July 2008
July 01, 2008
IRS Urged to Move Quickly to Warn Charities Accused of Election Wrongdoing
A new federal report says the Internal Revenue Service has done a good job of increasing its efforts to educate churches and charities about federal law that bans political-campaign activity by such groups, and that it has improved the way it handles allegations of wrongdoing.
But the report said the tax agency needs to do more “to ensure that tax-exempt organizations receive timely notification that they might be involved in prohibited political activity” and to clarify to IRS employees the criteria it uses to evaluate cases through its Political Activities Compliance Initiative.
“These actions should increase the likelihood that tax-exempt organizations will stop the prohibited activities before the relevant election and that tax-exempt organization activities will be evaluated consistently and fairly,” said the report by the Treasury Department’s Inspector General for Tax Administration.
The report said that the IRS has already agreed with its findings and completed “several corrective actions.”
Federal law says that 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.”
June 2008
June 30, 2008
Senators Propose Tax Incentives for Midwestern Disaster Relief
A group of Midwestern U.S. senators have introduced legislation to create tax incentives for charitable giving to help victims of the storms, tornados, and floods that have hit their region.
The Midwestern Disaster Tax Relief Bill—an amendment to H.R. 3221, an unrelated bill designed to ease the housing crisis—would allow individuals and corporations to get unlimited charitable deductions for donations to relief efforts in the affected areas through the end of 2008. (The measure would not apply to contributions to donor-advised funds.)
It would also allow people using their vehicles for disaster relief to deduct 70 percent of the business mileage rate. (The rates now are 14 cents per mile for charitable activities and 50.5 percent for business activities.) Volunteers could also exclude from their income reimbursements from charities for use of their vehicles.
The bill, S. AMDT. 5035, would also extend provisions that expired at the end of 2007 allowing a variety of businesses such as restaurants, grocery stores, or farms to earn an “enhanced deduction” for donating surplus food to charity. In general, federal law allows companies to deduct the production costs of certain goods they donate, which is usually below their fair market value. The “enhanced deduction,” which is now is limited to certain kinds of corporations, allows donors to deduct production costs plus some of the difference between production costs and fair market value.
Sponsors include 10 senators from Illinois, Indiana, Iowa, Minnesota, Missouri—including Charles Grassley, Republican of Iowa, the senior Republican on the Senate Finance Committee, and Barack Obama of Illinois, the presumptive Democratic presidential nominee.
The Council on Foundations offers this analysis of the amendment on its Web site.
Child-Sex Organization Denied Tax-Exempt Status
The Internal Revenue Service has revoked the tax-exempt status of an organization that seeks to decriminalize consensual sexual activity between adults and minors.
The organization had applied to receive tax-exempt status, saying that its charitable mission was to work for “law change to protect the rights of sexual-active consenting kids and adults, and to amend child pornography law; to provide counseling to sexual-active kids and adults; and scientific studies; educational and artistic.”
The group’s founder and executive director said in filings with the IRS that he had served prison time for two counts of sex abuse with minors before starting the organization. The man was listed as its sole officer and board member.
The IRS denied the request, saying that it organizations that work to violate laws do not have a charitable purpose. As is its policy in these rulings, the organization was not named.
June 25, 2008
Nonprofit Leaders to Attend Obama Economic-Competitiveness Conference
Several nonprofit and philanthropic leaders are among a dozen people who have been invited to attend a conference on economic competitiveness that Sen. Barack Obama, the presumptive Democratic presidential nominee, is holding on Thursday in Pittsburgh.
Participants in the “American Competitiveness Summit” will discuss ways the country’s work force can remain competitive in a 21st-century global economy, according to a statement by the Obama campaign.
They will include Lael Brainard, vice president of the Brookings Institution, a think tank in Washington; Eli Broad, founder of the Broad Foundations, in Los Angeles; Geoffrey Canada, chief executive of the Harlem Children’s Zone, a charity that serves poor children in New York; Steve Case, chairman of the Case Foundation, in Washington; Susan Hockfield, president of the Massachusetts Institute of Technology; and Harold Varmus, president of the Memorial Sloan-Kettering Cancer Center, in New York.
They will join business, labor, and other leaders at the conference.
“Obama has called for a strategy that creates the jobs and opportunity of the future built upon an improved education system, investments in energy, green jobs, innovation and infrastructure, and a commitment to fiscal responsibility and fair trade,” the Obama campaign statement said.
Mr. Broad said in a statement that he would discuss ways to improve the country’s public schools and other education issues.
To learn more about the 2008 campaign and nonprofit issues, go to our special election section.
June 23, 2008
Congress Considers Giving Volunteers More Money for Mileage Expenses
Congress is considering legislation that would increase the tax deduction for people who use their automobiles as part of their volunteer work for charities.
Under federal law, volunteers who drive their cars for charitable purposes may be reimbursed up to 14 cents per mile without the payments being subject to federal income tax.
Some members of Congress say that rate is too low, particularly as gas prices have reached more than $4 per gallon.
Bills pending in Congress would increase the reimbursement to reflect the business mileage rate, which was raised this week to 58.5 cents per mile.
Sen. Russell D. Feingold, a Wisconsin Democrat, is sponsoring a Senate bill that would increase the reimbursement. Rep. Todd Russell Platts, a Pennsylvania Republican, has introduced legislation in the House.
