Non-Profit Legal Matters

The Blog of the Law Firm for Non-Profits®

Proposed SUN Act Requires Increased Nonprofit Transparency

Senator Jon Tester (D-Mont.) recently introduced the Sunlight for Unaccountable Nonprofits Act (The SUN Act), which would require that already public information about nonprofits (specifically, that included on their annual information returns) be made available to the public at no charge in an open, searchable format. The Act specifically would require the information provided be “easy to find, access, reuse, and download in bulk.”

The SUN Act would also require disclosure of large donors (those who give $5,000 or more) to exempt organizations engaging in political activities. This would include an organization that indicates on its exemption application that it intends to spend money attempting to influence the selection, nomination, election or appointment of a person to a public office or that states on an information return that it has participated in, or intervened in, a political campaign on behalf of, or in opposition to, any candidate for public office.

Opponents of the SUN Act are concerned that such a disclosure requirement would chill free speech. But supporters of the Act point to the growing trend of “dark money” support of political campaigns, primarily meaning money from tax-exempt social welfare organizations that are not required to identify their donors.

The Act has been assigned to a congressional committee, which will consider it before possibly sending it on to the House or Senate as a whole.

Do you think the Act goes too far or not far enough with respect to nonprofit transparency?

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What’s in a Name?

Maybe a better question is, What is a name worth? If you’re the family of Avery Fisher and New York’s Lincoln Center, a name is worth at least $15 million … and perhaps $100 million or more.

For years, Lincoln Center has wanted to renovate Avery Fisher Hall, which is infamous for its subpar acoustics and poor sight lines. The project is expected to cost about a half billion dollars. Lincoln Center believes that an angel donor will be needed to kickstart the project, and that the Angel donor will want naming rights for the hall. As might be expected, Avery Fisher’s family has threatened to sue if Avery Fisher Hall is renamed.

Avery Fisher was an electronic pioneer whose $10.5 million donation allowed Lincoln Center to renovate the New York Symphony’s concert hall, which now bears his name. So why has Lincoln Center agreed to pay Fisher’s family $15 million? To give up its claim on the name of the hall. Indeed, Lincoln Center expects that the naming rights can fetch a donation of $100 million or more, the amount donated by David H. Koch to the New York State Theater, now known as the David H. Koch Theater.

Does it surprise you that Lincoln Center is willing to pay the Fisher family more than the amount Avery Fisher donated in the first place? It certainly has surprised the nonprofit legal community. The details of the deal have yet to be released. Perhaps the payment is a settlement to the Fisher family in order to avoid litigation. Indeed, threatened lawsuits in the last several years against universities that tore down or renamed buildings funded with donations from as far back as the Civil War era have resulted in major payouts by the universities.

Nowadays, donations with naming rights and other rights to donors come with detailed contracts that specify the period in which the donee may not change the name and the rights the donor or successors receive if the name is changed or the building is damaged.

If you’re concerned about a donation that includes naming rights or other perks for the donor, whether you are a donor or the recipient nonprofit, please contact us. The Law Firm for Non-Profits has deep experience in this area.

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IRS Top Tips for Year-End Charitable Donations

IRS tipsAs individuals and businesses get ready to make their year-end charitable donations, the IRS provides its top tips about giving:

1. If you are making a charitable contribution of clothing and household items (e.g., furniture, furnishings, electronics), they must generally be in good used condition or better to be tax-deductible. Donors must get written acknowledgments from charities for all gifts worth $250 or more, which must include a description of the items contributed.

2. A donor must have a bank record or a written statement from the charity to which it is contributing in order to deduct any monetary donation, no matter the amount. A written statement or acknowledgment must include the name of the charity, the date of the contribution, and the amount of the contribution.

3. Contributions are deductible in the year they are made. Donations by credit card are deductible in the year charged, not necessarily in the year paid. Checks are deductible in the year mailed.

4. Always check that a charity is eligible. Only donations to eligible organizations are tax-deductible. The IRS Select Check is a great place to start your search.

The IRS provides more year-end tax tips here. Happy donating!


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One Week Until Giving Tuesday!

Giving TuesdayRemember when we told you about Giving Tuesday last year? By now the familiar #GivingTuesday hashtag has probably started reemerging on all your favorite social media sites as it is being held on December 2, 2014. Over the Thanksgiving holiday, Giving Tuesday wants you to remember the event as an alternative to shopping events such as Black Friday and Cyber Monday.

