Frequently Asked Questions

Every day nonprofits call the Partnership's office with questions about how the law impacts day-to-day operations. New questions addressed in this issue include:
 

•                   What percentage of a donor’s adjusted gross income is deductible for charitable gifts made in 2005?

•                   What are the critical elements of the proposed 990 in light of increased IRS and public scrutiny on charities?

•                   If we are a tax-exempt organization, will we be exempt from sales taxes in other states?

•                   Do we need releases when we use photos of clients in our materials and on our website?

By following this link to the Partnership's website, you can review our staff attorneys' responses to these and other frequently asked questions. 

Legal Alerts and Recent Developments

Federal:
 

•   Penalties for Private Benefit Transactions: The IRS has proposed new regulations clarifying the penalties for board members when transactions between the charity and any private person/company result in improper financial gain to the private person/company or benefit the private person/company more than the charity.  Click Here. 
   

• The Katrina Relief Act passed by Congress this fall includes a provision permitting individual donors to deduct contributions made to charities before January 2006 up to 100% of the donor's adjusted gross income (as opposed to the normal 50% limitation).  This provision applies to gifts to most charities, not only those whose missions or activities address disaster relief.  Click Here for an explanation of H.R. 3768.

• Donations of Cars, Boats, etc.: IRS has issued a Form for donors to use when contributing motor vehicles, boats, and airplanes. Click here to view IRS Form 1098-C.  The form may also be used by the charity to provide the donor with a contemporaneous written acknowledgment of the contribution.  Note that the form requires the charity to report the donor's social security number. 

• Mileage Reimbursement Increased: The Internal Revenue Service has issued the 2006 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes, which many employers use to reimburse their employees for business travel. Beginning Jan. 1, 2006, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be 44.5 cents per business mile driven.  The mileage rate for charitable purposes, which is set by statute and not the IRS, remains unchanged at 14 cents per mile.

• Update for Charities that are Federal Contractors:  Effective February 6, 2006, charities that are contractors or subcontractors of the federal government and that recruit employees over the internet must comply with special regulations pertaining to recordkeeping about applicants for employment, particularly those that apply for a position over the internet.  These regulations clarify who is considered an "applicant" for a position, and define the charity's many recordkeeping obligations during the hiring process, taking into consideration internet job postings, email responses from job applicants and electronic recordkeeping technology methods.  The complete text of the regulations and explanations may be found at: Final Regulations.  The final rule (at Sec.  60-1.12(a)) requires contractors to retain records of qualifications used in the hiring process, and any and all expressions of interest received through the Internet, including records such as resumes submitted on-line, and records identifying job seekers who were contacted regarding their interest in a particular position.  Other specifics are spelled out in a directive from the Department of Labor entitled:  "Contractor Data Tracking Responsibilities."

• Threats to Nonprofit Advocacy:  For updates on legislative attempts in Washington to limit charities' ability to lobby, go to the Independent Sector's website. 

• Charitable Reform - Impact on Charities and Charitable Giving:  The Senate version of the Tax Relief Act of 2005, passed November 18, 2005, contains numerous provisions that encourage charitable giving but also address perceived abuses in the charitable sector.  The Senate version would limit deductions of clothing and household items to a value assigned by the IRS, rather than the donors' determination of the value. Other provisions address charitable deductions for donors who do not itemize and permit donors to use their IRA's to make tax-free distributions directly to charitable organizations after the taxpayer has reached age 70½  years. The charitable reform provisions also include penalties for involvement in tax shelter transactions, increased penalties for self-dealing and excess benefit transactions, new restrictions on credit counseling organizations, and a number of far-reaching reforms for donor advised funds and supporting organizations.  The Senate version also creates new standards and penalties for appraisals of property donations. For a full discussion of the provisions, Click Here.  Parallel legislation is being considered by the House of Representatives, and further debate may occur in conference sessions before this legislation is finalized.   Check the website of the Independent Sector for updates:   www.independentsector.org.
  
