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Critical legal information for enhancing and expanding the activities of charitable fund-raisers
As the competition for gifts grows increasingly intense, managers and fund-raisers for charitable organizations must learn how to work with tax and business law to optimize their return. Written by the leading legal authority on tax-exempt organizations, this book provides an accessible approach to understanding the various laws and offers solutions to enhance an organization's wealth and effectiveness. Bruce Hopkins clearly explains to fund-raisers the pertinent aspects of the law, enabling them to dramatically increase funding without legal missteps. He also thoroughly details the steps needed to solve the fund-raiser's most pressing legal headaches, including maintenance of tax exemption and public charity status, planned giving, charitable giving rules, unrelated business activities, fund-raiser's compensation, state regulations, and much more.
This book provides critical answers to fund-raisers' questions such as:
* What law basics should every fund-raiser know?
* Is a charitable organization required to apply to the IRS for tax-exempt status?
* What are the charitable contribution deduction rules?
* How do the unrelated business income rules apply to fund-raisers?
* How does a charitable organization start a planned giving program?
* What are the important elements of the fund-raiser's contract?
* What are the contents of a typical charitable solicitation act?
* Can a charitable organization have a taxable subsidiary?
* When does a fund-raiser need a lawyer?
With its comprehensive coverage of the legal issues that nonprofit organizations face,
The First Legal Answer Book for Fund-Raisers is a powerful resource that every fund-raiser must have!
The First Legal Answer Book for Fund-Raisers is the third in Wiley's Legal Answer Book Series. (Yes, more are coming, including The Second Legal Answer Book for Fund-Raisers.)The first two of these books—The Legal Answer Book for Nonprofit Organizations and The Second Legal Answer Book for Nonprofit Organizations—reflect my attempt to summarize, using the question-and-answer format, the broad sweep of the law of tax-exempt organizations and charitable giving.
With this book, I focus on these areas of the law from the unique standpoint of those who are charged with the difficult task of raising money for charitable ends. That task is arduous, indeed, due in no small part to the law that the federal and state governments keep heaping on the fund-raising process. Much of this law directly affects and shapes— often burdens—the administrative aspects of fund-raising.
I am a lawyer, not a fund-raiser—and I like things that way. I would much rather advise as to the law than have to raise charitable dollars in an environment dictating compliance with all of these requirements. In other words, my sympathies are extended to you charitable fund-raisers. Having said that, I feel compelled to raise a rather sensitive point. Some of you are easing the compliance burden by the tried and true technique of . . . noncompliance. Most of this, I hasten to add (and believe), is inadvertent.
My take on this situation, however, is that it is getting harder to sustain this approach to fund-raising law compliance. The issues are mounting, regulators are growing more knowledgeable, donors are more sophisticated, and then there is this matter of modern technology. It's a different fund-raising world where a prospective donor can call up your organization's most recent Form 990 by computer and ask penetrating questions while you are straining to secure a gift. Thus, in short, there is a lot of law out there for you, the fund-raiser, and you and/or your organization is expected to adhere to it. My goal with this Legal Answer Book is to help you understand the law and appropriately comply with it—and to make this process as palatable as possible for you. (I have done many seminars for associations of fund-raisers over the years on the subject of the law applicable to fund-raising professionals, and I know that the vast majority of you would much rather be elsewhere— and you often are.)
The book opens with a look at the basics: what the fund-raiser should know about the federal and state law applicable to charitable fund-raising. Chapter 1 ranges over some basic definitions pertaining to the fund-raiser and the organization( s) he or she serves, and some basic law concepts applicable to most charitable entities. This is not law school for fund-raisers; it is an attempt to create a framework as to the minimum amount of law the fund-raiser should master fairly early in the career.
Next is explored the matter of public charity status. Charitable organizations that engage in fund-raising are not likely, of course, to be private foundations. Yet, my experience with fund-raisers has led me to conclude that most of you do not know the public charity status of the charity you are raising money for—or, if you do, you do not fully understand the advantages and disadvantages of that status or if that status should be changed (or perhaps worse, has been lost). If you are in this position, Chapter 2 is for you.