According to Kathy Calvin, President and CEO of United Nations Foundation, one of the founders of the event, in just three years, “it has become one of the largest initiatives dedicated to giving back.” It has more than 13,000 partners around the world organizing campaigns to “get out the give.” The event encourages each person to “find a way for your family, your community, your company or your organization to come together to give something more.”

With just one week to go, Giving Tuesday is providing a free webinar on best practices to measure the impact of your Giving Tuesday campaign and a twitter conversation with the Family Dinner Project, a nonprofit focused on educating the public about the benefits of family dinners. Forbes is also broadcasting a live discussion with Kathy Calvin about Giving Tuesday.

Do you have a campaign planned for Giving Tuesday? If so, let us know what it is in the comments section below!

Have a happy and healthy Thanksgiving!

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GuideStar Looks Toward Second Revolution

GuideStarAfter 20 years in business, GuideStar wants a facelift. The nonprofit information database (which you probably know as the place to find an organization’s Form 990) wants to execute a new strategic plan that it calls Guidestar 2020. GuideStar calls it the organization’s second revolution: “nonprofit transparency that drives nonprofit effectiveness.”

The new plan includes the development of new data innovation, collection, and distribution tools. The tools are aimed at making the website more effective for both nonprofits and for users of the site. One tool would enable nonprofits to create one profile to use across multiple online-giving platforms. Another would enable users of GuideStar to search nonprofits by their causes.

GuideStar also hopes to create a tool that will allow nonprofits to report program outcomes so that users could get a better picture of each nonprofit’s effectiveness.

GuideStar currently has almost 3 million registered users and information on 1.5 million 501(c)(3) organizations. 98% of its website visitors access basic information on nonprofits for free.

GuideStar chief executive Jacob Harold says the organization wants to raise $10 million to implement its strategic plan. The Bill and Melinda Gates Foundation has pledged $3 million over three years to get the revolution started. The foundation’s senior program officer, Victoria Vrana, describes GuideStar as one of the few central sources of information on nonprofits and acknowledges that updating the information on the site will be an enormous task.

How often do you use GuideStar?

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UnKoch My Campus

Students at almost 30 colleges are holding protests, demanding: “UnKoch My Campus!” They want more transparency from their colleges about the academic influence they feel billionaire brothers Charles and David Koch have “bought” with their sizable donations to the schools. Since 2005, the brothers have donated nearly $50 million to 254 colleges nationwide according to an interactive database published by Greenpeace.

The largest college recipient so far is George Mason University, which has received $24 million from Koch organizations since 2005. Student protestors at the university are demanding to know what departments and programs have received that funding.

The university’s president maintains that donors are not allowed to sway academic decisions.

Students at schools supported by the Koch brothers have a reason to be suspicious. There is a history of Koch-backed colleges accepting requirements of academic influence that come along with the money. In 2011, Florida State University revealed that a donation to the university’s economics department came with a donor-approved advisory board that could veto hiring decisions.

Most of the Koch brother’s donations to colleges are for hiring professors, building economic research centers, or supporting research about libertarian politics. Although college officials could certainly reject a donation if it doesn’t further the educational purposes of the school, according to Forbes, no school has yet publicly turned down a Koch gift.

Has your organization been offered a donation from the Koch brothers? Did it come without explicit or implicit requirements? If your organization was offered a donation with requirements such as these – whether from the Koch brothers or otherwise – would it accept it?

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British Officials Fear Terrorists Hijacking Charities

The Charity Commission, a British government watchdog for charities, is formally investigating 86 British aid organizations to determine whether their charitable funds have been hijacked by terrorists in Iraq and Syria to finance military operations. The Commission fears that extremists are smuggling from the aid groups when the groups are distributing donated cash and equipment in the region.

The number of terrorism-related investigations has almost doubled since February amid growing concerns that charities operating in Iraq and Syria are potential targets for extremists included ISIS. William Shawcross, the chair of the Commission, explained: “Even if extremist and terrorist abuse is rare, which it is, when it happens it does huge damage to public trust in charities. That’s why I take it very seriously.”

The investigations also come at a time when calls for action to cut off terrorist financing are increasingly popular, including The Telegraph’s Stop the Funding of Terror campaign. Globally, experts fear that millions of dollars of charitable donations have already been used to buy weapons and supplies for terrorists in Iraq and Syria.

The Charity Commission has already taken action against charities linked to extremists, with the most serious facing terrorism prosecutions in court. 8 million pounds (about $12,642,000) has recently been given to the Commission to strengthen its ability to tackle abuse of charities. Shawcross is especially concerned about newer charities that are less experienced and often more vulnerable to exploitation.

