15
May

Four Major Cases Affecting Nonprofits

Whether one is a nonprofit or for profit organization, it is important to recognize key changes that are happening in your field. This month we highlight four important cases that can effect your nonprofit.

Case #1: Transparent GMU v. George Mason University

This case is important because it affects whether a nonprofit has to disclose agreements between the nonprofit and its donors.[1] This lawsuit was filed by a George Mason University student group in response to the university receiving sizable donations to its foundation by the Charles Koch Foundation.[2] The Charles Koch Foundation had issued gifts up to 15 million USD to George Mason so that the university may rename the law school for Supreme Court Justice Scalia and allow the Charles Koch Foundation to have input on faculty staffing.[3] Transparent GMU sued George Mason University to publicize the rest of the agreement between the donors and the university with the argument that the agreements are covered by Virginia’s open record laws.[4] The Virginia Fairfax County Circuit Court held that the George Mason University Foundation was not a public body however and therefore not compelled to publicize the donation agreement due to the open record laws.[5] This case is important for nonprofits to know because after this ruling, it is unlikely that a nonprofit will have to disclose the details surrounding it’s donations even if the public demands it. This is significant in light of the typical public filings and public reporting that a nonprofit must normally do.

Case #2: Underwood v. The Donald J. Trump Foundation

This case is important because it concerns a 501(c)(4) nonprofit organization misspending funds.[6] Attorney General Underwood of New York alleged the Foundation had an unlawful political coordination with the Trump presidential campaign and had several transactions to benefit the Trumps.[7] Eventually the Trump Foundation agreed to be dissolved and have its assets distributed to other charitable organizations under judicial supervision after the Foundation failed to have the case dismissed.[8] This case is important for nonprofits to consider because it shows if that nonprofits can be sued for illegal practices. As such, nonprofits must take all necessary precautions to follow the rules or face charges.

Case #3:

This case concerns how nonprofits obtain donations. Recently, there was an ongoing investigation by the California Attorney General Xavier Becerra. He issued three cease and desist orders against Food For the Poor, MAP International, and Catholic Medical Mission Board.[9] These cease and desist orders stem from the three nonprofit organizations allegedly using deceptive practices in fundraising solicitations.[10] Allegedly the organizations represented program spending percentages as inaccurately high as a result of including noncash contributions.[11] The three charitable organizations are appealing the order. The group faces the possibility of having their charitable registrations revoked and fines over $1.65 million.[12] This case is important for nonprofits to note because none of the three nonprofits are based in California but simply have solicited California residents. As a result, nonprofits are on notice that the response will be swift and aggressive should it mislead the public. This is a cautionary tale to nonprofit organizations on the importance of being transparent and using honest means to solicit donations.

Case #4: Gogtay et al v. Second Chance, Inc.

This case demonstrates the importance of accurately disclosing to donors the tax deductibility of their donations. It is a class action lawsuit out of Maryland that alleged the nonprofit Second Chance mislead donors into believing they would receive significant tax refunds for donations.[13] The plaintiffs alleged hundreds of donors were deceived into donating with promises of tax refunds and were audited by the IRS that disallowed the deduction.[14] The plaintiffs allege Second Chance knew the IRS did not approve of the benefits they were promoting and that Second Chance made false representations.[15] Nonprofit organizations should be aware of this case because it demonstrates the need to make accurate disclosures or face serious ramifications.

[1] Big Donors Sometimes Mean Big Headaches: George Mason University, University of Chicago, and More, Nonprofit Law Prof Blog, (May 3, 2018) https://lawprofessors.typepad.com/nonprofit/2018/05/big-donors-sometimes-mean-big-headaches-george-mason-university-university-of-chicago-and-more.html.

[2] Id.

[3] Id.

[4] Id.

[5] Sarah Larimer, George Mason University Foundation is not subject to public records laws, judge rules, Wash. Post, (July 6, 2018) https://www.washingtonpost.com/news/grade-point/wp/2018/07/06/george-mason-university-foundation-is-not-a-public-body-judge-rules-in-records-case/?utm_term=.7513c0cb2a4f.

[6] Attorney General Underwood Announces Lawsuit Against Donald J. Trump Foundation And Its Board of Directors For Extensive And Persistent Violations of State And Federal Law, N.Y. State Office of the Attorney General, https://ag.ny.gov/press-release/attorney-general-underwood-announces-lawsuit-against-donald-j-trump-foundation-and-its (last visited at Feb. 13, 2019).

[7] Id.

[8] Id.

[9] Mark Hrywna, Charities Get Cease And Desist From California AG, The Nonprofit Times, (Mar. 22, 2018), http://www.thenonprofittimes.com/news-articles/charities-get-cease-desist-california-ag/.

[10] Id.

[11] Id.

[12] Id.

