Government and Politics Watch

May 09, 2008

IRS Updates Rules on Dislosing Business Activities

The Internal Revenue Service has updated its guidelines that explain how charities must make public their Form 990-T filings, which list business activities not directly related to charity’s mission.

As part of the Pension Protection Act of 2006, charities that file the Form 990-T must now make their filings available for public inspection.

New IRS reporting guidelines released this week clarify the rules behind this requirement. Most notably, the guidelines say nonprofits must make filings available for three years after their filing date. The requirement applies to all Form 990-T filings made after August 17, 2006.

The tax agency’s guidelines also state that charities do not have to provide supporting documents and attachments that do not relate to the imposition of unrelated business income tax.

As a result, nonprofit groups do not have to make public Form 5471 (Information return of U.S. persons with respect to certain foreign corporations), Form 8886 (Reportable Transaction Disclosure Statement), and Form 8913 (Credit for federal telephone excise tax paid).

— Peter Panepento

May 08, 2008

A Project to Create More Hillary Clintons

Despite Sen. Hillary Clinton’s historic run for the presidency, women are greatly underrepresented in the U.S. political system – -a scenario the White House Project is attempting to change.

Marie Wilson, the group’s president, told a session at a Council on Foundations conference about her group’s efforts to train women across the country to run for political office, calling it an example of nonpartisan political activity that is permitted under the tax code governing charities.

The United States ranks 71st in the world in the percentage of women serving in parliament (here, the House of Representatives). “It is not really a representative democracy,” said Ms. Wilson.

Ms. Wilson, who headed the Ms. Foundation for almost two decades before starting the White House Project in 1998, said many of the women who received grants from the foundation were creating innovative social programs that focused on HIV/AIDS, health care, small loans, and promoting a “living wage.”

“That’s the government in exile,” she thought, and wanted to find a way to give them more power. The White House Project, in New York, has trained 1,700 women over the past three years in the mechanics of running for office, touching on campaigning, communications, and fund raising, Ms. Wilson said.

But it has found the most effective way to persuade them to become candidates is to give them examples of other women who have made that leap — for example, by showing a documentary about Shirley Chisholm, a black congresswoman who ran for the Democratic presidential nomination in 1972. Many women are reluctant to step forward because they see so few other politicians who look like them, she said.

In that sense, she said, Senator Clinton has inspired more women to want to try politics, showing “you can get to the highest level.”

— Suzanne Perry

May 07, 2008

IRS Filing Deadline Is Fast Approaching for Small Charities

Next week comes the first annual deadline for the smallest nonprofit groups to comply with a new federal requirement to file annual information with the Internal Revenue Service, and a group of accountants in Connecticut want to make sure organizations are ready.

New tax law requires nonprofits groups with $25,000 or less in annual revenue to file the new Form 990-N informational tax return by the 15th day of the fifth month after the end of a fiscal year. For those operating on a calendar year, for example, the deadline would be May 15.

Previously, small groups were exempt from filing any returns with the IRS. To inform them of the new requirement, the IRS sent out 650,000 letters last year, and posted an online question-and-answer page meant to help organizations comply.

But Adam P. Cohen, a West Hartford accountant, thinks more ought to be done to get the word out about the new rule and to teach organizations how to file. So, in conjunction with the Connecticut Society of CPAs and a local group that offers pro-bono accounting services, Mr. Cohen has publicized information about the Forms 990-N, and is running free clinics this week to assist in their preparation.

Charity officials can visit the clinics on Friday afternoon at any of three libraries around the state to learn how to file the online Forms 990-N, also known as “e-postcards.”

The form requires only basic information, such as the name of a principal officer, a mailing address, and confirmation that gross receipts total less than $25,000. Still, some charity observers worry that many small organizations may be intimidated by the federal forms, and that many more may not even be aware they exist.

If an organization fails to file the Form 990-N three years in a row, the IRS will automatically revoke its tax-exempt status.

“My suspicion is that there are many micro-nonprofit groups that don’t know about the requirement,” Mr. Cohen says. “You might have the checkbook for your kid’s soccer league, but the information about your responsibilities has not reached you.”

— Debra E. Blum

May 03, 2008

Spreading Innovative Solutions to Society's Problems

A new project Public Innovators, seeks to build stronger ties between government officials and social entrepreneurs.

The premise is that people from both worlds have a lot to share with each other.

Social entrepreneurs have developed creative new approaches to many of the pressing problems that government officials are trying to solve in areas like education, health care, and poverty. Government, in turn, has the resources that social entrepreneurs need to expand the reach of their programs and create systemic change.