Both lawmakers have introduced similar bills in the past, with no success.
But with costs for energy rising quickly, Senator Feingold said volunteers should be entitled to a larger reimbursement.
“By increasing the amount of reimbursable mileage, we can make it easier for volunteers to continue helping these organizations provide important services to their communities without having to worry about the impact it will have on their wallets,” Sen. Feingold said in a written statement.
The reimbursement rate for volunteers has not changed since 1997 — though volunteers who used their cars, trucks, and other vehicles for the Hurricane Katrina relief efforts were able to receive the standard business mileage rate from August 25, 2005 though December 31, 2006.
The Joint Committee on Taxation estimates the government would lose $2-million in revenue from 2008 through 2012 if Congress increases the mileage rate for volunteers.
June 20, 2008
Where the White House Candidates Stand on the Estate Tax
The political debate over the future of the estate tax is being watched closely by those in the philanthropic world, many of whom believe the tax motivates people who inherit wealth to give more to charity.
Not surprisingly, the tax is becoming a key issue for those in the nonprofit world who are sizing up how the contenders for the White House would affect charities if they are elected.
Sen. John McCain wants to cut the tax, while Barack Obama favors maintaining it at the levels that go into effect in 2009.
Their positions on the issue have become much more clear in the past month, as the two candidates have been trading barbs over the tax on the campaign trail.
The current law is complex, and varies by year. This year, heirs may exempt up to $2-million ($4-million for couples) from taxation, with amounts over that level taxed at a 45-percent rate. Next year, however, the exemption increases to $3.5-million ($7-million for couples), with the same tax rate.
If Congress does not act, in 2010 the estate tax will die for one year. In 2011, the law would then revert back to the 2001 rules, with a $1-million tax exemption ($2-million for couples) and a 55-percent tax rate.
Mr. Obama is no fan of the new rules governing the tax. In his book The Audacity of Hope, he said it “would be hard to find a tax cut that was less responsive to the needs of ordinary Americans or the long-term interests of the country” than repeal of the tax.
He proposes maintaining the 2009 levels of a $3.5-million exemption ($7-million for couples) and a 45-percent tax rate.
By contrast, Mr. McCain supports a $5-million exemption ($10-million for couples) and a 15-percent tax rate.
Speaking at the National Small Business Summit this month, he called the estate tax “one of the most unfair tax laws on the books,” adding, “the first step to reform is to keep it predictable and keep it low.”
A summary of the two candidates’ positions on the estate tax, and on other issues affecting the nonprofit world, can be found on The Chronicle‘s Campaign 2008 page.
June 18, 2008
Foundation Leader Wins Congressional Seat
Donna Edwards will soon be reporting to a new office in Washington.
Ms. Edwards, the executive director of the Arca Foundation in Washington, won a special election Tuesday to represent Maryland’s Fourth Congressional District in Congress.
The Democrat had defeated Rep. Albert R. Wynn, who now holds the seat, in the Maryland primary in February. After his loss, Mr. Wynn decided to vacate his seat to allow Ms. Edwards to get a jump start in her new role — provided she was able to win Tuesday’s special election.
Because Ms. Edwards lives in a largely Democratic district, she was heavily favored to defeat Republican nominee Peter James.
Ms. Edwards and Mr. James will go head-to-head again in November’s general election.
But for now, at least, she is relishing her victory, which makes her Maryland’s first black female member of Congress.
“It really didn’t hit us about the element of history, but what it says is that we’re ready for change and for people who represent all of us,” Ms. Edwards told The Baltimore Sun.
New Effort Seeks to Educate Americans About Tax Policies
With help from the Bill & Melinda Gates Foundation, two Washington think tanks have created a new fund to help policy makers, journalists, and the public better understand the way tax dollars are raised and spent.
The Urban-Brookings Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, hopes to use a $2.5-million challenge grant from the Gates foundation to create a $10-million fund to analyze tax issues.
The Seattle grant maker will match one out of every three dollars the fund receives before April 1, 2011.
“Getting objective estimates and analyses into the public domain allows policy deliberations to unfold based on facts rather than spin, leading to improved decision making,” said Leonard Burman, director of the Tax Policy Center, in a statement.
Mr. Burman said the new fund would enable his organization to expand its activities, including developing models for improving the tax system and building better analyses of state, local, corporate, and international taxes.
The next few years will be a particularly opportune time to discuss tax policies, said the organization’s leaders. Most of the tax cuts enacted in 2000 are set to expire in 2010, and tens of millions of baby boomers will retire, placing unprecedented demand on the tax system.
June 16, 2008
Decision Day Near for Foundation Leader's Congress Bid
A Washington foundation leader will learn tomorrow whether she will be the newest member of Congress.
Donna Edwards, executive director of the Arca Foundation, in Washington, is the favorite to win Tuesday’s special election to represent Maryland’s Fourth Congressional District.
Ms. Edwards, a Democrat, defeated Rep. Albert R. Wynn, who now holds the seat, in the Maryland primary in February.
Mr. Wynn has since decided to vacate his seat — a decision that is expected to allow Ms. Edwards to get a head start in Congress and solidify her effort to win the seat in November’s general election.
