THINK Before You Fire - What Claire Underwood Did Wrong

Although I don't spend much time watching TV, I came across the new Netflix series House of Cards in which all 13 episodes were released at once for back to back watching. I enjoyed the series for its political perspective, but found it interesting as an employment lawyer as well.

Claire Underwood played by Robin Wright is the cold and beautiful wife of Francis Underwood, House Majority Whip (Kevin Spacey). Claire is the director of the non-profit Clean Water Initiative (CWI). In the beginning of the season, she fires half her staff, assigning the actual serial ax job to the office manager, who is terminated by Claire immediately after the firings are completed. She then actively recruits Gillian Cole (Sandrine Holt). When Claire first interviews Gillian, she is ill and, even before she is hired, Claire sends her to her personal physician, all expenses paid, a novel recruiting tool. Once she is on the job for a few months, Gillian tells Claire that she is pregnant as an explanation of why she cannot fly on CWI business. Gillian begins missing work periodically, and childless Claire makes a remark questioning her priorities and commitment to CWI. Ultimately, Gillian defies Claire on a matter of principal and Claire fires her on the spot for her insubordination. When Claire is later visited by counsel, we find out that not only has Gillian sued CWI but that she will not accept any monetary amount to settle her claim. Gillian tells Claire that the publicity resulting from her suit will cost CWI, Claire and her high profile politician husband more than any settlement payment and insure a better world for her unborn child. She also has many witnesses happy to testify for her including the former office manager, and adds that any embellishment of her testimony is justified by the need to expose CWI as a sell-out to corporate interests.  

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Employment Law Lessons From The Penn State Scandal

"Lessons from the Lion's Den:  Employment Law Takeaways from the Penn State Scandal" is the title of one of the sessions I will be attending at the Employment Law Institute, a gathering of employment lawyers in Philadelphia later this month. I anticipate this will be a popular session as the Penn State scandal has changed much of the way we approach not only employment law but education processes and non-profits' conduct as well. 

As a volunteer Master Gardener through the Penn State Cooperative Extension, I have been recently notified that all Master Gardeners must have background checks performed. One of the forms that I just received and must complete, along with all other volunteer Master Gardeners, is a Disclosure Statement in which I must report professional misconduct or sanctions, and any harassment or discrimination that I was found to have committed by any court, adjudicative body or administrative body including, but not limited to, any findings of harassment or discrimination made by present or former employers. I am further to report any felony or misdemeanor for which I was convicted or pled no contest. 

Although I am told that engagement in such conduct may not, in and of itself, disqualify me, failure to disclose this information or any misrepresentation is grounds to revoke my volunteer certification as a Master Gardener. 

Certainly, criminal convictions in which an individual is afforded due process protection, and which are public record, are something that is reasonable to report. However, findings of harassment or discrimination made by present or former employers is not in the same category. I advise both employers and employees that any internal investigation of harassment or discrimination in the workplace is distinguishable from criminal process in that due process rights do not exist. Someone about whom a harassment or discrimination complaint is made is not entitled to counsel, not entitled to cross-examine his or her accuser and not entitled to notice of interrogation.

Requirements for disclosure, such as I just received, will increase the pressure on both employers and employees to engage in a more legalistic process within the workplace before findings are made that could have long term ramifications. 

 

Christina Hausner is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, PA. She received her law degree from Duquesne University School of Law and has practiced in the area of employment law for over 25 years.

  

Nonprofits and Deferred Compensation Plans

One challenge many nonprofit organizations face is competing against for-profit businesses to attract key employees and administrators to run their operations. More often than not, nonprofits just do not have the funds to match their for-profit counterparts. Fortunately, there are plenty of qualified administrators out there who are willing to take a lower salary from a nonprofit because they believe in that organization’s mission. However, there is another incentive that most nonprofits have that is not available to for-profit businesses:  Section 457 Deferred Compensation Plans (“457 Plans”). 

As the name suggests, 457 Plans are authorized by Section 457 of the Internal Revenue Code. This section allows tax-exempt organizations and government agencies to establish a deferred compensation plan for key employees. Each year the nonprofit can divert a portion of the employee's salary (up to $17,500 in 2013) into the 457 Plan instead of paying it directly to the employee. Because those funds go into the Plan the employee is not taxed at that time. Instead, taxes on the amount diverted into the Plan are postponed until the Plan is authorized to dispense funds from the 457 Plan to the employee.

The Plan then acts similarly to a pension or 401K plan in that the money accumulates from year to year in the Plan and generates income on investments. As a result, these Plans are extremely helpful in helping a nonprofit’s key employees plan and save for retirement. Another advantage of a 457 Plan is that the tax on the income on those investments is also postponed until the employee actually starts receiving benefits from the Plan.

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Hurricane Sandy - Expedited Tax Exempt Review by Internal Revenue Service

In the wake of the devastation caused by Hurricane Sandy, the Internal Revenue Service announced an expedited review and approval process for organizations formed to aid victims of Sandy that are seeking tax-exempt status.  Qualifying organizations still need to apply for tax-exempt status by filing a Form 1023 with the IRS. However, if they write “Disaster Relief, Hurricane Sandy” on the top of the form, the IRS will give immediate attention to the application.  The IRS did not state exactly how long it will take them to grant tax-exempt status, but the process would normally take approximately four to six months.

In addition, organizations who have already applied for tax-exempt status where IRS approval is pending can also apply for expedited review if they intend to provide relief for victims of Hurricane Sandy. In such cases, the organization needs to send a fax labeled “Disaster Relief, Hurricane Sandy” and include the organization’s name, employer identification number, contact name and phone number to 513-263-4554.

Please note that if you are looking to donate to a charitable organization providing relief to victims of Hurricane Sandy, the IRS recommends donating to existing tax-exempt organizations who they believe will be able to administer relief programs more efficiently than newly formed organizations. If you want to check to make sure the organization you are giving to is tax exempt, the IRS features a Select Check tool that allows taxpayers to search a database to determine if the charity has IRS approved tax-exempt status. For more information, about applying for tax-exempt status, please see the IRS website.  

 

Matthew Grosh is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree and LL.M. in Taxation from Villanova University.

 

The EXTRAordinary Give- Making a Difference in Our Community

The Lancaster County Community Foundation has announced “The EXTRAordinary Give,” a unique event that will help local community benefit organizations raise funds.  The Foundation has set aside $250,000 to match a portion of donations made to preregistered nonprofits on November 30, 2012.  There will also be an additional $50,000 in prizes.  This  program will be an effective way to fire up your existing donor base and help cultivate new supporters.  The deadline for nonprofits to register is October 31, 2012.  For more information and to register your organization, please see the Lancaster County Community Foundation’s event webpage.

