April 2008
April 28, 2008
Obama Criticized for Charity Connection
Sen. Barack Obama is under fire again for his ties to a charity leader.
FrontPage Magazine, a conservative online publication, and conservative blog writers are lambasting the Democrat from Illinois because his Web site listed as a supporter Hatem El-Hady.
Mr. El-Hady is the former chairman of KindHearts, a Muslim charity in Ohio that was closed in 2006 by the federal government for allegedly raising money for Palestinian terrorists.
Mr. El-Hady and the nonprofit organization have denied the charges.
What’s more, senators during a hearing this month questioned about how the Bush administration was investigating Islamic charities.
Mr. El-Hady’s profile was posted on My.BarackObama.com, a social-networking site of Obama supporters.
According to some blog authors, the profile of Mr. El-Hady was no longer available on the site once questions were raised about him. Previously, the profile said that he was one of more than 220 “friends” of Mr. Obama’s wife and that he had raised $60 for the presidential candidate.
This is not the first time Mr. Obama has been criticized for his connection to a nonprofit group.
This month concerns were raised about Mr. Obama’s association with the Woods Fund of Chicago and one of its board members, William C. Ayers, who had been part of the Vietnam-era Weather Underground. Mr. Obama served as a member of the Woods Fund’s board from 1998 to 2001
Read The Chronicle article about the Woods Fund controversy and how other presidential candidates stand on nonprofit-related issues.
— Ian Wilhelm
April 25, 2008
Senate Leader Considers Tougher Penalties for Mistakes on Tax Form
Could nonprofit groups face steep fines if they skip lines or misreport information on informational tax forms?
Sen. Charles Grassley, the senior Republican on the powerful Finance Committee, says tougher penalties are possible if charities do not take steps to improve their reporting on the Form 990 informational tax return.
Mr. Grassley and his staff will be paying attention to what degree charities comply with upcoming changes to the Form 990. Many nonprofit groups will have to fill out an updated version of the form beginning in 2009.
Mr. Grassley said the new form — as well as the Pension Protection Act of 2006 — will make it easier for the public and the government to monitor the financial effectiveness of charities.
But, he said, more needs to be done.
“Time and again, problems at nonprofits come back to boards that aren’t independent or hands-on enough,” Mr. Grassley said. “Another challenge is making sure nonprofits are accurately reporting the amount of money going to their charitable purpose.”
As a next step, lawmakers might consider tougher penalties for groups that fail to fill out key lines of the Form 990 and for groups that fail to accurately report information on the form.
Congress could also revisit plans to calculate ratios that show how much of a charity’s revenue is used to fulfill its mission versus how much pays for executive salaries and fund-raising costs.
Steven T. Miller, commissioner of the IRS’s tax-exempt and government-entities division, said this week at a conference on tax-exempt organizations held by the Georgetown University Law Center Continuing Legal Education Department, that the IRS is still considering similar plans.
Dean Zerbe, a tax lawyer in Washington and a former top aide to Mr. Grassley, says such measures might be necessary, even in light of the tougher reporting requirements.
“Let’s face the reality. The 990s hit the trifecta in that they are often late, incomplete, and inaccurate,” Mr. Zerbe said. “We’ve got to make certain folks are filling them out, filling them out correctly, and filling them out accurately. That might require penalties that are substantial enough to get everybody to wake up.”
April 24, 2008
John McCain Proposes Antipoverty Efforts
Following in the footsteps of President Lyndon B. Johnson, Sen. John McCain is touring southern states to draw attention to American poverty.
While not declaring a “war on poverty” as Mr. Johnson did in the 1960s, the presumptive Republican presidential candidate proposed providing tax incentives to telecommunications companies to spur Internet service in small towns and supporting job-training programs at community colleges, reports The New York Times.
“There must be no forgotten places in America, whether they have been ignored for long years by the sins of indifference and injustice, or have been left behind as the world grew smaller and more economically interdependent,” he said in a speech in Alabama.
