Date post: | 26-Dec-2015 |
Category: |
Documents |
Upload: | piers-king |
View: | 215 times |
Download: | 1 times |
1
Fundraising Regulations
________ ___________________________ ________________
Insert Replication Partner Logo
2
What are we doing?
“Far too many charities have broken the understood covenant between the taxpayers and nonprofits– that charities are to benefit the public good, not fill the pockets of private individuals.” --Senator Charles Grassley, then Chairman of the Senate Finance Committee, now ranking Republican on the Finance Committee, at the June 22, 2004 Hearing on Charity Oversight and Reform
3
Purpose of Today
Discuss legal and ethical issues in charitable fundraising
Provide you with a checklist Minimum legal requirements to stay in
compliance
4
About Your Organization
Board of directors Members Staff members Volunteers Internal training program
5
Regulations
State Requirements Maryland Charitable Solicitations Act Federal Requirements Federal Charitable Solicitation Requirements Special Topics
6
Overall Confidence In Charitable Organizations, 2002-2008
A Great Deal
A Fair Amount
Not Too Much
None
September 2002 13% 47% 26% 11%
August 2003 12% 47% 27% 10%
October 2003 18% 45% 27% 7%
January 2004 13% 49% 25% 9%
August 2004 15% 50% 25% 7%
July 2005 15% 49% 24% 8%
July 2006 20% 49% 20% 9%
March 2008 16% 48% 25% 9%
CONFIDENCE IN CHARITABLE ORGANIZATIONS, 2006 June 2008, PAUL C. LIGHT
7
Pension Protection Act of 2006
Annual reporting by nonprofits not filing 990 Tighten rules for gifts of façade easements New rules for donor advised funds and
supporting organizations Requires cancelled check or receipt for ALL
donations Limits deductions for donation of “fractional
interests” in artwork Excise tax exemption for blood collector
organizations
8
Pension Protection Act of 2006 (2)
Limits donations of clothing and household items, must be good or better condition
Tightens requirements for credit counseling agencies
Increases penalties for valuation misstatements Doubles penalties for “excess benefit
transactions” Limits deductions for donations of stuffed trophy
animals—lesser of taxidermy cost or value 990-T disclosure (UBIT)
9
State Requirements
Insert Replication Partner Logo
10
State Requirements
Incorporation General corporate law principles Specific corporate requirements and what is
not required Specialized record-keeping requirements
11
Incorporation
Not required to obtain Tax-Exempt status from the IRS
Advantages of incorporation Protection from liability Recognition by the State
12
General Corporate Law Principles
Legal Differences between Nonprofits and Corporations: Stockholders Vs. Members Powers of Members Board of Directors
Responsible for Governance Duty of Care and Duty of Loyalty In limited cases they may be liable
Maryland law does not require Opening meetings (Annual, Board or Committee) to the
public Employee access to financial records
13
Specialized Record-keeping Requirements
IRS requires that nonprofits keep sample copies of all fundraising materials including: Dues statements Fundraising solicitations Tickets Receipts Evidence of payment Ad copies TV/radio scripts or transcripts Other evidence of any on-air solicitations (if applicable) And more!
14
Specialized Record-keeping Requirements
Specialized Record-keeping Requirements
15
Specialized Record-keeping Requirements
Specialized Record-keeping Requirements
16
Maryland Charitable Solicitations Act
Insert Replication Partner Logo
17
Maryland Charitable Solicitations Act Requirements
Key concepts and terms Registration requirements Documents and materials which must be
available upon request Point of solicitation disclosures Working with a professional solicitor Honesty in fundraising
18
Key Concepts and Terms
Charitable contribution Charitable organization Charitable solicitation Charitable representatives Fundraising counsel Professional solicitor Associate solicitor
19
Registration Requirements
Fundraising notice registration Even if an organization is not required to
register, they must still file a “Exempt Organization Fundraising Notice” with the Secretary of State’s office
20
Registration Requirements (Cont.)
Organizations are exempt from registration and disclosure requirements. An exempt organization does not engage professional solicitor and either: Solicit for a named individual and the gross amount is
delivered to that individual; Is exempt from federal tax and is a religious organization,
the parent or a school affiliated with a religious organization; Solicit contributions only from members (students, former
students, parents of students or former students, staff, of a school, college or university);
Do not receive more than $25,000 in charitable contributions for the year in which registration would be required; or,
Only receives contributions from for-profit corporations and private foundations.
21
Registration Requirements (Cont.)