U.S. charitable organizations are required to determine whether potential international grantees are on terrorist watch lists, among other safeguards. Breaking these rules can lead to criminal charges. If your organization makes grants overseas, do you check grantees and their principles against known terrorist lists?

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Nonprofits Subject to Email Phishing Attacks

phishingOn October 29, many received an email from Christopher Oechsli, president of Atlantic Philanthropies, saying the New York foundation was planning on randomly giving away $1 million. The email stated that recipients should consider themselves to be “lucky individuals.”

Unfortunately for these email recipients, the foundation, which announced plans to stop its operations by 2020, was not just blindly getting rid of its assets. Instead, the foundation was the victim of an email phishing attack, which uses well-known names to trick email recipients into providing personal information such as their social security or bank account numbers. The foundation has been attacked seven times in the past 18 months.

Luckily the foundation was tipped off by some email recipients who contacted the foundation to ask whether the emails were legitimate. The foundation immediately posted a warning on its website regarding the fake emails. The foundation also asked recipients of the phishing emails to report them.

The Anti-Phishing Working Group, a worldwide coalition that aims to unify the global response to cybercrime, reports that 6,271 phishing attacks in the first half of 2014 targeted the “.org” Internet domain name used by nonprofits. World Vision, a nonprofit organization dedicated to tackling the causes of poverty and injustice, has been a consistent victim of phishing attacks. The organization has been attacked at least monthly with attacks spiking during high-profile disasters. The emails have varied, including offering employment or soliciting donations. World Vision recommends that potential donors type the organization’s URL into their web browser to ensure that donations end up in the right place.

Has your organization been the victim of a phishing attack? If so, share with us how it occurred and what steps were taken to combat future phishing attacks.

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Red Cross Responds to Mismanagement Reports

We told you earlier this week about a joint investigation by NPR and ProPublica into the mismanagement of the American Red Cross’ responses to Hurricanes Isaac and Sandy in 2012. In an interview with PBS NewsHour, Suzy DeFrancis, Chief Public Affairs Officer for the Red Cross, responded to that investigation.

DeFrancis explained that the investigation was one-sided, failing to show the good that the Red Cross did during the hurricane responses. She noted that the organization distributed 17.5 million meals and snacks and 7 million relief items such as gloves and hats. DeFrancis also stated that the Red Cross deployed 17,000 people for the response, most of them being volunteers.

In response to the allegations that Red Cross vehicles were driven around empty for show or were otherwise utilized for media purposes, DeFrancis explained that only disaster responders directed the trucks and that all trucks were full of food. As the Chief Public Affairs Officer she explained that she had firsthand knowledge that public relations staff could not tell any emergency response vehicles where to go.

DeFrancis also responded to allegations of wasted food. She said that although some food did go to waste, there was nowhere near the amount of waste cited in the investigative report.

DeFrancis admitted that the organization learned some lessons from the responses, noting that the Red Cross hasn’t been a response organization for 130 years without making changes to get better.

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Media Declares Botched Red Cross Responses

After two major hurricanes hit the east coast in 2012, many responded in a typical fashion – by donating to the American Red Cross. Indeed, the Red Cross received hundreds of millions of dollars in donations to assist with the storm relief. Did the donations go to waste?

According to a joint investigation by ProPublica and NPR, the Red Cross botched its emergency responses to both hurricanes — first to Hurricane Isaac and then to Superstorm Sandy two months later. The investigative reports cite internal Red Cross documents, emails, and interviews with two Red Cross staff members on the ground during the hurricane and reveal mismanaged volunteers and vehicles and supplies diverted for public relations purposes. One Red Cross driver admitted to the investigators that the organization’s supervisors ordered dozens of trucks usually used to deliver aid to be driven around nearly empty just for show.

The reports also show that the Red Cross lacked basic supplies to distribute to victims after the storms. Even when they did have the supplies, they had trouble connecting the supplies to the victims, in one case being forced to throw away tens of thousands of meals.

The Red Cross has denied allocating resources for public relations purposes and defended the charity’s overall responses to the storms. In an official statement to ProPublica and NPR the organization wrote: “While it’s impossible to meet every need in the first chaotic hours and days of a disaster, we are proud that we were able to provide millions of people with hot meals, shelter, relief supplies, and financial support during the 2012 hurricanes.”

These botched jobs follow closely on the heels of the financial mismanagement allegations the organization endured after September 11 and Hurricane Katrina. In that instance a series of the Red Cross’ chief executives were forced to resign and Congress forced an overhaul of the organization.

Will you still donate to the Red Cross? Do you think the Red Cross would improve if there was a competitor charity providing effective disaster relief?

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