Introducing the Nonprofit Law Podcast

Coming in June 2007... the Nonprofit Law Podcast.

Beware of IRS emails

Some malevolent beast out there is giving the IRS a bad name.... Ok, a worse name (although I think the IRS is cute as a button, quite frankly). CNN reports:

The Internal Revenue Service is warning businesses across the country of two new and potentially devastating e-mail scams which could silently take over their computer hard drives.

The e-mails contain official-looking IRS logos and information, falsely notifying the reader of IRS action against them or their company. A link for further information is actually a hot button that would secretly launch an insidious computer program. That program, known as a Trojan horse, could cause a variety of paralyzing problems as it directly accesses the hard drive.

I hasten to note... the virus almost certainly won't work on a Mac. But... be careful of IRS emails today people...

Senate: More disclosure for charities needed

A Senate committee wrote the Treasury Department a letter asking the IRS to include additional disclsoures in the Form 990 annual tax return. Specifically:

• Executive pay and perks
• Expanded questions on governance
• Expanded questions on endowments
• Related organizations and joint ventures (to determine if there are private benefits)
• The amount of money spent on fundraising

The next Form 990 may be more time-consuming to complete if all of these measures are adopted, but they certainly would give the public a better understanding of the internal workings of any given charity. The devil's in the details, however... if the IRS agrees and adds these sections in a new 990, but gives poor guidance on how one fills out the section, there could be problems. More to come on this, to be sure...

What the heck is a 509(a)?

Has your organization received a letter from a funder asking you to certify that you are not exempt under section 509(a) of the tax code? "I thought we were a 501(c)(3)!" you probably thought!

Some funders have been sending these requests out lately, all to comply with a relatively new part of federal law. For the vast majority of charities, the answer is, "no we are not a supporting organization exempt under IRC Section 509(a)." Results may vary depending on your situation, of course... check out AFJ's blog for more!

Treasury report: 1.6 million US charities

A new report from the Inspector General of the Treasury reveals that the IRS does a bad job at policing connections between terrorist groups and the (few) U.S. charities that support them. This is kind of old news... what I found interesting was that we finally have some updated stats on how many charities there are in the US. According to the Chicago Tribune,

The report said that in fiscal year 2006 there were about 1.6 million tax-exempt organizations, excluding churches, with $2.4 trillion in assets and $1.2 trillion in annual revenue. In tax year 2003, the latest year figures were available, these organizations filed about 300,000 returns subject to review for possible terrorist connections.

1.6 million charities and $2.4 trillion in assets... no wonder my client's app with the IRS is taking forever to process!

Humor: SCOTUS rules, "It Depends"

From The Onion... complete with a WRTL reference:

WASHINGTON, DC—In a landmark 8-1 decision, an uncharacteristically subdued Supreme Court ruled "it depends" in the case of Panetti v. Quarterman, leaving the issue of executing the mentally ill completely open-ended.

The entirely indeterminate ruling is a first for the high court.

* * *

A lot of these cases are really hard, and it's comforting to know that we now have a little wiggle room," said Justice John Paul Stevens, the oldest and longest-serving current member of the high court. "Take Wisconsin Right to Life, Inc. v. Federal Election Commission. Maybe issue ads should be able to run less than 60 days before a public official is up for reelection, if the issue is important enough. Maybe the official should be forced to comment on the matter so his constituents know where he stands. 'It depends' would work really well in that case.

Nonprofits and MySpace

Alliance for Justice's Nonprofit Advocacy Blog covers an interesting topic this week... 501(c)(3) MySpace pages and partisan comments. Their advice is right on... make sure that your nonprofit is paying attention to the people and organizations it "friends" (I love how MySpace has changed a noun to a verb!) and set your privacy settings so someone can approve all comments. A stray electioneering comment could place your organization's tax status at risk!

501(c)(3) newsletters

A recent complaint filed against an Oregon nonprofit highlights an issue that pops up every few years... can a 501(c)(3) organization include a candidate in its newsletter?

The answer is... as it always seems to be in the wonderful world of tax law... "it depends." If the candidate is given the opportunity to stump for his or her candidacy in the pages of the newsletter, it's far more likely that the IRS will consider the 501(c)(3) to be engaged in illegal electioneering. However, it is possible that a 501(c)(3) can run a column by a person who is running for office if the newsletter focuses on issues and does not mention the person's candidacy. This is a classic example of the "facts and circumstances" analysis that the IRS uses to look at election-time activity of charities... there are very few bright line rules. When in doubt, talk with a lawyer who knows the rules!

Donor Advised Funds comments

Alliance for Justice recently submitted comments to the Treasury Department asking for "clarity on the definition of expenditure responsibility for donor advised funds-specifically, that it not include the restriction on use of funds for lobbying and voter engagement activities that apply to private foundations." Check out AFJ's comments here (PDF).

U.S. Blogging Laws

Blogs are an important tool used by many nonprofits... if you're blogging, here's a great resource on blogger law from Aviva Directory... hat tip to Politics and Technology for the pointer. Topics covered include:

* Whether to Disclose Paid Posts
* Is Deep Linking Legal?
* The Legal Use of Images and Thumbnails
* Laws that Protect You From Stolen Content
* Domain Name Trademark Issues
* Handling Private Data About Your Readers
* Who Owns User-Developed Content and Can You Delete It
* The Duty to Monitor Your Blog Comments, and Liability
* Basic Tax Law Issues in Blogging
* Limited Liability Laws and Incorporating
* Spam Laws and Which Unsolicited Emails are Legal
* Are Bloggers Protected from Journalism Shield Laws

Stanford Nonprofit Law Clinic

Stanford Law School announced an exciting development today:

Stanford Law School today announced that it has appointed Jay A. Mitchell as lecturer in law and director of its new Nonprofit and General Counsel Clinic. The clinic will provide students opportunities to engage in public interest lawyering through business and transaction work with nonprofits and small enterprises.

Chalk up as yet another "I wish they had this when I was in law school" moment. This clinic will be a great opportunity for any budding lawyer to get real world experience before he or she hits the "real world."

New Study: Foundations Support of Nonprofit Overhead Costs

The Aspen Institute and the Center on Philanthropy at Indiana University released an interesting study on foundation support of nonprofit overhead costs. The study finds that foundations may support these costs more than conventional wisdom suggests, but that doesn't seem to translate to preceptions on the nonprofit side.

A new study by the IU Center on Philanthropy shows that 69 percent of foundations support nonprofits' overhead expenses, while nearly two-thirds of nonprofits surveyed say they lack funding for overhead costs. Twenty-eight percent of nonprofits reporting inadequate overhead said the cause was external pressure to keep expenses low.

Read more on the study here.

IRS redesigning Form 990

This has been threatened promised for a few years now... the Wall Street Journal reports on the latest here.

Portland bound

I will be in Portland for the week so blogging may be lighter than normal... I'm hoping to connect with some of my colleagues in the nonprofit community this week, so I might find some interesting news on what's happening on the left coast.

political activity guidance coming from the IRS

Alliance for Justice's nonprofit advocacy blog posted a blurb from BNA Money & Politics:

"The Exempt Organizations Division in the Internal Revenue Service is planning to issue precedential guidance on what constitutes political activity, based on a fact sheet the service published in February, [said] Judith Kindell, Internal Revenue Service tax law specialist in the Exempt Organizations Division."

Good news... the IRS is often stingy in handing out precedential guidance on important issues like the line between political activity and non-political activity. This helps nonprofits immensely as we head into the heart of the '08 election cycle.