June 10, 2008
Senator Blasts Payment Policies at Nonprofit Hospitals
Sen. Charles E. Grassley, the senior Republican on the Senate Finance Committee, once again blasted nonprofit hospitals during a Senate hearing today about ways to fix the country’s health-care system.
The Iowa senator, who frequently questions whether nonprofit hospitals are earning their tax breaks, specifically criticized institutions that have an “upfront collection policy,” or demand cash payments from people with inadequate or no insurance before treating them.
He cited an article in The Wall Street Journal about a leukemia patient who had trouble getting care at the M.D. Anderson Cancer Center, in Houston, because her insurance did not cover all of her treatment.
That patient, Lisa Kelly, was scheduled to testify at the Finance Committee’s hearing, “47 Million and Counting: Why the Health Care Marketplace Is Broken.” “The troubling thing about her story is that these were actions taken by a hospital that is funded through taxpayer dollars and charitable gifts,” Mr. Grassley said.
He said nonprofit hospitals receive $40-billion in benefits through their exemptions from income, sales, and property taxes; tax-deductible contributions; and tax-exempt bonds.
“The current environment is no different than where we were over a hundred years ago,” he added. “Back then, people with money had private physicians who made home visits. The poor received treatment at alms houses supported by philanthropy. The only difference now is that many of those former ‘alms houses’ have become rich institutions that believe they no longer need to serve the poor to reap all the beneits of their tax-exempt status.”
M.D. Anderson told the Journal that it started the upfront-collection system in 2005 after its unpaid patient bills jumped by $18-million, to $52-million, threatening its mission to cure cancer.
IRS Says Number of Charities Rose 6% in 2007
More than 1.1 million charities and private foundations were registered with the Internal Revenue Service as of September 30, 2007, according to figures released by the tax agency.
The IRS reported that the number of groups classified under Section 501(c)(3) of the Internal Revenue Code rose from 2006 to 2007 by 64,176, or 6 percent — the highest percentage increase in four years.
In 2007, a total of 1,128,367 charities and foundations were registered with the federal government, compared with 1,064,191 in 2006.
The number of groups classified under Section 501(c)(3) has increased by 73 percent over the past dozen years. In 1996, the revenue service counted a total of 654,186 of them.
Until last year, the pace of growth of all charitable organizations had been gradually slowing down. The number of groups increased by 1.7 percent from 2005 to 2006; 3.5 percent from 2004 to 2005; 4.8 percent from 2003 to 2004; and 6 percent from 2002 to 2003.
The IRS acknowledges that an unknown number of the organizations classified under Section 501(c)(3) are still on the government’s books, even though they have shut down.
The IRS’s statistics show that the total number of tax-exempt organizations classified under all parts of Section 501(c) of the Internal Revenue Code rose by 62,827, or 4 percent, from 2006 to 2007.
The statistics were published in the IRS’s Data Book for 2007.
June 06, 2008
IRS Panel Finds Problems With Deductions Taken by Art Donors
The Internal Revenue Service has recalculated the value of hundreds of pieces of artwork for which deductions were claimed by taxpayers who donated them to charities or left them to heirs.
As it has in the past, the tax agency’s Art Advisory Panel found that many people exaggerated the value of paintings and other items contributed to charities and placed too small a value on objects left to heirs.
Each year, a committee of art experts meets to review appraisals submitted by people the IRS is auditing. The committee steps in when a taxpayer says a work is worth at least $20,000.
In its report for 2007, the art panel said that 61 percent of 1,002 items in 131 cases had been valued incorrectly. The committee agreed with taxpayers on 36 percent of the appraisals; 3 percent needed further study.
Taxpayers had claimed a total value of $279-million for the items, most of which were estate and noncharitable gifts to heirs.
The art panel recommended total adjustments of more than $94.5-million. That figure included a 47-percent reduction in the values of items for which an excessive charitable deduction had been claimed, and a 58-percent increase on undervalued items in estate and noncharitable gift appraisals.
June 04, 2008
Pa. Legislators Form Charitable Nonprofit Caucus
An alliance of nonprofit groups in Pennsylvania has worked with the state’s General Assembly to set up the Pennsylvania Charitable Nonprofit Caucus, a grouping of state legislators that will discuss charity-related issues.
The Pennsylvania Association of Nonprofit Organizations, or PANO, and the United Way of Pennsylvania led the effort to create the caucus, which includes Democratic and Republican members of both the house and senate.
“State government and charities share the common goal of promoting quality of life in our communities,” Joe Geiger, PANO’s executive director, said in a statement. “The caucus will help both nonprofits and lawmakers by preventing the unintended consequences of otherwise good legislation.”
David Ross, PANO’s public-policy officer, said charities would like to discuss legislation in areas like charitable tax exemptions, sales taxes on services, lobbying, volunteerism, and government money for human services and the arts. He said they are worried, for example, about a bill, SB 1328, that would allow local governments to charge tax-exempt organizations fees for “essential services” like police and fire departments.
Saying that charities have “one arm tied behind their backs” because they are unable to contribute to political campaigns and can do only limited amounts of lobbying, Mr. Ross said the caucus would offer a way to give feedback to lawmakers.