Charitable organizations that must register: Organizations before they begin soliciting in the state Have contributions solicited on its behalf in the state Solicits contributions outside the state but is based in
Maryland Registration includes
Copy of 990 Audit by an independent CPA (>$200,000) Review by CPA ($100,000 – $200,000)
22
Registration Requirements (Cont.)
After registration organizations must submit annual reports to the Secretary of State’s office
Annual Fees are as follows: < $25,000 with no professional solicitor: free < $25,000 with professional solicitor: $50.00 $25,000 – 50,000: $50 $50,001 - $75,000: $75 $75,001 - $100,000: $100 $100,001+: $200
23
Registration Requirements (Cont.)
Charitable representatives Must register, pay a fee and submit a bond to
the secretary of state Exempt organizations must file a “fundraising
notice” Special Rules:
Federated fundraising Consolidated registration
24
Documents and Materials Availability
Under MD law, you must produce the following documents within 30 days and mail it at no charge: A current financial statement which must include:
The organizations name, address and phone number Amount of total revenues Total revenues from charitable contributions Amount and percentage of revenues used in the past year
for: Management and general expenses Fundraising expenses Program services
If registered with SOS a statement confirming registration Statement of programs and uses for which funds are
requested
25
Point of Solicitation Disclosures
Maryland law requires that written charitable solicitations, and receipts for a charitable contribution, must contain: A statement that a copy of the nonprofits current
financial statement is available upon request; The name of the nonprofit, and the address and
telephone number where requests for the financial statement should be sent;
A statement that documents and information submitted to the state under the Maryland charitable solicitations act are available from the Secretary of State for the cost of copying and postage.
26
Sample State of Maryland Disclosure Statement
"A copy of our current financial statement is available upon request by contacting [name of organization] at [address and telephone number of organization]. Documents and information submitted to the state of Maryland under the Maryland Charitable Solicitations Act are available from the office of the Secretary of State, 16 Francis St., Annapolis, MD 21401 for the cost of copying and postage."
27
Point of Solicitation Disclosures
When is a disclosure required? “Written solicitations”
A disclosure is not required for: Accredited schools Colleges or universities to students, former
students, parents of students or former students, board members and staff
Advisable to always make a disclosure Must be conspicuous
28
Point of Solicitation Disclosures (Cont.)
Legal requirements which may affect soliciting: CAN Spam Act of 2003 FTC Telemarketing Sales Rule Junk Fax Prevention Act of 2005
Limited applicability to nonprofits
29
Point of Solicitation Disclosure (Cont.)
Special rules when awarding prizes: Mandated disclosures must be made on the
first page of the written solicitation: Manufacturer suggested retail price Conditions which must be met Donor cannot be required to make a purchase Information on chance drawings
Special rules for vending machines, canisters and other collection devices
30
Working with a Professional Solicitor
Regulatory requirements: Regarding filing of papers to the Secretary of
State Regarding what the solicitor must keep In addition there are special disclosure rules
for the solicitor including: Disclosure of identity Disclosure or organizations finances Written receipts Written authorization upon request
31
Honesty in Fundraising
Maryland state law has additional provisions on solicitations including in the following matters: Representation of purpose of solicitation Usage of funds from solicitations False or misleading promotions Consent of charities False representation
32
Federal Requirements
Insert Replication Partner Logo
33
Federal Requirements
Federal tax documents which must be made public
Methods of making documents available Penalties for noncompliance Multiple requests and harassment campaigns
34
Federal Tax Document Availability
The following documents should be available to the public The Form 990 for the previous 3 years The Form 990-T Original application for tax exempt status with
all materials submitted in support (1023 or 1024)
IRS determination letter for tax-exempt status
35
Making Documents Available
Must be available upon request at: The principal office Regional offices under certain conditions
3 or more FT employees (or PT equivalent) Does not include a service delivery site that
doesn't include an office for extra management staff other then those managing that site.
At a “reasonable location” if no office exists In person requests vs. in writing
36
Making Documents Available (Cont.)