Mr. McCain did not propose any specific programs to support charities, but he did highlight several nonprofit efforts on his tour.
In Gee’s Bend, Ala., he visited a nonprofit community center and praised its quilting club, whose work has been displayed in museums nationwide and on U.S. Postal stamps. And in Inez, Ky., the McCain campaign praised the work of a mentor program run by the chairman of the Republican National Committee.
To learn more about Mr. McCain’s policies towards charities, read The Chronicle’s profiles of the presidential candidates.
— Ian Wilhelm
Senator Seeks New Regulations for Charities
A key senator wants to give the Federal Trade Commission the power to regulate nonprofit organizations including penalizing charities that say in their fund-raising appeals they are raising money for a particular cause but devote very little of it to that purpose.
The effort by Sen. Byron L. Dorgan, a North Dakota Democrat, is the first stab at putting the brakes on nonprofit organizations that spend a very low percentage of the money they raise on their charitable missions.
Recent House hearings found that several groups that help veterans of the Iraq and Afghanistan conflicts spend most of their donations on fund-raising expenses or salaries rather than veterans and their families.
A provision on the regulation of nonprofit groups was included in legislation to extend the Federal Trade Commission bill, S. 2831, that is being considered by the Interstate Commerce, Trade and Tourism Subcommittee, which Senator Dorgan chairs.
The provision’s impact goes beyond fund raising. It directs the Federal Trade Commission to protect consumers from “unfair and deceptive” practices by charities in the same way that it regulates such practices by businesses, says Justin Kitsch, Senator Dorgan’s communications director. Federal Trade Commission officials said in a hearing on the bill that the provision would enable them to challenge price-fixing or other anticompetitive practices by nonprofit hospitals, for example.
Anthony Conway, executive director of the Alliance of Nonprofit Mailers, says he thinks the provision is unnecessary. “There’s already plenty of oversight and regulatory-body scrutiny of nonprofits,” he says. “I don’t think adding another layer of oversight is needed, and I’m not sure it would be beneficial.”
April 23, 2008
Government Prosecution of Charities Questioned
Questions are being raised about how the federal government is prosecuting charities accused of ties to terrorists.
In an article in The New Yorker, the journalist Patrick Radden Keefe examines the case against the Al Haramain Islamic Foundation, in Ashland, Ore. The group had its assets frozen in 2004 for alleged ties to Al Qaeda, which the charitable organization denies.
Mr. Keefe looks at how the government has relied on classified intelligence information to build a case against the charity and its practice of “‘Al Capone-ing’ suspects — charging them on whatever will secure a conviction.”
During a Senate Finance Committee hearing this month, Sen. Max Baucus, a Democrat from Montana who chairs the committee, also raised concerns about how the U.S. Treasury Department is investigating charities.
“We have also seen prosecutions failing in some high-profile trials involving charities suspected of having ties to terrorist organizations. What happened here? Were these prosecutions off base? Does the administration need to do a better job of monitoring these organizations?” he asked in his opening statement.
OMB Watch, a government watchdog group in Washington that has criticized the government crackdown on nonprofit organizations, says the hearing left questions “unasked and unanswered.” The advocacy group says aides to Mr. Baucus have agreed to meet with nonprofit representatives to discuss their concerns.
— Ian Wilhelm
April 21, 2008
Vermont Governor Expected to Sign Bill on Charity-Business Hybrid
Vermont is poised to become the first state to officially recognize a new kind of business designed to allow charitable ventures to more easily attract foundation money and other kinds of private capital. Advocates of the new business structure – what they describe as “a for-profit with a nonprofit soul” — say it has the potential to attract billions, if not trillions, of new dollars to organizations doing good works around the country.
The new business entity is to be called a low-profit limited liability company, or L3C, and Vermont’s governor is expected to sign into law at the end of the month the bill creating the designation.
An L3C, a variation of a limited-liability company, would operate like a for-profit business generating at least modest profits, but its primary aim would be to offer significant social benefits, such providing jobs in an economically depressed area. Such business models already exist: The Vermont law would give them a name, and, its advocates hope, both encourage the creation of more socially conscious businesses and attract more money to them.
