to have simply brought about a change in the legal form that the recipients of earmarks take.  Businesses can no longer receive earmarks, but nonprofits are still eligible.  Smart business people and their lawyers are now using nonprofits to collect earmarks, according to a front page article by Eric Lipton and Ron Nixon in today’s New York Times.  Companies Find Ways to Bypass on Earmarks.  We admire the clever structuring, but we are not at...

THE IRS NEEDS TO INVESTIGATE STATE OF ILLINOIS FUNDED TAX-EXEMPT ORGANIZATIONS CONTROLLED BY POLITICIANS AND THEIR APPOINTEES

DATELINE: June 21, 2010, Chicago

We’ve written before about the abuse of charities by politicians.  One thing is quite clear:  State and local politicians, particularly those who govern Illinois, are incapable of policing themselves or cleaning up the messes they make.  We’ve seen that with a series of federal investigations of political corruption—the most recent example being former Governor Rodney Blagojevich, now on trial.    

A federal prosecutor and criminal proceedings are not always necessary.  The IRS has authority to police many of the shenanigans using the intermediate sanctions in Section 4958 of the Internal Revenue Code.  Take the case of the DuPage National Technology Park. According to the Chicago Sun-Times, the 800-acre park has received $34 million in state grants, in addition to federal and local funding.  Dave McKinney, Ex-Naperville Councilman is the King of Nothing (September 21, 2010).  The expectations were that a vibrant tech park would result.  After almost a decade, only...

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...