ALERTS

ALERTS are "policy issues or concerns that affect nonprofits" and are included in each edition of ZimNotes, a free monthly E-newsletter, sent to your email address once a month, with articles and information to help your nonprofit forge a better future. For recent Zimnotes articles please visit our Free Resources or subscribe to ZimNotes.

Most Recent:

May 2008

New Resources: Campaign 2008 and V3 Campaign
The Chronicle of Philanthropy has compiled a new resource called Campaign 2008 with information about where the candidates for the White House stand on the issues that matter to nonprofit causes, information on getting the vote out, and the rules about the laws governing nonprofit involvement in political and advocacy activities. Another good resource on these issues is V3 Campaign whose motto is "V3 will make the voice of the nonprofit sector heard, its value realized, and its votes counted in EVERY election in America by Inauguration Day, January 20th, 2017." It's worth checking out their website to see the cool flashing statistics on the home page about nonprofits (such as 14 million folks work and 80 million volunteer in nonprofits every year).

IRS Getting Tough on Governance Issues
If anyone thought that the IRS is backing off governance issues, they are sadly mistaken. An IRS spokesperson recently said they will spend more effort monitoring the "efficiency and effectiveness" of nonprofits. IRS would try to "create and enforce a standard to ensure that organizations spend in line with their resources," a so-called commensurate test - to determine whether nonprofits are using their money in an acceptable way. Allegedly Congress and the public are frustrated that nonprofits with significant assets are doing little or nothing that would be considered "charitable;" in particular they point to educational institutions that are haording large endowments. See "Putting Charity to the Test: IRS considers controversial measure for charitable activity." Lawmakers are also considering 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 and may revisit plans to calculate ratios that show how much of a nonprofit's revenue is used to fulfill its mission versus how much pays for executive salaries and fundraising costs. In addition the Postal Service is talking about making nonprofits reveal fundraising costs in more detail than is already required by 990s. "Proposal to Improve Disclosure of Fund-Raising Costs Debated."


Also see past ZimNotes Alerts for major changes that will affect many nonprofits.
Archive:

April 2008

IRA ROLLOVER
The IRA Charitable Rollover (making it easier to donate to nonprofits from IRA accounts) provision contained in the Pension Protection Act of 2006 expired December 31, 2007. The previous IRA Rollover had already led to millions of dollars in new donations ($110 million to nonprofits in 2007). In early March 2008, the House and Senate budget resolutions for the 2009 fiscal year proposed to extend the IRA charitable rollover. Still preferable is the passage of a stand-alone IRA Charitable Rollover provision that is permanent, would remove the $100,000 annual limit on donations, and would lower the starting at age from 701/2 to 59 1/2. For more info and how to support this effort.

ESTATE TAX
This issue is back on the table. Recently the Senate Finance Committee held hearings to build consensus for a bipartisan compromise on the estate tax. According to Brookings Institution scholars, repeal could cost U.S. charities at least $10 billion in lost charitable giving per year. For more information on the estate tax and how concentrated wealth affects the economy, see www.faireconomy.org. For a fact sheet on the repeal of estate tax's affect.

WANT TO KNOW WHAT THE IRS THINKS ABOUT GOVERNANCE PRACTICES?
Good governance, while not dictated by federal tax law, is nonetheless a new focus of the IRS. To encourage such internal oversight, the IRS "commends" a series of policies and practices.

February 2008

NEW FORM 990
Recently, the IRS released a redesigned Form 990, the main tax form for nonprofit groups, for tax year 2008 (to be filed in 2009). The new form requires nonprofits to disclose more information about their financial operations than is currently required. Smaller nonprofit organizations, worried about the extra time it will now take to fill these out, were given a phased in three-year period. Although a goal was simplification, the main part of the redesigned Form 990 consists of an 11-page document-accompanied by 16 supporting schedules. By comparison, the current Form has a 9-page main section and two schedules.

WHAT ARE NONPROFITS DOING ABOUT THIS ELECTION YEAR?
A great example of nonprofits getting involved in this year's election - all perfectly legal--is the Primary Project, in which nonprofit leaders have been asking presidential nominees questions about how they would strengthen the economic and social capacity of the sector. Another excellent example is how Common Sense Media questioned the candidates about their issue. See also the discussion on nonprofits and politics in the 2008 campaign season. If your organization is doing something this year please tell us and we can share with other ZimNotes readers.

December 2007

New Tax Form for Small Nonprofits
On January 1, 2008, the requirement for small tax-exempt organizations to submit Form 990-N, the e-Postcard, will be implemented. Nonprofits with gross receipts of $25,000 or less (formerly exempt from notification) can access a web-based process for submitting the e-Postcard. For more information, see the IRS website.