Also, don’t forget to mark your calendar for Friday, November 30, 2012 to donate to those nonprofit organizations that benefit the community you live, work, and play in.  You can make your donation at www.extragive.org on that day.       

Matthew Groshis an attorney at Russell, Krafft & Gruber, LLP in Lancaster, PA. He received his law degree from Villanova University and practices in a variety of areas, including Nonprofit & Tax-Exempt Organizations.

Charitable Deductions Denied by Insufficient Acknowledgment

Some charities and other tax exempt organizations rely heavily on contributions from generous donors. On the other hand, those donors benefit by being able to deduct those donations from their taxes. However, a recent decision by the US Tax Court makes it clear how a simple mistake by the tax-exempt organization can prevent a donor from making the deduction.

In Durden v. Commissioner, TC Memo 2012-140, the Court prevented a married couple from claiming $25,000 in charitable deductions. The donations had been made to a church in various amounts throughout 2007. The Internal Revenue Service initially disallowed the deductions, and the taxpayers responded by producing records of their donations, which included a January, 2008 letter from their church acknowledging the donations.

Unfortunately, the 2008 letter did not include any statement that the church had not provided goods or services to the taxpayers in return for their donations. Because applicable tax laws specifically require such a statement, the IRS rejected the 2008 letter as an adequate acknowledgment of the donations. 

In response, the taxpayers obtained a June, 2009 letter from the church that included the required statement, however the IRS rejected the 2009 letter as untimely. The IRS based their decision on a specific tax law that requires taxpayers to receive acknowledgments from charities by the date on which they file their returns for the year the deduction is claimed, or by the return due date, including any extensions, whichever occurs earlier. In this instance, the 2009 letter was received by the taxpayers well after the return was filed in 2008.

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Matthew Grosh to Participate in Nonprofit Resource Network's Fall Training

On November 14, 2012, Matthew Grosh will be a course instructor for the Nonprofit Resource Network's Fall training. The session, entitled “Are You Legal? Ensuring the Integrity of Your Community Benefit Organization,” will assist organizations in managing risk.

Attorney Grosh is a Preferred Consultant for Millersville University’s Nonprofit Resource Network.

See the Nonprofit Resource Network Fall 2012 Training brochure for more information. 

Will Donations be Deductible if Tax-Exempt Application with IRS is Pending?

Some of the nonprofit and charitable organizations I work with are formed for an immediate purpose. For example, the purpose may be to aid victims of a hurricane, earthquake or other natural disaster. In those situations, it is important for the nonprofit corporation to be organized and formed quickly so that it can be up and running as soon as possible.  A common question I get from those clients is whether donations will be tax deductible.  The answer hinges on the nonprofit's status with the Internal Revenue Service.

When a nonprofit organization is formed, it generally cannot simply deem itself as "tax-exempt". Instead, if the organization is not a church, it must apply to the IRS for recognition as a tax-exempt organization. This is accomplished by filing an IRS Form 1023 (or Form 1024 depending on the organization's mission) and some related documents with the IRS. The organization must then wait for several months before they hear back from the IRS and, in some instances, there are delays because the IRS might require a few changes or modifications to the organization.  Eventually, once all the conditions have been met, the IRS will send the organization a letter either granting or rejecting tax-exempt status.

Now back to the question at hand: can a donor deduct a donation to an organization that has not received a determination from the IRS?  The answer depends on the outcome of the organization's application. If tax-exempt status is granted by the IRS, that status is pushed back retroactively to the date the organization was created.  That means donors who had previously donated to the organization can deduct those donations. However, if the IRS rejects the tax-exempt status, the rejection is also deemed retroactive and the donor will not be able to deduct the donation.

That answer tends to beg another question: what should a nonprofit whose tax-exempt status is still pending tell its donors? The simple answer is that donors should be told the truth: that the organization's tax-exempt status is pending and that their donations may not be deductible if tax-exempt status is rejected. In no way should the organization make any representations or guarantees that donations will be deductible because they may not be. Because so much is hinging on the tax-exempt application, I recommend that new nonprofits seek professional help in forming the corporation and applying for tax-exempt status.

Matthew Grosh is an attorney at Russell, Krafft & Gruber LLP in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including Taxation and Nonprofit & Tax-Exempt Organizations.

 

 

Using Photographs on Your Website? What You Need to Know

Now that we are living in the age of the internet, businesses are discovering the importance of marketing themselves online. However, some businesses are finding themselves in trouble under the US Copyright Act for inadvertently posting images or photographs on their websites without the proper permission to do so.

The following is a typical scenario in this area. First, a business goes to an internet marketing firm or a web designer to create a website to promote their products or services. The designer then inserts some photographs on the website that they found on Google or Yahoo! without checking to see if they were owned by someone or if they were in the public domain (i.e. free for anyone to use). 

A few months or even years go by and the business receives a letter from an attorney or collection agency stating that the photographs being used on the website are actually owned by their client.   The letter typically demands that the photographs be removed from the website and also that the business pay a certain amount as a fee for having used the photographs. In worst case scenarios, such demands may be in the hundreds of thousands of dollars. The letter also typically states that if the business does not comply, it will be sued under the Copyright Act.

Unfortunately for that business, even though it has not consciously done anything wrong, it is still subject to liability under the Copyright Act, which deems the unauthorized use of the photographs as copyright infringement. When infringement occurs, the Copyright Act provides several remedies to the owner of the photographs, including the recovery of what would have been the fee to use the photographs and a share of the infringer's profits. In addition, if the photographs have actually been registered by the owner, they may recover attorney fees and other additional amounts. Generally speaking, these remedies are available whether or not the infringement was innocent or accidental and can be quite substantial.

As a result, if your business uses the internet for business purposes, it is imperative to ensure that all images or photographs being used are in the public domain or that you have the arranged for the proper authority or permission to use the images or photographs. I would also suggest that you place additional scrutiny on images or photographs you obtain for free. Additionally, because of the potential for liability under the Copyright Act, I strongly suggest consulting with an attorney with experience in these matters to consider your options if you receive a letter similar to the one described above. For more information, please visit the website for the US Copyright Office.

Matthew Grosh is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including Business Law.

Vetting Nonprofit Board Members

For most nonprofit organizations, the board of directors establishes the policies that allow the organization to carry out its mission. As a result, in a perfect world, every board would be filled with qualified individuals who are passionate about and committed to the organization's mission. 

Unfortunately, in the real world, the perfect board does not exist. Achieving and maintaining an effective board is difficult for any organization, but it can be especially tough for nonprofits. I have seen clients end up with apathetic or problematic board members who, for one reason or another, actually hinder their organizations' missions. At times, board meetings devolved into dysfunctional bullying sessions where a few directors put their own interests ahead of those of the organization. The selfish actions of a few directors were so damaging in one instance that the organization was in danger of losing its tax-exempt status. 