The legislative caucus, which will officially debut on June 17, will be co-chaired by Sen. Andy Dinniman and Rep. W. Curtis Thomas, both Democrats, and Rep. Mario Scavello, a Republican, with a Republican senate co-chairman yet to be named.
A group of 30 charities and public foundations will act as an advisory board to the caucus.
May 2008
May 30, 2008
Grants Offered to Groups That Offer Ideas for Cleaning Up Elections
Mobilize.org, an “all-partisan” network focused on encouraging young people to become more fully engaged in the political process, is seeking grant proposals for innovative projects that encourage clean election practices at the local, state, and national level.
The organization is seeking the proposals by June 15, in anticipation of its Democracy 2.0 Entrepreneur Grant Summit, Money in Politics, to be held July 18 through 21, in Denver.
In partnership with the Sunlight Foundation and Common Cause, Mobilize.org is, according to an announcement on its Web site, “focusing efforts on empowering members of the Millennial Generation to develop innovative clean elections practices, emphasizing the creation of public finance reforms at the local and state level. These types of reforms are intended to give voters more control over the government by making politicians accountable to voters rather than wealthy campaign contributors,” according to the announcement.
At the meeting in Denver, the announcement says, grant winners will “each receive . . . between $3,000 and $5,000 and more importantly, will receive the support of Mobilize.org and our extensive partner network to champion their proposal and create systemic and long lasting change in the way elections are run.”
For more on how nonprofit groups can engage the millennial generation, see the transcript of The Chronicle‘s recent online discussion on the subject. And to share your opinion, click on the “comments” link below.
May 29, 2008
Senator Steps Up Pressure on College Endowments
Sen. Charles Grassley of Iowa is still considering proposing legislation that would require colleges and universities to distribute at least 5 percent of their endowments each year..
Mr. Grassley, the senior Republican on the Senate’s powerful Finance Committee, wrote in an opinion article published in The Chronicle of Higher Education to express concern that colleges and universities are not doing enough to make higher education more affordable.
Several major universities — including Harvard University, Yale University and Stanford University — have announced plans in recent months to reduce tuition costs and increase aid to students from lower- and middle-income families. Those plans followed a Finance Committee hearing last fall in which Mr. Grassley and others called for more scrutiny of college endowments.
But while the changes have mollified the concerns of some observers, Mr. Grassley writes that he is not yet convinced that all colleges and universities are doing enough to justify their tax-exempt status.
“Not only are higher-education institutions exempt from federal taxes, but their endowments are tax-free, and donations to them are tax-deductible. Part of the recent endowment spike came from the aggressive use of off-shore tax-avoidance strategies,” he writes. “Taxpayers pay for federal tax incentives to make higher education more accessible and affordable through 529 college-savings plans, a deduction for taxpayers filing jointly of up to $4,000 for tuition (depending on income), and the tax deductibility of interest on student loans.
“Such favorable tax treatment came through Congress, specifically through the Senate Finance Committee. Congress has an obligation to make sure those tax policies are working as intended.”
May 21, 2008
Government Drops Inquiry Into Obama Church
The Internal Revenue Service has dropped its investigation into allegations the United Church of Christ violated federal laws on electioneering.
In a letter. to the church, the IRS said the church’s responses to its inquiry had satisfied the tax agency that the organization had not broken any laws.
The IRS notified church officials in February that the government had a “reasonable belief” that the church had engaged in forbidden political activities when Sen. Barack Obama spoke at a major conference held by the church last year in Hartford, Conn. The IRS also expressed its concern that 40 volunteers for Mr. Obama, an Illinois Democrat who belongs to the church, “staffed campaign tables outside the [convention] center to promote” Mr. Obama’s presidential bid.
Under federal law, churches and charities must not participate in a political campaign by supporting or opposing a candidate for public office.
Officials of the United Church of Christ denied any wrongdoing. They told the IRS that they extended the invitation to Mr. Obama months before he announced his candidacy and that Mr. Obama was asked to speak about how his personal faith intersected with his public life.
What’s more, the church said it did not authorize campaign volunteers for Mr. Obama to set up tables near the convention center’s entrances, which are on public property.
House of Representatives Passes IRA Incentive
The U.S. House of Representatives on Wednesday passed a bill that would renew a tax break that encourages older Americans to give money from their individual retirement accounts to nonprofit causes.
Until December 31 of last year, donors age 70½ 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.
Members of Congress have been working to revive the tax break, and the House on Wednesday approved legislation that would extend the break for one year, from January 1, 2008, through December 31.
Before the bill passed the House Ways and Means Committee, a Democratic member of the committee unsuccessfully proposed shaping the measure to encourage colleges to lower their tuition costs.
Rep. Peter F. Welch, from Vermont, wanted to forbid colleges from receiving IRA rollover gifts if the institutions were not using their endowments to reduce tuition for needy students or to help veterans attend.
Foundation Leader on Inside Track to Congress
The leader of a Washington foundation is widely expected to become the newest member of Congress.
Donna Edwards, executive director of the Arca Foundation in Washington, is the favorite to win a June 17 special election to represent Maryland’s Fourth Congressional District.
Ms. Edwards, a Democrat, defeated Rep. Albert R. Wynn, who now holds the seat, in the Maryland primary in February.
