Can a merger boost your nonprofit?

With more and more charities applying for recognition every day, an interesting trend out of the grantmaking world is the encouragement of collaborative work and even mergers. This makes a lot of sense on the macro level... why have multiple organizations doing the exact same work, only to spend a portion out of each group on non-programming needs like overhead and administrative costs? If these costs are centralized or shared, there should be more money available for program work. Now, the devil's in the details... sometimes collaborative work loses efficiency because there are too many decision-makers, so the gains in merged efforts are (sometimes) lost. Still, it's an interesting trend. Check out today's Poughkeepsie Journal for an interesting article on the trend in upstate NY.

WRTL: The day after reporting

Check out the NY Times and Washington Post. It's a bad sign for the supporters of the electioneering communications provision when both papers report that the Justices appeared "skeptical." Of course, basing any prediction on the line of questioning at oral arguments is often a fool's errand. I belive I lost a (friendly) wager or two on McConnell that way...

MORE COVERAGE:

Slate
Los Angeles Times
Houston Chronicle
San Francisco Chronicle/AP
ABCNews

Initial reports on WRTL

Rick Hassen posts his thoughts here. He is live as this post goes up at the Cato event.

UPDATE... Allison Hayward weighs in (from another perspective) here. The Cato event will likely be podcast in the future... I'll post the link on the blog when it's live.

Switching servers

Things might get a little whacky here at the blog over the course of the next 24-48 hours. I think I may have chosen the wrong time to change servers with the WRTL this morning... hopefully the transition will go smoothly and things will return to normal sooner rather than later.

WRTL oral arguments tomorrow

If you really want to drill in and check out the briefs before the Court, they are all posted here. I am going to attempt to get into the hearing, but the word is that there are a fair number of lawyers who want to sit in on the arguments, and the seats may fill up quickly. We shall see... there is also an event at Cato afterwards featuring Jim Bopp, the attorney for WRTL and election law blogger Rick Hassen, amongst others. Details for that here... the event will be streamed live on the Internet, so check it out!

Conflicts of interest

I just got a call on a subject I deal with fairly frequently with nonprofits... activities that are absolutely legal, but appear problematic due to a potential appearance of a conflict of interest. I frequently suggest that nonprofits adopt clear conflict of interest policies to ensure that they always can point to procedures and guidelines to avoid even the appearance of a conflict. Check out the Council on Foundations excellent guide on the topic here (PDF).

Everson to Red Cross

IRS Commissioner Mark Everson is poised to take over the Red Cross according to the Washington Post. No word on potential replacements for the head job at the IRS... whether that will impact nonprofits is unclear. Everson's tenure included a fair amount of attention paid to shady tax shelters, so it's not inconceivable that a new Commissioner may have an impact. Too be continued...

SCOTUS showing its hand?

Rick Hassen had an interesting thought regarding the Supreme Court's decision to uphold a late term aboriton statute in relation to how it might handle the Wisconsin Right to Life case:

More significantly, the case shows that the new Roberts Court, despite claims of modesty, is not afraid to overturn precedent even if there are significant reliance interests involved. I've filed an amicus brief with Richard Briffault giving the Court a modest way to decide WRTL II, but I've also written that supporters of campaign finance regulation should be very afraid of this case specifically and of the Roberts' Courts approach to the campaign finance cases more generally. As Marty Lederman observes as well, Justice O'Connor's departure means cases like McConnell v. FEC are subject to being overruled---as early as this term.

It does appear that the Chief Justice may not be as shy to toss stare desis out the window for selected cases, despite his confirmation hearing testimony. It remains to be seen if this extends to WRTL II or not. I'm planning on attending the oral arguments next week... it's generally difficult to guage most Justices' opinions based on their questions, but I will be paying close attention to the Chief Justice and Justice Alito for this one.

IRS treasure hunt

Some of my tax-exempt attorney colleagues were "tasked" by fellow attorney John Pomeranz to uncover a long-lost IRS letter regarding permissible activity by charitable organizations around political conventions. It seems that a 1980 letter to Independent Sector has been cited by a variety of publications, but is not available in any of the traditional databases. For instance, Alliance for Justice's The Rules of the Game cites the letter, stating that a charity can work to get its positions in a party platform by:

• delivering the testimony to both parties’ platform committees,
• including a disclaimer in both oral and written testimony that the testimony is being offered for educational purposes only, and
• reporting the testimony and any responses in its regularly scheduled newsletter to members.

The letter is no longer lost... thanks to the stellar files of Holly Schadler, we are lucky enough to (finally) have access to this letter again. And just to serve as a redundant conduit of access to it, I'm posting the letter here (PDF). It's not the most important IRS ruling on charitable activities around elections... just the hardest to find. Well, at least it used to be.

Stay Exempt

The IRS has recently put out a new website called Stay Exempt... it's an online training website that "provides the tools and knowledge to help you keep your organization’s exempt status intact. It consists of five interactive courses, which you can take individually and in any order."
It also comes with an amusing cast of characters... coach, a "brilliant, straight-talking IRS agent"... and Vernon a retired volunteer (that's him on the left). Best part... they talk. Check it out... stayexempt.org.

To be honest, this is so campy I think I like it. When I get some time, I'll review the content in a future blog post...

SF Examiner: BCRA a failure

The SF Examiner is not a fan of BCRA... check out today's editorial.

The rise of the (c)s?

