The Internal Revenue Service (IRS) is being sued by a former congressional candidate who alleges that the agency wrongly allowed a so-called "dark money" political organization to operate as a tax-exempt entity.
Dr. David Gill is a Democrat who unsuccessfully ran to represent Illinois' 13th district in the 2012 elections. According to a report on The Huffington Post, Gill and the Citizens for Responsibility and Ethics in Washington (CREW) are arguing that the IRS should not have allowed the American Action Network (AAN) to spend $2.6 million in ads against Gill while at the same time enjoying tax-exempt status.
Gill and CREW allege that the agency misinterpreted tax laws when it released regulations for social welfare nonprofits. IRS guidelines state that these organizations must be "primarily" focused on social welfare, while the federal statute states they must be "exclusively" focused on it.
"It is offensive that the IRS turns a blind eye to reality and allows partisan political groups to seek refuge in a provision of the IRS code that is meant to govern organizations such as volunteer firefighter companies and homeowner organizations," Dr. Gill said in a statement.
Dr. Gill and CREW filed the civil lawsuit Tuesday under the provisions of the Administrative Procedure Act, which allows those who have suffered "sufficient harm" to file suit against the IRS. Gill can certainly claim to have suffered, as he believes that his close defeat -- he only lost by 1,002 votes to Republican Rodney Davis -- was due to "misinformation" spread about his support of Medicare in AAN's ads. One of those spots claimed that Gill would eliminate Medicare and replace it with single-payer healthcare.
AAN was the only 501(c)(4) nonprofit to spend significant money in the 13th district campaign.
You can read the full story on The Huffington Post.
Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts
Wednesday, February 20, 2013
Monday, July 23, 2012
IRS Considering Changing 501(c)(4) Governing Rules
The Internal Revenue Service (IRS) is considering changing a rule that allows social welfare nonprofits to run attack ads while not disclosing their donors.
According to a recently published letter from Lois Lerner, the director of the IRS's exempt organizations division, the agency is "aware of the current public interest in this issue," and that they will consider changes to the rules. The letter was sent on July 17 to two campaign finance reform groups, Democracy 21 and Campaign Legal Center, according to The Huffington Post.
The two advocacy groups had long pressed the IRS to not only review the regulations governing 501(c)(4)s, but also to investigate specific groups, including the Republican-leaning Crossroads GPS and the pro-Obama group Priorities USA. Both of these organizations have received increased scrutiny this election cycle, as critics claim that they should not be tax-exempt because their primary purpose is to advocate for a specific candidate.
Democracy 21 President Fred Wertheimer told The Huffington Post that the response from Lerner was significant, since it was the first time the IRS has publicly stated that they will consider changes to the regulations. He also pointed out that by mentioning the date the regulations were first put in place -- 1959 -- Lerner acknowledged they do not reflect current circumstances, such as the United States Supreme Court's Citizens United decision.
Both Wertheimer and Campaign Legal Center Executive Director J. Gerald Herbert responded to the IRS today with a letter pressing the agency to move quickly to investigate social welfare groups spending large amounts of money on the 2012 elections while hiding their donors from the public.
You can read the full story in The Huffington Post.
According to a recently published letter from Lois Lerner, the director of the IRS's exempt organizations division, the agency is "aware of the current public interest in this issue," and that they will consider changes to the rules. The letter was sent on July 17 to two campaign finance reform groups, Democracy 21 and Campaign Legal Center, according to The Huffington Post.
The two advocacy groups had long pressed the IRS to not only review the regulations governing 501(c)(4)s, but also to investigate specific groups, including the Republican-leaning Crossroads GPS and the pro-Obama group Priorities USA. Both of these organizations have received increased scrutiny this election cycle, as critics claim that they should not be tax-exempt because their primary purpose is to advocate for a specific candidate.
Democracy 21 President Fred Wertheimer told The Huffington Post that the response from Lerner was significant, since it was the first time the IRS has publicly stated that they will consider changes to the regulations. He also pointed out that by mentioning the date the regulations were first put in place -- 1959 -- Lerner acknowledged they do not reflect current circumstances, such as the United States Supreme Court's Citizens United decision.
Both Wertheimer and Campaign Legal Center Executive Director J. Gerald Herbert responded to the IRS today with a letter pressing the agency to move quickly to investigate social welfare groups spending large amounts of money on the 2012 elections while hiding their donors from the public.
You can read the full story in The Huffington Post.
Tuesday, March 27, 2012
An Increase In The Need For Nonprofit Services?