These cases make it clear that, when recruiting new board members, it is important for nonprofit organizations to implement effective vetting policies and thus minimize the possibility of letting a wolf into the henhouse. Here are a few tips that can help you establish such a policy:

Job Description. Adopt a job description for directors that incorporates your mission and clarifies the expectations and duties that the prospective directors will face when they join the board.

Job Interview. Treat the process just as you would a job interview. Go over the job description with candidates and ask them why your mission is important to them. This should help you weed out potential board members with self-serving motives. Ask them for references and follow through in checking them. Ask the interviewees how their skills and experience can support your mission.

Warning Signs. Asking the following questions can help your organization identify warning signs in potential directors:

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Veteran Tax Incentives and Lower Unemployment Rates

In December, I wrote about the extension of several tax incentives for employers who hire veterans. According to an article by CNN, those incentives appear to be working.

In the past month, the jobless rate for all generations of veterans has been around 7.5%, although the rate for young veterans returning from Iraq and Afghanistan is slightly higher at 10.2%. These numbers show an improvement from this time last year, when the jobless rate for Iraq and Afghanistan veterans was 12.5%.

The veteran tax incentives are in the form of two tax credits:

  • The Returning Heroes Tax Credit is a credit of up to $5,600 per employee for employers that hire veterans who were looking for employment for more than six months. If the veteran has been looking for employment for less than six months, the credit is generally up to $2,400 per employee. 
  • The Wounded Warriors Tax Credit can be up to $9,600 per employee for employers that hire veterans with service-connected disabilities who have been looking for employment for more than six months.  

Both of those credits took the place of the Work Opportunity Tax Credit (WOTC), which expired at the end of 2011. The WOTC was designed to spur employers to hire individuals from targeted groups that have a high unemployment rate, including qualifying veterans. Both the Returning Heroes and Wounded Warriors Tax Credits are currently scheduled to expire after December 31, 2012. Both credits are also available to tax-exempt employers. 

Because some of the calculations and qualification criteria related to the credits are complex, I suggest that you consider consulting with a tax professional if your business or nonprofit organization is planning on utilizing one of the credits. For more information, please see the IRS website.

Matthew Grosh is an attorney at Russell, Krafft & Gruber LLP in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including Taxation and Nonprofit & Tax-Exempt Organizations.

Matthew Grosh to Participate in Nonprofit Panel at PANO Conference

On April 17, 2012, Matthew Grosh will be a part of a legal breakout panel at the Pennsylvania Association of Nonprofit Organizations (PANO) annual conference. The session, entitled “Don’t Have Your Story Be a Scandal,” will consist of a panel of nonprofit legal experts discussing a variety of topics to clarify policies and procedures that can help organizations manage their risk levels.

Attorney Grosh previously served on PANO’s Conference Planning Committee. He is also a Preferred Consultant for Millersville University’s Nonprofit Resource Network.

See the PANO 2012 Conference Brochure for more information about this year’s conference.

Healthcare Tax Credit for Small Businesses and Tax-Exempt Organizations

It is tax season, and while much of spring is spent discussing what must be paid out in taxes, it is also a great time to take advantage of savings opportunities.

For small businesses, one of the greatest expenditures, healthcare, can now offer additional savings this tax season. The Affordable Care Act (enacted March 2010) intends to help small businesses and tax-exempt organizations afford the cost of providing healthcare to their employees. In particular, the credit is focused on helping employers with low and moderate income workers, and encouraging employers to offer health insurance for the first time or maintain the coverage that they already have.           

The Small Business Healthcare Tax Credit provides a credit worth up to 35% of eligible small businesses’ premium costs through 2013. Even if a business did not owe tax in 2011, the credit can be carried back or forward for other tax years. Non-profits are also eligible to receive a tax credit of up to 25% of the cost of the organization's premium through 2013. Even if a business has no taxable income, they may be eligible to receive the credit as a refund. This is particularly beneficial to tax-exempt organizations. In 2014, the rate increases to 50% for small businesses and 35% for non-profits. 

To be eligible, a business or tax-exempt organization must meet the following requirements: 

  1. The employer must cover at least 50% of the premium for healthcare coverage based on the single employee-only rate.
  2. The employer must have less than the equivalent of 25 full-time workers (for example, an employee with fewer than 50 half-time workers may be eligible).
  3. The employer must pay average annual wages below $50,000. The credit will gradually phase out for businesses with average wages between $25,000 and $50,000.
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It Takes a Village: Pastors and the Law

Some say it takes a village to raise a child. Others say it takes a family. I recently became convinced that it takes a law firm to advise a pastor who is administering a church. While preparing to participate in a class on church administration as part of the ministerial formation requirement for students at the Lancaster Theological Seminary, I became convinced that any pastor in a parish setting needs a law firm on call. Anecdotes related by the adjunct professor, the Reverend Dr. Barbara Kershner Daniel, about her years in the parish ministry further illustrated the need.

Pastors face many decisions in the course of their work, from choosing a form of organization for their church to managing property matters. Depending upon denominational polity and local requirements, pastors face concerns in the buying, selling and mortgaging of real estate in addition to those which an individual or commercial enterprise would encounter. Real estate law and church law such as the United Methodist "trust clause" intersect.

Changes in worship style and advances in technology now necessitate that each pastor become familiar with licensing and permissions. The new intellectual property issues go far beyond the standard church performance exception to copyright law that for many years made such concerns unnecessary. Printing hymns in bulletins, using screen projections, not to mention sharing podcasts and streaming videos, now demand that each pastor become his or her own intellectual property lawyer.

Having some working knowledge of real estate and intellectual property law is hardly enough. In what can be a highly competitive fundraising environment, pastors must also understand the administration of estates and trusts. The more estate planning knowledge pastors have, the more effective they will be in raising funds for their churches.

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National Legislation Introduced to Further Protect Children - The Speak Up Act

As we have witnessed the Penn State Scandal spark movement toward change in state legislation, it is no surprise that its impact has now reached Washington, D.C. Yesterday, Pennsylvania Senator Robert Casey and California Senator Barbara Boxer introduced the Speak Up to Protect Every Abused Kid (Speak Up) Act of 2011. The purpose of the Act is to ensure that all adults, no matter what profession, will be legally obligated to report cases of suspected child abuse and/or neglect. The Speak Up Act would require all states to enforce this law and would also make clear to whom suspected abuse should be reported, either directly to law enforcement or to state Child Protective Services.