[13] Lorraine Mirabella, Lawsuit says nonprofit Second Chance misled consumers, Baltimore Sun, (Oct. 12, 2017), https://www.baltimoresun.com/business/bs-bz-second-chance-lawsuit-20171012-story.html.

[14] Id.

[15] Id.

3
Aug

The Nonprofit Outlook: Staying Ahead of the Financial Curve

nonprofittrends

As a tax-exempt organization, your business goals are likely not profit-driven, but they are purpose-driven. That’s fantastic and truly why your organization is authentic with heart and impact! However, adopting a financially competitive mindset can lead to more and better services provided, which leads to more lives being changed. The following are key ways to stay ahead of the financial curve:
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4
Jun

The “Netflix Model” for Donations

nonprofit
In the age of the internet, the world is at your fingertips. Business transactions can cross thousands of miles in a matter of seconds when using online platforms. For nonprofit organizations who take advantage of this connectivity, the opportunities for growth are endless.

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23
Apr

5 Keys to Expanding Your Non-Profit Abroad

shutterstock_69021739

You began your organization with a mission. You provide services or aid to a target population. Whatever your charitable purpose, you are driven by a desire to see change. After establishing your organization, ensuring governmental compliance, building a network of sustainable donations, and seeing your work create change in your community, what’s next?

Your organization may be ready to grow internationally. This ambitious goal requires preparation. Here are five keys to expanding your non-profit abroad.

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19
Feb

What is a Dual Representation Agreement with a Lawyer and When is it Used?

ProsCons             Deciding when to invest in an attorney is an important decision. Frequently, people hope to save money and have one attorney or agent represent the interests of both individuals on either side of a dispute. However, in order to do so the attorney must comply with strict disclosure rules for the state in which he or she is practicing. Both parties on either side of the conflict must be made aware that there is a potential conflict, that they have the right to independent representation, and they generally are required to sign a written agreements acknowledging they have been made well aware of their rights. Sometimes this agreement is reached and both parties and the attorney will review and be asked to sign a conflict of dual representation agreement. Read more

12
Feb

7 Top Management Skills to Run a Successful Non-Profit

Non-Profits

If you are contemplating starting a non-profit organization, there are certain skills needed by the principal management for running a non-profit organization. These skills are unique to non-profit organizations and are needed to operate as efficiently as possible. The following seven skills are extremely important.

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25
Jan

Is Your Higher Education Institution Compliant with Federal Financial Regulations?

federal financial contract regulations In the United States today, the majority of Americans use credit and debit cards and students are no different. Often times students receive their first card when they enter a college or university. These cards are school sponsored credit cards. The schools are required by law to comply with the consumer protection laws when offering school sponsored credit cards. In December of 2015, the Federal Consumer Financial Protection Bureau (CFPB) sent warning letters notifying 17 higher education institutions that they have to improve disclosure of credit card agreements as required by law.

All colleges and universities are required to comply with the Credit Card Accountability Responsibility and Disclosure Act (CARD). Rule 15 U.S.C. § 1650(f)(1), known as the CARD Act, necessitates that all institutions of higher education must disclose publicly any contract or agreement made with a credit card issuer or a creditor whose intent is to market a credit card. 12 CFR § 1026.57(b); Comment 1026.57(b)-1 sets forth the guidelines for compliance:

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6
Jan

Maintaining Patient Rights under HIPPA After The New Gun Laws

HIPPA Privacy

The accidents caused by firearms continue to rise in the United States. This week, the federal government has decided to take action to reduce the number of firearms obtained by ineligible individuals. The people who fall into this category of “ineligible” include convicted felons, perpetrators of domestic violence, as well as individuals who suffer from mental health challenges that risk harm to themselves or others. The question then becomes how institutions will properly comply with federal healthcare privacy laws under HIPPA and also meet the objective of these executive orders.

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13
Nov

Middle Eastern Governments Are Beginning to Close Their Doors to Foreign Scholars

Middle East nonprofits

Middle Eastern countries are rich in history, culture, food, and language. The region is dynamic and deep in learned texts, insights, and more. However, outsider access to this region is becoming more limited as many Middle Eastern countries are reluctant to receive foreign criticisms of their economic policies, human rights records, or political unrest. This is in contrast to another country near the region that welcomes international students, business, and research into its country. This is the country of India. By allowing foreigners into its country, the Indian government is able to promote global economics and improve its advancement and scholarship.

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6
Nov

Understanding Your Non-Profit

Businesspeople Holding Up a Globe --- Image by © 2/Ryan McVay/Ocean/Corbis

Businesspeople Holding Up a Globe — Image by © 2/Ryan McVay/Ocean/Corbis

Many people have heard of tax exempt organizations, yet not everyone is clear on what the term means. A tax exempt organization is one that is exempt from paying federal income tax. There are 29 types of nonprofit organizations that the Internal Revenue Service recognizes as exempt from at least some federal income tax. The eight most common types of tax exempt nonprofit organizations are:
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