Mr. Wynn has since decided to vacate his seat — a decision that is expected to allow Ms. Edwards to get a head start in Congress and solidify her effort to win the seat in November’s general election.
Ms. Edwards said during a recent speech at the Council on Foundations annual meeting that her experience in the nonprofit world will inform her decision making as a lawmaker.
“You’re going to have yet another friend on Capitol Hill,” Ms. Edwards told the foundation leaders.
May 15, 2008
Senator Dodd to Introduce Bill to Improve AmeriCorps Educational Grants
Sen. Christopher Dodd, Democrat of Connecticut, plans to introduce legislation on Friday to increase the value of the educational awards earned by participants in AmeriCorps, the federal national-service program, and make them tax-exempt.
The senator, a former Peace Corps volunteer, plans to introduce the AmeriCorps:Together Improving Our Nation (ACTION) Act of 2008, according to a statement from his office.
People who complete a year of full-time service in AmeriCorps, often at nonprofit groups, now receive $4,725 in money they can use to take college courses. The new legislation would raise that amount “to reflect the rising cost of college,” the statement said.
Senator Dodd has scheduled a news conference on Friday to provide further details of the legislation, which would also make the chief executive of the Corporation for National and Community Service—the federal agency that operates AmeriCorps—a member of the president’s cabinet.
Abortion-Rights Group Faces Backlash After Obama Endorsement
NARAL Pro-Choice America, the abortion-rights group, is feeling a backlash after endorsing Barack Obama for president on Wednesday.
Allison Fine, author of A. Fine Blog, writes that “e-mails started to fly around yesterday” from supporters of Hillary Clinton, who is challenging Mr. Obama for the Democratic nomination.
“In pained tones the senders, my circle of Hillary supporters, expressed their shock that one of the preeminent pro-choice organizations, one that they have supported in good times and bad, had double-crossed them in the eleventh hour of the presidential campaign.”
Ms. Fine, an author and senior fellow at Demos: A Network for Change and Action, a public-policy research organization in New York, criticizes NARAL for “spitting in the eye of the strongest woman candidate in the history of the country,” rather than waiting for three weeks, when the Democratic primaries will be over.
NARAL may be suffering from the panic that is afflicting many “last century” membership organizations as their donors age, prompting them to “flail around” trying to attract young people, she adds. “I would be happy to tell you about far more graceful ways to enter the connected age than scorning your core constituency,” she writes.
In explaining on the Huffington Post why NARAL’s political action committee backed Mr. Obama, Nancy Keenan, the group’s president, praises the senator’s record on reproductive-health issues and says he will be able to unite Americans with different viewpoints.
“He has reached new generations and energized young voters, independent voters, and Republican voters,” she writes. “He’s the candidate of the future.”
The reaction to that post was mixed, but many commenters praised NARAL’s move. “Although the backlash may seem overwhelming please understand that a new generation of young ladies is ready to take up the call for action,” one wrote, saying it made no sense to support a candidate simply because she is a woman.
What do you think? Did NARAL make the right decision to back Senator Obama? Will it suffer by alienating some of its donors? Or win by attracting new ones?
Cindy McCain Joins Board of Montana Military Charity
Cindy Hensley McCain, wife of Sen. John McCain, the Republican presidential contender, has joined the board of Grateful Nation Montana, a new charity that provides scholarships and other services to children of Montana soldiers killed in Iraq or Afghanistan.
“There are not many more noble causes than the young soldiers who have given their lives for the cause of freedom. And, especially for me as a military mother, it is certainly significant to support this newly founded organization as a board member,” Ms. McCain said in an e-mail message.
Grateful Nation Montana, in Conrad, Mont., was started by David Bell, an insurance executive, and John McCarrick, a lawyer. Mr. Bell said the group — which is working with the Montana state university system to provide tutors and mentors to the children who get scholarships — is a pilot project that the organization hopes can be spread across the country.
Ms. McCain is the mother of two sons who are in the military.
(To read more about charities that are helping families recover from the wars, see The Chronicle’s special report.)
May 14, 2008
Lawmaker Proposes New Twist on IRA Donation Incentives
Charities have been facing an uphill battle persuading Congress to make permanent a tax break that encourages older Americans to give money from their individual retirement accounts to nonprofit causes.
Now a Democratic lawmaker is pushing the idea — but he wants to do so in a way that encourages colleges to lower their tuition costs, The Chronicle of Higher Education reports.
Rep. Peter F. Welch, a Democrat of Vermont, wants to forbid donors from taking advantage of the tax break if they give their money to colleges that are not using their money to reduce tuition.
In a letter to the House Ways and Means Committee, Mr. Welch said wealthy colleges were among the biggest beneficiaries of those IRA distributions and should not be eligible to receive them unless they started using their endowments “specifically for containing college costs” for needy students. He urged the Ways and Means Committee to modify the Internal Revenue code as part of its drafting of a tax bill under consideration.
Mr. Welch has previously proposed requiring colleges to spend at least 5 percent of their endowments every year, and to report annually on how much of their endowments had been spent.
May 09, 2008
IRS Updates Rules on Dislosing Business Activities
The Internal Revenue Service has updated its guidelines that explain how charities must make public their Form 990-T filings, which list business activities not directly related to a charity’s mission.
