When the Revenue Agent Comes Calling

Back in the early 2000’s, Enron, Worldcom, and other business scandals rocked the corporate world.  Although that wrongdoing involved huge, for-profit companies, it caught the attention of charity regulators at all levels of government. We wrote in “Written Governance Policies: Which Ones Should Nonprofits Have?” that the Internal Revenue Service as well as the California Attorney General (and equivalent officials Read More

A Marriage (…Um..Merger…) is Announced

One day, you’ll read about some chapters of National Organization X breaking away. The next day, there will a press release about a happy merger of separate organizations Y and Z devoted to the same charitable cause. These decisions to marry or divorce - philanthropically speaking, that is - often focus on the practical considerations of policy and strategic planning. Of course, being lawyers, our worldview is a bit Read More

Critics’ Concerns About Form 1023-EZ: Spot On

The Internal Revenue Service’s own Taxpayer Advocate Service (TAS) has confirmed that the worst fears about the new Form 1023-EZ launched in mid-2014 were well-founded. In its recent 2015 Annual Report to Congress, the “highlights” section on the cover includes this headline: “Recognition as a Tax-Exempt Organization is Now Virtually Automatic for Most Applicants.”   Troubled Form 1023-EZ Procedure The Taxpayer Read More

Trying to Wriggle Out of Feeder Organization Status?: Not Easy

Three old hippies walk into a bar …. Well, they were former hippies, but they weren't at a regular bar. They were sipping cappuccinos at a trendy spot at Venice Beach - a coffee bar. Actually, one of them was a young lawyer, but the imaginary friends joining her were some famous former hippies. Their discussion inspired the young lawyer to set up a special new business reflecting enlightened social philosophy. But it Read More

Private Letter Rulings for Nonprofits Curtailed

It’s been a tough few years for the IRS Division that has primary responsibility to implement the laws for tax-exempt organizations. The Tax Exempt and Government Entities (TE/GE) Division has endured - together with the IRS, generally - budget cuts and hiring freezes. It’s also been caught up in the fallout from the long-running saga of former Exempt Organizations Unit Director Lois Lerner and the purported partisan Read More

All Profits to Charity?: Not a 501(c)(3)

From time to time, folks come into our office with the idea of doing something like Newman’s Own; that is, starting a business and donating all the proceeds to charity. They ask us to help them set up a 501(c)(3) organization. They are often surprised to learn that Paul Newman and his partner set up that salad- dressing and pasta-sauce business as a for-profit company. It gives all after-tax profits to the Newman’s Read More

GuideStar Launches Redesigned Charity Profiles

For over two decades, GuideStar has led the way in the philanthropic community to gather and disseminate charity profiles - information about “every single IRS-registered nonprofit organization.”  This influential Section 501(c)(3) organization provides “... as much information as [they] can about each nonprofit’s  mission, legitimacy, impact, reputation, finances, programs, transparence, government, …” and Read More

What is an Executive Committee?

In “Lessons for Charity Governance From Sweet Briar and San Diego Opera,” we highlighted two instances in which, under the prior leadership just ousted, it was clear that a small group of insiders had dominated and overwhelmed the boards of directors almost off the proverbial cliff. So what exactly is a corporate executive committee?  Is it necessary? Is it a valuable element of governing any corporation, including a Read More

Get Ready for Machine-Readable Form 990s

There is a significant technological advance coming down the pike in connection with the IRS Form 990, the  all-important information return required for many tax-exempt organizations. Machine-readable Form 990’s (Modernized E-file, “MeF”) will reportedly be launched in the next month or so. The significance of this innovation is that this method makes it possible to electronically search for data, making it much Read More

Lessons in Charity Governance, Courtesy of Sweet Briar and San Diego Opera

In the spring of 2015, we followed with keen interest two developing stories about major community institutions that were suddenly threatened with immediate closure: Virginia’s Sweet Briar College and the San Diego Opera.  We watched as these institutions’ supporters rallied to oust the leadership that had proposed these unexpected and undesirable courses of action, and and how those dissenters saved the Read More