For more information on this legislation please visit:

http://www.casey.senate.gov/newsroom/press/release/?id=4870f6e4-6537-44d8-ad1b-3c41da07751e

or

http://www.clasp.org/news_room/news_releases?id=0057

Pennsylvania Legislature to Strengthen Reporting Requirements of Sex Abuse

On Friday I posted an article regarding Pennsylvania's Mandatory Reporting Statute which requires certain people to report suspected child abuse to the proper authorities.  I highlighted some of the changes that have occurred in the law and the continuing confusion with the current law.  I suggested that our legislature may be prompted to take a look at the current law.   If you were watching the interview with Governor Tom Corbett on Meet the Press on Sunday morning, he confirmed that the move to strengthen the law has already begun.  Pennlive.com posted an Associated Press article with more details on the interview. The article says in part:

State lawmakers from both parties have proposed changes to toughen the law that governs the reporting of sex assaults, Corbett added. He said he would not be surprised to see it strengthened this year. 

“We have to make sure the change in the law is one that is effective,” he said.

 

The Penn State Child Sex Abuse Scandal and the Legal Obligation to Report

Unless you have avoided picking up a newspaper, turning on the television or conversing with friends, family or co-workers recently, you probably have heard about the scandal surrounding Penn State University and the sexual abuse allegations against former defensive coordinator, Jerry Sandusky. The scandal, however, extends beyond the football program and has resulted in criminal charges being filed against former athletic director, Tim Curley, and finance and business administrator, Gary Schultz. The charges against these two individuals are perjury and failure to report child abuse. The allegations surrounding the Penn State football program and the charges against its administration, aside from becoming major national news, have brought significant attention to the Pennsylvania Child Protective Services Law and have raised a number of questions about who is required to report child abuse and when.

The current Child Protective Services Law in Pennsylvania requires that someone who, in the course of their employment, comes into contact with children must make a report to the appropriate Children & Youth Service or police when they have reasonable cause to suspect that a child has been a victim of abuse. The Law further goes on to specifically list a number of categories of persons who are required to report suspected abuse including, but not limited to:

  • Any licensed physician, osteopath
  • Medical Examiner, Coroner
  • Funeral Director
  • Dentist
  • Optometrist
  • Chiropractor
  • Podiatrist
  • Intern
  • Registered Nurse
  • Licensed Practical Nurse
  • Hospital personnel engaged in the admission, examination, care or treatment of persons
  • Christian Science practitioner
  • Member of the Clergy
  • School administrator, teacher, school nurse
  • Social services worker
  • Day-care center worker or any other child-care or foster-care worker
  • Mental health professional
  • Peace officer or law enforcement official

This list is not meant to be exclusive of others, but provides specific examples of those required to report. The Law also provides that any person may, even if not included in the above list, report suspected child abuse, although the Law does not impose a specific duty to do so.

The language of the Child Protective Services Law, while seemingly clear in its intent to require those in contact with children to report abuse, does leave open the question of what constitutes contact with children during one’s course of employment. Does it require constant contact? Occasional contact? It has been found that incidental contact with children during employment is not enough to trigger a reporting duty under the Law. In one case decided by a federal court interpreting this law, the Court found that a photo lab worker in a retail store was not under the purview of the Child Protective Services Law. Because the photo lab worker did not have regular contact with children during the course of her employment, she did not have a duty to report suspected abuse she perceived from photographs she processed in the lab.

Much has been made of the legal duty to report child abuse in the context of the allegations against the Penn State administrators. The question has been raised by at least one of the administrator's attorneys as to whether a crime was actually committed by the administrator’s failure to report the information provided to him by Joe Paterno and the former graduate assistant who allegedly witnessed the sexual abuse of the child. It has also been pointed out by legal journals and commentaries that in 2002, when these alleged failure-to-report crimes occurred, the law was different than it is today. The 2002 law required that the abused child come directly in contact with a person in his or her professional capacity in order for that person to be considered a mandatory reporter. The law was then amended in 2007 to broaden the reporting requirements and include those who received the information second-hand. 

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Tax Exempt Organizations from Start to Finish Seminar, November 9, 2011

Matthew Grosh will be on the faculty for the National Business Institute's seminar Tax Exempt Organizations from Start to Finish, on November 9, 2011 in Harrisburg, Pennsylvania.  This seminar will cover topics such as:

  • Establishing, operating and terminating tax-exempt organizations.
  • Studying the various categories of 501(c)s under the internal revenue code, and learn how to properly apply for tax-exempt status.
  • Making sure to include all of the key provisions in articles of incorporation and bylaws.
  • Recognizing the two Sarbanes-Oxley requirements for nonprofit organizations, and learn what other SOX practices may be extremely valuable to implement.
  • Gaining a better understanding of the fiduciary duties and potential liabilities of the Board of Directors and officers.
  • How to ensure organizational transparency on Form 990, while using it as a positive marketing opportunity.
  • Avoid inadvertent paperwork mistakes that may trigger a compliance check by the IRS.
  • Understand what documentation needs to be filed to authorize dissolutions of exempt organizations.
  • Maintain an ethical practice by knowing how to handle multiple representation and confidentiality dilemmas.

If you are interested in attending you can register online.

Changes to PA Liquor Code: Extended Happy Hour, Beer-to-Go and Special Occasion Sales for Nonprofits

 As you may have seen in recent newspaper articles, Governor Corbett recently signed into law some changes to the Pennsylvania Liquor Code. The most publicized of these changes is that "happy hours", the period of time when a licensed establishment can sell discounted alcoholic beverages, has been expanded. The previous law limited happy hour to two hours per day with a maximum of 14 hours per week. The change allows a bar or restaurant to have a happy hour up to four hours per day, but maintains the 14 hour per week maximum.

This change allows a bar or restaurant some flexibility and discretion in setting their happy hours to target busy times when the specials may attract more customers. Common criticisms of these changes are that the expanded freedom will permit more drinking during those hours and possibly lead to an increase in driving under the influence offenses or accidents.

These changes are likely another step by the state to modernize the current liquor code, which was originally passed in 1951. While it has been updated and amended numerous times since then, many who work with the liquor code on a regular basis complain that it has become outdated. Whatever the reason, the expanded happy hour allows those who hold a liquor license to exercise some choice over when and how long they want to offer specials for alcoholic beverages

While the expansion of the happy hour restraints have garnered most of the headlines for the recent updates or changes to the liquor law in PA, the same law made some other important changes to the liquor code. One of the more interesting changes was that hotel, restaurant or other public service licensees may sell beer-to-go in either open or closed containers, as long as the municipality where they are located does not have open container prohibitions. This would allow an establishment to sell a draft beer to go or other similar beverage which could be carried out into the street, assuming the municipality of the location does not have an ordinance which prohibits open containers. Finally, the new law expanded the ability for certain types of nonprofit organizations to receive a special occasion permit to allow them to raise funds for their organization.

These changes highlight the fact that the liquor law rules and guidelines can be somewhat complex. If you need help interpreting the law and want to insure you are operating within the law you should contact a lawyer with experience in liquor law matters.

