Monday, January 17, 2011

Upcoming: 3 ABA Webinars on Nonprofit Legal Issues

The ABA Business Law Section's Committee on Nonprofit Organizations, in conjunction with the Section of Taxation's Exempt Organizations Committee, is sponsoring a three part webinar series on nonprofit legal issues. This series is intended for lawyers whose practice does not focus on nonprofits but who either represent public charitable nonprofits or sit on nonprofit boards. It also is a great refresher for lawyers who regularly work in the nonprofit area. Each program will provide practical advice for addressing important nonprofit legal issues.

The topics are as follows: Nonprofit Formation Issues (January 19), Tax Issues for Nonprofits (January 26) and Nonprofit Governance Issues (February 2).

Lisa Runquist will speak on the Nonprofit Formation program on January 19 and  on the Nonprofit Governance program on February 2.

IRS Increases Form 990 Filing Threshold; California, Not Yet...

Some exempt organizations that previously were required to file Form 990/990-EZ may now file the short "e-postcard" Form 990-N. The IRS announced last week that, pursuant to Revenue Procedure 2011-15 (pdf), small exempt organizations whose gross receipts are not normally more than $50,000 are relieved from the requirement for filing Form 990 (which includes the Form 990-EZ). The previous filing threshold had been $25,000. Regardless of their gross receipts, all supporting organizations must file Form 990 (or 990-EZ), all private foundations must file a Form 990-PF, and churches and their related entities are not required to file informational returns.

While this is a welcome change, insofar as it reduces the filing burden for many organizations, it may create some confusion for California exempt organizations, since the filing threshold for the Form FTB199 is still set by law at $25,000.  It should also be noted that, effective for tax years beginning on or after January 1, 2010, small tax-exempt organizations in California with gross receipts normally equal to or less than $25,000 must file FTB 199N, the California e-Postcard similar to Form 990-N.

Thus, if an organization normally has gross receipts less than $25, 000, it will be able to file both Form 990-N and Form 199N. However, if it has gross receipts less than $50,000 and more than $25,000, it may file Form 990-N, however it will still be required to file the full Form 199.  Since any organization may file a complete Form 990, organizations in this situation may decide to file both Form 990 (or Form 990-EZ) and Form 199.

Sunday, January 9, 2011

Grassley Staff Reports of Media-Based Ministries

On January 6, 2011, the staff of Senator Chuck Grassley issued several reports regarding six "media-based ministries", including those run by Joyce Meyer, Benny Hinn, Creflo Dollar,  Eddie Long, Paula White, and Kenneth Copeland.  These reports are the result of an investigation of these churches begun in November 2007, when Senator Chuck Grassley issued letters of inquiry to them in response to reports he had received that the leaders of these organizations had been engaging in some extravagant spending, such as buying a private jet, driving a Rolls Royce or Bentley, or installing a $23,000 commode. Senator Grassley expressed concern that perhaps the tax-deductible contributions to these organizations were being misused to support luxury lifestyles. The senator requested information from these organizations regarding the compensation of pastors and other individuals associated with these churches.  Two of the organizations, Joyce Meyer and Pastor Hinn, complied fully with Senator Grassley's request. The remaining four either did not respond, or provided incomplete responses. The staff summary memo, together with reports on each of the individual ministries and correspondence between Senator Grassley and the Evangelical Council for Financial Accountability (ECFA) are available on the Senate Finance Committee website.

These reports are likely to initiate further inquiry and could lead to new legislation with regard to the federal oversight of not just of religious and church entities, but of all 501(c)(3) tax-exempt organization.  The staff summary memo raises several issues in regard to reporting and accountability of churches, as well as the standards applicable to all charitable organizations. 

In particular, Appendix C of the staff summary memorandum (pdf)  raises the following issues:
  • Whether there should be a federal advisory committee for churches and religious organizations.
  • Whether the parsonage allowance under IRC 107 should be limited to a single residence or a specific dollar amount, or whether it should be limited to a more select group of individuals.
  • Whether churches should be required to make some kind of informational return filing requirement. 
  • And whether the "church tax inquiry" protections of IRC 7611 should be removed in regard to excess benefit transactions.
Appendix D raises several issues which impact all 501(c)(3) organizations, including:
  • Whether all 501(c)(3) organizations must include specific language in their organizational documents prohibiting engaging in acts of self-dealing (currently only private foundations are required to do so)
  • Whether a penalty tax should be imposed on charitable entities where there has been an excess benefit transaction. 
  • Whether the rebuttable presumption of reasonableness for transactions should be replaced with minimum standards of due diligence. 
  • Whether guidelines should be developed for compensation studies used to set reasonable compensation under the rebuttable presumption standards. 
  • And whether the practices of "love offerings"should be excluded from gross income of a recipient when a charitable organization has facilitated the offering. (A practice mainly seen in religious organizations)
Finally, Appendix E of the report addresses whether the electioneering prohibition should be eliminated or circumscribed.  It is worth noting that political activity was not a significant issue raised in regard to the 6 media-based ministries. Nevertheless, the staff proposes either replacing the prohibition with a limitation similar to the lobbying restrictions on 501(c)(3) organizations, or retaining the prohibition, but defining "participate in" and "intervene in" a political campaign in terms of federal election law.

The individual reports of the 6 media-based ministries suggest that at least some are taking advantage of their religious and a tax-exempt status in order to provide personal benefits to the individuals who are running them.  As part of the process and in order to initiate further action, Senator Grassley has formally asked the ECFA to consider the issues raised by his staff and spearhead a discussion about how to address those issues.  ECFA has begun to establish an independent commission to review and provide input on major accountability and policy issues affecting church and religious organizations.

Monday, January 3, 2011

Thursday, 1/6/2011: Phone Conference: Practical Considerations on Nonprofit Governance

As part of the California State Bar's Cyber Institute, Lisa Runquist will present a telephone seminar discussing the impact that recent developments in the IRS and Attorney General's oversight of nonprofit organizations have had on nonprofit governance. From the description:
The IRS, as well as the Attorney General, are now actively involved in the area of nonprofit governance. As a result, it is imperative that nonprofit leaders take an active role in reviewing, restructuring if necessary, and implementing a corporate governance structure that will allow their organization to thrive in this new environment. We will discuss such issues as: What do you, as a leader need to know in order to make the correct decisions for your organization? What policies does your organization need to adopt or update? What should be included in these policies? How will each policy be implemented? Are there any issues with how your nonprofit is currently organized that might trigger an IRS audit? Will your organization`s answers to the new Form 990 impact the charitable giving to your nonprofit organization.
Although directed at California attorneys who represent nonprofit organizations (MCLE credit is available), non-attorneys and out-of-state practitioners will also find the information useful and relevant and are welcome to attend. Thursday, January 6, 2011, 11:30 a.m. - 12:30 p.m. Pacific Time