The NonProfit Times reported today that, according to the Internal Revenue Service (IRS), the amount of nonprofits in the U.S. decreased by 18 percent last year. As you probably know very well, a lot of people rely on nonprofits for affordable services, especially in this tough economy.
This news made us wonder whether nonprofits have noticed an increase in demand for their services during the past year. We went to Twitter to find out, and were given the following responses from our followers:
What are your thoughts on this issue? Tweet at us @nonprofittimes or respond in the comments section below. We will update this post with new tweets from our followers.
This news made us wonder whether nonprofits have noticed an increase in demand for their services during the past year. We went to Twitter to find out, and were given the following responses from our followers:
@NonProfitTimes As the economy worsens, the need for services increases. We have been fortunate through these hard times. Hope it continues
— Ctr for Child&Family (@centerforchild) March 27, 2012
@NonProfitTimes Our ToolBanks are seeing their user-ship rise as NPOs use a ToolBank to make more efficient use of service project budgets.
— ToolBank USA (@ToolBankUSA) March 27, 2012
What are your thoughts on this issue? Tweet at us @nonprofittimes or respond in the comments section below. We will update this post with new tweets from our followers.
Thursday, March 8, 2012
Nonprofit Ordered To Return $130G
A Massachusetts state auditor has demanded a Charlestown nonprofit return $130,000 after it was accused of using the funds on outside expenses.
The Boston Herald reported today that Charlestown, Mass.-based Life Focus Center Inc. allegedly used the funds, which were intended to help the disabled, to pay for food, alcohol, and other expenses while on a vacation in Disney World. The organization has denied these claims.
State auditor Suzanne M. Bump called the charges a "horrifying" waste of taxpayer money, and ordered Life Focus to refund $130,000 to the state. This information was revealed after an audit of the nonprofit, which showed that Executive Director Jack Millerick charged over $123,000 on the agency's credit card in fiscal years 2009 and 2010. While a good portion of the money was allegedly spent during the Disney World vacation, nearly 40 percent of the purchases in 2010 were made in New Hampshire, where Millerick has a vacation home. He has told Bump's office that all of the purchases made during the Disney vacation were business-related, and blamed payments for gas on "human error."
Aside from the improper spending, Life Focus Center executives are also accused of hiring family members. The auditor's report stated that Millerick hired his wife, Karyn, to serve as communications director, a position which paid her $85,000 in 2010. He also paid his brother-in-law $6,600 for maintenance services but did not report those expenses to the IRS or state tax officials.
You can read more about this story in The Boston Herald. Interested in reading more about finance? Sign-up for our financial eNewsletter, Exempt.
The Boston Herald reported today that Charlestown, Mass.-based Life Focus Center Inc. allegedly used the funds, which were intended to help the disabled, to pay for food, alcohol, and other expenses while on a vacation in Disney World. The organization has denied these claims.
State auditor Suzanne M. Bump called the charges a "horrifying" waste of taxpayer money, and ordered Life Focus to refund $130,000 to the state. This information was revealed after an audit of the nonprofit, which showed that Executive Director Jack Millerick charged over $123,000 on the agency's credit card in fiscal years 2009 and 2010. While a good portion of the money was allegedly spent during the Disney World vacation, nearly 40 percent of the purchases in 2010 were made in New Hampshire, where Millerick has a vacation home. He has told Bump's office that all of the purchases made during the Disney vacation were business-related, and blamed payments for gas on "human error."
Aside from the improper spending, Life Focus Center executives are also accused of hiring family members. The auditor's report stated that Millerick hired his wife, Karyn, to serve as communications director, a position which paid her $85,000 in 2010. He also paid his brother-in-law $6,600 for maintenance services but did not report those expenses to the IRS or state tax officials.
You can read more about this story in The Boston Herald. Interested in reading more about finance? Sign-up for our financial eNewsletter, Exempt.
Wednesday, March 7, 2012
IRS To Investigate Political Groups
The Internal Revenue Service (IRS) is coming under fire from some conservative political groups for taking part in what they term a political witch hunt.
As the election season heats up, the IRS is taking a closer look at political nonprofits. The New York Times reported that the agency has sent dozens of questionnaires to conservative Tea Party organizations in recent week in an attempt to determine their political leanings and activities. Existing nonprofits like American Crossroads, on the Republican side, and Priorities USA, on the Democratic side, will also be pressed by the IRS to justify their tax-exempt status.