Aaron Zeamer is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Widener School of Law and practices in a variety of areas including Liquor Law issues.

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Matthew Grosh joins S. June Smith Center Board of Directors

Matthew Grosh has joined the S. June Smith Center's Board of Directors. Matt is proud to be given the opportunity to support the mission of the S. June Center which is to, "...support children with developmental needs through education, therapeutic services, and family-centered programming. We seek to educate children, support families and strengthen communities through our Infant/Toddler and Preschool Programs, as well as Project Together, Community Outreach, SPLASH, Miracles `n Motion, Community Training, and Tiny Miracles."

In addition to Matt's efforts to support the mission of the S. June Smith Center, he will be working with his colleagues Holly Filius and Julie Miller who both serve on the S. June Smith Center Foundation's Board of Directors. Holly has served on the board since 2006 and currently serves as the President. Julie joined the board in 2009. 

2011 PANO Conference and Looking into the Future of Nonprofits

On Monday and Tuesday, I had the pleasure of attending the Pennsylvania Association of Nonprofit Organizations' (PANO) Annual Conference in Harrisburg. This conference gave me the opportunity to meet people from various nonprofit organizations and learn about their missions. I also found that the educational tracks and keynote speaker gave additional insight into understanding the challenges organizations face and will continue to deal with in the future.

I attended two educational sessions during the conference - Raising More Money from Your Local Business and Federal & State Legislative Briefing. The first session enhanced my understanding of the fundraising issues my nonprofit clients deal with on a daily basis, which will also be helpful to me in my position on the Board of Directors of Meals on Wheels of Lancaster. I look forward to using what I have learned to help this worthy organization in their fundraising efforts. I also attended the Legislative Briefing because I am always concerned with how proposed and new legislation could affect my clients.

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Handling Quid Pro Quo Contributions

Literally translated from Latin, quid pro quo means "something for something." However, the more common English translation is “this for that.” As a movie enthusiast, the phrase always reminds me of the 1991 Academy Award winning film "The Silence of the Lambs." There is a memorable scene where Hannibal Lecter is speaking to FBI Agent in Training Clarice Starling, “If I help you, Clarice, it will be "turns" with us too. Quid pro quo. I tell you things, you tell me things.”Simply put, the phrase typically means: you scratch my back, I'll scratch yours.

The phrase has a slightly different impact in the world of nonprofit and tax-exempt organizations. In some instances, contributions to an organization may not be entirely gratuitous because the contributor is getting something of value in return. For example, people who pay to play in a charitable golf tournament receive a round of golf (and usually a few promotional knick-knacks). A portion of their payment goes toward the round of golf and a portion goes to the nonprofit. That is the essence of a quid pro quo contribution, and there are a few rules that a recipient nonprofit must follow.

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Russell, Krafft & Gruber Exhibits at 2011 PANO Annual Conference

 Russell, Krafft & Gruber is proud to be exhibiting, for the third year in a row, at the Pennsylvania Association of Nonprofit Organizations (PANO) Annual Conference held on April 4- 5, 2011. This event will feature keynote speaker Tim Delaney, Esq. of the National Council of Nonprofits and 11 workshops. The workshop topics include:

Monday, April 4, 2011

  • (Almost) Everything You Wanted to Know About Nonprofit Law in One Meeting
  • Focus on Mission: Getting More Bang for Your Buck - Collaboration Panel
  • Raising More Money from Your Local Business Community

Tuesday, April 5, 2011

  • Lobbying & Advocacy: The Most Important Tool in Your Mission Toolbox
  • The "New Normal" - Panel
  • Which IT Trends Will Impact Your Organization in 2011 - Technology Panel
  • Yes, Chicken Little, the Sky is Falling! Are You Positioned to Respond to the New Financial Reality
  • Federal & State Legislative Briefing
  • Making Friends with Facebook
  • Succession: You Can Do It! - Panel
  •  The Pollyanna Principles: A New and Revolutionary Way "Nonprofits" Can Change the World!

If you are attending please stop by our booth and enter to win a door prize. We are looking forward to participating in the workshops and being able to support this great event. 

Matthew Grosh elected to the Board of Directors for Meals on Wheels of Lancaster

 Matthew Grosh has joined the Board of Directors for Meals on Wheels of Lancaster, whose mission is to, “improve the nutrition by providing meal service to the ill, disabled and senior residents within the greater Lancaster area.” Matthew is looking forward to use his experience as legal counsel for nonprofit organizations to help Meals on Wheels of Lancaster achieve their mission.  If you would like to volunteer for or donate to Meals on Wheels of Lancaster, please visit the website.

IRS Expands Form 990 E-Filing Options

The IRS has decided to make things easier for many small nonprofit organizations.  All nonprofits are required to file a version of the IRS Form 990, which serves as an annual informational return.  Last summer in IRS Extends Deadline for From 990 Filing, I addressed the various forms and indicated that the IRS Form 990-N, which is a simple e-Postcard requiring minimal information, is the easiest version to complete. 

For the 2009 tax reporting, only nonprofits with annual gross receipts less than $25,000 could file the 990-N.  But the IRS has raised this threshold to $50,000 for 2010 tax reporting.  Organizations with gross receipts between $50,000 and $100,000 must still file a 990-EZ while all others must file the regular 990.  Private foundations, who must still file a Form 990-PF, will not be able to take advantage of this change.    

For more information, please see Revenue Procedure 2011-15.

Christina Hausner Receives Pennsylvania Bar Association Pro Bono Award

On December 13, at the Lancaster Bar Association holiday party, Christina Hausner was presented with a Pennsylvania Bar Association Pro Bono Award recognizing  the extensive legal services she has provided voluntarily and without payment to those who are unable to afford them. Chris has actively participated in the Volunteer Attorney Program,  regularly representing income eligible clients referred to her by MidPenn Legal Services, handling over 55 cases since 1989.  While she has handled a variety of  cases over the years,  in this past year she has provided representation to  unemployment compensation claimants exclusively, and has been successful in obtaining benefits for most of these clients.  Russell, Krafft & Gruber is proud of her accomplishment and her dedication to the community.

Christina Hausner is a partner at Russell, Krafft & Gruber. She practices primarily in the areas of Employment Law, Municipal Law, Civil Litigation and Personal Injury.

 

IRS Standard Mileage 2011

The Internal Revenue Service has announced a new standard mileage rate for 2011, which is generally used to estimate the costs of operating an automobile for tax purposes. The new rate, effective January 1, 2011, is 51 cents per mile, up one cent from last year. In addition, the standard mileage rate for medical or moving and medical expenses has been raised from 16.5 to 19 cents per mile, and the rate for charitable purposes remains at 14 cents per mile.