   

New York:

•  What's in a Name? Consent is now required from the NYS Department of Education for nonprofits to use certain terms in a nonprofit's name that connote an educational purpose, such as "education," "museum," "arboretum," "history," "historical," "historical society," "library," "school," "kindergarten," "prekindergarten," "preschool," "university," or other terms restricted by NYS Education law section 224.   This requirement stems from recent amendments to Section 404 of the New York Not-for-Profit Corporation Law. The amendments also prohibit the use of the terms "museum," "arboretum" or similar names, unless authorized under special legislative charter, or Regents charter, to operate such an entity, or otherwise allowed to do so in writing by the Board of Regents or Education Department.  The new law goes into effect on January 1, 2006.  Note:  Existing nonprofits doing business under such names will have one year to obtain consent from the NYS Regents or Commissioner of Education to continue using their current name or make appropriate changes. For further assistance with this issue, please contact the Pro Bono Partnership's White Plains office. (914)328-0674.

• Revised Nonprofit Dissolution Law: New York has just passed a new law significantly simplifying the process of dissolving a New York Not-For-Profit corporation.  Among other changes, the revised law should result in less frequent judicial intervention in the dissolution process, substituting administrative oversight by the Attorney General.  These changes should ease the difficulties of properly winding down the affairs of a charity.  

• Security Breaches:  Effective December 7, 2005, New York employers, including charities, are required to inform anyone, including employees, of security breaches that would jeopardize personal information.  Click here for a description of the Information Security Breach and Notification Act .

Connecticut: 

• A Civil Union law now permits same-sex couples to enter into a civil union and to enjoy most of the legal benefits and protections extended to married couples under Connecticut law.  The law was effective October 2005.   As this new law has just been implemented, there are still questions regarding the full extent of the law's reach. However, the law will most certainly have implications for many nonprofit employers in the state, particularly in the area of benefits administration.  Check with our office if you need more information.

• The Connecticut Solicitation of Charitable Funds Act, effective November 2005, now requires charities to renew their registration annually, with revised forms. Click here to download the registration forms. 

• Security Breaches:  Effective January 1, 2006, CT law permits consumers to require credit bureaus to "freeze" their records from disclosure, and also requires businesses, including charities, that conduct business in CT to report breaches of secure personal information.  Click here to read more about it.

New Jersey: 

• On-Line Annual Report Filing:  New Jersey now requires charities to renew their Annual Report filings electronically from the State's website.  On-line filing requires charities to use a credit card to charge the $25 Annual Report filing fee.
• Security Breaches:  New Jersey's Identity Theft Prevention Act requires businesses, including charities, that discard personal information about clients to destroy it thoroughly and to notify consumers when sensitive information maintained about them has been accessed by an unauthorized person. The law also limits the use of Social Security numbers by prohibiting their display on most mailed materials and on membership cards, and requires reports of investigations to be maintained for 5 years.  The NJ Division of Consumer Affair's website contains a link to the Act and various resources on identify theft.
• Charities Registration Website Updated:  The NJ Division of Consumer Affairs has revamped its website to make it more 'user friendly' for charities: Click Here. 

To be added to or removed from the e-newsletter list, please call the Partnership's New Jersey office: (973) 273-0600. 

To apply for legal assistance in New York, New Jersey or Connecticut, please click here.

The information provided in this email newsletter was prepared by Pro Bono Partnership for educational purposes only and should not be considered legal advice on any specific matter; nor does the distribution or receipt of this e-newsletter signify an attorney-client relationship between Pro Bono Partnership and the recipient.  The content of this e-newsletter is subject to Copyright Protection.

IRS Circular 230 Disclosure : To ensure compliance with requirements imposed by the IRS, we inform you that (i) any tax advice contained in this communication (including any attachments or enclosures) was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; and (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) you should seek advice based on your particular circumstances from an independent advisor.