Editor’s Notebook

A little bit of this and that today

1 – The EOTJ Mailbag

3 – Bidding Farewell

1 – More on EO Compliance

2 – IRS Phone Numbers

Over the next few days, I will be sending out more IRS phone numbers and email addresses, but today I’m resending the EO Division roster that I emailed on October 20. I neglected to add email addresses to go with the phone numbers, so consider this a correction. I’ve also added EO Division Counsel who are located in Washington.

The following sentences appeared in an article I reprinted yesterday from the Philanthropy Journal, a publication of the Institute for Nonprofits at N.C. State University:

“Most of the sector cooperates willingly with the IRS in its efforts to ensure nonprofits are complying with federal regulations, [Lois Lerner] says, while a handful are confused about how to comply and an even smaller number have ‘bad intentions.’

“‘The nonprofit sector wants to do the right thing, and if they know what to do they will do it,’ she says. ‘The combination of greater transparency, governance and accountability are absolutely necessary.’ And with the new Form 990, and the oversight role of a handful of watchdog agencies, nonprofits have been doing a better job of ‘self-regulating,’ which could prevent further regulation by lawmakers at the federal level.”

Sparkle Plenty had this reaction to Lois’ remarks:

“It may be the case (though this is debatable) that MOST organizations cooperate willingly. However, plenty of organizations ask their lawyers and CPAs who they are consulting on EO tax mandates, ‘what do I need to do to stay below the radar screen?’, which translates to ‘how much of this crap can I ignore’? Regardless, there can be no debate that way more than a handful (or is that the hand of ‘he’s got the whole world in his hands’?) are indeed confused. With no precedential guidance on tons of things — what is UBIT-reachable, what is ‘electioneering’, what comprises ‘private benefit’?  — the c3 sector (and plenty of advisors) have no choice but to be confounded….”

I will add Gary Snyder, editor of Nonprofit Imperative (www.garysnyder.com), as another who probably suspects Lois’ rosy scenario may be too rosy. His newsletter is dedicated to “exposing the crisis in nonprofit fraud leadership … a crisis of pervasive and monumental waste, fraud, abuse, mismanagement, and malfeasance throughout the charitable sector which costs taxpayers and contributors tens of billions of dollars annually.”

My take: So who is right? Was it Don Rumsfeld who said we don’t know what we don’t know? That may be the case here. On what does Lois base her rosy scenario? Has the IRS done a project on compliance in the EO sector? How has Lois divined that “an even smaller number have ‘bad intentions’?” Perhaps we need a new question on the Form 990, “Does the organization (and its managers) have bad intentions, or is the organization just confused?”

I vaguely recall the IRS once reporting on which types of organizations they had audited in a given fiscal year, what areas of noncompliance were discovered, and the number of organizations in each category: (c)(3)s, (c)(4)s, (c)(5)s, etc. I’m not aware of the IRS releasing a report of this nature in recent years. If this is true, why not? A reader recently asked me how many private foundations had been audited in the last few years. I said I had no idea, although we both agreed zero might be a good guess. I assume Nan Downing, Director of EO Examinations, has reports on her desk telling her which types of organizations are being audited, what the issues being uncovered are, and the number of each type of organization being audited. Unless I have somehow missed these reports, why aren’t they being released to the public? No names, just data.
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My most requested feature is IRS phone numbers. Why I don’t know, since most of you report that no one calls you back or, if they do, they provide little useful information. There are a few exceptions. Steve Clarke, for example, has been helpful in regard to Form 990 questions. Some IRS people are downright unhelpful, but I’ll let you discover them on your own. Since Marv Friedlander retired, there has been no go-to person in EO. In fact, I think the IRS company line to EO practitioners is to not call the EO function, but instead to call the IRS tax help line at 1-800-829-1040.

I’m always open to hearing about readers’ experiences with calling the IRS. This is an area where “applying the tax law with integrity and fairness to all” is a critical issue — clearly another area where the ACT Committee should make some inquiries as to what is the official policy. If the EO function does not want practitioners to call, then they should make that announcement and then apply it uniformly, with no exceptions. It’s only fair that everyone be treated the same.

