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 federal District Court in Rhode Island (Chief Judge John J. McConnell, Jr.) has issued a temporary restraining order to force the Trump Administration to make funds available for the Supplemental Nutrition Assistance Program (”SNAP”) despite the governmental shutdown.
The Tax Court has finalized the excess benefits taxes and penalties due from a former Pennsylvania state senator who was previously convicted criminally on 137 counts of fraud, obstruction of justice and willfully aiding or assisting in filing false tax returns. The excess benefit taxes were due on benefits he had improperly obtained from a charity for which he was considered a “disqualified person.” (See Nonprofit Issues®, Vol. XXXI, No. 3).
The federal District Court in Massachusetts (William G. Young), in “perhaps the most important [case] ever to fall within the jurisdiction of this district court,” has held that non-citizen students lawfully present in the United States have the same free speech rights as American citizens and cannot be arrested and deported because of pro-Palestinian or anti-Israel speech or association.
A Magistrate Judge in the federal District Court of Oregon has recommended that a nonprofit organization be permitted to continue its suit against two former employees and their new business entity for misusing the nonprofit’s donor lists and other trade secrets and disclosing confidential information obtained while they worked for the organization. The judge has rejected motions to dismiss claims for misappropriation of trade secrets, intentional interference with economic relationships, defamation, and breach of the duty of loyalty.