The Campaign Finance Institute has released a report on nonprofits as we enter the '08 election cycle. CFI concludes that 527s are likely to remain important in the next election, but that there seems to be a shift towards taxable entities and 501(c)s running "issue" campaigns with "strong electoral overtones." Donors to 527s, the report concludes, are starting to look to 501(c)s as an alternative place to put their money to influence elections.

One person's issue campaign is another's electioneering... this ongoing dialogue is a major part of the issues before the Supreme Court on the 25th in Wisconsin Right to Life...

Donating lists

Usually, I get the question... "can we donate our organizational list to candidate X?" The answer is generally no, depending on the candidate or the type of nonprofit. If the organization is a charity it may even violate two or more laws! Over at the politics and technology blog, the question was asked in reverse... "can we give our candidate's list to our favorite organization?" Check it out... the advice may surprise you!

The long wait

When I first prepared an Form 1023 to get the IRS to recognize the organization's 501(c)(3) status, I was shocked at how long the process took. Back then, I had a response, following a supplemental information request (a fancy way of saying "hey, we need to know more about you before we ok this application.") within six months.

Ten years later, I really long for those good old days of lightning fast IRS response.

These days you're lucky to even hear back from the IRS at all within six months. As of this moment, the IRS is processing October 2006 applications! As charities have become more and more popular, the IRS seems less prepared to handle the crush. As a result, many organizations that had grand fundraising and operational plans sit and wait for the paperwork to percolate through the system. There are, of course, other options for these groups, including fiscal sponsorship and volunteer activity. I'll post more about these options in the future.

Word to the wise... when forming your charity, be prepared for a long wait.

BCRA turns 5

Today marks the fifth anniversary of the passage of BCRA... it is being celebrated and mourned simultaneously, depending on one's point of view. It bears noting that the Supreme Court will be hearing oral arguments in Wisconsin Right to Life in a few weeks. I'm planning on heading down to the Court to hear the arguments. I was speaking with a friend from San Francisco last night and realized that this will be the first time I will be at a SCOTUS oral argument run by someone other that Chief Justice Rehnquist... it should be interesting to see how differently Chief Justice Roberts runs the show.

IRS cracks down on charity cheats

CNN has the story... this is more of an issue for your donors, but its important to be aware that the IRS is turning its attention to abusive claims of charitable deductions...

What's next for campaign finance reform?

Bob Bauer posts on the future of campaign finance reform without Marty Meehan (D-MA) at the helm. Meehan is set to retire from Congress in a few months. Without his co-sponsor, what's next for Chris Shays (R-CT)? Well, after a major scare in the 2006 election at least he doesn't have to worry about facing hockey legend Mike Richter in 2008 anymore...

Impact of web ads

The L.A. Times has an article today regarding the now well-traveled anti-Clinton 1984 parody ad that hit YouTube several weeks ago. One thing that seems to be of issue lately is the fact that federal election law largely leaves these ads alone. This ad was produced - from what we can tell - by an individual unaffiliated with the Obama campaign. Assuming this is accurate, and there is no coordination, the law categorizes this now very effective ad as free speech with no reporting or limits whatsoever.

Many suggest that there should be disclosures involved with these ads. In the article, Rick Hassen notes that the low cost of these types of ads removes the interest in requiring disclosures. I agree wholeheartedly with that... producing these types of ads are now so incredibly cheap that the actual expenditure might only be a few dollars. Consider that the ad in question likely was produced on a home computer using iMovie, or some other type of inexpensive video editor. The clips are free, and uploading to YouTube for distribution is free. How much of a quid pro quo could there be (from a corruption standpoint) for an ad expenditure that was only a few bucks? This begs the question... would the required consitutional basis for overcoming a First Amendment challenge to regulate these types of ads need to rely on the impact of the ads rather than the cost? Clearly this ad has had great impact... but there are (I'd wager) hundreds of other ads floating on YouTube that have had no impact whatsoever. Should their creators also disclose their identity, or does it not matter since their impact has been closer to zero? What are the metrics on this? Rick suggests in the article that disclosure is important to weigh credibility... I'm not sure that is a sufficiently compelling interest for First Amendment purposes.

Lots of questions remain... as always in the realm of campaign finance, the answers may be a bit elusive.

UPDATE: Slight correction above... I'm reminded that disclosure requirements are subject to exacting scrutiny, as opposed to strict scrutiny under McIntyre v. Ohio Elections Comm'n. Still a tall mountain to climb for anyone that would propose disclosure requirements for these types of ads.

Nonprofits: good apples

My former colleague Liz Towne at Alliance for Justice wrote an excellent letter published in today's Washington Post. A recent rule change at the OPM drops the 25% administration cost cap to qualify for charity programs run by the feds. This is a good idea... frankly, as Liz notes in her letter, setting an arbitrary administrative cost percentage that suggests one type of charity is efficient and another is not is a poor method to measure effectiveness. There are a host of other factors that contribute to efficiency and efficacy, including the size of the organization and the services it provides. There are better ways to measure these things, and administrative costs should be a part, not the sole method to make the determination.

Check out the letter here.

Internet ads... back to the future?

We mentioned this pro-Obama, anti-Clinton ad that borrows heavily from Apple's famed 1984 ad on the latest Capital Caucus. I'm sure that's the reason why it's made the print media and Rick Hassen's blog. Or not...

It's interesting to see the viral explosion of a cleverly created advertisement... how this will be regulated in the future - and my guess is that it will be - is open to some debate. For now in federal elections, the Internet is pretty much wide open unless there's a paid advertisement involved.