There should not be a group of well-connected practitioners who get their phone calls returned. The IRS should not be discriminating among practitioners. As the EO function has become less transparent in recent years, telephone access has become even more important. Clients are willing to pay for information from those who have access. The IRS should not be creating two classes of tax practitioners — the favored few and everyone else.

For telephone and email access, there should be a uniform policy, and it should be adhered to, no exceptions. Discrimination in any form is truly repugnant to our belief in “truth, justice, and the American way of life.” Maybe the folks at IRS never watched Superman as kids. I know it was my favorite show.

Being President of the United States is no fun. It’s probably impossible to be a successful POTUS nowadays. And the criticism is never-ending. If I understand Connie Rosenberg’s views correctly, to run for President today means you must be insane, but that means you should not be President by reason of insanity!

I think another position where it is probably impossible to succeed is being Director of Exempt Organizations. While I’m not saying Lois Lerner is insane, she is in a no-win position. I have a certain amount of sympathy for Lois as I feel she has an impossible job. I sometimes feel that I’m also in a no-win situation, because if I criticize her, some readers say I am being mean and unfair. If I don’t criticize her, other readers say I’m being too easy on her. And then some readers go back and forth, first saying I am being mean, then saying I’m being too easy!

On Monday I noted my disappointment with Lois’ “I’m not going to talk about that” answer to a question at the NAAG/NASCO Conference. Later I heard from a reader who said I must have been sleeping through her presentation. He said Lois addressed the current problem of (c)(4)s, (c)(5)s, and (c)(6)s being involved in too much political activity by saying that organizations needed to be educated about what they can do in advocating their positions and candidates. My reader’s comment was that “education” is not what is needed. The (c)(4)s, (c)(5)s, and (c)(6)s currently in the news for their political involvement have sophisticated EO attorneys at their beck and call. While there is some confusion as to where advocating a position becomes advocating a candidate, the cases in the news are clearly in the political realm. According to my reader, what the IRS needs to do now is kick some butt, not “educate.”

1 – Follow-up to Yesterday’s Tom Brady Article

2 – EOTJ Questionnaire Results

1 – Tom Brady Being Dissed in New England

As most of you know, I’m easily outraged. But it’s hard for even me to get outraged over a column in Tuesday’s Boston Globe over a “charity scandal.” While I’m reprinting the article for those who have not seen it, basically carmaker Audi is giving Tom Brady, the New England Patriots’ quarterback, the use of a car as a reward for his work with a charity, Best Buddies.

What I see is a win-win-win situation. One, the charity gets the benefit of having Tom Brady associated with it — free publicity that no doubt generates contributions from football fans to Best Buddies.

Two, Audi is just doing what corporations are expected to do — make their products attractive to the general public by having stars use and display their products.

Three, Tom Brady seems to be a decent guy who is getting the use of a car in return for his implicit or explicit endorsement. The author of the article appears to be a bit sloppy in saying that Brady got a $97,000 car. What he got it seems is the use of the car for a year, so his benefit is the cost of leasing the car for a year, which is much less than $97,000, although it appears he gets the use of a car every year, so maybe eventually it totals $97,000.

I am very much against charities selling their soul to corporations in the guise of sponsorship arrangements, where the corporation’s interests are paramount and the charity ends up as a shill for the corporation’s products. But I don’t see anything wrong with the situation that so outrages the Boston Globe’s columnist. Am I missing something here?

2 – Old Business

In regard to yesterday’s discussion of the filing requirements for 501(c)(4) organizations, John Pomeranz of Harmon, Curran, Spielberg & Eisenberg, Washington, had this to say:

“Just to supplement Marc Owens’ excellent summary of the fate of non-1024-filing 501(c)(4)s, I remind you of the attached field service advice issued by the IRS ten years ago discussing the issue. This went out because Ogden was, at the time, routinely sending such filers a Form 1120 and saying, ‘Aren’t you supposed to filing this instead?’”

Yesterday, I asked, “Is 501(c)(4) Status Being Abused?” I can hardly keep up with the questions and comments this query has generated. As noted yesterday, some (c)(4)s are being set up to engage in political activity, and donors like them because they remain anonymous. Some commenters are saying, “Why should we care?”, others say these organizations come and go with such rapidity that the IRS would be wasting its time to track them down, others say (c)(3) filing requirements should be imposed on (c)(4)s, and so it goes.