Estate Tax Developments
In November the Senate Finance Committee held another hearing on repealing the estate tax. Warren Buffett testified that repeal of the tax would be a windfall for a few wealthy families and widen income disparity. Sen. Max Baucus (D-MT) and Sen. Charles Grassley (R-IA) both expressed personal support for estate tax repeal, but acknowledged that it is off their agenda in the Senate for now. For more information on the estate tax and how concentrated wealth affects the economy, see www.faireconomy.org.

Free Online Guide to Internet Advocacy
The Internet Advocacy Book is a free resource for nonprofits and socially progressive political organizations that use the Internet to advocate for their cause. More information.

October 2007

Does IRS Read Your Comments?
Good news. Apparently sometimes IRS does read comments, and based on 650 comments that were made to its draft new Form 990, has made revisions that include ratios being dropped from the summary page. This is good news as these ratios are often used by charitable rating groups to measure financial efficiency as the main (or only) criteria for effectiveness.

Bad news is that the IRS is keeping their new governance questions:

1. Does the organization have a written conflict of interest policy?
2. If Yes, how many transactions did the organization review under this policy and related procedures during the year?
3. Does the organization have a written whistleblower policy?
4. Does the organization have an audit committee?

These and other questions will increase the cost of filing (from preparers) and for many nonprofits will ask about things that are not (yet) legally required. For more information on the Form 990, visit the Tax Information for Charities & Other Non-Profits page of the IRS website. See also article from the Chronicle of Philanthropy.

Does Congress Read Your Emails?
Unclear: apparently they do but some more than others. A recent conference hosted by the Congressional Management Foundation was dedicated to replacing the misinformation, misperceptions, and frustrations about communications between Members of Congress and citizens with solid research and a collaborative process. One key take away finding was: "Many congressional staff doubt the legitimacy of identical form communications, and want to know whether communications are sent with constituents' knowledge and consent." More information.

September 2007

Comment and Learn About Draft Federal Form 990
You can still comment on the new draft of Federal Form 990. This is a major overhaul of the annual information return that most nonprofits are required to file and that many watchdog groups use to analyze and compare how nonprofits are doing. There are a number of controversial parts of the proposed changes including an over-reliance on financial indicators for a nonprofit’s effectiveness, questions stemming from Sarbanes Oxley about whether nonprofits follow certain policies and practices, such as policies on conflicts of interest, whistleblowers, and how long to keep documents. Comments on the draft are due to the IRS by September 14.

More information:

• IRS information on draft Form 990
• See other's comments submitted to IRS already
• Chronicle of Philanthropy article
• Independent Sector draft comments on Form 990

July 2007

Small Nonprofits Have New Filing Requirement
Beginning next year small nonprofits (under $25,000 or less per year) will have to file an annual electronic notice, known as the e-Postcard or Form 990-N, to inform the IRS of their current address and contact information. This new form is part of the Pension Protection Act of 2006 and is supposed to help the IRS fight fraud. It may instead cause major headaches for legitimate organizations that fail to file. Organizations that fail to send the IRS an e-Postcard within three years will automatically lose their tax-exempt status and have to re-apply for exemption. More information about the Form 990-N is available online.

New 990 Forms Coming
The Wall Street Journal reported on the new IRS Form 990 (nonprofits' annual return). This is the form that groups such as GuideStar use to either post directly to the public or analyze and compare how well nonprofits are doing with overhead and fundraising expenses. All nonprofits will need to pay close attention as this document has become a key marketing tool (whether you like it or not) for telling the world about your financial revenue, financial practices and compensation. More information.

Gates Foundation Supports Advocacy
The Bill & Melinda Gates Foundation gave $7.1 million to help Gulf Coast organizations advocate for affordable housing and workers' rights. What struck ZimNotes as remarkable about this is the "trend setting value" of such a large foundation giving that amount of money for advocacy work…could be the start of a new trend for public policy advocates. More information.

June 2007

Small Nonprofits Have New Filing Requirement
Beginning next year small nonprofits (under $25,000 or less per year) will have to file an annual electronic notice, known as the e-Postcard or Form 990-N, to inform the IRS of their current address and contact information. This new form is part of the Pension Protection Act of 2006 and is supposed to help the IRS fight fraud. It may instead cause major headaches for legitimate organizations that fail to file. Organizations that fail to send the IRS an e-Postcard within three years will automatically lose their tax-exempt status and have to re-apply for exemption. More information about the Form 990-N is available online.

