Churches testing the courts on politics

The Chronicle is reporting an impending legal firestorm:

In a test of federal tax law, a conservative legal group is encouraging pastors to preach about election candidates in September, reports The Wall Street Journal.

The Alliance Defense Fund hopes a court case will result from this open defiance of tax rules, which bar churches from engaging in partisan politics, and that the restrictions will be struck down by the courts.

Would the current Supreme Court turn back the decades-old ban on electioneering by churches? Would there be an equal protection problem if this was not also extended to other public charities? These and other questions might be answered in the next couple of years...

IRS releases 2008 goals on enforcing political activity

Alliance for Justice has a nice summary of the latest on the IRS Political Activities Compliance Initiative:

On April 17, 2008, the IRS Tax Exempt and Government Entities Division issued a letter providing guidance on how they will treat certain activity in the 2008 political campaign season. The letter stated the goals of the Political Activities Compliance Initiative (PACI) task force in the 2008 election season and provided limited guidance on PACI's enforcement of 501(c)(3)s engaging in election-related activity in two specific areas: 501(c)(3)-501(c)(4) websites and issue advocacy.

See more here.

Vermont poised to create charity-business hybrid

From the Chronicle of Philanthropy:

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.

I'm really intrigued with this new model, having been working more closely with a socially responsible LLC that also has an affiliated sister 501(c)(3) charity, it seems this might be a new path. Often we see a lot of these corporate models beginning in a few states (the laboratories for laws) and see them sweeping across the country. This one bears watching.

IRS cracking down on political activities of nonprofits... again?

Roll Call reports...

Tax regulators are hinting at an imminent crackdown of outside political outfits masquerading as nonprofit organizations, groups that already are making a splash in the 2008 Congressional primaries.

So, we might see some of the new 501(c)(4)s that were gearing up to engage in a lot of activity supporting or opposing candidates drop out before they begin... this might prompt some litigation depending on how the IRS chooses to enforce things. It's still stinging from losing the DLC case recently, and I suspect the DLC's success may prompt other 501(c)(4)s to fight it out in the courts with the IRS over anything in the exempt activity (loosely speaking, anything that supports or opposes a candidate) category.

New Form 990 instructions

Considering the new form is not to be filed until 2009, it might be a bit premature for most people to take a peek, but if you want to see what next year's Form 990 instructions look like, the IRS is ready to show you... here. More on this from the Chronicle.

IRS engaged in political-speech crackdown?

Church Executive Magazine asks whether the IRS is amping up enforcement this year.

IRS reaches out to charities to aid in economic stimulus

From the IRS:

The IRS is encouraging various partners and stakeholders such as charities, churches and governmental organizations to assist in efforts to reach out to those Americans who may be eligible for the 2008 economic stimulus payment but who normally have no requirement to file a tax return. People who receive certain Social Security, Veterans Affairs, Railroad Retirement or wages from earned income or combat pay may be eligible and not know it.

It's good to see that the IRS is trying to make it easier for low-income individuals receive the allocated funds. Asking charities to aid in the process strikes me as a good idea to facilitate the effort... more about this program here.

Housecleaning

We'll be having some downtime here at the site as we shift servers on March 20th (next Thursday as I type this). You might experience some delays in getting in touch with us during that process, but everything should be operational in short order. Thanks!

Senate deepens financial review of television ministries

NBC is reporting that the Senate Finance committee is renewing its demands for certain churches to provide detailed financial information. The letters sent today are a follow-up to letters sent last year to a virtual who's who of large televangelist ministries, including Benny Hinn and Kenneth Copeland.

These ministries are 501(c)(3) organizations that are required to turn over certain financial information through their Form 990s upon public request. The Senate investigation is turning up the heat on the financial practices of some of these organizations.

Ethics and nonprofits

If you're in Atlanta, this looks like a great opportunity to learn about running an ethical organization:

Seminar Announcement

What: The Nonprofit Studies Program of the Andrew Young School of Policy at Georgia State University presents its Brown Bag Seminar Series in Nonprofit Research.

Who: John Knapp of The Center for Ethics and Corporate Responsibility at the J. Mack Robinson College of Business will address the topic: "Fostering Ethical Cultures in Non-Profit Organizations"

When: Tuesday, March 11, 2008 at 12:30 PM

Where: Seminar Room #749 at the Andrew Young School of Policy Studies Building at 14 Marietta Street, NW

The purpose of these seminars is to discuss research-in-progress by faculty associated with the nonprofit program.

We invite students, faculty and interested members of the community to join us!

Drinks and cookies will be served.

All that and cookies too... I wish I could swing the trip down for this one! Hat tip to the good folks at the Nonprofit Law Profs blog for the original pointer.

Still more on churches and politics

The Wall Street Journal is the latest to report on the various issues related to churches and politicking... I was happy to see that it noted that there have only been two revocations since 1954. One of them (the more recent... 1992) was a church in Binghamton that took out full page ads telling readers to vote for Bob Dole. Good old Branch Ministries... I don't know if they had any inkling how badly they violated tax law, but they didn't jsut cross the line... they jumped over it!

Nonprofit Law Podcast #34: What triggers an IRS audit?

Nonprofit Law Podcast #34 covers the murky world of IRS audit procedures (now less murky!).