In Vermont, the Castanea Foundation, an operating foundation that works to preserve farmland, is mulling plans to establish L3Cs under the new law that would set up local food-production efforts, like a cheese-aging facility or meat-processing plant.
“As an economic development tool, the L3C may be a great vehicle for us,” says Tim Storrow, the foundation’s executive director.
A key goal of the L3C idea is also to increase the number of loans or other so-called program-related investments that foundations make to businesses created to advance social missions. Having a special legal structure for these hybrid groups will help grant makers identify potential loan recipients, and, the idea goes, spur additional private investments, too.
— Debra E. Blum
April 18, 2008
IRS Pledges to Stomp Out 'Egregious' Violations of Politicking Rules
The Internal Revenue Service says that in this election year it is making “extensive efforts” to educate charities and churches about federal law that bans their political campaign activity.
At the same time, the tax agency plans to enforce the law with “a focus on cases involving allegations of egregious violations,” says Lois G. Lerner, director of the IRS’s office on exempt organizations, in a press release.
By law, the IRS notes, churches and charities may not “participate in, or intervene in (including the publishing or distributing of any statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”
The IRS says it is sending letters to the national political party committees that explain the law’s prohibition about churches and charities. In March, a letter from the revenue service was published in the Federal Election Commission’s monthly newsletter, asking candidates to ensure that their contacts with charities do not inadvertently jeopardize the tax-exempt status of any charity, the IRS said.
The tax agency also has posted on its Web site a “program letter” to its employees who work in its exempt organizations office that explains its objectives this year.
Among other things, the letter explains how IRS officials should review cases in which churches and charities post communications on their Web sites.
“Many of these communications include links to Web sites of other organizations,” the letter says. “The analysis of cases involving links on a 501(c)(3) organization Web site involves determining whether material on a linked Web site is attributable to the Section 501(c)(3) organization.”
Over all, says Steven T. Miller, commissioner of the IRS office for tax-exempt and government entities, “We take very seriously our obligation to ensure that tax-exempt organizations have the information they need to make the right decisions about political campaign activities.”
Mr. Miller added: “The vast majority of charities want to do the right thing, and as in past years, we will continue our efforts to make sure they have the information they need.”
IRS Seeks Advice From Charities
The Internal Revenue Service is inviting charities to recommend the “tax issues” that the government should focus on over the next year as it issues guidance to help organizations understand federal law.
In a notice published today, the IRS said it it hoped the public would offer suggestions for its annual Guidance Priority List that it uses “to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance.”
The IRS said that the Treasury Department and the revenue service “recognize the importance of public input” so that the government “focuses resources on guidance items that are the most important to taxpayers and tax administration.”
Charities should submit ideas by May 31 for them to be considered for inclusion in guidance the IRS issues from July 1 of this year through June 30, 2009.
April 17, 2008
Senators Seek to Extend Tax Incentives for Charity
Leaders of the Senate Finance Committee are introducing a bill that would renew and extend a key provision that benefits donors with individual retirement accounts.
Until December 31 of last year, donors who are 70 1/2 or older were able to transfer up to $100,000 to charity from their individual retirement accounts each year without paying income taxes on the money.
The new bill would extend this provision to the end of 2009, according to its authors, Sens. Max Baucus, a Montana Democrat who chairs the Senate Finance Committee, and Charles Grassley of Iowa, the committee’s senior Republican.
Additional provisions in the bill drafted by Mr. Baucus and Mr. Grassley would renew and extend other provisions for charitable giving, including one involving certain donated property used for conservation purposes and another for certain deductions allowed for donations of food.
April 14, 2008
Politics and Advocacy Groups
Nonprofit groups set up under 501(c)(4) of the Internal Revenue Code are playing a larger role in this year’s presidential election and may face greater scrutiny because of it, writes Paul Kiel onTPMMuckracker, a left-leaning political blog.
