State Charities Bureau Briefs Society Committees, Seeks Their Input

By Tom Morris

The annual joint session between representatives of the New York State Charities Bureau and the New York State Society of CPAs Not-for-Profit Organizations Committee and Exempt Organizations Committee is always a unique opportunity for dialogue. When William Josephson, assistant attorney general in charge of the Charities Bureau, and three high-level members of his staff met with the committees on April 3, the focus was on charities’ fundraising costs, the Bureau’s ongoing electronic filing project, and proposed revisions to regulations that would affect charitable donors.

Karin A. Goldman, assistant attorney general and charities registration chief, discussed the Bureau’s latest “Pennies for Charity” report, released late last year. She said the report contained alarming numbers. For example, with $188 million raised for charitable causes through 586 individual telemarketing campaigns, only 16 (two percent) of the campaigns gave 75 percent or more of the money they raised to the charity, and in many cases the charities actually lost money. Goldman said many statistics in the study, which the Bureau has been conducting since 1994, gave the Attorney General’s Office confirmation that donors expect a high level of accountability and disclosure regarding how charities fulfill their fiduciary responsibilities. She noted that part of the mission of the work performed by the Attorney General’s Office and the Bureau is to help donors to comparison shop. The complete “Pennies for Charity” report is available online at www.oag.state.ny.us.

Goldman also discussed the Attorney General’s Office’s proposed revised regulations pursuant to Article 8 of the Estates, Powers & Trusts Law and Article 7-A of the Executive Law. Josephson said the proposal has been well received in the New York State Assembly thus far. The provisions include a revenue measure whereby donors would receive a tax deduction for only part of their donations, and an excise tax on charities whose fundraising costs exceed 50 percent of their income. She also said the regulations have not been amended in a long time, and that many things have changed, so the revisions are definitely needed. The project involves trying to combine two sets of regulations, and the Bureau is seeking input from the NYSSCPA committees.

Goldman explained that the proposed revised regulations also seek to improve contracts for fundraising professionals, with provisions to require charities to obtain bids from at least three fundraisers and have the bids reviewed by the board of directors. She said the state cannot make certain types of fundraising contracts currently in use illegal, because three U.S. Supreme Court cases in the 1980s challenged state laws in these areas. Significantly, the U.S. Supreme Court found charitable solicitation to be constitutionally protected speech under the First Amendment. Another factor is that causes that are unpopular or just starting to fundraise need to spend more money in that area.

Goldman said the state will propose that fundraisers be required to tell prospective donors that they can review information on fundraising costs before they decide to give, but noted that unless U.S. Supreme Court decisions change fundraising disclosures, the Attorney General is limited in what it can do. She said that current law does require fundraisers to disclose their identity and their relationship to the charities they represent. A provision of the revised regulations would require charities to disclose if they are using a New York mailing address but are actually located elsewhere.

Assistant Attorney General James Siegal talked about the Bureau’s electronic filing projects. He reported that the Bureau is part of a consortium with 12 other states and the National Center for Charitable Statistics (NCCS), and that downloadable software for preparing Form 990s is available online at www.nccs.urban.org. He said that e-filing reduces the burden for multiple-filers in particular, another area in which the Bureau seeks input and feedback from the NYSSCPA committees. Siegal said the plan is for the software to be as compatible as possible with accountants’ trial balance software and other current tax-filing software that charities use. Siegel said the NCCS has created a free “Turbo-Tax–like” package as a way to encourage people to use it, and that a project regarding uniform reporting across the states is ongoing.

Responding to a committee member who urged the Attorney General to be alert concerning confidentiality of donor lists, Siegal said the NCCS is looking at software that would encrypt donor information so there are two data sets, with one in which certain parts are encrypted. Goldman noted that the Bureau now manually removes donor information that need not be made publicly available, the concern being that public disclosure of certain donor information would make donors reluctant to give.

Josephson said the committees’ comments were useful and much appreciated, and thanked them for the opportunity to converse with them. The session, organized by Not-for-Profit Organizations Committee Chair Julie Floch and Vice Chair David Ashenfarb and Exempt Organizations Chair Raymond Parker Jones, is one of two joint sessions that the committees hold each year to focus on their compatible agendas and concerns. The second joint session, generally held in the fall, will be with representatives from the Internal Revenue Service.