Читать книгу The Law of Fundraising - Bruce R. Hopkins - Страница 94

1 1. To a lesser extent, the boundaries of these laws are also somewhat set by the scope of the terms solicit (see § 3.2(c)) and contribution (see § 3.2(e)).

2 2. See § 2.1.

3 3. See Tax-Exempt Organizations, Part Three; Charitable Giving, § 2.2.

4 4. IRC §§ 501(c)(3), 509(a)(1) (IRC § 170(b)(1)(A)(i)-(vi)), and 509(a)(2)-(4).

5 5. IRC § 501(c)(4). See Tax-Exempt Organizations, Chapter 13.

6 6. Id., Chapter 17.

7 7. A problem with this type of statutory exclusion is that it invites the argument that the excluded solicitations would be embraced by the statute absent the special exception.

8 8. E.g., Wendy L. Parker Rehabilitation Foundation, Inc. v. Commissioner, 52 T.C.M. 51 (1986).

9 9. For a discussion as to whether an organization that exists solely for the benefit of its membership can qualify as a charitable organization, see Commonwealth v. Association of Community Organizations for Reform Now, 463 A.2d 406 (Pa. 1983). Also, Packel v. Frantz Advertising, Inc., 353 A.2d 492 (Pa. 1976).

10 10. See § 3.2(a).

11 11. A discussion of these points appears in Packel v. Frantz Advertising, Inc., 353 A.2d 492 (Pa. 1976).

12 12. See § 3.2(a).

13 13. See § 3.2(b).

14 14. State v. Blakney, 361 N.E. 2d 567, 568 (Ohio 1975).

15 15. Id. Likewise Brown v. Marine Club, Inc., 365 N.E. 2d 1277 (Ohio 1976).

16 16. As to the latter, see § 3.2(e).

17 17. See § 5.5.

18 18. See Charitable Giving, § 7.18.

19 19. See §§ 3.2(i), 4.7.

20 20. See § 3.2(d).

21 21. Commissioner v. Duberstein, 363 U.S. 278, 285 (1960), quoting from Commissioner v. LoBue, 351 U.S. 243, 246 (1956).

22 22. United States v. American Bar Endowment, 477 U.S. 105, 116–117 (1986).

23 23. Robertson v. United States, 343 U.S. 711, 714 (1952).

24 24. United States v. American Bar Endowment, 477 U.S. 105, 118 (1986).

25 25. Hernandez v. Commissioner, 490 U.S. 680, 692 (1989).

26 26. Id.

27 27. See Charitable Giving, § 2.1.

28 28. Attorney General v. International Marathons, Inc., 467 N.E. 2d 51 (Mass. 1984).

29 29. See § 3.5(i).

30 30. See §§ 3.5, 4.8.

31 31. See § 3.3.

32 32. See § 3.5.

33 33. See § 3.2(h).

34 34. See § 7.11(a).

35 35. See §§ 3.2(a), 3.5.

36 36. A registration regime does not require the same level of constitutional law protection as does a licensing regime. E.g., Illinois ex rel. Madigan v. Telemarketing Associates, Inc., 538 U.S. 600 (2003); Dayton Area Visually Impaired Persons, Inc. v. Fisher, 70 F.3d 1474 (6th Cir. 1995). Cases pertaining to a license requirement include Thomas v. Chicago Park District, 534 U.S. 316 (2002); Forsyth County v. Nationalist Movement, 505 U.S. 123 (1992).

37 37. In most instances, this classification will be as an organization that is tax exempt under IRC § 501(a) because it is described in IRC § 501(c)(3). In general, see § 3.2(b).

38 38. See §§ 3.2(g), 3.2(h).

39 39. See § 4.6.

40 40. See § 4.19.

41 41. See § 4.2 for a discussion of the constitutionality of this type of fee arrangement.

42 42. See § 4.4.

43 43. See § 3.7.

44 44. The development of this unified registration statement is a welcome one. This advance toward simplicity and uniformity is somewhat marred by the additional supplemental statements and varying annual reports.

45 45. See § 3.5.

46 46. See § 3.7.

47 47. A court upheld a state statute requiring religious institutions to apply for an exemption from the state's charitable solicitation act, rejecting the contention that the application scheme constituted an impermissible prior restraint on speech (Free the Fathers, Inc. v. State of Tennessee, 2008 WL 360612 (Tenn. Ct. App. 2008)).