Some fund-raisers work with newly formed entities. This means that the organization may be seeking its recognition of tax-exempt (and public charity) status during the time the fund-raiser is in the picture. Chapter 3 identifies the portions of the application to be filed with the IRS that are of principal concern to fund-raisers.
Chapters 4 and 5 are the ones the typical fund-raiser is likely to first turn to and dwell on (partly, perhaps, as a reason for delay of review of other portions of the book). Chapter 4 is a summary of the federal law charitable contribution tax deductibility rules. Chapter 5 is a summary of the tax law concerning the planned giving techniques. This information is, it goes without saying, essential for the fund-raiser.
Believe it or not, the unrelated business rules can apply in many ways in the fund-raising setting. Chapter 6 leads the fund-raiser through the basic rules and then concentrates on those that are unique to charitable fund-raising.
In Chapter 7, I wander about in an area that many fund-raisers don't like to consider: the law aspects of their compensation. Here, I explore some current developments as to the basic requirement of the standard of reasonableness. Also examined is this pesky matter of percentage-based compensation. For those of you who are not employees, I offer some thoughts on the elements of the fund-raiser's contract.
Another aspect of all this that has troubled me over the years is the process of preparation of charitable organizations' annual information returns (usually, Form 990). I am continually dismayed at the lack of involvement in this process by the fund-raiser. Thus, Chapter 8 looks at the annual information return from the fund-raiser's perspective—and contains a plea for including the fund-raiser in the preparation of the return. (If you can't be part of the process, please at least read these returns.)
The book ends with the state law rules. In this context, we have a big chunk of the law that causes fund-raisers (and charities) compliance headaches and that is the basis for considerable noncompliance. Chapter 9 surveys the contents of these laws and offers some advice about complying with them.
I feel compelled now to bring up an aspect of this book that is illustrative of the state of the law pertaining to fund-raising: not all of the applicable law is in here. In fact, as the reference to the First Legal Answer Book in this area reflects, there was only room to include a discussion of about one-half of it. To remedy this deficiency, as noted, The Second Legal Answer Book for Fund-Raisers will be forthcoming. Subjects to be treated include the intermediate sanctions rules, estate planning, property valuation, gift substantiation, the quid pro quo contribution rules, special events, postal law, securities law, antitrust law, the IRS's audit perspective, and various disclosure requirements. (If you have questions relating to any of these areas, send them to me at bhopkins@ pwvs. com.) The way the law in this field is evolving, there may be some material in there that can't be conceived of at this writing.
Your author is finishing up his 30th year of law practice. A goodly amount of what is in this book is reflective of answers to questions that arise year in and year out, from clients and seminar attendees. Also, I often draw on responses to questions that should be asked . . . and are not. Some perspectives and commentary have been included.
The end product has real value only if those who need it can use it to promptly resolve a problem or answer a question before them. To facilitate its usefulness, all of the questions answered in the book are listed at the beginning. There is also an index. Endnotes have been kept to the minimum. (For more, see "How to Use This Book" on page xi.) Those who need additional information on a matter can turn to one or more of the books in Wiley's Nonprofit Law, Finance, and Management Series. One of my favorites for you is The Law of Fund-Raising, in its second edition and annually supplemented.
I want to thank my editor at Wiley, Martha Cooley, who has been so supportive of this and other Answer Books. Her tolerance of the inability of those who write tax regulations and rulings, and court opinions, on subjects pertaining to charitable fund-raising to match the timing of issuance of their documents with Wiley's publishing schedule is greatly appreciated. I also want to thank Robin Goldstein, an associate managing editor at Wiley, for her fine work on this book.
Bruce R. Hopkins
Kansas City, Missouri
The Basics: What Every Fund-Raiser Should Know About the Law.
Public Charity Status.
Tax Exemption Application.
Charitable Contribution Deduction Rules.
Unrelated Business Activities.
Annual Information Returns.
State Law Regulation.