Mr. Kiel writes that with the Federal Election Commission’s crack down on Swift Boat Veterans for Truth and other groups established under Section 527 of the tax code, political partisans are turning to the advocacy groups — classified under the 501(c)(4) section of the code — to influence this year’s race for the White House.
The 501(c)(4) groups can advocate for policy changes during elections as long as they do not specifically coordinate their efforts with political campaigns or parties. They can also endorse candidates.
Unlike charitable organizations and churches, which can allow their donors to take a tax break, donors to advocacy groups cannot claim a tax deduction. However, a number of charities, such as the Sierra Club, operate separate both a charitable arm and an advocacy group.
While there appears to be a growing number of these advocacy groups, at least one has not lived up its expectations.
According to an article in The New York Times, the conservative Freedom Watch has not been the major player in politics that was predicted when it opened its doors in 2007.
— Ian Wilhelm
Leader of Nonprofit Group Urges Moving Beyond Obama's 'Bitter' Comment
Sen. Barack Obama, under fire for telling a gathering in Marin County, Calif., that people in small towns are “bitter” about federal neglect of their communities, got in trouble because people hate to be on the receiving end of stereotypes, says Dee Davis, president of the Center for Rural Strategies.
“Who wants to be labeled?” he writes on the center’s online news journal, the Daily Yonder. “Even in the context of sharing polling data that correlates professed values with recurring disappointments, who wants to be summed up and explained away for the benefit of Marin County donors?”
But, he adds, the country’s challenge is to get beyond the controversy over the “bitter” comment and follow up on the Democratic presidential candidate’s point that “rural life is threatened by economic policy that perpetually fails rural communities.”
“There are 60 million of us in rural America,” Mr. Davis writes. “The poverty rates are substantially higher, as are rates of unemployment, substance abuse, diagnosed clinical depression, and deaths in Iraq and Afghanistan.”
Presidential candidates tend to deal with those problems by showing up every four years for the Iowa primary election to “take a stand on ethanol subsidies,” he adds. “As if it matters.”
The Center for Rural Strategies is a nonprofit group in Whitesburg, Ky., that seeks to promote better public understanding about rural issues. “Sadly, what is missing from the political debate are speeches about how robust rural economies lift national prospects, fill the coffers, expand opportunities,” Mr. Davis writes.
What do you think about Senator Obama’s remarks? Let us know by clicking on the comments link below this article.
April 09, 2008
Nonprofit Group May Remove Sen. McCain From Board
Project Vote Smart, a voter education nonprofit group, is poised to remove Sen. John McCain from its board of directors because the Arizona Republican has not responded to a political survey it sends to presidential candidates, according to an article in Mother Jones, a liberal magazine.
The bipartisan organization, in Philipsburg, Mont., asks all candidates for presidential, congressional, gubernatorial, and state legislative offices to answer its Political Courage Test, which asks questions about taxes, the federal budget, and other policy issues.
Neither of the Democratic presidential candidates, Sen. Hillary Clinton and Sen. Barack Obama, have answered the survey, reports the magazine.
In Mr. McCain’s case, Mother Jones reports that Vote Smart’s executive committee voted in February to remove the senator from the board if he doesn’t respond by today. The senator was a founding board member of the organization and has answered the survey previously.
The magazine writes that Mr. McCain’s campaign did not respond to a request for comment.
— Ian Wilhelm
April 08, 2008
IRS Official Takes New Role Monitoring Charities in Senate
Sen. Charles Grassley has tapped a former Internal Revenue Service official to replace a well-known former aide who had aggressively pursued efforts to regulate nonprofit organizations.
Theresa Pattara, a project manager at the IRS Office of Exempt Organizations, will replace Dean Zerbe as Mr. Grassley’s senior tax counsel. Mr. Zerbe left the post in February to join the Washington office of the Alliant Group, a Houston tax-consulting company.
