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Annual Giving Campaigns

For most organizations and individual donors, December is the largest “giving” month of the year!

Americans typically give about 3 percent of their yearly income to charity1, which equates to the average annual household donation being $2,9742However, the average person makes 24% of his or her annual donations between Thanksgiving and New Year’s. 3  Cross those statistics with the role year-end giving plays for organizations and you better get giving!

It’s estimated that 17 percent of a benefiting organizations’ yearly budget can be received in the month of December alone, often times double their normal monthly donations. 4  For many non-profit organizations, 24%-49% of their yearly operating budget is received during the Giving Season, from Thanksgiving to Christmas 4, 5.  With numbers like those, fundraising stakes are at an all-time high this time of year!

There’s a variety of ways to incorporate an annual giving campaign into your organization’s revenue. Here’s just a quick list of ideas to think about in regard to ways to reach all different types of donors:  Monetary donations, Wish Lists, Auctions, End of Year Mailing/Emailing Campaign, online stores/merchandise, monthly/re-occurring giving, house partiers, real estate donations, planned giving, raffles, in-kind donations, sponsorships, phone-a-thons, 5K’s, crowdsourcing, yearly dinner/Gala and more!

For it is in giving, that we receive! ~ Francis of Assisi

Happy Holidays!

Athena Aardweg

 Sources:
  1. http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=519#.VI3rRntWLKE
  2. http://www.nptrust.org/philanthropic-resources/charitable-giving-statistics/
  3. https://generosityresearch.nd.edu/assets/13043/american_express_charitable_gift_survey.pdf
  4. https://www.blackbaud.com/files/resources/downloads/2014/2013.CharitableGivingReport.pdf
  5. Winter 2011 issue of the Nonprofit Fundraising Survey

Giving Tuesday 101

It’s not too late to participate in #GivingTuesday!

Have you heard of #GivingTuesday but don’t quite understand it? Don’t worry, it’s only 3 years on the making and the movement is just getting started. GivingTuesday, the Tuesday after Thanksgiving, is a National Day of Donation Giving that follows the tradition of Black Friday, Small Business Saturday and Cyber Monday. This movement provides an outreach request of donations in regard to the spirit of the Holidays in the US!

To help you get started, here’s a round-up of the main resources to get your organization on board and ready for this fundraising event on December 2nd:

  1. The Official #GivingTuesday website includes info on this event as well as a ton of resources and information related to “giving”: http://www.givingtuesday.org/
  2. John Haydon, non-profit digital marketing expert, created an Ultimate Last-Minute #GivingTuesday Campaign Checklist: http://www.johnhaydon.com/givingtuesday-campaign-checklist/
  3. TechSoup has a great list of ways to use Storytelling to retain and attract new donors in your GivingTuesday Campaign: http://tinyurl.com/TechSoupStorytelling
  4. The Association of Junior Leagues International, Inc. created an excellent and comprehensive list of sites related to #GivingTuesday: http://connected.ajli.org/2014/11/the-ultimate-givingtuesday-resource-guide/

Happy Giving (and receiving)!

~Athena Aardweg

Is your Nonprofit Organization Impacted by Recent Amendments to the Florida Solicitation of Contributions Act

The Florida Solicitation of Contributions Act (the “Act”) requires anyone who solicits donations, i.e., charitable organizations, sponsors, professional solicitors and fundraising consultants, to register with the Florida Department of Agriculture and Consumer Affairs (the “DACA”). This includes many, if not all, nonprofit organizations.  Recent amendments to the Act have added some additional administrative and reporting requirements which became effective July 1, 2014.

A few important changes for charitable organizations to note include:

1. Charitable organizations must report changes to their registration statement within 10 days. Examples of changes include: (i) anything related to the organization’s registration statement, including activities in other states; or (ii) criminal, administrative, or other actions against the organization. Failure to disclose this information within the 10 day window will result in automatic suspension of the organization, until such time that the information is submitted.

