Solicitations Corner & Some Happenings

Charity Advisor Resource Newsletter - Volume 2.1 (2010)

BY JONATHAN D. ACKERMAN, ESQUIRE

Small Charities Last Chance to Avoid Revocation - BEWARE - October 15, 2010 Deadline
The Pension Protection Act of 2006 made two important changes affecting tax-exempt organizations, effective the beginning of 2007. First, it mandated that all tax-exempt organizations other than churches and church-related organizations must file an annual return with the IRS. The Form 990-N was created for all tax-exempt organizations that had not previously had a filing requirement (for instance, organizations with gross receipts less than Twenty Five Thousand Dollars). Second, the law also required that any tax-exempt organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.
 
The IRS announced on July 26, 2010 that small nonprofit organizations at risk of losing their tax-exempt status due to the failure to file returns for 2007, 2008 and 2009 can nonetheless preserve their status by filing returns by October 15, 2010 under a one-time relief program. Two types of relief are available - one, small organizations required to file Form 990-N (e-Postcard) simply need to go to the IRS website, supply the eight information items called for on the form and electronically file it by October 15 - that action will bring them back into compliance; and second - under the voluntary compliance program, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by October 15 and pay a compliance fee. For details see the IRS Outreach Toolkit which includes an article, a list of the organizations IRS records show are at risk, and a YouTube video.
 
MD Adopts Jointly-Owned Property Creditor Protection & Revocable Trust - The Maryland General Assembly passed interesting new legislation (SB 25) designed to free Maryland estate planners from the inflexibility of tenancies by the entirety in situations where tenancy by the entireties-like asset protection is important. As background, tenancy by the entirety is a specific type of joint property ownership. In order to qualify for this special type of property ownership, certain technical requirements must be met. The most significant requirement is that the ownership must be between only husband and wife. The benefit of this form of property ownership is that creditors of one spouse cannot attach an asset which is owned as tenants by the entirety. However, there are times where one or both spouses would desire to put a jointly-owned piece of property into trust. Prior to this legislation, such an act would terminate this special type of ownership and the creditor protection that went along with it. This law attempts to remedy this issue; however, note that many questions have been raised about the interpretation and application of this new law.
 
MD Adopts New Uniform Power of Attorney Act - The Maryland General and Limited Power of Attorney Act (SB 309 and HB 659) has also been adopted and for the first time codifies an agent's responsibilities to his or her principal, gives an extended list of interested persons standing to petition a court to construe a power of attorney to review an agent's conduct, makes powers of attorney generally enforceable as to third parties dealing with the agent, and provides statutory forms whose acceptance is enforceable by court order and liability for reasonable attorney's fees and costs. IMPORTANT - a power of attorney executed on or after October 1, 2010 must be executed with the same formalities as a will and acknowledged before a notary public.
 
The Effect of the Economy On the Nonprofit Sector - Some 40 percent of participants in GuideStar's June 2010 nonprofit economic survey reported that contributions to their organizations dropped between January 1 and May 31, 2010, compared to the same period a year earlier. Another twenty-eight percent said that contributions had stayed about the same, and thirty percent stated contributions had increased. Among the other findings: (a) eight percent of respondents indicated that their organizations were in imminent danger of closing, (b) in order to balance budgets, seventeen percent of respondents reduced program services, and eleven percent laid off employees, and (c) more than sixty percent of participants reporting decreased contributions and attributed the drop to a decline in both the number of individual donors and the size of their donations.