While there are generally no Pennsylvania laws requiring employers to use the IRS' rate, there may be some tax advantage for doing so. The IRS will deem employers who make qualifying reimbursements up to 51 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use. Qualifying employees who are not reimbursed for their business mileage will be able to deduct 51 cents per mile on their individual tax returns.

Reasonable Compensation for Executives in Tax-Exempt Organizations

Recently, I had the privilege of becoming a preferred consultant for the Nonprofit Resource Network (NRN). The mission of the NRN is to enhance the effectiveness of local nonprofit organizations in carrying out their own missions. In addition to holding a number of educational seminars and networking events in or near Lancaster County, the NRN provides hands-on counseling to help nonprofits achieve long-term financial stability. As a preferred consultant, I was given the opportunity to write an article for the new resource section of their website. I am posting the article on the Lancaster Law Blog to benefit our readers as well. I would also encourage everyone to check out the Nonprofit Resource Network website for additional information pertaining to nonprofits.

It probably goes without saying that effective leadership is an essential component to the performance of non-profit organizations. In order to successfully pursue their tax exempt purposes, it is essential for non-profits to seek out and hire quality executives to run the show. 

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Matthew Grosh is a Preferred Consultant for the Nonprofit Resource Network

Matthew Grosh has been selected as a Preferred Consultant for the Nonprofit Resource Network (NRN). The mission of the Nonprofit Resource Network is to "enhance the effectiveness of nonprofit organizations, providing professional development, networking opportunities and access to critical information resources."

The NRN describes the Preferred Consultant Network as a directory that provides access to prescreened consultants that you may need to build and operate an effective nonprofit. All consultants in the NRN’s Preferred Consultant Network have successfully completed a consultant screening application and have agreed to engage in a post-engagement evaluation process with agencies who have contacted them through the NRN.

Matt is passionate about helping Nonprofit & Tax-Exempt Organizations succeed. He is a member of the Pennsylvania Association of Nonprofit Organizations and has presented several seminars on Nonprofit legal issues. Matt is a frequent contributor for the content for the Nonprofit & Tax-Exempt Organizations section of the Lancaster Law Blog.

Tax Benefits of 2010 Hire Act Still in Effect

In order to spur the struggling economy, the federal government passed the Hiring Incentives to Restore Employment (HIRE) Act of 2010 this year. The goal of the HIRE Act was to provide incentives for employers to add new employees to their businesses, specifically, employees that were previously unemployed. With the unemployment rate gradually increasing, offering employers incentives to add new employees is even more important than when the HIRE Act was passed.

The HIRE Act predominantly encourages hiring new employees by creating tax benefits for employers that hire previously unemployed and certain part-time employees. The Act exempts employers from its share (6.2%) of social security taxes for hiring new employees that either did not work in the last 60 days or worked 40 hours or less in the last 60 days. In addition, if the employee is kept for one year (52 weeks) the employer can receive up to a $1,000 tax credit for the 2011 tax year. For example, an employee that has not worked since April 2010 who is hired on October 1, 2010 and retained until October 1, 2011 would create a $1,000 tax credit for the employer filing its taxes in 2012 for the 2011 fiscal year.

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Unclaimed Property Holder Amnesty Program

Under Pennsylvania’s Unclaimed Property Act (the "Act"), some businesses and non-profit organizations were required to file an unclaimed property report with the Pennsylvania Treasury by April 15th.  Many failed to do so.  However, under the Unclaimed Property Holder Amnesty Program (the "Program"), some of those late filers will be able to file without penalty until October 31, 2010.

In general under the Act, unclaimed property is any financial asset that has been left with a business without activity or contact for a period of one year or more.  In many cases, people have property such as expired gift certificates, checking accounts, stocks, dividends, uncashed checks, CDs and unclaimed insurance benefits.  The Pennsylvania Treasury maintains an online database to search whether you have any unclaimed property.

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Thoughts on Seminar - How to Keep Tax-Exempt Organizations in Compliance

On August 25, 2010, I served on the faculty of a National Business Institute seminar focused on keeping tax exempt organizations in compliance relevant with tax law. I personally spoke about annual reporting requirements, complying with rules on disclosures to potential donees when soliciting donations, appealing a revocation of tax exempt status and intermediate sanctions. 

Of particular interest to many in attendance was the ability to use the IRS Form 990 as a fundraising tool. Last September, I posted about this topic and discussed how non-profits can use the 990 to effectively convey their mission and several of their largest projects to the donating public.

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How to Keep Tax-Exempt Organizations in Compliance

Matthew Grosh will be on the faculty for the National Business Institute's seminar How to Keep Tax-Exempt Organizations in Compliance, on August 25, 2010 in Harrisburg, PA. This seminar will cover the various aspects for protecting your tax-exempt status, like information to stay current on the latest regulations, study the impact of Sarbanes-Oxley on tax-exempt organizations, avoid intermediate sanctions and ensure accounting practices are up to par.

 The National Business Institute lists the top five benefits of attending as:

  • Gain strategies for safeguarding directors, officers and executives from potential liability.
  • Create an environment of accountability by establishing comprehensive internal controls.
  • Follow annual reporting requirements and comply with the rules governing disclosures and solicitation.
  • Know how to identify what qualifies as unrelated business income – and what the exceptions are.
  • Adhere to the accepted guidelines for determining appropriate executive compensation.

If you are interested in attending you can register at the National Business Institute website.

IRS Extends Deadline for Form 990 Filings

A couple of months ago in my post Reminder for Nonprofits: Form 990 Due on May 17, I warned that some nonprofit organizations could lose their tax-exempt status if they failed to timely file their informational returns for the last three consecutive years. Unfortunately, thousands of nonprofits failed to heed this warning and did not file in time. Fortunately, in a rare display of mercy, the IRS has extended the due date to October 15, 2010.

The relief is limited to organizations that can file a Form 990-N, which is merely an e-Postcard with minimal information required, or a Form 990-EZ. In general, an organization can file a Form 990-N if their annual gross receipts are less than $25,000. If its annual gross receipts are less than $100,000 but more than $25,000, a nonprofit can file a Form 990-EZ. Organizations with annual gross receipts greater than $100,000, which are required to file a Form 990, and private foundations, which are required to file a Form 990-PF, are unable to take advantage of the extension and must re-apply for tax-exempt status if it has been lost.

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Is Your Non-Profit Organization Utilizing Online Fundraising Resources?