2. Organizations are required to adopt a conflict of interest policy. This is intended to cover transactions between the organization and any party in which an officer, director, or trustee has a direct or indirect financial interest. This certification must be submitted along with the organization’s annual registration statement, and must contain a certification of compliance from each of the organizations officers, directors, and trustees.

3. In regards to the filing of the organization’s annual financial statement, the following brackets have been established by the recent amendment:

  • Annual contributions of less than $500,000:  An audit, review or compilation of the financial statement is optional.
  • Annual contributions between $500,000 and $1 million: The financial statement must be audited or reviewed by an independent certified public accounting firm.
  • Annual contributions of $1 million and greater: The financial statement must be audited by an independent certified accountant firm.

4. All charitable organizations that have more than $1 million in total revenue and spend less than 25% of their total function expenses on program service costs must file supplemental information. This supplemental information should include the names and specific sums paid to all: (i) employees or consultants that were paid more than $100,000 during the preceding fiscal year; and (ii) service providers that were paid more than $100,000 during the preceding fiscal year (a description of the services provided must be included).

These organizations must also provide: (i) total salaries of all persons employed by the charitable organization; (ii) fundraising amounts paid to professional solicitors, and contributions received from professional solicitors; (iii) travel expenses; and (iv) overhead and other expenses related to managing and administering the charitable organization.

5. If the charitable organization uses collection receptacles for donated items, a permanent sign must be displayed on each sign of the receptacle, including: name of the organization, business address, telephone number, and the DACA registration number.

6. All written and website solicitation must include the following statement:

A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAY BE OBTAINED FROM THE DIVISION OF CONSUMER SERVICES BY CALLING TOLL-FREE WITHIN THE STATE. REGISTRATION DOES NOT IMPLY ENDORSEMENT, APPROVAL, OR RECOMMENDATION BY THE STATE.

The statement must also include a toll-free number for the DACA, along with the website for the DACA.

7. Failure to comply with the Act may lead to a cease and desist order, and/or monetary penalties ranging from $5,000 to $10,000.

The information presented here is for information only. If you have specific  legal questions regarding your project or nonprofit organization please contact us today for a free consultation. 

Political Activity at your 501(c)(3) Nonprofit Organization

It is getting close to my least favorite time of the year: election season. Floridians will be electing a new governor in 2014; Americans will be electing a new President in 2016. There are many important issues at stake and without a doubt issues that impact the work of your nonprofit organization and your stakeholders.Despite recently court ruling holding corporations to have certain rights under the Bill of Rights, the IRS has long-standing restrictions on the advocacy and political activity of 501(c)(3) nonprofit corporations. This is the first of a series of blog posts that will explore these rules and regulations. This post focuses on 501(c)(3) nonprofit organizations and political advocacy and activity.

This blog is presented for informational purposes only. Please contact a licensed attorney if you have any specific questions or concerns about the political activity at your nonprofit organizations.

NO PARTISAN POLITICAL ACTIVITY

The IRS completely prohibits all partisan political activity. This means that 501(c)(3) nonprofit organizations cannot “directly, or indirectly, participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office.”[1] Doing so could result in loss of the organization’s tax-exempt status, resulting in taxes being imposed on both the organization and its Board of Directors and officers.[2]

NONPARTISAN POLITICAL ACTIVITY IS USALLY OK

Organizations can engage in a variety of non-partisan political activities. This includes voter education, registration and ‘get out and vote drives’.[3]  The most important factor is that these activities are not biased or favor one party or candidate over another.[4]  501(c)(3) organizations can engage in non-partisan activity designed to educate voters, such as public forums and the publication (print or electronic) of voter education guides.[5]  It is also permissible to conduct voter education (where and how to vote) and registration.[6]

501(c)(3) organizations can also host candidates or have a legislative breakfast in which politicians come to discuss pertinent policy issues with key agency stakeholders. These candidate appearances are permitted as long as the organization provides equal opportunity to all political candidates seeking office and provides a fair, non-partisan forum.[8]  Whether this activity constitutes political intervention will be determined by the surrounding facts and circumstances. Generally speaking, organizations should extend invitations to all candidates seeking the same office.