48 48. Because of constitutional law constraints and as a practical matter, the law does not normally attempt a definition of the term church. See Tax-Exempt Organizations, § 10.1. If an organization is regarded as a church or closely related organization for federal income tax purposes (IRC § 170(b)(1)(A)(i)), it presumably is treated the same for state fundraising regulation purposes.

49 49. IRC § 508(c)(1)(A), which also applies with respect to integrated auxiliaries of churches, and conventions or associations of churches.

50 50. Foundations functioning on behalf of educational institutions that are operated by state governments are expressly recognized by the federal tax law, as concerns public charity and charitable donee classifications (IRC § 170(b)(1)(A)(iv)). See Tax-Exempt Organizations, § 12.3(b)(v). Foundations functioning on behalf of other educational institutions are also public charities, often publicly supported ones (IRC §§ 170(b)(1)(A)(vi) (IRC § 509(a)(1)) and 509(a)(2)). See Tax-Exempt Organizations, § 12.3(b)(i), (iv). Some of these foundations in the second category are supporting organizations (IRC § 509(a)(3)), although they may meet a test as to public support. See Tax-Exempt Organizations, § 12.3(c).

51 51. As to this point, an analogy may be made to the federal securities laws, which differentiate between regulated sales of securities to the public and somewhat unregulated private offerings of securities.

52 52. One court held that a state's charitable solicitation act was inapplicable to private foundations, for the reason that the “obvious intent” of the statute is “to regulate those charitable organizations, who solicit or accept contributions from persons or corporations outside the charitable entity” (Estate of Campbell v. Lepley, 532 P.2d 1374, 1375 (Okla. 1975)) (emphasis added).

53 53. This type of provision has been applied in the courts (e.g., Salvation Mission Army Workers Holy Orthodox Christian Church v. Commonwealth, 383 A.2d 995 (Pa. 1978); Blenski v. State, 245 N.W.2d 906 (Wis. 1976)).

54 54. See § 6.15.

55 55. These provisions are of dubious legality (see § 4.5).

56 56. Principally, the federal annual information return (Form 990). In general, see § 5.9, Chapter 7.

57 57. This exemption, which of course exempts all or nearly all charitable entities, is available for all organizations that are tax exempt by reason of IRC § 501(c)(3).

58 58. See § 4.2(g).

59 59. A state may have an alternative to the use of bonds, in that a certificate of deposit, letter of credit, or U.S. obligation can be filed in lieu of a bond. This approach allows investment assets to be pledged while not disturbing the underlying investment. It eliminates the expense of premiums, and reduces the time and expense associated with renewals of bonds.

60 60. See § 3.2(h).

61 61. See § 4.1.

62 62. See § 4.3.

63 63. Kentucky State Police Professional Association v. Gorman, 870 F. Supp. 166 (E.D. Ky. 1994).

64 64. National Federation of Nonprofits v. Lungren (N.D. Cal., order issued Mar. 29, 1995).

65 65. See § 4.15.

66 66. See § 3.2(h).

67 67. These requirements are discussed in § 8.6.

68 68. This is because this type of charitable solicitation is not usually regarded as doing business within a state (see infra note 78).

69 69. This type of rule has been upheld in the courts (e.g., Lewis v. Congress of Racial Equality, 274 S.E.2d 287 (S.C. 1981); Blenski v. State, 245 N.W. 2d 906 (Wis. 1976); People v. Caldwell, 290 N.E.2d 279 (Ill. 1982)). In Blenski, the court stated that the “crime of unauthorized use of names is directed at protecting the public against being misled and not protecting the person whose name is used. This purpose does not require that liability for this crime be imposed for each individual person whose name is used, particularly where … the unauthorized uses are simultaneously committed” (at 911).

70 70. This type of provision has been upheld in the courts (e.g., American Gold Star Mothers, Inc. v. Gold Star Mothers, Inc., 191 F.2d 488 (D.C. Cir. 1951); People ex rel. Brown v. Illinois State Troopers Lodge No. 41, 286 N.E.2d 524 (Ill. 1972)). An illustration of the misapplication of this type of rule by regulatory authorities appears in City of Evanston v. Evanston Fire Fighters Association, Local 742, International Association of Fire Fighters, AFL-CIO-CLC, 545 N.E.2d 252, 262–266 (Ill. 1989).

71 71. In general, see § 9.5.

72 72. This proposed multistate legend was prepared by Robert S. Tigner, General Counsel, Association of Direct Response Fundraising Counsel. His contribution is gratefully acknowledged.

73 73. A fiduciary is a person who has special responsibilities in connection with the administration, investment, and distribution of property that belongs to someone else; this range of duties is termed fiduciary responsibility.