Although both sides will be questioned, some conservatives are crying foul on the IRS's questions. Jay Sekulow, a conservative lawyer, is representing 16 Tea Party groups that are claiming the questions amount to harassment and a political witch hunt. Conservatives point to a renewed effort by Democratic lawmakers to demand that these nonprofits and so-called Super Political Action Committees (PACs) disclose their donors and identify their major funders in political advertisements.
The issue the IRS has with these groups, designated as 501(c)(4)s (social welfare organizations) under the tax code, is they are concerned they are not living up to requirements. Social welfare groups cannot engage solely in political activities. In an e-mail to The New York Times, the IRS said they must be primarily engaged in the promotion of social welfare in order to keep their exempt status. It's unclear how much political activity constitutes an excessive amount.
Another concern is whether donations to political nonprofits are tax deductible. While an individual donation to a group like American Crossroads would not qualify as such, some companies could attempt to justify donations as a necessary business expense. Tax experts believe that some donors are putting their donations into their marketing and advertising budgets and deducting them from their taxes. This claim has not been proven, however.
You can read the full story in The New York Times.
As the election season heats up, the IRS is taking a closer look at political nonprofits. The New York Times reported that the agency has sent dozens of questionnaires to conservative Tea Party organizations in recent week in an attempt to determine their political leanings and activities. Existing nonprofits like American Crossroads, on the Republican side, and Priorities USA, on the Democratic side, will also be pressed by the IRS to justify their tax-exempt status.
Although both sides will be questioned, some conservatives are crying foul on the IRS's questions. Jay Sekulow, a conservative lawyer, is representing 16 Tea Party groups that are claiming the questions amount to harassment and a political witch hunt. Conservatives point to a renewed effort by Democratic lawmakers to demand that these nonprofits and so-called Super Political Action Committees (PACs) disclose their donors and identify their major funders in political advertisements.
The issue the IRS has with these groups, designated as 501(c)(4)s (social welfare organizations) under the tax code, is they are concerned they are not living up to requirements. Social welfare groups cannot engage solely in political activities. In an e-mail to The New York Times, the IRS said they must be primarily engaged in the promotion of social welfare in order to keep their exempt status. It's unclear how much political activity constitutes an excessive amount.
Another concern is whether donations to political nonprofits are tax deductible. While an individual donation to a group like American Crossroads would not qualify as such, some companies could attempt to justify donations as a necessary business expense. Tax experts believe that some donors are putting their donations into their marketing and advertising budgets and deducting them from their taxes. This claim has not been proven, however.
You can read the full story in The New York Times.
Monday, February 27, 2012
IRS Adjusts Disclosure Requirements
The North Bay Business Journal reported today that, in a recently released Jan. 11 memo, the IRS outlined changes to Form 990 for the 2011 tax year. While the changes are relatively small, they are designed to help reduce some of the headaches that come with disclosure requirements. Among the changes is a clarification of what could be considered income for executives and other highly compensated employees, including information from their W-2 forms. This change should make it easier for nonprofits to know what they need to report when it comes to executive compensation.
Another change that was discussed in the memo involves how nonprofits should treat partnerships on their balance sheet. It is now required that organizations report the share of assets between the partner organizations as a separate item, showing the ending capital from the joint venture. The IRS also sought to clarify requirements to foreign activity, which is important for nonprofits that run missions overseas. Foreign investments can now be valued up to $100,000 before disclosure, whereas organizations were only required to disclose this information if the investments resulted in a $10,000 net revenue or expense.
While all these changes are designed to make the Form 990 easier to understand, it will undoubtedly lead to more work for nonprofits come tax day. We'd like to hear your thoughts on these new changes. Do you think they will make things easier, or do you foresee new headaches because of them?
You can read the full story in The North Bay Business Journal.
Tuesday, December 20, 2011
Creating A Start-Up Nonprofit Isn't Easy
If you were ever thinking of starting your own nonprofit, take a step back: It's not as easy as it sounds.
In a piece written for The Huffington Post, Marty Zwilling, a start-up expert, explains the complications of starting your own nonprofit. He explains that although most people looking to create a start-up company see nonprofits as the easy route to success, there's a lot that goes into the process. This includes a healthy business model, which was recently outlined in an article on The NonProfit Times website. A nonprofit still has to make money on everything it sells in order to maintain its operating expenses. This is true even if it relies totally on donations.