At the actual event, all candidates must be given an equal opportunity to participate. This includes both “the nature of the event” and the “manner of the presentation.”[9]

The IRS will consider all of the facts and circumstance surrounding these types of events when deciding whether the activity is non-partisan and permitted, or partisan and in violation of the political intervention ban.[10]  Generally speaking, fairness and equal opportunity are the gravamen of this inquiry. Questions asked to the candidates must give both sides an opportunity to present his or her views on the topics being discussed.[11]  The organization must also allow all candidates an equal chance to discuss and debate issues, and to present both sides of the issue.

Our post next week will examine issue advocacy at 501(c)(3) nonprofit organizations.

References:
[1] 26 C.F.R. § 1.501(c)(3)-(1)(b)(3)(i) and (ii).
[2] G. Lavarda, NONPROFITS: ARE YOU AT RISK OF LOSING YOUR TAX-EXEMPT STATUS?, 94 Iowa L. Rev 1473 (2009).
[3] IRS Rev. Rul. 2007-41 (2007).
[4] IRS Rev. Rul. 2007-41 (2007). “[V]oter education or registration activities conducted in a biased manner that favors (or opposes) one or more candidates is prohibited.” Id.
[5]  N. Dacunha, SAFE LINKING FOR SECTION 501(C)(3) ORGANIZATIONS, 20 Taxation of Exempts 26 (2009).
[6] E. Kingsley, THE IRS EXPANDS ITS GUIDANCE ON CAMPAIGN ADVOCACY, 19 Taxation of Exempts 45 (2008).
[7]  IRS Rev. Rul. 2007-41 (2007).
[8]  IRS Rev. Rul. 2007-41 (2007). The IRS points out that the relevant facts and circumstances to be considered include: [1] “Whether the organization provides an equal opportunity to participate to political candidates seeking the same office; [2] Whether the organization indicates any support for or opposition to the candidate (including candidate introductions and communications concerning the candidate’s attendance); and [3] Whether any political fundraising occurs.” Id.
[9]IRS Rev. Rul. 2007-41 (2007).
[10] IRS Rev. Rul. 2007-41 (2007). The following factors are identified by the IRS as important in this inquiry: 1. Whether questions for the candidates are prepared and presented by an independent nonpartisan panel 2. Whether the topics discussed by the candidates cover a broad range of issues that the candidates would address if elected to the office sought and are of interest to the public, 3. Whether each candidate is given an equal opportunity to present his or her view on each of the issues discussed, 4. Whether the candidates are asked to agree or disagree with positions, agendas, platforms or statements of the organization, and 5. Whether a moderator comments on the questions or otherwise implies approval or disapproval of the candidates.
[11] IRS Rev. Rul. 2007-41 (2007).

 

New 1023-EZ Form Makes Applying for 501(c)(3) Tax-Exempt Status Easier

 The Internal Revenue Service recently introduced a new, shorter application form to help small charities apply for 501(c)(3) tax-exempt status more easily.

“This is a common-sense approach that will help reduce lengthy processing delays for small tax-exempt groups and ultimately larger organizations as well,” said IRS Commissioner John Koskinen. “The change cuts paperwork for these charitable groups and speeds application processing so they can focus on their important work.”

The new Form 1023-EZ, available today on IRS.gov, is three pages long, compared with the standard 26-page Form 1023. Most small organizations, including as many as 70 percent of all applicants, qualify to use the new streamlined form. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.

“Previously, all of these groups went through the same lengthy application process — regardless of size,” Koskinen said. “It didn’t matter if you were a small soccer or gardening club or a major research organization. This process created needlessly long delays for groups, which didn’t help the groups, the taxpaying public or the IRS.”