The Pittsburgh Post-Gazette has some good news for nonprofit organizations: Study shows  big jump in online contributions for nonprofit groups.  Here are a few highlights from the article: 

  • While online donations are up, they still only account for a small portion (5.7%) of total contributions to nonprofits,  hence traditional fundraising methods are still essential.
  • Check to see if there is an organization in your area dedicated to helping regional nonprofits raise money, both  online and offline.   There may also be similar organizations dedicated to helping certain categories of charitable missions.
  • Much like a pledge-drive on public television, online donations tend to be spurred when matched with an event, such as a matching campaign or concert.
  • Make sure the technology used to collect online donations is sound and in good working order.  You don’t want to lose donations because of a server crash or software bug.
  • Smaller organizations tend to benefit more from online donations than larger organizations because less resources are necessary. 
  • Fundraising will always be a challenge for non-profit organizations, but utilizing new technology and trends is one way to supplement traditional fundraising efforts.

Reminder for Nonprofits: Form 990 Due on May 17

We would like to pass along a reminder from our friends at the Pennsylvania Association of Nonprofit Organizations: annual tax returns for tax-exempt organizations (IRS Form 990) are due on May 17.  The annual returns are usually due on March 15, but that date falls on a Saturday this year, so the IRS extended the deadline to the next business day.  While not all nonprofit organizations are required to file, an organization can lose its tax-exempt status if it is required to file and fails to timely do so.  If you are unsure whether your nonprofit organization is required to file, please visit http://nccsdataweb.urban.org/PubApps/990search.php and enter the appropriate information.  To find out which 990 form your organization is required to file please visit http://www.irs.gov/charities/article/0,,id=217087,00.html.

As I discussed in a previous blog post, remember that Form 990 can be a useful fundraising tool. 

Tax Matters: New Payroll Tax Credit and Intermediate Sanctions

A few weeks ago I wrote about protecting the tax-exempt status of your nonprofit organization. As promised therein, this post covers intermediate sanctions; however, before I broach that topic, I wanted to pass along a quick tax note.

Earlier this month, President Obama signed the Hiring to Restore Employment Act (or the HIRE Act). One key provision allows most nonprofit and some for-profit organizations to keep their share of the 6.2% payroll tax on certain new hires of certain individuals for the rest of 2010. The new hire must NOT: (1) have worked more than 40 hours in the previous 60 days; (2) replace an existing employee (unless the former employee left voluntarily or for cause); and (3) be related to owners or managers of the hiring organization. Additionally, if the employer is a nonprofit, the new employee must perform work that furthers the employer's tax-exempt purpose. The Act also includes other provisions such as a new hire retention credit.  Please check the IRS website for additional details if you think your organization or business could benefit from the HIRE Act. 

Now, back to the subject at hand. The sanctions are called "intermediate" because they generally don't threaten the tax-exempt status of a nonprofit. They were developed because the IRS wanted a system more flexible than the all-or-nothing decision to revoke or not revoke tax-exempt status of questionable organizations. 

Essentially, intermediate sanctions penalize "disqualified persons" from entering into "excess benefit transactions" with tax-exempt organizations. The Internal Revenue Code defines a "disqualified person" as someone who was in a position to exercise substantial influence over the dealings of the organization at any time during the five year period ending on the date of the transaction in question. These are generally the directors, officers, key employees, founders, substantial contributors and employees with compensation based on revenue. Family members of "disqualified persons" also tend to be deemed "disqualified". 

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Russell, Krafft & Gruber Exhibits at 2010 PANO Annual Conference

Russell, Krafft & Gruber is proud to be exhibiting at the Pennsylvania Association of Nonprofit Organizations (PANO) Annual Conference held on April 6, 2010. This event features keynote speaker Robert Egger of the DC Central Kitchen and 9 educational workshops. The workshop topics include:

  • Using Technology to Move Your Mission Forward
  • Partnering with Corporations: Five Strategies to Increase Sponsorship Income
  • Nonprofit Advocacy Engagement: Now Is the Time for Community Benefit Organizations to Step Up
  • Emerging Trends in Health Insurance for Employers
  • A Look at Nonprofit Collaboration and Shared Services
  • Make Your Teams All They Can Be and Much More
  • Jumping In With Both Toes... How To Immerse Your Organization in Social Media Without Drowning
  • "To Merge or Not to Merge?"
  • The Pollyanna Principles: A New and Revolutionary Way to Approach (and Enhance!) "Nonprofit" Governance!

Protect the Tax-Exempt Status of Your 501(c)(3) Charity: The Prohibition on Private Inurement and the Private Interest Doctrine

Allowing a nonprofit organization to be tax exempt provides an incredible advantage by leaving the organization with more resources to accomplish its mission, especially with charitable organizations. However, the tax-exempt status can be taken away if the organization breaks the rules. Thus, it is important for the directors, officers and employees of tax-exempt organizations to know about those rules and how they interact.

One such rule is known as the "prohibition on private inurement", which states that an organization is not operated exclusively for tax-exempt purposes if its net earnings inure, in whole or in part, to the benefit of private individuals. Okay, that is admittedly dry and probably raises more questions than it answers, but the prohibition is basically meant to prevent money or other assets of the organization from going to an individual that is not in one of the charitable classes the organization is meant to benefit (otherwise known as the "public beneficiaries"). The obvious examples are directors who grossly overpay themselves or divert funds for their private use. Inurement also occurs when a private individual benefits from any transaction with the organization that does not reflect fair market value and current economic conditions.

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2009 Tax Deduction for 2010 Haiti Earthquake Donations

The tragic events recently suffered in Haiti have spurred millions of dollars in donations from American taxpayers to relief agencies devoted to helping earthquake victims. Through special legislation enacted on January 22, 2010, those taxpayers will generally be able to claim those deductions on their 2009 returns. It is hoped that the immediate benefit will spur even more current donations.

However, there are some limitations. 

  • First, because donations to qualified charities are considered itemized deductions, the new provision will be unavailable to taxpayers who utilize the standard deduction. 
  • Second, qualifying contributions are limited to cash and do not include property donations.  Qualifying  cash contributions can be made by text message, check, credit card or debit card. 
  • Third, to qualify, donations must be made specifically for the relief of victims in areas affected by the January 12, 2010 earthquake in Haiti, and they must be made after January 11, 2010 and before March 1, 2010. 
  • Fourth, the donations must be made to bona fide, qualified charities. The IRS maintains a database of such charities, but many churches and government agencies qualify even though they are not listed. 
  • Please also note that donations to foreign organizations are generally not deductible. 

Finally, it is also important to keep a record of your donation. For donations by text message, the phone bill will suffice as long as the name of the charitable organization is listed.

IRS Standard Mileage Rate for 2010

The Internal Revenue Service has announced a new standard mileage rate for 2010, which is generally used to estimate the costs of operating an automobile for tax purposes. The new rate, effective January 1, 2010, is 50 cents per mile, down 5 cents from last year. In addition, the standard mileage rate for medical or moving and medical expenses has been lowered to 16.5 cents per mile, and the rate for charitable purposes remains at 14 cents per mile.