Payment for copies Disclosure of reason for request Avoid providing copies by putting this
information on the internet: Provide URL to the requestor It only excuses the organization from providing
copies, not from making the documents public Posting must be in PDF form
37
Penalties for Noncompliance
Federal law provides penalty for noncompliance
“Willful failure” to allow inspection or provide copies: $5,000 plus $20 for every day you fail to
provide the forms Maximum penalty of $10,000
38
Multiple Requests and Harassment
An organization does not have to respond to: Multiple requests from the same individual or
address Two requests within thirty days Four requests within a year
Requests that are part of a harassment campaign
Organizations must apply to IRS to determine if harassment is occurring
39
Federal Disclosure Requirements for Soliciting
Contributions
Insert Replication Partner Logo
40
Federal Charitable Solicitations Requirements
Deductibility of contributions under IRS code The quid pro quo rule Substantiation of charitable contributions
41
Deductibility of Contributions
In general Section 170 of the IRS code
Organizations to which Charitable Contributions are allowed: A governmental entity if "for exclusively public
purposes;" Certain “corporations, trust, or community chest, fund
or foundation” A post or organization of war veterans From an individual to a lodge system under conditions A cemetery company
42
Deductibility of Contributions (Cont.)
Percentage limitations on contributions Generally, corporations may deduct up to 10%
of taxable income Generally, individuals may deduct up to 50%
of adjusted gross income NOTE: The precise calculations are
somewhat more complicated and the specific provisions of the Internal Revenue Code should be reviewed and donors should be encouraged to talk to tax advisors
43
Quid Pro Quo Rule
Assumption of deductibility No expectation of receiving anything
More complicated when donor receives or has the right to receive. For example: Dinner or entertainment provided with
donation Promotional merchandise Membership benefits
44
Quid Pro Quo Rule (Cont.)
Background. 1993 law establishes strict rules.
Applies to any contribution over $75 where donor receives something in return.
Charity must provide an estimate of “fair market value.”
General rule: An organization should NOT state in solicitation
materials, catalogs, or tickets that the donor's payment is tax-deductible if the donor is receiving something of value in exchange for the contribution.
45
Quid Pro Quo Rule (Cont.)
Defining “fair market value (FMV)” The retail value of the goods or services to
the donor Charity must provide a “good faith estimate”
based off of “reasonable methodology” Although only required for contributions of
$75+, advisable for everything
46
Quid Pro Quo Rule (Cont.)
If FMV = cost of ticket. No portion of the contribution is deductible and
this should be stated on the ticket. However, it is deductible if the donor refuses
the goods or services offered. Refusal must take place at the time of the
contribution.
Payments for raffle tickets, lottery tickets, bingo cards or other gaming activities are not tax-deductible.
47
Quid Pro Quo Rule (Cont.)
The “insubstantial” exception Full amount may be tax-deductible if:
The FMV of what the donor receives is less than either 2% of the amount of the contribution or $96 in 2010, whichever is less
The amount of the contribution was more then $48.00, the benefits consist of token items with the organizations name and the cost of the token was less then $9.60 (2010)
48
Quid Pro Quo Rule (Cont.)
PENALTIES ARE SUBSTANTIAL!!! A charity can be assessed a fine of $10 per
contribution, with a maximum penalty of $5000 per event
49
Quid Pro Quo Rule (Cont.)
Sample disclosure "Ticket price: $100. For tax purposes only $50
is tax-deductible. The balance of $50 represents the fair market value of the food and entertainment at this event."
50
Quid Pro Quo Rule (Cont.)
Deductibility and charity auctions Charity must make a “good faith estimate”
This estimate may be done with “any reasonable methodology”
Donors must be told that they may only deduct the value of their bid exceeding FMV
When the items are unique, FMV may be estimated from similar items in the marketplace
51
Quid Pro Quo Rule (Cont.)
Membership benefits. Annual membership for $75 or less may be
disregarded if the benefits are "rights or privileges that can be exercised frequently during the membership period."
Free admission to an event may also be disregarded, provided that the event is open only to members and cost (excluding allocable overhead) for the event is no more than $9.60 per person in 2010.
52
Quid Pro Quo Rule (Cont.)
Membership benefits (cont.) Newsletters may generally be disregarded Two-tiered membership categories:
Membership in the higher tier may be disregarded if the benefits are identical to benefits in the lower tier
Example: Bronze ($60): free admissions, free parking and
gift shop discounts Silver ($200): free parking, gift shop discounts for
goods and services, and special commemorative silver bowls (valued at $35)
53
Quid Pro Quo Rule (Cont.)
Corporate employee benefits. May be treated the same as an individual
benefit. Charity just needs to provide a description of
services offered rather then FMV estimate. Matched contribution benefits.
Benefits provided to the employee will not effect the employers deductible.
54
Quid Pro Quo Rule (Cont.)