The change will allow the IRS to speed the approval process for smaller groups and free up resources to review applications from larger, more complex organizations while reducing the application backlog. Currently, the IRS has more than 60,000 501(c)(3) applications in its backlog, with many of them pending for nine months.

Following feedback this spring from the tax community and those working with charitable groups, the IRS refined the 1023-EZ proposal for today’s announcement, including revising the $50,000 gross receipts threshold down from an earlier figure of $200,000.

“We believe that many small organizations will be able to complete this form without creating major compliance risks,” Koskinen said. “Rather than using large amounts of IRS resources up front reviewing complex applications during a lengthy process, we believe the streamlined form will allow us to devote more compliance activity on the back end to ensure groups are actually doing the charitable work they apply to do.”

The new EZ form must be filed online. The instructions include an eligibility checklist that organizations must complete before filing the form.

The Form 1023-EZ must be filed using pay.gov, and a $400 user fee is due at the time the form is submitted. Further details on the new Form 1023-EZ application process can be found in Revenue Procedure 2014-40, posted today on IRS.gov.

There are more than a million 501(c)(3) organizations recognized by the IRS.

Related Item:

Information on Form 1023-EZ

Advantages and Disadvantages of Forming a Nonprofit Organization

Nonprofit organizations support the role of government, helping resolve or prevent society’s problems. Here are some considerations to help one decide whether to incorporate a nonprofit corporation.

ADVANTAGES

  • The forming of a corporation, whether profit or nonprofit, protects the incorporators from personal liability for the debts of the corporation unless the incorporators cosign a contract or other promise to pay if the corporation does not. The corporation is a separate “person” under the law.
  •  Organizations which apply for and receive acceptance as 501(c)(3) organizations qualify as exempt from income taxation and often state sales taxes.
  •  Most nonprofit organizations qualify for private and public grants, including those from individuals, foundations, other nonprofits, and government sources.
  •  Some kinds of nonprofits receive special rates from vendors and others such as postal rates for mass mailings.
  •  Contributors receive deductions for contributions to nonprofits.
  •  Some municipalities in some states give more zoning freedom to nonprofits which gives them greater bargaining power for variances, etc.

DISADVANTAGES

  • Forming a corporation, whether profit or nonprofit, means giving up some control from one person or a few individuals to a group, that is, a board of directors.
  • There are many reporting requirements
  • Nonprofits are more limited in their activities and purposes than ordinary business corporations.
  • Most records are open to public review.

DIFFERENCES BETWEEN PROFIT AND NONPROFIT ORGANIZATIONS

  • Nonprofits seek to give service; ordinary businesses want to make a profit.
  • Nonprofits use revenue left over after expenses are paid to advance the organization’s exempt purpose.
  • Nonprofits proactively seek to resolve community problems without regard to profit.
  • Nonprofits should not compensate their employees higher than reasonable rates.
  • Members of nonprofit boards of directors are motivated by a desire to serve the public, not monetary gain.
  • Many nonprofits provide services through hundreds of hours of volunteer work and thousands of dollars in charitable contributions

STARTING A NONPROFIT OR NEED LEGAL ADVICE FOR AN EXISTING NONPROFIT? Contact Side Project Inc. today. We have lawyers admitted to practice in Pennsylvania, Florida and the United States Tax Court ready to help.

The Side Project Inc.

Welcome to the Side Project Blog. Side Project Inc. is a nonprofit organization dedicated to supporting charitable and philanthropic efforts large and small. We provide legal and development services to socially-minded people and organizations.  Our blog highlights and discusses tax-exempt and nonprofit organization legal issues, social enterprise legal issues, development and fundraising ideas, and program evaluation resources to help you with your charitable side projects. We also highlight charitable side projects and social enterprises from socially-minded people across the country.  The information presented here is for information only. If you have specific  legal or development questions regarding your project please contact us today.