The due diligence process in considering a merger or affiliation is serious, but don’t let the lawyers use it to tell you why it shouldn’t be done. Lawyers are trained to tell you the risks. They will seldom provide the vision.
A charity that does not spend at least a portion of its time in advocacy work is probably not doing its job as well as it should.
Therefore, charities must understand the tax law definitions of "lobbying" and "legislation." There is a vast amount of advocacy that can be carried on without approaching tax limitations. Private foundations can support most of it, and preparing an application with foundation rules in mind can make it easier to get funded.
Tax law is not the only issue, however. Beware of federal and state lobbying registration requirements, with different definitions, and different reporting.
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Despite the political grandstanding that erupted after the disclosure that IRS determinations staff and attorneys had asked some improper questions of Tea Party and other potentially political organizations applying for 501(c)(4) social welfare exempt status, there has been no evidence that the IRS or the Obama Administration was targeting political foes.
When one reads the Treasury Inspector General’s Report, press reports of staff statements to the House Committee on Oversight and Government Reform, and comments of former IRS officials, one comes away with a vision of front line staff struggling to try to determine who can qualify as a (c)(4) organization when there is no clear definition to work with.
It isn’t as easy as it once was to claim a charitable contribution deduction for a gift to charity.
Because of perceived abuses by taxpayers claiming inflated deductions without adequate justification, Congress and the Internal Revenue Service have tightened the rules over the last several decades.
The rules apply to the taxpayers seeking the deduction. In most cases, they do not directly apply to the charities receiving the gifts and do not impose penalties on charities, but charities that want to assist their donors and receive additional gifts will want to be sure that the donors are in position to claim their deductions properly.
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The 11th Circuit Court of Appeals has reversed a trial court decision and allowed a black rights nonprofit to sue for violation of the First and 14th Amendments when Pinellas County revoked an authorized grant and denied a second grant of Covid-relief funds. It has found that the African People’s Education and Defense Fund (“APEDF”) has alleged sufficient facts to survive a motion to dismiss.
A Pennsylvania charity seeking real estate tax exemption for a multi-parcel facility does not need to show that the activity on each parcel of the facility would separately meet the five-part test for charitable use, the Commonwealth Court has recently affirmed. If the organization itself meets the definition of an institution of purely public charity eligible for exemption, it merely has to show that the parcel is actually and regularly used for the purposes of the organization.
Massachusetts’ charitable immunity law that immunizes charities against tort liability in excess of $20,000 does not protect a charity from having to pay a plaintiffs’ legal fees to enforce a civil contempt citation when the defendants failed to comply with court orders, the Supreme Judicial Court of Massachusetts has ruled.
New Jersey has had a tortured history with the judicially created doctrine of charitable immunity.
According to the state Supreme Court, the state Supreme Court, like courts or legislatures of most states in the country, rejected the theory of charitable immunity, which holds that people who give to charitable organizations should not have those funds diverted to pay for judgments for people injured by the organization. The Supreme Court reversed its prior acceptance of charitable immunity in a series of cases in 1958 and abolished the rule for the state.
