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Independent Sector Proposes Charity Reforms In Interim Report to Senate Finance Committee

Panel promises additional recommendations later; Grassley praises effort as beneficial

The Panel on the Nonprofit Sector convened by the Independent Sector held a joint appearance with Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and released the Panel’s first set of recommendations on March 1, with Grassley praising the effort as helpful to the Committee.

The report covers much of the same ground as earlier comment drafts (See Nonprofit Issues, February 16-28, 2005), but leaves some issues unresolved and promises additional recommendations later in other areas.

The Interim Report covers 15 specific sets of recommendations for improving accountability and governance of charities.

Finance Committee Holds Another Hearing On Charity Governance, Ways to Cut Tax Gap

Sen. Grassley looks at contribution deductions as means to slice away at difference between taxes due and taxes paid

The Senate Finance Committee’s review of charitable activities, which started primarily as a review of ways to prevent charitable abuses, is shifting toward a search for revenue to slice away at the nation’s tax gap, the $300 billion difference between what taxpayers should be paying and what they are actually paying each year.

Senate Proposes Two Year Contribution Breaks, Permanent Limits on Deductions, DAFs and SOs

Donor Advised Funds and Supporting Organizations would face new restrictions to make them more “accountable”

After nearly a year and a half of Congressional controversy about perceived charity abuses, a discussion which morphed during the session into ideas to raise revenue from the charitable sector, the Senate has included a few tax breaks and a lot of regulation in the Tax Relief Act of 2005, passed late at night before the Thanksgiving recess. (S.B. 2020.) In addition to new rules for donor advised funds and supporting organizations, the Senate would impose a series of new requirements for claims of deduction for personal property

The major incentives for charitable giving, previously embodied in various versions of the CARE Act, include permission for all taxpayers to deduct charitable contributions in excess of $210 per year ($420 for joint filers), and an IRA rollover provision for taxpayers over 70 1/2. Both breaks would be effective only for the years 2006 and 2007.

Congress Passes Charitable Reforms, Approves Limited Giving Incentives

Big changes made for DAFs, SOs and general accountability; IRA rollover allowed for some direct gifts to charity

Congress has passed the most sweeping set of changes to the rules governing charities since 1969 (H.R. 4), enacting a legislative definition and series of regulations for donor advised funds, imposing new limitations on supporting organizations and generally tightening a series of rules to improve the “accountability” of charities and donors. One of the provisions calls for recapture of deductions for appreciated personal property if the charity does not use the property in its charitable program. The bill has also enacted some incentives for charitable giving, most of which are operative only until the end of 2007.

Act 55 Defines 'Charity' Eligible for Exemption

Compromise bill allows small business to seek to enjoin unrelated commercial activity, imposes new financial accountability requirements

Although the state Supreme Court has relieved the pressure on hospitals and colleges by recent favorable decisions, this Act will be particularly beneficial to smaller charities in their negotiations with municipalities--if the Court accepts a legislative attempt to define the state Constitution. The "sleeper" in the Act, however, is the unfair competition provision, which will be utilized by small business to threaten charities whether or not the Court accepts the other provisions of the Act.

Permanently Restricted Funds Should Be Designated As Permanently Restricted on Pa. Financial Statements

Accountants have been confused by state’s adoption of statute which permits trustees to set income as a percentage of fund value

More than five years after the Pennsylvania legislature passed Act 141 of 1998 giving charitable trustees the right to adopt a unitrust-type spending policy to determine distributions from endowments, there is still no generally accepted consensus on the classification of such funds or the presentation of gains or losses in the funds under generally accepted accounting principles.

What May You Ask in Employment Interview?

Nonprofits can reduce the risk of liability by avoiding questions that suggest illegal discrimination in hiring.

Claims of employment discrimination are among the leading causes of lawsuits against nonprofits. Some of that litigation could be avoided by following some simple rules about asking questions in pre-employment interviews.

The Employment Law Department of the Philadelphia law firm of Montgomery, McCracken, Walker & Rhoads, LLP, has put together a summary of some general legal requirements which apply to any inquiry, whether written or oral. (List included in article.)

Employment Record-Keeping Requirements

Federal statutes set forth employment-related records which must be preserved and the period for retention.

This Ready Reference Page covers:

The records which must be retained and the period for retention for each of the following statutes:

Title VII, Civil Rights Act of 1964
Title VII; ADA
Title VII
Fair Labor Standards Act
Family & Medical Leave Act of 1993
Immigration Reform and Control Act
Occupational Safety and Health Act
Employee Retirement Income Security Act ("ERISA")
Department of Labor
Age Discrimination in Employment Act ("ADEA")

Classify: Employee or Independent Contractor?

The IRS has listed 20 factors in determining whether a worker is an employee or an independent contractor, but, in the final analysis, control is the key

When the IRS audits a nonprofit organization, one of the first things it looks at are the employment records and the classification of any independent contractors. If the organization has not been withholding income taxes and FICA payments for those the IRS considers to be employees, it can be a costly experience for the organization, and potential personal liability for the "responsible persons" who failed to withhold. Although it may seem like a real bother, err on the side of withholding.

Six Steps for Effective Internal Investigations

The risks of legal action by a complainant, the accused, or a third party can be reduced by a thorough and effective inquiry and convincing documentation of the process

Nonprofit managers are often called upon to conduct investigations of possible employee misconduct. The issues include theft of property, embezzlement, sabotage, fighting, drug or alcohol use, theft of trade secrets, sexual or racial harassment, and acceptance of bribes.

 

An effective investigation can be essential to defending a claim brought by a former employee, such as a discrimination, harassment, wrongful discharge, or defamation claim.

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