While there are generally no Pennsylvania laws requiring employers to use the IRS' rate, there may be some tax advantage for doing so. The IRS will deem employers who make qualifying reimbursements up to 50 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use. Qualifying employees who are not reimbursed for their business mileage will be able to deduct 50 cents per mile on their individual tax returns.

Using Form 990 as a Fundraising Tool

Tax-exempt and nonprofit organizations can now find a marketing opportunity in an unusual place, their tax return. It's no secret that people generally hate filling out tax returns almost as much as they hate paying their actual taxes (click here to see an amusing letter sent to the IRS by a disgruntled taxpayer). So it may come as a surprise to many tax-exempt and nonprofit organizations that they can use their well prepared tax returns for an important purpose - fundraising.

Many donors use the website GuideStar.org to access the most recent Form 990, which are the annual tax returns filed by tax-exempt organizations. This can help guide donors in assessing organizations for charitable contributions. Recently the IRS has changed Form 990 enabling it to serve as a powerful public relations tool.

For example, in Part I, Line 1, the preparer is directed to,"[b]riefly describe the organization's mission or most significant activities". This gives the preparer a great opportunity to use positive, inspirational and persuasive language to sell the organization to potential donors. Also, this portion of the tax return will likely be the first entry a potential donor may read, thus it's important to utilize this properly to promote your organization's mission. The usual droll prose used to fill out most tax returns should be avoided and, because it is a tax return, don't stretch the truth.

In Part III, Line 4 the preparer must describe how the organization's three largest programs serves its tax exempt purpose. This is another great opportunity to describe and promote exactly how the organization fulfills its mission. The description of programs should be in depth and as specific as possible. Consider answering these questions when filling out Part III, Line 4:

  • Who was helped? 
  • How many people were helped? 
  • How many volunteers were used? 
  • How much money was raised and disbursed? 
  • Are there any statistical results? 

Give the potential donor confidence that his money will be well used.

Also note that in Part X, Line 1, it asks for the amount of money an organization is keeping as cash in a non-interest-bearing account. If this entry reflects a large sum of money, it gives potential donors the impression that the organization is merely sitting on the money it receives instead of using it to fulfill its mission. As a practical matter, it's best to structure the organization's finances so that little or no money should appear in this portion of the tax return.

Thoughts on Seminar - Legal and Financial Aspects of Tax-Exempt Organizations

On Monday, August 10, 2009, I had the pleasure of serving as a faculty member for a National Business Institute presentation entitled “Legal and Financial Aspects of Tax-Exempt Organizations." It was a pleasant change of pace because, unlike most continuing legal education programs that are attended solely by attorneys, this program also targeted representatives and employees of non-profit organizations.

While mingling between sessions, I was able to meet the attendees and learn about the wide array of noble missions their organizations carry out. In hearing about those accomplishments, it occurred to me how important it is for those organizations to protect themselves so that they can continue to carry out their missions. This includes not only finding qualified board members, officers and employees, but also avoiding conflicts of interest, following the rules and regulations regarding lobbying and political activities, proper financial management, and protecting the organization from a litany of potential liabilities and pitfalls. Fortunately, we were able to address many of these issues during the seminar.

In addition, I have recently posted a checklist for a healthy non-profit organization. In the near future, I will be posting information on using the IRS Form 990 as a marketing tool for donations. I invite you to check back on the blog from time to time for other postings related to effectively running a non-profit organization.

Checklist for a "Healthy" Nonprofit Organization

Maintaining a healthy nonprofit organization is essential. Not only will it help to ensure the success of your organization and your mission but also serve as a way to foster trust with supporters. I have created a checklist for nonprofit entities to evaluate the health of their organizations. This is intended as a proactive measure to help nonprofits identify and address potential issues before they become serious.

In addition, the  Pennsylvania Association of Nonprofit Organizations (PANO) has developed the Standards for Excellence Program to also provide support and education to Nonprofits to ensure the success of their mission. PANO describes the mission for the program, "To assist organizations in the implementation of the Standards for Excellence Code and Program in order to expand management capacity and demonstrate credibility in the communities served. "

  • Are you incorporated as a Pennsylvania nonprofit corporation?
  • Do you have up-to-date bylaws?
  • Do you have an up-to-date "Conflict of Interest" policy for officers and board members?
  • Do you have business income unrelated to you non-profit purpose?
  • If a charity, do your organizing documents:
    • bar the organization from participating in political campaigns?
    • provide for the distribution of assets upon dissolution?
    • prohibit any director, officer, trustee, etc., from benefiting from net earnings?
    • limit the organization to charitable purposes?
  • If a public charity, do you:
    • receive a substantial portion of your support from government sources, publically supported charities or the general public?
    • maintain a continuous, ongoing program to solicit funds?
    • limit unrelated business income?
  • If a private foundation, do you:
    • have any investment income or place limits on business holdings per year?
    • prohibit self dealing between the organization and related parties?
    • require annual distributions of income?
    • limit expenditures to those that further the organization's purpose?
  • Have you applied for and/or received tax-exempt recognition from the Internal Revenue Service?
  • Do you file a from 990 with the PA Department of Revenue annually?
  • Do you bar distributions to the founders of the organization or substantial contributors or individuals whose compensation depends on the organization's revenues?
  • Do you enter into joint ventures with "for profit" businesses?
  • Do you have money in a non-interest bearing account?

Legal and Financial Aspects of Tax-Exempt Organizations

Matthew Grosh will be on the faculty for the National Business Institute, Legal and Financial Aspects of Tax-Exempt Organizations on August 10, 2009. This seminar is an opportunity for Nonprofit business professionals such as Attorneys, Accountants, CPAs, CFOs, Presidents, Executive Directors, Vice Presidents, Officers and Trustees, Enrolled Agents, and In-House Counsel to continue their education. The seminar will cover How to become Tax-Exempt, Financial and Tax Considerations, Lobbying and Political Activities, Changing Regulatory Environment, Ethical Considerations, Advising Directors and Officers of Tax-Exempt Organizations, and Maintaining Tax-Exempt Status.

Program Summary - "Build a Comprehensive Understand of Practical Foundational Nonprofit Concepts."

7 Benefits of Attending

  • Gain practical knowledge on Form 990 to ensure your client's compliance with IRS standards.
  • Save your clients money: learn about special exceptions available to nonprofits.
  • Make sure your client's fundraising and political activities go off without a hitch - get an insider's grasp of regulations governing lobbying and charity work.
  • Don't miss any important steps in applying for exempt status - let our faculty walk you through the process.
  • Ensure your clients full disclosure by crossing the T's and dotting the I's on Form 1023.
  • Find out how recent legislative efforts and court decisions will affect your practice.
  • Clearly outline the duties and liabilities of officers, directors, and managers to protect your clients from inadvertently breaking the law.

If you are interested in attending you can register at the National Business Institute website.