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ADVOCACY
EVALUATION
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ADVOCACY back to top
Q: Regarding 501(h) election, the general instructions of 5768 state: "This election must be signed and postmarked within the first taxable year to which it applies."
Does this mean the 501(h) election cannot be retroactive to the previous year, as some guidance text describe?
Our circumstance: we did not anticipate lobbying activity, but circumstances made it necessary for our group to lobby to change a ruling on payments for a cancer-related therapy. We succeeded in spearheading a legislative fix last year in Dec ... just one month of that year and with very low expenditures (about 300 dollars) as it was email-based. We recognize the benefits of this election, but wish to know if we can do so retroactively to cover unanticipated lobbying in 2007.
A: The IRC Section 501(h) election is for a charitable organization to use the lobbying expense "safe harbor," Section 501(h)(6) states that the election under Section 501(h) is effective for all tax years of the organization which end after the date the election is made. Consequently, the 501(h) election cannot be retroactive to the previous year, and any information the inquirer has read which states that a retroactive election can be made is incorrect.
The small 2007 lobbying expenses of his organization (he said about $300) should not cause his organization any problems with the IRS. Section 501(c)(3) describes exempt, charitable organizations, and also requires that: . . . "no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as provided in subsection (h))." (Emphasis added.)
The Internal Revenue Service has not defined a "substantial part of the activities" to influence legislation. Since the 501(h) election allows an organization which has a budget of not more than $500,000 to spend up to 20% of its exempt purpose expenditures on lobbying, $300 is highly unlikely to be a substantial part of the exempt purpose expenditures of the organization. If the organization completes and files Form 5768 in 2008, the lobbying expenditure safe harbor under Section 501(h) will be available in 2008 for the organization, and will continue in effect until the organization revokes the election.
EVALUATION back to top
Q: I work at a non profit law firm and cannot find any information on the monetary benefit non profits have on the community. We are in the process of grant writing and this information would be extremely helpful.
A: You might want to check with the two universities in your area that have centers on nonprofit and philanthropic studies for community economic impact information specific to your geographic area.
The Institute of Public Service and the Center for Nonprofit Leadership of Seattle University http://www.seattleu.edu/artsci/npl/
Nancy Bell Evans Center on Nonprofits and Philanthropy
http://tools.evans.washington.edu/research/nbec/
You are welcome to review the Economic Impact of Nonprofit Studies done by the Community Research Institute of the Johnson Center for Philanthropy at: http://www.cridata.org/Publications.aspx
Your local area community foundation may also have related information they can share with you as well.
Q: Are you able to provide assistance in the form of samples or guidelines on peer evaluations for a board of directors in the non-profit sector?
A: BoardSource offers information and guidelines on self-assessment for boards on their site at http://www.boardsource.org/Knowledge.asp?ID=1.349. They also have an inexpensive tool available if you search on their site under http://www.boardsource.org/Bookstore.asp?Type=epolicy&Item=1035.
FINANCIAL MANAGEMENT back to top
Q: I need to ask about a pastor that has retired due to disability and is still provided with a "housing allowance". This is not taxable nor should he pay Social Security on it...right? I want to do it the right way. How do I file the housing for IRS? 1099 or W2s? Last year it caused a problem for him at Social Security the way I filed it.
A: Our accounting specialist has provided the following feedback to your inquiry:
Please take a look at pages 7-9 of IRS Publication 517. This information should help you with your parsonage questions. It is recommended that you read the document completely before making your accounting decisions. It details that normally the value of a parsonage or a parsonage allowance is subject to self-employment income, but not federal taxable income. However it is not subject to self-employment after the person is retired. Normally parsonage amounts are reported in box 14 of the form W-2, as an information item only. If the person is retired, no W-2 would normally be issued. You can access the entire publication at www.irs.gov.
Please seek professional accounting assistance for confirmation or clarification of this information, if necessary. This response is not to be considered professional financial assistance.
Q: I recently took over as a supervisor at a non-profit organization that provides behavior therapy to children diagnosed with autism. The way our program is set up, the parents can be put on a scholarship so they don't have to pay for any of the treatment cost. We are trying to determine a method for using financial need to determine who qualifies for the scholarship. Does your company offer any information about this issue?
A: Here's a comprehensive model we found from the: Ashe County Health Department. You might also try contacting various counseling organizations in your area to do some market-area benchmarking.
Q: Do you know what the specific rule is around making a 990 available to the public?
A: This resource covers all of the information you’re looking for:
990s in the Spotlight
http://www.mcf.org/MCF/forum/2004/990s.htm
FUNDRAISING back to top
Q: A particular high-net-worth individual who will be a donor to our 501(c)(3) organization is in a position to bring many other such high-net-worth donors. This person wants to enter into a contractual relationship that establishes the % of the donor amount to be paid to him as compensation. He’d like the contract put in place as quickly as possible. Do you have any guidelines on this?
A: A contractual relationship with this donor would change the relationship to one of employee/employer, with the contracted employee undertaking the role of a commission-paid fundraiser. This is not a decision to be rushed into making. Careful and thorough due diligence considering the ethical and potential legal issues involved would be appropriate. Two resources currently on the Nonprofit Good Practice Guide speak to the ethical considerations involved in this kind of practice are listed below.
Why Good Fundraisers are Never Paid on Commission: Advice for Start-Up Fundraising Programs
http://www.charityvillage.com/cv/research/rfrm24.html
This article discusses fundraising ethics and compensation
Argument Against Paying Development Professionals Based Upon the Amount of Funds Raised
http://www.raise-funds.com/898forum.html
This article discusses the ethics of paying development professionals based on a percentage of the money raised, commission-based compensation, and performance bonuses.
Also, The Association of Fundraising Professionals Code of Ethics has several principles to consider. Read here: http://www.afpnet.org/ka/ka-3.cfm?content_item_id=1068&folder_id=897
Q: I am a full time student presently taking business ethics and upon graduation plan to become a professional grant-writer. A paper I am writing involves stating ethical dilemmas I am likely to encounter in the field to which I aspire which is grant writing for nonprofits. Could you please send me information relating to this or suggest other research engines which may help me out?
A: People who help to raise money for charities are often faced with ethical dilemmas. A fundraiser's job is to cultivate relationships that can lead to a donation to his or her charity. These relationships often result in the fundraiser learning a great deal of extremely sensitive information about the donor's wealth, business dealings, and family relationships. This information can cause harm if it ends up in the wrong hands.
Grant writers should be aware of these situations, but they have other concerns. They usually work on projects that may occur many years in the future and that can have a impact the lives of co-workers and community members. Another problem can come from the fact that fundraising is a small community and people either know someone or have worked for nearly every major charity in a community.
For example, confidential plans to build a new medical school downtown could be used for personal gain. That is wrong. You might learn about a new project by your charity that could impact a competing charity. You need to keep that information private. You may want to withhold from applying for a grant because you want another charity to win it. That is very unethical.
When writing grant proposals, an ethical grant writer will make sure that:
* the need is accurate and respectful of the people being served
* a majority of stakeholders have input into the design of the project
* the proposed project is described clearly and succinctly
* promised outcomes are possible given the current capacity of the charity
* evaluation is built into the project design
The grant writer is also usually responsible for reporting on the actual outcomes of the funded project. The report should be an objective analysis of the project's successes and failures. This fair evaluation will help the charity and the donor decide whether to replicate the project to help others in communities around the country or the world.
Q: Do you offer, or do you know of an organization that offers an electronic template fo