As part of the Pension Protection Act of 2006, charities that file the Form 990-T must now make their filings available for public inspection.
New IRS reporting guidelines released this week clarify the rules behind this requirement. Most notably, the guidelines say nonprofits must make filings available for three years after their filing date. The requirement applies to all Form 990-T filings made after August 17, 2006.
The tax agency’s guidelines also state that charities do not have to provide supporting documents and attachments that do not relate to the imposition of unrelated business income tax.
As a result, nonprofit groups do not have to make public Form 5471 (Information return of U.S. persons with respect to certain foreign corporations), Form 8886 (Reportable Transaction Disclosure Statement), and Form 8913 (Credit for federal telephone excise tax paid).
May 08, 2008
A Project to Create More Hillary Clintons
Despite Sen. Hillary Clinton’s historic run for the presidency, women are greatly underrepresented in the U.S. political system – -a scenario the White House Project is attempting to change.
Marie Wilson, the group’s president, told a session at a Council on Foundations conference about her group’s efforts to train women across the country to run for political office, calling it an example of nonpartisan political activity that is permitted under the tax code governing charities.
The United States ranks 71st in the world in the percentage of women serving in parliament (here, the House of Representatives). “It is not really a representative democracy,” said Ms. Wilson.
Ms. Wilson, who headed the Ms. Foundation for almost two decades before starting the White House Project in 1998, said many of the women who received grants from the foundation were creating innovative social programs that focused on HIV/AIDS, health care, small loans, and promoting a “living wage.”
“That’s the government in exile,” she thought, and wanted to find a way to give them more power. The White House Project, in New York, has trained 1,700 women over the past three years in the mechanics of running for office, touching on campaigning, communications, and fund raising, Ms. Wilson said.
But it has found the most effective way to persuade them to become candidates is to give them examples of other women who have made that leap — for example, by showing a documentary about Shirley Chisholm, a black congresswoman who ran for the Democratic presidential nomination in 1972. Many women are reluctant to step forward because they see so few other politicians who look like them, she said.
In that sense, she said, Senator Clinton has inspired more women to want to try politics, showing “you can get to the highest level.”
May 07, 2008
IRS Filing Deadline Is Fast Approaching for Small Charities
Next week comes the first annual deadline for the smallest nonprofit groups to comply with a new federal requirement to file annual information with the Internal Revenue Service, and a group of accountants in Connecticut want to make sure organizations are ready.
New tax law requires nonprofits groups with $25,000 or less in annual revenue to file the new Form 990-N informational tax return by the 15th day of the fifth month after the end of a fiscal year. For those operating on a calendar year, for example, the deadline would be May 15.
Previously, small groups were exempt from filing any returns with the IRS. To inform them of the new requirement, the IRS sent out 650,000 letters last year, and posted an online question-and-answer page meant to help organizations comply.
But Adam P. Cohen, a West Hartford accountant, thinks more ought to be done to get the word out about the new rule and to teach organizations how to file. So, in conjunction with the Connecticut Society of CPAs and a local group that offers pro-bono accounting services, Mr. Cohen has publicized information about the Forms 990-N, and is running free clinics this week to assist in their preparation.
Charity officials can visit the clinics on Friday afternoon at any of three libraries around the state to learn how to file the online Forms 990-N, also known as “e-postcards.”
The form requires only basic information, such as the name of a principal officer, a mailing address, and confirmation that gross receipts total less than $25,000. Still, some charity observers worry that many small organizations may be intimidated by the federal forms, and that many more may not even be aware they exist.
If an organization fails to file the Form 990-N three years in a row, the IRS will automatically revoke its tax-exempt status.
“My suspicion is that there are many micro-nonprofit groups that don’t know about the requirement,” Mr. Cohen says. “You might have the checkbook for your kid’s soccer league, but the information about your responsibilities has not reached you.”
— Debra E. Blum
May 03, 2008
Spreading Innovative Solutions to Society's Problems
A new project Public Innovators, seeks to build stronger ties between government officials and social entrepreneurs.
The premise is that people from both worlds have a lot to share with each other.
Social entrepreneurs have developed creative new approaches to many of the pressing problems that government officials are trying to solve in areas like education, health care, and poverty. Government, in turn, has the resources that social entrepreneurs need to expand the reach of their programs and create systemic change.
“What social entrepreneurs are really doing is they’re responding to market failures, not unlike a regular entrepreneur responds to market opportunities,” says Andrew Wolk, chief executive of Root Cause, the Cambridge, Mass., nonprofit group behind Public Innovators. “They are trying to do that by creating transformative, innovative solutions that are sustainable.”
Together with the Aspen Institute, a Washington think tank, Root Cause has published a report that discusses how government agencies could use their influence – and grant dollars – to encourage more innovative approaches to solving social problems.
Among the report’s recommendations: Government agencies should give nonprofit groups greater latitude in how they spend government grants to encourage creativity, but at the same time, set performance standards and publish results.
Over the next 18 months, Root Cause and Aspen plan to hold a series of meetings in cities nationwide to discuss how government officials and social entrepreneurs can do a better job of collaborating. Those discussions will be followed by a conference for government officials to come together to share lessons learned about working with social entrepreneurs.
