The Form 990 tax information return for most tax-exempt organizations is the organization’s most important public relations document.  This is especially true for public charities.  More important than a group’s fancy annual report that is sent to a couple thousand people, perused briefly and usually trashed shortly thereafter, the Form 990 provides a huge amount of information that is instantly available on the Internet at any moment to anyone in the world who has access to a computer.

The Senate Finance Committee released a 19-page staff “white paper” prior to its June 22 hearing outlining a series of proposals that would significantly increase governmental regulation of charities.

Although Committee Chair Chuck Grassley (R-Iowa) said the discussion paper is intended only to start a “dialogue” on the issues, if significantly implemented, the proposals could extend federal regulation vastly beyond federal tax law and into areas of governance and fiduciary duty traditionally left to the states. It also includes recommendations for more state and federal cooperation in enforcement proceedings.

The paper, self-described as “a work in progress,” is divided into 9 sections, including proposals dealing with exempt status, expanding self-dealing rules, limiting administrative expenses, improving Form 990 reporting, federal governance rules.

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.

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.

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 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.

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.

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.

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.)

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")