“What social entrepreneurs are really doing is they’re responding to market failures, not unlike a regular entrepreneur responds to market opportunities,” says Andrew Wolk, chief executive of Root Cause, the Cambridge, Mass., nonprofit group behind Public Innovators. “They are trying to do that by creating transformative, innovative solutions that are sustainable.”

Together with the Aspen Institute, a Washington think tank, Root Cause has published a report that discusses how government agencies could use their influence – and grant dollars – to encourage more innovative approaches to solving social problems.

Among the report’s recommendations: Government agencies should give nonprofit groups greater latitude in how they spend government grants to encourage creativity, but at the same time, set performance standards and publish results.

Over the next 18 months, Root Cause and Aspen plan to hold a series of meetings in cities nationwide to discuss how government officials and social entrepreneurs can do a better job of collaborating. Those discussions will be followed by a conference for government officials to come together to share lessons learned about working with social entrepreneurs.

— Nicole Wallace

May 01, 2008

How the Next President Plans to Help Young People

America’s Promise has asked the three presidential candidates about their views on children’s issues and how they were personally affected by the organization’s five promises to today’s young people — providing caring adults, safe places, a healthy start, effective education, and opportunities to help others.

The politicians’ video responses have been posted on the group’s Web site. While short on detail, the videos offer some insight to the three’s priorities.

Sen. Hilary Clinton, a Democrat from New York, cites her experience working with the Children’s Defense Fund and supporting children’s health care.

Sen. John McCain, Republican from Arizona, says his generation was lucky to have parents who were able to fulfill the five promises with their children, but today’s young people face more obstacles.

Sen, Barack Obama, Democrat from Illinois, discusses his dedication to his daughters and how the last promise — giving children the opportunity to aid others — is perhaps the most important.

To learn more about how the senators stand on other nonprofit issues, read The Chronicle’s campaign coverage.

— Ian Wilhelm

April 28, 2008

Obama Criticized for Charity Connection

Sen. Barack Obama is under fire again for his ties to a charity leader.

FrontPage Magazine, a conservative online publication, and conservative blog writers are lambasting the Democrat from Illinois because his Web site listed as a supporter Hatem El-Hady.

Mr. El-Hady is the former chairman of KindHearts, a Muslim charity in Ohio that was closed in 2006 by the federal government for allegedly raising money for Palestinian terrorists.

Mr. El-Hady and the nonprofit organization have denied the charges.

What’s more, senators during a hearing this month questioned about how the Bush administration was investigating Islamic charities.

Mr. El-Hady’s profile was posted on My.BarackObama.com, a social-networking site of Obama supporters.

According to some blog authors, the profile of Mr. El-Hady was no longer available on the site once questions were raised about him. Previously, the profile said that he was one of more than 220 “friends” of Mr. Obama’s wife and that he had raised $60 for the presidential candidate.

This is not the first time Mr. Obama has been criticized for his connection to a nonprofit group.

This month concerns were raised about Mr. Obama’s association with the Woods Fund of Chicago and one of its board members, William C. Ayers, who had been part of the Vietnam-era Weather Underground. Mr. Obama served as a member of the Woods Fund’s board from 1998 to 2001

Read The Chronicle article about the Woods Fund controversy and how other presidential candidates stand on nonprofit-related issues.

— Ian Wilhelm

April 25, 2008

Senate Leader Considers Tougher Penalties for Mistakes on Tax Form

Could nonprofit groups face steep fines if they skip lines or misreport information on informational tax forms?

Sen. Charles Grassley, the senior Republican on the powerful Finance Committee, says tougher penalties are possible if charities do not take steps to improve their reporting on the Form 990 informational tax return.

Mr. Grassley and his staff will be paying attention to what degree charities comply with upcoming changes to the Form 990. Many nonprofit groups will have to fill out an updated version of the form beginning in 2009.

Mr. Grassley said the new form — as well as the Pension Protection Act of 2006 — will make it easier for the public and the government to monitor the financial effectiveness of charities.

But, he said, more needs to be done.

“Time and again, problems at nonprofits come back to boards that aren’t independent or hands-on enough,” Mr. Grassley said. “Another challenge is making sure nonprofits are accurately reporting the amount of money going to their charitable purpose.”

As a next step, lawmakers might consider tougher penalties for groups that fail to fill out key lines of the Form 990 and for groups that fail to accurately report information on the form.

Congress could also revisit plans to calculate ratios that show how much of a charity’s revenue is used to fulfill its mission versus how much pays for executive salaries and fund-raising costs.

