I attended the 2009 WCTEO in Los Angeles last Thursday and Friday. It’s always a great conference for professionals in the nonprofit and tax-exempt sector: impressive and knowledgeable speakers, interesting topics, and a chance to meet with peers and people you greatly admire. My only and very minor criticism is that the scope of some of the programs is geared more toward people with little familiarity with the topics than those who are hoping to drill deeper. As a result, for regular attendees of these EO (exempt organizations) conferences, a couple of the programs felt a little repetitive.
As is customary with EO conferences, the opening programs were presented by the regulators. It was intriguing to hear Sara Hall Ingram, Commissioner of the Tax Exempt and Government Entities Division of the IRS, discuss her passion for governance. Despite the vocal objection of many attorneys in field, it looks like the IRS intends to continue to lay down and enforce rules on governance, an area governed by state laws. IRS reps also discussed the increase in user fees for exemption applications next year and the Cyber Assistant release, which will "guide" the preparation of exemption applications.
Belinda Johns, Senior Assistant Attorney General of California, provided an update of the AG's charitable trusts section, including cuts affecting the division. The AG's focus continues to be on diversion of assets, board failure, fundraising abuses, and governance. One recent action that illustrates this focus is the complaint filed by the AG against L.B. Research & Education Foundation. Johns also described the AG's new registry search, which indicates when a charity is suspended for being delinquent in its filings with the AG. Presumably, when a charity is suspended, it is no longer able to engage in charitable solicitations in the state. A failure to register initiative will be developed when the budget allows.
Philip Hackney of the IRS and EO attorney David Wheeler Newman discussed supporting organizations and donor-advised funds. The focus of this program was on the proposed regulations regarding Type III supporting organizations released on September 24. The comment period ends December 23. Great session, highlighted by Newman's critical questions about the proposed regulations. I would have liked to have heard more about donor-advised funds, but this may be a focus next year if proposed regulations come out by such time.
Connie Collingsworth, general counsel for the Bill and Melinda Gates Foundation, spoke during lunch about her enviable position and some of the strategies of the Gates Foundation. One fascinating project funded by the Foundation: the development of repellents that inhibit the olfactory senses of mosquitoes to detect humans.
Next was a program on mergers, dissolution, and other forms of restructuring presented by EO attorneys Lisa Runquist and LaVerne Woods. They provide four hypotheticals and discussed how each might be approached. Runquist described how a disappearing corporation in a merger might set up a "shell corporation" with minimal activity as part of a contingency plan if the merger doesn't work out. Woods noted that in a dissolution, a private foundation need not always choose to terminate private foundation status.
Douglas Mancino and Nancy Shelmon discussed legal, accounting and financial issues triggered by the economic downturn. Mancino cautioned against relying on the diversity provided by fund of funds alternative investments. The speakers both discussed broken pledges, and the possible duty of boards to seek enforcement. Reynolds Cafferata's article - Should Pledges Be Enforceable? - is a recommended resource.
The final program on Thursday, Civil and Criminal Penalties Affecting Exempt Organization, was presented by panelists Michael Blumenfeld and Mark Weiner, both from the IRS, and Charles Rettig. Failure to file a return and willful failure to collect and pay over employment taxes received particular attention. The opinion in the American Friends of Yeshivat Ohr Yerushalayim, Inc. case earlier this year was included in the handouts (read also Charity Governance's description of the case here).
Read my post on Day Two of the WCTEO here.