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Obama campaign takes fire over church conference speech

Sen. Obama's speech at last summer's United Church of Christ conference has managed to pull an IRS investigation according to the AP. Here's some interesting analysis from two sources:

John Wilson's IRS Probe Of Obama's Church Underscores Anxieties For Nonprofits underscores the difficulty charities and other nonprofits are facing with these subjective rules... something I've blogged about before.

Over at the Nonprofit Law Prof blog, there's a a great pointer to Jack Siegel's take on the situation. Quoting their quote of him:

We do think Congress must step in and write a prohibition on political campaign activity that addresses the reality of how churches and other Section 501(c)(3) organizations interact with political candidates. In addressing this problem, we would like to see Congress take an approach akin to that taken by the intermediate sanctions in Section 4958. That is, rather than penalizing the innocent entity or the entity that can't control a speaker once the speech has begun, the sanctions should focus on the speaker's conduct, penalizing the speaker. Many will argue that this raises First Amendment issues. We recognize that possibility, but are not convinced. Obviously, the speaker has a right to speak, but the speech in question is by invitation. Consequently, this is not silencing the speaker in terms of access to the public square.

A safe harbor for the charity in case the speaker slips into campaign mode would probably face a lot less resistance compared to the flip side: penalizing the speaker. I'd be very surprised if that idea ever got off the ground.

Law schools

I got a question in my email box from a prospective law student... unfortunately the student's email bounced back on me so I couldn't respond! So, if you fit that bill... email me at tim at tim dash mooney dot com and I'll resend it to you directly.

A lot of people ask me about how to go about training to become a lawyer serving nonprofits... I think the bottom line is that law schools are - for the most part - not the place where you'll learn that craft. There are absolutely some great programs out there (Columbia and Boston College come to mind immediately) but I've always maintained that no matter what type of law you'd like to practice, you want to find a good clinical program rather than seek out the best academic program. I'm sure others may disagree, but I can honestly say I learned far more about being a lawyer in my litigation clinic than in any of my classes.

One major piece of advice I give to anyone thinking about nonprofit work in law school... take administrative law. You'll be shocked how often it's relevant to the work you do!

Candidate accused of misusing charity

A North Carolina state representative is being accused of using her charity's resources to aid in her election efforts. Rep. Mary McAllister helped found Operation Sickle Cell in 1972 and has found herself the target of a state auditor's investigation. More on this from the Fayetteville Observer.

Interesting to see that it is a state investigation... it's conceivable that the IRS could look into this as well.

Look out FEC... here comes another lawsuit

Happy Valentine's Day FEC! SpeechNow.org is filing a lawsuit against the FEC today, asking a federal court to allow it to advocate for or against federal candidates without having to comply with contribution limits. The way things have been going in these cases, the SpeechNow.org argument has a really strong chance of succeeding... it takes no corporate money and it does not coordinate with federal candidates nor make contributions to federal candidates. It's (kind of... sort of) akin to the successful arguments made decades ago in MCFL. If that rings a bell, that case opened things up for certain types of ideological 501(c)(4) organizations to make independent expenditures.

In any event, pay attention to this one if you want your nonprofit to be able to engage in more election-related advocacy. It's got a lot of election lawyers taking notice.

OC Church under IRS investigation

Memo to all 501(c)(3)s (especially churches)... yes, the head of your organization can endorse a candidate. Just be sure to not use the organization letterhead when you do it... it matters (apparently) to the IRS.

As I write this, I'm thinking about the paradox in IRS rules at times... in what I like to call the "hang a lantern on your problem" rule, the IRS has no problem when an endorsing person is listed with their organizational affiliation along with an asterisk that leads the reader to a disclaimer stating "organizational affiliation listed for identification purposes only." (IRS FS-2006-17) Contrast that with this instance where clear organizational identification (the letterhead) seems to be leading this church into an investigation even though the pastor is suggesting that the letter underscored a personal endorsement. I think you can distinguish the two endorsement scenarios, but it underscores a continuing problem for all 501(c)(3)s out there: the facts and circumstances analysis is so subjective that it's sometimes difficult to know where the line is between legal and illegal activity.

Nonprofits and elections

BoardSource has just released a new article by my former boss, John Pomeranz entitled
Staying Legal While Engaging in Election-Related Activities. It's free for BoardSource members, but you can check out a free portion of the article here.

Since it's a timely subject, be sure to check out the latest in the Nonprofit Law Podcast's Beyond the Podcast series... Nonprofits and Elections: Balancing Personal Versus Organizational Activity. It's an on-demand video you can get through the NLP site here.

Nonprofit Law Podcast #31: Do we have to file a 990?

Nonprofit Law Podcast #31 is live, covering whether your organization needs to file a Form 990 this year.

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When the IRS will audit your nonprofit

The IRS recently released Fact Sheet 2008-14, in which it spelled out when your nonprofit might be considered for an examination of its activities:

To determine which organizations should be targeted, experienced specialists analyze information from Forms 990 and other sources. This analysis will usually result in the selection of a group of returns for examination or compliance check. EO also reviews media reports and receives complaints from the general public and Congress about potential non-compliance by exempt organizations. After confirming the information, and when appropriate, these organizations may be selected for examination or to receive a compliance check.

This isn't terribly earth-shattering news... basically the IRS says that it looks at 990s, media reports and complaints, which most in the community already assumed. It's good to have it documented officially, however.