An employee makes a $500 contribution to a charity which is then matched by his/her employer with an addition $500. The charity provides the employee with goods/services based on the combined contribution of $1,000, and does not provide any additional benefit to the employer. The receipt given to the employee must include: The amount of the employee's contribution, A description of the goods/services provided, And the organization's good faith estimate of the fair market
value of the benefit received. The receipt provided to the employer for the matched payment
must list that no good or service was provided to the employer in consideration of its $500 contribution.
55
Substantiation of Charitable Contributions
Donors must have proof to claim deduction Cancelled check Bank record Receipt from charity
Name and address of donor Amount of donation Disclosure statement
For donations of $250+, a donor needs written proof from the charity
56
Substantiation of Charitable Contributions (Cont.)
Thank you for your contribution of $250 on [date]. You should retain this receipt/letter in your records for tax purposes. As you may be aware, the IRS no longer will accept a canceled check as substantiation of a charitable contribution of $250 or more. [Select one]: (this letter further serves to verify that you did not receive anything of value in exchange for your contribution. Therefore, the entire amount of your donation is tax-deductible) or (this letter further serves to verify that you received described goods or services, which had a fair market value of $_____. therefore, only $xx.Xx of your donation is tax-deductible) or (this letter further serves to verify that the items you received in exchange for your donation were insubstantial under IRS guidelines. Therefore, the entire amount of your donation is tax-deductible.)
57
58
59
Substantiation of Charitable Contributions (Cont.)
When contributions are deducted from payroll, two documents are needed Pay stub, W-2 or similar documents Document outlining that the employee did not
receive anything for the contribution Each contribution should be considered
separately when considering the $250 threshold
60
Substantiation of Charitable Contributions (Cont.)
Donations of goods Clothing or household goods must be in “good
or better” condition Donor must obtain a receipt of donation
Should just mention items donated Donor is responsible for valuing items
61
Substantiation of Charitable Contributions (Cont.)
Value of donation $250+
General IRS rules apply $500+
Form 8283 must be filed with return Donations of items worth $5,000+
Form 8283 AND an appraisal from a qualified appraiser
Donations of property of $5,000+ Organization must sign part IV of 8283 If the organization sells property within 2 years, they
must file a form 8282 with the IRS
62
Substantiation of Charitable Contributions (Cont.)
Planes, boats and automobiles Gross proceeds vs. FMV Significant intervening use Material improvement Donor must obtain a “contemporaneous
written acknowledgement” with: Donor’s name and SSN or FEIN Vehicle identification number (VIN) One of three statements
63
Substantiation of Charitable Contributions (Cont.)
Intellectual property. The lesser of the donor’s “tax basis” in the property or
its FMV. Other special cases:
Taxidermy property. Facades of historical buildings. Conservation easements. Partial interests in art or other valuable property. Property used by charities for their charitable purposes
and subsequently sold.
64
Substantiation of Charitable Contributions (Cont.)
Receipts where the donor obtains good or services. Subtract goods or services from value of
donation. If a donor made a gift of $275 and in exchange
received goods or services valued at $50, then the deductible portion of the gift is only $225 and the receipt requirement is not triggered. However, the donor will still have to have proof to claim the deduction.
65
Special Topics
Insert Replication Partner Logo
66
Special Topics
Fundraising and the internet State consumer protection laws Direct marketing association – privacy rules
67
Fundraising and the Internet
State charitable solicitation laws Uniform charities registration form Fundraising appeal on the internet Solutions
Disclaimer language Multi-state registration
68
State Consumer Protection Laws
Commercial-nonprofit marketing alliances Consumer protection laws apply to nonprofits as
well. A nonprofit is as engaged in advertising as the
sponsor. Advertisements may not misrepresent a
nonprofits’ stance on a product. Advertisements must avoid expressed or implied
claims that advertised product is superior, unless claim is true an substantiated and nonprofit has determined product to be superior.
69
State Consumer Protection Laws (Cont.)
Commercial-nonprofit marketing alliances (cont.) Advertisements shouldn't be misleading about
the effect of consumers purchasing decisions on charitable contributions by the consumer or commercial sponsor.
Nonprofits should avoid entering into exclusive relationships. Where they do, the exclusivity should be clearly and conspicuously disclosed.
70
Direct Marketing Association – Privacy Rules
The direct marketing association rules: Companies must disclose when they are
sharing consumer's private information (e.g. Names and addresses) with other marketers.
Allow consumers the option to not have their information shared.
Honor requests to not receive solicitations Participate in DMA's two national name-
removal services. DMA’s Mail Preference System DMA’s Email Preference System
71
QUESTIONS???
Insert Replication Partner Logo