Mr. Zerbe had been a controversial figure in philanthropy, pushing efforts to tighten the rules that govern college endowments, nonprofit hospitals, donor-advised funds, supporting organizations, and evangelical ministries.
Ms. Patttara has a similar reputation. During her time with the IRS, she managed efforts to enforce the Pension Protection Act of 2006 and worked on the revision of the Form 990 informational tax return. The overhaul was the first significant effort to revamp the form, which most charities must fill out to disclose data about their finances and operations, in 25 years.
She had also worked with Mr. Zerbe on Mr. Grassley’s Finance Committee staff in 2005 and 2006 as a Capitol Hill fellow.
“The federal Treasury forgoes billions of dollars a year from tax-exempt groups,” Mr. Grassley said in a written statement. “I need a good member of my tax team to help make sure tax-exempt policy works as well as possible. Theresa knows these issues inside and out.”
For more on some of the key issues that will confront Ms. Pattara, read a transcript of The Chronicle’s recent live discussion with Mr. Zerbe.
—Peter Panepento
April 06, 2008
Climate Change's Effect on the Poor
America’s presidential candidates need to think more about how to help the world’s poor adapt to climate changes, writes Nicki Bennett, an Oxfam aid worker.
In On the Ground, a blog by The New York Times, she writes that the White House contenders have proposed cutting greenhouse gas emissions, but “none are talking about the impact of climate change on poor people -– or what they might do about the fact that places like Bangladesh and New Orleans are already being bashed by climate-related disasters and slowly losing land to rising sea levels.”
Bangladesh, where Ms. Bennett works, may lose 20 percent of its land in the next two decades thanks to rising sea levels and melting Himalayan glaciers, forcing millions of people to leave their villages, she writes.
— Ian Wilhelm
April 03, 2008
Would Estate Tax Repeal Hurt Charity Fund Raising?
If Congress permanently repeals the estate tax, many charities and foundations worry that they will see a significant, long-term decline in large gifts from wealthy donors.
Diana Aviv, president of Independent Sector in Washington, told the Senate’s Finance Committee at a hearing today that the tax is vital in encouraging the nation’s rich to give money to charity.
But her organization, which represents about 600 large charities and foundations, is also recommending Congress close some loopholes to make sure unscrupulous donors do not use charities as tax shelters.
“The estate tax provides a stream of funding that is essential for the services charitable organizations perform to enrich lives and strengthen communities across the nation and around the world,” Ms. Aviv said.
She added that eliminating the tax would also cost the government about $500-billion over the next 10 years
And that number could grow if the federal government takes steps to make sure some wealthy donors aren’t using charities to shortchange the Internal Revenue Service.
Ms. Aviv pointed to the fact that some donors are using charitable lead trusts to pass on large sums to their heirs under the guise of charity.
The popular planned-giving tool allows donors to put money into a trust that provides annual revenue to a charity. Once the donor dies, his or her heirs inherit the funds that remain in the trust.
Ms. Aviv said the government should consider changing the laws that govern these trusts to curb potential abuse.
What do you think? Is the estate tax necessary for the long-term health of charities and foundations? Should Congress change the way charitable lead trusts operate? Click on the comment link below this post to share your thoughts.
April 02, 2008
Key Tax Official Plans to Step Down
Roger Colinvaux, legislation counsel to the Congressional Joint Committee on Taxation, has announced he is leaving his post at the end of April. He accepted a tenure-track position at Catholic University of America’s law school, in Washington.
Mr. Colinvaux helped shepherd key legislation for nonprofit groups, including the Individual Retirement Account (IRA) provision in the Pension Protection Act of 2006. That provision allows donors older than 70 1/2 years to donate up $100,000 tax-free from their retirement accounts to charities.
“I’ve been at Joint Tax for seven years and the Pension Protection Act was the culmination of many years work,” says Mr. Colinvaux.
At Catholic University, he will continue his focus on public policy. “I want to help inform the debate on these issues from an academic standpoint.” He adds, “Being at a university is actually being at a nonprofit, and I look forward to teaching and working with students.”
— Sam Kean