All this is not to say that you shouldn't try to make your own nonprofit. You just need to be aware of some of the challenges that come with it. Zwelling listed five reasons creating a start-up nonprofit can be a challenge. Here are a few I found most compelling:
In a piece written for The Huffington Post, Marty Zwilling, a start-up expert, explains the complications of starting your own nonprofit. He explains that although most people looking to create a start-up company see nonprofits as the easy route to success, there's a lot that goes into the process. This includes a healthy business model, which was recently outlined in an article on The NonProfit Times website. A nonprofit still has to make money on everything it sells in order to maintain its operating expenses. This is true even if it relies totally on donations.
All this is not to say that you shouldn't try to make your own nonprofit. You just need to be aware of some of the challenges that come with it. Zwelling listed five reasons creating a start-up nonprofit can be a challenge. Here are a few I found most compelling:
- You know that 501(c) form you have to fill out to become tax-exempt? It requires a lot more than just filling out a form, and it can take a long time to be approved. The form has to be accompanied with a $850 fee, and it can take as long as two years to completely finish.
- Start-ups require willing investors, and it can be a challenge to get them interested in a nonprofit since it will be hard to guarantee an excellent return on investment.
- Private start-up companies don't have to disclose their salaries or spending practices to anyone other than the IRS. Nonprofits, on the otherhand, undergo trememndous public scrutiny.
Friday, August 5, 2011
Exempt Magazine Preview Part 2
Thought I would give our readers an excerpt from another one of the articles from the newest issue of NPT's Exempt Magazine. This article is about 403(b) plans:
In Revenue Ruling 2011-7 issued earlier this year, the Internal Revenue Service (IRS) provided sponsors of 403(b) plans with some much-needed guidance regarding how to terminate plans. Many 403(b) plan sponsors have been reconsidering whether they want to continue to maintain such plans in light of the final regulations that were issued by the IRS in 2007 covering 403(b) plans.
Until this guidance was issued, the IRS’s position was, generally, that a 403(b) plan could not be terminated, so the guidance is a welcomed step. However, there are issues that have not been addressed by the IRS in the guidance and issues that plan sponsors may need to address to terminate their plans.
Steps to Plan Termination
The guidance outlines the steps a plan sponsor needs to take to effectively terminate a plan and to distribute plan assets. Below is a brief discussion of each of the steps and potential issues that a plan sponsor must consider.
Adopt a Binding Resolution to Terminate the Plan. On or before the date of termination, the plan sponsor must adopt a binding resolution establishing the termination date, freezing contributions to the plan, discontinuing the purchase of annuity contracts or mutual funds, fully vesting all plan participants, approving the distribution of plan benefits and approving the termination of the plan.
This would seem to be relatively simple, except that the IRS assumes that a plan’s document(s) allow the plan sponsor to terminate its plan. However, this is frequently not the case, so plan sponsors must review the plan document to be sure it allows for the termination. If the plan document does not contain termination provisions, then the plan sponsor should consult with a plan advisor to determine if the language authorizing the termination can be added to allow for it.
Be sure to read the full article over at The NonProfit Times.
In Revenue Ruling 2011-7 issued earlier this year, the Internal Revenue Service (IRS) provided sponsors of 403(b) plans with some much-needed guidance regarding how to terminate plans. Many 403(b) plan sponsors have been reconsidering whether they want to continue to maintain such plans in light of the final regulations that were issued by the IRS in 2007 covering 403(b) plans.
Until this guidance was issued, the IRS’s position was, generally, that a 403(b) plan could not be terminated, so the guidance is a welcomed step. However, there are issues that have not been addressed by the IRS in the guidance and issues that plan sponsors may need to address to terminate their plans.
Steps to Plan Termination
The guidance outlines the steps a plan sponsor needs to take to effectively terminate a plan and to distribute plan assets. Below is a brief discussion of each of the steps and potential issues that a plan sponsor must consider.
Adopt a Binding Resolution to Terminate the Plan. On or before the date of termination, the plan sponsor must adopt a binding resolution establishing the termination date, freezing contributions to the plan, discontinuing the purchase of annuity contracts or mutual funds, fully vesting all plan participants, approving the distribution of plan benefits and approving the termination of the plan.
This would seem to be relatively simple, except that the IRS assumes that a plan’s document(s) allow the plan sponsor to terminate its plan. However, this is frequently not the case, so plan sponsors must review the plan document to be sure it allows for the termination. If the plan document does not contain termination provisions, then the plan sponsor should consult with a plan advisor to determine if the language authorizing the termination can be added to allow for it.
Be sure to read the full article over at The NonProfit Times.