May 01, 2008
How the Next President Plans to Help Young People
America’s Promise has asked the three presidential candidates about their views on children’s issues and how they were personally affected by the organization’s five promises to today’s young people — providing caring adults, safe places, a healthy start, effective education, and opportunities to help others.
The politicians’ video responses have been posted on the group’s Web site. While short on detail, the videos offer some insight to the three’s priorities.
Sen. Hilary Clinton, a Democrat from New York, cites her experience working with the Children’s Defense Fund and supporting children’s health care.
Sen. John McCain, Republican from Arizona, says his generation was lucky to have parents who were able to fulfill the five promises with their children, but today’s young people face more obstacles.
Sen, Barack Obama, Democrat from Illinois, discusses his dedication to his daughters and how the last promise — giving children the opportunity to aid others — is perhaps the most important.
To learn more about how the senators stand on other nonprofit issues, read The Chronicle’s campaign coverage.
— Ian Wilhelm
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
March 2008
March 28, 2008
IRS Clarifies How to Request Nonprofit Tax Document on Business Activities
The Internal Revenue Service has issued a notice explaining how the public can request copies of a nonprofit organization’s Form 990-T, which lists unrelated business income.
All 990-Ts filed after August 17, 2006, are available from the IRS, but the agency does not currently have a way for people to request them. To make sure they are available, the agency is allowing people to adapt a form used to make requests for other documents (called the 4506-A) by writing a request for a 990-T on line 7 of the 4506-A.
(The 990-T can also be obtained by writing an individual charity directly to request a copy.)
The tax agency says it will change its request form in the near future to make it easier to secure a 990-T.
— Sam Kean
March 26, 2008
Watchdog Urges Foundations to Curtail Tax Fraud
A key figure in Congress’s recent efforts to curb abuse in the nonprofit world says foundations need to become much more aggressive in stopping tax fraud.
Otherwise, foundations could soon be in the cross hairs of federal lawmakers.
Dean A. Zerbe, a former top aide to Sen. Charles Grassley of Iowa, said in an online discussion with Chronicle readers that some members of Congress are concerned about family foundations that are paying family members for administrative or board positions.
Mr. Zerbe, who stepped down from his Senate job last month to work as national managing director for Alliant Group in Washington, also said he is concerned that private foundations are being used as a tax shelter by some wealthy donors.
“There needs to be better leadership from the foundation community in this area overall to address these problems,” Mr Zerbe said. “The private foundations should come forward with their proposals of reform and not wait for Congress.”
During the hour-long discussion, Mr. Zerbe also answered questions about issues such as the Combined Federal Campaign, endowment spending by colleges, and the tax status of religious organizations.
March 25, 2008
Lawmakers Fight Proposed Budget Cuts for National-Service Programs
More than 30 members of the House of Representatives have signed a bipartisan letter asking the House Appropriations Committee to reject the 2009 budget cuts proposed by President Bush for national-service programs.
The proposals would prevent the Corporation for National and Community Service, the federal agency that operates the programs, from fulfilling its strategic plan of boosting the number of Americans who volunteer annually by 10 million, to 75 million, by 2010, the letter says.
“Americans have stepped forward in record numbers to serve, but funding cuts have prevented national service programs from growing at a rate to meet demand,” it adds.
President Bush, as part of an effort to rein in the federal deficit, in February proposed cutting the Corporation for National and Community Service’s program budget from $782.7-million in 2008 to $751.5-million in 2009. That followed several years of cuts that have steadily reduced the budget from its 2005 level of $856.6-million.
The letter to the Appropriations Committee was signed by the four co-chairmen of the House National Service Caucus—Doris Matsui, Democrat of California; Todd Platts, Republican of Pennsylvania; David Price, Democrat of North Carolina; and Christopher Shays, Republican of Connecticut—and 30 other lawmakers.
It proposes restoring the budget for the main AmeriCorps program, which provides grants to nonprofit groups that operate national-service programs, to its 2004 level of $312-million, compared with the administration’s proposal for $274.2-million (up from $256.8-million in 2008).
It also proposes increasing the budget for the National Civilian Community Corps, which sends trained volunteers to disaster areas, to $26.7-million, up from $23.8-million, saying it “continues to serve as a key program in the Gulf Coast’s long-term recovery efforts.” Mr. Bush proposed cutting that budget to $9.9-million.
The letter urges Congress to reject Mr. Bush’s proposal to cut the Senior Corps programs, which tap volunteers age 55 and older, from $213.8-million this year to $174-million in 2009. They propose a budget of $239.9-million.
The lawmakers said Congress should provide a “robust appropriation” for the national-service programs, calling them a “smart investment that leverages federal dollars to create a greater capacity to meet community need.”
A similar letter is now being circulated for signature in the U.S. Senate.
March 24, 2008
Group to Unveil National Nonprofit Voter-Participation Campaign
A group that aims to get nonprofit organizations more involved in nonpartisan election activities will unveil the 2008 National Nonprofit Vote Campaign on April 1.
The campaign, created by the Nonprofit Voter Engagement Network, will provide training, information, legal resources, how-to guides, and materials such as bumper stickers and posters to help nonprofit groups get voters to the polls for the November elections.