74 74. An excellent discussion of the role of an attorney general in overseeing charitable organizations appears in City of Evanston v. Evanston Fire Fighters Association, Local 742, International Association of Fire Fighters, AFL-CIO-CLC, 545 N.E. 2d 252, 256–262 (Ill. 1989).

75 75. This type of restriction, however, is unconstitutional (see § 4.5).

76 76. E.g., Commonwealth v. Events International, Inc., 585 A.2d 1146 (Pa. 1991); People ex rel. Scott v. Gorman, 421 N.E.2d 228 (Ill. 1981); People ex rel. Scott v. Police Hall of Fame, Inc., 376 N.E.2d 665 (Ill. 1978). In general, Suhrke, “What Can Be Done about Fund Raising ‘Fraud’?,” XXVI Phil. Monthly (No. 6) 5 (1993).

77 77. Details about this project and the forms are available at www.nonprofits.org/library/gov/urs.

78 78. One court observed that “[i]t is doubtful … whether the solicitation of funds for a charitable purpose is, to use the statutory words, the ‘carrying on, conducting or transaction of business’” (Lefkowitz v. Burden, 254 N.Y.S.2d 943, 944–945 (1964)). A subsequent court opinion, however, suggested that the solicitation of funds constitutes doing business in a state (Commonwealth v. Events International, Inc., 585 A. 2d 1146, 1151 (Pa. 1991)).Clearly, a charitable organization organized in one state and maintaining an office or similar physical presence in another state is doing business in the latter state. The general rule is that merely mailing charitable solicitation material into a state is not doing business in that state, although a contrary approach can be established by statute or regulation. In many states, the determination as to whether an organization is doing business in a state is under the jurisdiction of the secretary of state, whereas the registration and reporting requirements of a charitable solicitation act are administered by the attorney general. In some states (such as California), a determination that a charitable organization is doing business in the state leads to a requirement that the organization file for and receive a ruling as to its tax-exempt status in the state (or else be subject to state taxation). Thus, fundraising in a state can entail an obligation on the part of the charitable organization to file with three separate agencies in the state.

79 79. E.g., Horner and Makens, “Securities Regulation of Fundraising Activities of Religious and Other Nonprofit Organizations,” XXVII Stetson L. Rev. (No. 2) 473 (Fall 1997).

80 80. E.g., Missouri ex rel. Nixon v. RCT Development Association, 290 S.W. 3d 756 (Mo. Ct. App. 2009) (applying a state's merchandising practices act (a consumer protection law) to enjoin a charitable fundraising scheme); People v. Gellard, 68 N.E.2d 600 (N.Y. 1946). A challenge to a state's use of an unfair trade practices act and state sweepstakes law to regulate charitable fundraising failed, with the court finding that the plaintiffs lacked standing to bring the suit (American Charities for Reasonable Fundraising Regulation, Inc. v. Shiffrin, 46 F. Supp. 2d 143 (D. Conn. 1999)).The state of Minnesota, in mid-1999, charged a charity located in Louisiana and its fundraising company with the use of deceptive tactics in raising money, by telephone, for terminally ill children (Williams, “Minn. Sues Charity, Solicitors Over Telephone Appeals,” XI Chron. of Phil. (No. 14) 29 (May 6, 1999)).

81 81. In addition to these state requirements, there are hundreds of county and city ordinances, as noted supra note 1. The constitutionality of these ordinances is a subject that is attracting increasing attention. Two of these ordinances, portions of which were struck down as being unconstitutional, are discussed in Chapter 4 (see the analyses of the Gospel Missions of America case).One of the obvious aspects of these ordinances is the enormous administrative and financial burden they place on charities that raise funds statewide, regionally, and certainly nationally. A court has, however, rejected the argument that the costs of compliance with these ordinances is an unconstitutional form of direct or indirect regulation of interstate commerce; it also held that the substantial benefit to the county involved outweighs any compliance difficulties. Further, a free speech argument (see § 5.8) failed; the court myopically wrote: “The County also correctly points out that localities are well within their power to regulate charitable solicitation within their territorial boundaries” (American Charities for Reasonable Fundraising Regulation, Inc. v. Pinellas County, 32 F. Supp. 2d 1308, 1325 (M.D. Fla. 1998)). But see, however, § 4.13(c).

82 82. These recommendations are reproduced at Bureau of National Affairs, Daily Tax Report (no. 185) (Sep. 26, 2005).

83 83. Pension Protection Act of 2006 (Pub. L. No. 109-280).