New 990 Forms Coming
The Wall Street Journal reported on the new IRS Form 990 (nonprofits' annual return). This is the form that groups such as GuideStar use to either post directly to the public or analyze and compare how well nonprofits are doing with overhead and fundraising expenses. All nonprofits will need to pay close attention as this document has become a key marketing tool (whether you like it or not) for telling the world about your financial revenue, financial practices and compensation. More information.

Gates Foundation Supports Advocacy
The Bill & Melinda Gates Foundation gave $7.1 million to help Gulf Coast organizations advocate for affordable housing and workers' rights. What struck ZimNotes as remarkable about this is the "trend setting value" of such a large foundation giving that amount of money for advocacy work…could be the start of a new trend for public policy advocates. More information.

April 2007

PENSION ACT IRA ROLLOVER PERMANENT POLICY PENDING
The existing IRA Rollover in the recent Pension Protection Act of 2006, though limited, has already led to millions of dollars in new donations. Initial reports to the National Committee on Planned Giving already show that during the first four months the provision was in effect, more than $50 million in contributions was made to nonprofits through the IRA rollover. A coalition, led by Independent Sector, is working to expand the provisions and make them permanent.

Appraisals
The Act also imposes new penalties on taxpayers who claim a deduction for gifts of property valued at $5,000 if they overstate the property's value. Appraisers may also be subject to disciplinary action. Note: A new IRA reports alleges large amounts of revenue was lost due to incorrect or no appraisals. See the report.

For a more detailed analysis of the Pension Act see:
1. Independent Sector Analysis
2. Council on Foundations
3. United Way of America
4. IRS released guidelines explaining the new Pension Protection Act with a focus on the IRA rollover, starting on page 13. A copy of the guidelines is available online. Also see this section of their website.

SOCIAL ENTERPRISE & NONPROFITS HYBRID DISCUSSED
A recent meeting sponsored by Aspen Institute brought together leading thinkers in
the social enterprise movement to discuss this emerging segment of the economy and the work of nonprofits. See the report, "Mixing Mission and Business: Does Social Enterprise Need A New Legal Approach?".

IRS STUDY ON EXECUTIVE COMPENSATION
A report of findings of the Exempt Organizations Executive Compensation Compliance Project indicated about half of the over 1800 tax returns had mistakes in reporting. More information.

February 2007

Pension Protection Act
IRS released guidelines explaining the new law that offers tax benefits to donors who make gifts to nonprofits directly from their IRAs. Under the Pension Protection Act, which Congress passed in August, donors older than 70 1/2 may transfer (rollover) up to $100,000 from their individual retirement accounts to nonprofits in 2006 and 2007.

A copy of the guidelines (Notice 2007-7) is available online; see page 13 of the notice. www.irs.gov/pub/irs-drop/n-07-07.pdf. However, despite its popularity (National Committee on Planned Giving says at least $25 million has been given through the rollovers in just a few months) the provision expires at the end of 2007. A coalition, led by Independent Sector. is working on legislation that would expand the provisions and make it permanent. More information.

January 2007

COMMENT ON NONPROFIT SELF-REGULATION PRINCIPLES!!!
The Panel on the Nonprofit Sector invites the nonprofit community to comment on its draft principles on self-regulation. Principles arranged in the following four categories:

• Facilitating Legal Compliance responsibilities and practices, such as implementing conflict of interest and whistleblower policies, that will assist charitable organizations in complying with their legal obligations.
• Effective Governance policies and procedures a board of directors should implement to fulfill its oversight and governance responsibilities effectively.
• Strong Financial Oversight policies and procedures an organization should follow to ensure wise stewardship of charitable resources.
• Responsible Fundraising policies and procedures organizations that solicit funds from the public should follow to build donor support and confidence.

Comment on regulations.

Can We Learn from the Brits?
England just enacted a new nonprofit law, the first in 400 years (let's see--that's way before this country even existed; perhaps we can learn something). Nonprofits, called charities, will find it easier to raise money and regulate themselves but will need to prove they benefit the public. The law also requires larger charities to provide more public information about their effectiveness, performance and finances. Recent laws increased financial accountability but this law grants less government oversight. The law calls for an agency that both monitors and helps nonprofits, something that is also being talked about in this country. More information.

2006 Election and Nonprofits
For an analysis of what the 2006 elections (and incoming 2007 Congress) mean to nonprofits see Rick Cohen's article in Philanthropy Journal, Election Roundup. Also Jennifer Lowe-Davis, Alliance for Justice, fears that this new congress will attempt to limit nonprofits' advocacy rights.

Media Coverage of Nonprofits
Robert Egger's Op Ed in the latest issue of the Chronicle of Philanthropy makes a case for fundamentally changing the way media covers nonprofits so that newspapers provide meaningful and consistent coverage. See article.

Copyright 2008 Zimmerman Lehman.