Thursday, August 4, 2011
Brooklyn Nonprofit Mystery
Why are 196 nonprofits registered to one Brooklyn home? That's what investigators want to find out.
In a story in Monday's New York Post, it was reported that 196 New York nonprofits are registered to a Brooklyn house without the owners being aware of it. As if this wasn't strange enough, some of these organizations have ties to a group of rabbis involved in money laundering and child molestation. It sort of sounds like the plot to a bad movie. A really bad movie.
As investigators work to figure out this mystery, the Post managed to find out some interesting tidbits. A dozen of the registrations were traced back to a tax lawyer named Joseph Schubin. He claimed that the multiple registrations were a mistake by the IRS. Schubin worked at a dozen of these charities, and he explained that the IRS mistakenly put the address of this Brooklyn home, where he used to work, instead of the organizations official address. Keep in mind that the IRS nonprofit application requires a charity register its own address.
This is a very odd story, no question about it. It actually brings to mind a story NPT wrote recently about a man who was registered to 2,300 nonprofits out of one office building in Nevada. Will there be any other similarities to that story? We'll have to wait and see. In the mean time, get the full scoop on this story at The New York Post.
In a story in Monday's New York Post, it was reported that 196 New York nonprofits are registered to a Brooklyn house without the owners being aware of it. As if this wasn't strange enough, some of these organizations have ties to a group of rabbis involved in money laundering and child molestation. It sort of sounds like the plot to a bad movie. A really bad movie.
As investigators work to figure out this mystery, the Post managed to find out some interesting tidbits. A dozen of the registrations were traced back to a tax lawyer named Joseph Schubin. He claimed that the multiple registrations were a mistake by the IRS. Schubin worked at a dozen of these charities, and he explained that the IRS mistakenly put the address of this Brooklyn home, where he used to work, instead of the organizations official address. Keep in mind that the IRS nonprofit application requires a charity register its own address.
This is a very odd story, no question about it. It actually brings to mind a story NPT wrote recently about a man who was registered to 2,300 nonprofits out of one office building in Nevada. Will there be any other similarities to that story? We'll have to wait and see. In the mean time, get the full scoop on this story at The New York Post.
Thursday, March 10, 2011
The IRS is requested to investigate nonprofit political dealings
Here's another summary of a past NPTV story. Check it out in its entirety here.
Congressional mid-term elections are just around the corner, and the IRS has been requested to launch investigations into the political campaign dealing of numerous major organizations with 501C4, C5 and C6 designations. This is the subject of those well laid out video presentation. The request was made to the IRS by Max Baccus, a Democrat from Montana and the chairman of the U.S. Senate Finance Committee.
Four primary areas of investigation
The IRS will be focusing their survey on 4 key areas with regard to the organizations in question. Were activities for their states tax-exempt objectives, or are dealings related to political campaigns their primary area of focus? Are they complying with proxy tax and notice requirements? Are their activities bases on the private interests of large contributors, or legislative lobbying? Do they provide extra benefits to significant donors? According to Grant Thornton LLP, organizations that are exempt from federal tax are prohibited from making political campaign dealings their prominent focus.
The nature of the tax law means that it limits the measure to which charitable organizations can get involved in the political arena. At this stage it is unknown how exactly the IRS will conduct its survey, but it is likely that 501C3 organizations will be the subject of investigation as well in the future due to increasing media attention and pressure from congress. Be sure to check out this video about this interesting development in the nonprofit sector.
Congressional mid-term elections are just around the corner, and the IRS has been requested to launch investigations into the political campaign dealing of numerous major organizations with 501C4, C5 and C6 designations. This is the subject of those well laid out video presentation. The request was made to the IRS by Max Baccus, a Democrat from Montana and the chairman of the U.S. Senate Finance Committee.
Four primary areas of investigation
The IRS will be focusing their survey on 4 key areas with regard to the organizations in question. Were activities for their states tax-exempt objectives, or are dealings related to political campaigns their primary area of focus? Are they complying with proxy tax and notice requirements? Are their activities bases on the private interests of large contributors, or legislative lobbying? Do they provide extra benefits to significant donors? According to Grant Thornton LLP, organizations that are exempt from federal tax are prohibited from making political campaign dealings their prominent focus.
The nature of the tax law means that it limits the measure to which charitable organizations can get involved in the political arena. At this stage it is unknown how exactly the IRS will conduct its survey, but it is likely that 501C3 organizations will be the subject of investigation as well in the future due to increasing media attention and pressure from congress. Be sure to check out this video about this interesting development in the nonprofit sector.
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