Posts tagged ‘regulations’

January 11, 2019

Was the Trump Foundation the Only Funder on Santa’s Naughty List?

As you struggled to raise more money at the close of 2018 while carving out holiday time with loved ones, you might have missed an important news story.

On Dec. 18, news reports announced that the New York Attorney General’s Office and the Trump Foundation had reached an agreement to dissolve the Foundation. Under the terms of the deal, the NY Attorney General will distribute the Foundation’s remaining assets to charities.

Donald Trump

However, the closing of the Trump Foundation does not end the matter. Barbara Underwood, the NY Attorney General, says the state still seeks $2.8 million in restitution, plus additional penalties.

Furthermore, the Attorney General is asking the court to bar Donald Trump from serving with nonprofit organizations in New York for 10 years. The state’s lawsuit also calls for a one-year ban for three of Trump’s children — Don Jr., Ivanka, and Eric — all of whom were Trump Foundation board members.

The State of New York “lawsuit says that Trump’s charitable organization, which he founded in 1987, engaged in ‘persistently illegal conduct’ and that Trump basically used the Foundation as a slush fund to promote his business and political campaign,” according to a report in Vox.

This news item is inherently important. It involves a charitable foundation with significant assets that appears to have acted far less than charitably. It also involves the President of the United States. However, the significance of this story does not end there.

If the NY Attorney General is correct about the alleged misdeeds of the Trump Foundation, dissolution of the Foundation and a temporary prohibition of Trump family members from serving with NY charities for a limited time seem like an insignificant punishment. Unless serious penalties are levied against Donald Trump and his family members who were involved, the Trumps alleged criminal behavior will go unpunished. Furthermore, they will remain free to create and/or serve with nonprofit organizations outside of the State of New York. Other than a bit of bad press, the Trumps will pay little for their behavior.

The problem does not end there. Failure to hold the Trumps personally liable not only fails to punish the Trump family, it sends a signal to anyone interested in using a charitable foundation for personal benefit. That signal is that there is little downside for misbehavior. In other words, there will be little to no deterrent effect unless severe penalties are imposed by the court, assuming the allegations are proven true.

The other thing we need to understand about the Trump Foundation story is that it is not an isolated situation. A decade into my fundraising career, the nonprofit sector was rocked by the scandal surrounding the Foundation for New Era Philanthropy. Operating from 1989 to 1995, the Foundation raised over $500 million in an elaborate Ponzi Scheme that defrauded well known charities and experienced philanthropists out of millions.

That wasn’t the first funder scandal, and it certainly wasn’t the last. Let’s face it. The Trump Foundation is not the only funder on Santa’s naughty list.

As another report in Vox observed, “There are some 86,000 foundations in the United States, with total assets of around $890 billion. And the vast majority of them never face this kind of scrutiny.”

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December 11, 2015

Warning: The IRS Wants You to Do Something Dangerous

The US Internal Revenue Service wants you to do something foolish.

The IRS has proposed that charities acquire, record, and report the Social Security numbers of all donors who give $250 or more in any given calendar year. The IRS justifies the proposal by stating that “the collection of information is necessary to properly substantiate charitable contribution deductions under the exception to the general requirements for substantiating charitable contribution deductions of $250 or more.”

IRS logoHowever, the proposed regulation is particularly stupid because it is completely unnecessary while being dangerous — to nonprofits and their donors — and costly to implement properly.

You can read the proposed regulation by clicking here. In addition, the website will allow you to share your comments with the IRS by December 16, 2015.

If adopted, compliance with the regulation would be voluntary, for now. Nevertheless, there are several reasons you should be very wary, including:

Voluntary Compliance Could be Made a Requirement.

If the IRS truly believes the measure is necessary, why wouldn’t it seek to change voluntary compliance to a requirement? The collection of Social Security numbers from donors is either essential or not. The IRS can’t have it both ways. Therefore, there is a strong possibility that the IRS is cynically hoping to gain acceptance for the proposal in stages, first seeking voluntary compliance before making it a requirement.

“Any proposed regulations that would create this has the potential for being a slippery slope,” David Heinen, spokesman for the North Carolina Center for Nonprofits, told Fox News.

The IRS Lacks the Capacity to Safeguard Data.

“Number one, the IRS has not demonstrated its capacity to hold this type of information from confidentiality and a security point of view,” US Rep. Peter Roskam (R-IL), a member of the House Ways and Means Committee, told Fox News.

Mark Fitzgibbons, President of Corporate Affairs at American Target Advertising, echoed Roskam’s concerns when he told Fox News, “The IRS can’t keep its information confidential, they’ve been hacked.” ATA offers direct-response fundraising services.

There are two major security problems with providing the IRS with donor Social Security numbers: 1) The very real risk that the data would not be safe in the hands of the IRS, and 2) the public’s perception that the data would be at risk at the IRS.

Most Charities Lack the Ability to Safeguard Data.

The data security concern also applies to charities themselves. Few nonprofit organizations are capable of truly protecting donor data. Giving hackers and nefarious insiders easy access to donor Social Security numbers and other information puts donors at significant risk of identity theft. To mitigate that risk would cost charities an enormous amount of money.

“Charities are not well equipped to deal with this,” Roskam said. “We’ve had for-profit companies — some of the biggest companies in the world — that have spent millions and millions and millions of dollars trying to protect their confidential data. And it’s been hacked, and it’s been breached.”

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May 23, 2012

Special Report: US Congress and NY Governor Focus on Nonprofit Sector

In the halls of government, last week was a very interesting time for the nonprofit sector.

The U.S. House of Representatives Ways and Means Subcommittee on Oversight began a series of hearings about the nonprofit sector with an eye toward regulatory reform. There’s an excellent summary in the Venable Nonprofit Alert 

In New York, Governor Cuomo has proposed new regulations capping nonprofit executive compensation, limiting the use of state funds for administrative expenses, and imposing new reporting requirements. If adopted in New York, these regulations could serve as a model for consideration by other states. The New York Nonprofit Press has prepared a terrific summary of the Governor’s proposals, visit.

I’m very tempted to editorialize, but I’m restraining myself, at least for the moment. That doesn’t mean you have to. I invite you to freely share your views of these two news items.

That’s what Michael Rosen says… What do you say?

 

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