Tag Archives: compliance

News From Your Internal Revenue Service

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The United States Internal Revenue Service (IRS) Building is seen in Washington on September 20, 2010. UPI/Kevin Dietsch Photo via Newscom

The IRS hosts free one-day seminars throughout the country for small and mid-size nonprofits to learn how to “keep their tax-exempt status and comply with tax obligations.”

The next one is in Phoenix on December 7 and 8, and it’s designed for “administrators or volunteers who are responsible for an organization’s tax compliance, as well as those interested in careers in the nonprofit sector.”

If you go, treat yourself to an overnight, a meal, or at least a drink, at the Arizona Biltmore. That’s my own endorsement. It’s not part of the IRS announcement. Wouldn’t it be a deductible business expense?

Would you like to see a draft of the 2010 Form 990? Here’s a copy from IRS. Spoiler alert >>>>>>>> Part VI, question 17, is still a Charity Registration disclosure.

I get this info from the Service’s Exempt Organization Update. You can get these emailed to you by subscribing.

Your Charity as Creditor: Red Flags Rule

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The Federal Trade Commission has a delightful new rule, the Red Flags Rule (link is to a 17 page .pdf from the FTC), which may draw your nonprofit into its regulatory web.

Your involuntary participation hinges on the law’s definition of “creditor” and the Red Flags Rule clearly announces that charities can fall within the law’s reach. This has me thinking about red flag football as a kid, when I was routinely forced into involuntary non-participation, after neither team picked me as a player. In an especially low point in my childhood, I was the football.

The Red Flags Rule compels organizations of all types to identify those business processes (red flags) that make them vulnerable to identity theft. Enforcement begins in December of this year.

Charity Registration Relied On Differently

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registration sign

I’ve been collecting examples of how different types of organizations rely on Charity Registration to further their work. Mostly, compliance with the registration laws, which vary from state to state, is cited as a mechanism to protect the public from fraudulent nonprofits. That’s the avowed purpose of these regulations, though I often question whether they’re fulfilling their purpose.

The most common citation to Charity Registration laws in the alerts I get, is from the Better Business Bureau’s many offices. Most recently, playing off the Buffett/Gates challenge, BBB national suggests you can give like a billionaire if you do proper research and due diligence. Your transformation includes, “Check the organization out with . . . the local Charity Registration office.” Here’s a local BBB affiliate going into detail about its state’s registration statute, then correcting its post after the attorney general’s office read it. (They could have saved themselves embarrassment if they’d bought my ebook.)

The Better Business Bureau folks aren’t the only ones looking out for us. The press occasionally cites registration laws similarly. The Miami Herald gives advice to “Protect Yourself Against Phony Charities.” A Lincoln, NE accounting firm also wants you to stay safe from fraud. And charities want to keep you away from their unscrupulous counterparts. (Go to the bottom of the page to the KNOW YOUR CHARITY section, item number 6.)

Sometimes it’s a charity making mandatory disclosures, but this is much rarer than it should be. The American Cancer Society’s compliance page reveals that what’s required isn’t so simple. (Maybe my alerts don’t pick up similar pages and maybe other disclosures are in print.) ACS clearly takes registration seriously.

Freedom Riders USA used their Connecticut registration number in a press release announcing their recent fundraising run.

That’s something I hardly ever see in the U.S. and see all the time from English charities. That’s because much of the U.K. has a centralized registration system, under the Charity Commission for England and Wales, so there is one set of rules, and it includes disclosure of the charity registration number. The English (and Welsh) know to look for the standardised number. That goes a long way to insuring real protection from fraud.

Speaking on October 22nd at the 2nd Long Island Not-for-Profit Fiscal Conference

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Click on the image for event details

I’ll speak about Charity Registration in the afternoon session #2 at the 2nd Long Island Not-for-Profit Fiscal Conference.

What’s great about this event is they promise to have speakers who can “provide the expertise you need in a language you can understand.” I always strive to do that.

If you’re in the NYC or Long Island area and work with a nonprofit that needs more information on Charity Registration, this is a great event for you to attend.

Here is the conference website and registration form with speaker bios where you can get the schedule of speakers and events.

The 2nd Long Island Not-for-Profit Fiscal Conference – click on the link or the image to get more information.

I hope to see you there.

Email Solicitations Have Consequences

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Recently two friends emailed me about Catalog Choice’s $20,000 Paperless Choice Digital Fundraising Challenge. It’s a contest to encourage nonprofits away from paper solicitations to “successful & replicable digital fundraising campaigns.” Including email. I applaud the idea, co-sponsored by the Overbrook Foundation.

The nonprofits that nominate their email fundraising campaigns need to know that in many states, email appeals are solicitations, and solicitations trigger Charity Registration requirements. If the soliciting nonprofit isn’t registered with state authorities, then its solicitations are illegal. In a lot of states that means criminal or civil fines. Serious consequences.

Email fundraising is a solicitation in states like Arizona, California, Connecticut, D.C. (not a state, but has abundant nonprofit registration requirements), Florida, Illinois, Massachusetts, New Jersey, New Mexico, New York and Virginia.

Open mailbox and keyboard

Like so much of the Charity Registration morass, penalties vary state-by-state. Arizona calls noncompliance a Class 1 misdemeanor, with fine up to $2,500 and jail up to 60 days. (I doubt anyone is going to prison over this.) And Arizona has scant exemptions, only for political committees and parties. That means nearly every fundraising email landing there demands registration with the secretary of state.

California, like D.C., is a tough place to comply in. It seems like the attorney general’s office (registration in most states is with the secretary of state or A.G.) went out of its way to make the process confusing, time consuming and expensive. But, the fines are low in the Golden State: only $25 per month. The District of Columbia has civil fines and fees. Florida, an enormously important fundraising state with its hefty crop of retirees, offers the narrowest of exemption categories. In Florida, scofflaws face a 3rd degree felony for goodness sake, with fines up to $5,000. (The jail time is measured in years.)

If your nonprofit sends email solicitations, you might look at Catalog Choice’s contest. You might also look at the Charity Registration requirements in states where those emails land.

(I signed up with Catalog Choice. It’s free and nonprofit. If they relieve me of the Smith+Noble catalogs that I’ve tried about 8 times over 3 or 4 years to unsubscribe from, I’ll donate $50.)