Steven T. Miller, commissioner of the IRS’s tax-exempt and government-entities division, said this week at a conference on tax-exempt organizations held by the Georgetown University Law Center Continuing Legal Education Department, that the IRS is still considering similar plans.

Dean Zerbe, a tax lawyer in Washington and a former top aide to Mr. Grassley, says such measures might be necessary, even in light of the tougher reporting requirements.

“Let’s face the reality. The 990s hit the trifecta in that they are often late, incomplete, and inaccurate,” Mr. Zerbe said. “We’ve got to make certain folks are filling them out, filling them out correctly, and filling them out accurately. That might require penalties that are substantial enough to get everybody to wake up.”

— Peter Panepento

April 24, 2008

John McCain Proposes Antipoverty Efforts

Following in the footsteps of President Lyndon B. Johnson, Sen. John McCain is touring southern states to draw attention to American poverty.

While not declaring a “war on poverty” as Mr. Johnson did in the 1960s, the presumptive Republican presidential candidate proposed providing tax incentives to telecommunications companies to spur Internet service in small towns and supporting job-training programs at community colleges, reports The New York Times.

“There must be no forgotten places in America, whether they have been ignored for long years by the sins of indifference and injustice, or have been left behind as the world grew smaller and more economically interdependent,” he said in a speech in Alabama.

Mr. McCain did not propose any specific programs to support charities, but he did highlight several nonprofit efforts on his tour.

In Gee’s Bend, Ala., he visited a nonprofit community center and praised its quilting club, whose work has been displayed in museums nationwide and on U.S. Postal stamps. And in Inez, Ky., the McCain campaign praised the work of a mentor program run by the chairman of the Republican National Committee.

To learn more about Mr. McCain’s policies towards charities, read The Chronicle’s profiles of the presidential candidates.

— Ian Wilhelm

Senator Seeks New Regulations for Charities

A key senator wants to give the Federal Trade Commission the power to regulate nonprofit organizations including penalizing charities that say in their fund-raising appeals they are raising money for a particular cause but devote very little of it to that purpose.

The effort by Sen. Byron L. Dorgan, a North Dakota Democrat, is the first stab at putting the brakes on nonprofit organizations that spend a very low percentage of the money they raise on their charitable missions.

Recent House hearings found that several groups that help veterans of the Iraq and Afghanistan conflicts spend most of their donations on fund-raising expenses or salaries rather than veterans and their families.

A provision on the regulation of nonprofit groups was included in legislation to extend the Federal Trade Commission bill, S. 2831, that is being considered by the Interstate Commerce, Trade and Tourism Subcommittee, which Senator Dorgan chairs.

The provision’s impact goes beyond fund raising. It directs the Federal Trade Commission to protect consumers from “unfair and deceptive” practices by charities in the same way that it regulates such practices by businesses, says Justin Kitsch, Senator Dorgan’s communications director. Federal Trade Commission officials said in a hearing on the bill that the provision would enable them to challenge price-fixing or other anticompetitive practices by nonprofit hospitals, for example.

Anthony Conway, executive director of the Alliance of Nonprofit Mailers, says he thinks the provision is unnecessary. “There’s already plenty of oversight and regulatory-body scrutiny of nonprofits,” he says. “I don’t think adding another layer of oversight is needed, and I’m not sure it would be beneficial.”

— Elizabeth Schwinn

April 23, 2008

Government Prosecution of Charities Questioned

Questions are being raised about how the federal government is prosecuting charities accused of ties to terrorists.

In an article in The New Yorker, the journalist Patrick Radden Keefe examines the case against the Al Haramain Islamic Foundation, in Ashland, Ore. The group had its assets frozen in 2004 for alleged ties to Al Qaeda, which the charitable organization denies.

Mr. Keefe looks at how the government has relied on classified intelligence information to build a case against the charity and its practice of “‘Al Capone-ing’ suspects — charging them on whatever will secure a conviction.”

During a Senate Finance Committee hearing this month, Sen. Max Baucus, a Democrat from Montana who chairs the committee, also raised concerns about how the U.S. Treasury Department is investigating charities.

“We have also seen prosecutions failing in some high-profile trials involving charities suspected of having ties to terrorist organizations. What happened here? Were these prosecutions off base? Does the administration need to do a better job of monitoring these organizations?” he asked in his opening statement.

OMB Watch, a government watchdog group in Washington that has criticized the government crackdown on nonprofit organizations, says the hearing left questions “unasked and unanswered.” The advocacy group says aides to Mr. Baucus have agreed to meet with nonprofit representatives to discuss their concerns.

— Ian Wilhelm