“Our belief is that nonprofits are the sleeping giant of the democratic process,” said Bridgette Rongitsch, director of the network, a project of the Minnesota Council on Nonprofits. “These groups have daily contact and super trusting relationships with the people they work for. These are the same communities who are not turning out [to vote] in big numbers.”
The Nonprofit Voter Engagement Network—which was created in 2005 and has received money from foundations including the Carnegie Corporation, Open Society Institute, and Tides Foundation—has so far focused mostly on voter-participation projects in the states of Ohio, Louisiana, Massachusetts, Michigan, and Minnesota.
The Nonprofit Vote Campaign is the group’s first effort to reach out to nonprofit groups in all 50 states, Ms. Rongitsch said. As of April 1, its Web site will serve as a “one-stop shop” for information and resources about nonprofit voter-participation activities.
Government Finds Vehicle-Donation Law Has Had Mixed Effect
In a new report, the Government Accountability Office has found that charities have had mixed experiences with vehicle donations after a new law in 2005 altered how much donors could deduct for vehicles.
Before January 1, 2005, donors could claim a tax break equal to the fair market value of a donated vehicle. After that date, donors could deduct only the amount for which the charity later sold the vehicle. The government changed the law because it found examples of large discrepancies between the market value claimed by donors and the actual sales price.
The report — which contains in-depth interviews with 10 charities, but no statistical survey — looks at the effect of the new law on the number of vehicles donated, the quality of the vehicles donated, and the revenue generated by donated vehicles.
The results, while not clear cut, were generally negative: Between 2003 and 2006, six of the 10 charities received fewer vehicles and less revenue from vehicle sales, sometimes millions of dollar less. Only three groups reported increases for each measure. (One did not provide data.) In addition, all the charities reported an increase in paperwork, and some had scaled back their vehicle-collection programs because of the new law.
— Sam Kean
Former Senate Aide Takes Questions on Philanthropy
Join The Chronicle on Tuesday, March 25, at noon for an online discussion with the prominent charity watchdog Dean A. Zerbe.
As a top aide to Sen. Charles Grassley, the senior Republican on the Senate Finance Committee, Mr. Zerbe has been a prime mover in Congressional efforts to stomp out charity abuses.
His wide-ranging criticisms of charities and foundations divided the nonprofit world, but everybody agrees that his influence on the operations of nonprofit groups will be felt for many years to come.
Mr. Zerbe started more than a dozen investigations of charitable activities that had previously drawn little attention on Capitol Hill, such as the tax breaks donors take for gifts of land and deals between charities and insurance companies.
He was a key figure in the effort to overhaul the Internal Revenue Service Form 990 and recently has been pushing for reform of nonprofit hospitals, donor-advised funds, and the compensation practices of evangelical ministers.
Mr. Zerbe stepped down from his Senate job last month to work as a tax lawyer in Washington, and in an one-hour conversation with Chronicle readers, he will examine what’s next for nonprofit groups on Capitol Hill, including the outlook for tax incentives to encourage charitable giving.
In addition, he will answer questions about what he has learned from his investigations — information all nonprofit leaders need to understand as their organizations come under increasing scrutiny from lawmakers, the news media, and others.
People who ask questions in advance have a better chance of receiving answers during the online discussion.
March 21, 2008
Key Lawmaker Challenges IRS's Inquiry Into Sen. Obama's Church
Sen. Joseph I. Lieberman of Connecticut is challenging the Internal Revenue Service’s investigation into alleged political activities of the United Church of Christ and is asking the IRS to explain why it began the inquiry.
Mr. Lieberman, a Connecticut independent, said he found the investigation “especially troubling because of the service’s inadequate guidance” for churches trying to follow federal law when they invite candidates to appear at gatherings.
The IRS notified the United Church of Christ in February that the government had a “reasonable belief” that the church had engaged in forbidden political activities because Sen. Barack Obama spoke at a major conference held by the church last year in Hartford. The IRS also said that 40 volunteers for Mr. Obama, an Illinois Democrat, “staffed campaign tables outside the [convention] center to promote” Mr. Obama’s presidential efforts.
Under federal law, churches and charities must not participate in a political campaign in support of, or in opposition to, a candidate for public office. An organization that violates the law a single time could be forced to pay a penalty fee and have its tax exemption revoked.
Officials of the United Church of Christ denied any wrongdoing.
Senator Lieberman told the IRS that the church “took significant precautions to ensure that Senator Obama’s appearance” satisfied legal requirements.
“Throughout my career in the Senate, I have supported the strong and fair enforcement of our nation’s tax laws, including laws applicable to religious institutions,” wrote Mr. Lieberman.
“But I am concerned about the chilling effect on legitimate activity by religious organizations that results from initiating a church tax inquiry without first satisfying the reasonableness standard, and I am further concerned by the lack of clear guidance in this area,” Senator Lieberman said.
Mr. Lieberman, the Democratic nominee for vice president in 2000, this year has endorsed Sen. John McCain, the Arizona Republican, for president.
March 17, 2008
How Nonprofit Work Influenced Barack Obama's Mother
In a New York Times profile of Sen. Barack Obama’s mother, Stanley Ann Dunham Soetoro, the newspaper describes her as “the parent who most shaped” the Democratic presidential candidate and discusses her work in the nonprofit world and international development.
Ms. Soetoro served as a program officer i