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PRACTICE AREAS

Legal Services for Nonprofit and Tax-exempt Organizations
Caritas Law Group regularly serves as outside general counsel to tax-exempt and nonprofit organizations. We also represent donors with respect to significant gifts, and socially responsible companies with respect to cause-marketing arrangements and corporate giving strategies.

PRACTICE AREAS

Legal Services for Nonprofit and Tax-exempt Organizations
Caritas Law Group regularly serves as outside general counsel to tax-exempt and nonprofit organizations. We also represent donors with respect to significant gifts, and socially responsible companies with respect to cause-marketing arrangements and corporate giving strategies.
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Outside
General Counsel

Cause Marketing
(commercial co-ventures)

Charitable Solicitation
and Professional
Fundraiser Registrations

FEATURED BLOG POSTS
  • The Problem With Donor Advised Funds

    With the growing popularity of donor-advised funds (DAFs), nonprofits have been keeping a close eye on new regulatory proposals that could result in increased oversight and scrutiny of DAFs. Recently, a new proposal from the Initiative to Accelerate Charitable Giving is gaining traction in the philanthropic community and may signal that major changes in regulation and oversight of charities may be in the works. What are Donor Advised Funds, and How are They Broken? Donor-advised funds (DAFs) are a charitable vehicle in which donors give money or assets (like stocks, bonds, and real estate) to a nonprofit fund sponsor who disperses the donations over time to charitable causes. DAFs can offer a tax advantage to donors by allowing them to claim an immediate deduction for the full value of their donations while spreading out the disbursement of funds over many years. Likewise, DAFs can be used to minimize capital gains tax by permitting donors to directly transfer assets (like stock) without having to first liquidate them. DAFs are also appealing for their flexibility, ease of setup, the ability for anonymization, and typically low administrative costs.   One of the biggest criticisms of DAFs is that they encourage philanthropies to warehouse wealth rather than distribute them to the charitable causes for which they were intended. By way of background, DAFs were originally the brainchild of local community foundations looking for a better way to encourage philanthropy at a regional level. However, the concept was soon appropriated by large corporate financial firms, like Fidelity and Schwab, who stood up a charitable arm to operate as a DAF sponsor, while their for-profit investment branch profited from fees charged for the investment and management of the associated DAF funds. Critics of this scheme argue that fund sponsors are disincentivized to make grants, preferring instead to rack up handsome fees generated by funds that continue to appreciate under their management. Indeed, Fidelity, Schwab, and a handful of other large financial firms are now among the nation's biggest charities thanks to their well-oiled DAF machines.  What are the Proposed DAF Reforms? Reforms proposed by the Initiative to Accelerate Charitable Giving reflect growing public criticism of the philanthropic machine; common sentiments include the need for accountability and measures to ensure that foundations and donors do not hoard their wealth. In step with these concerns, the key features of the recent proposal include: Requiring donor-advised funds to distribute funds to charities within 15 years in order for the donor to receive tax benefits at the time of contribution. Prohibiting private foundations from granting money to donor-advised funds to satisfy federal requirements to pay out 5 percent of assets each year. Tax incentives for foundations to accelerate distribution and payouts. Although many believe the current proposal to be a long-shot, the Chronicle of Philanthropy reports that it has wide support from a diverse list of prominent supporters that could mark a tear in the fabric of the philanthropic universe. The Nonprofit Quarterly similarly notes that a proactive agenda for regulation has long been missing within philanthropy, with the recent proposal signaling a shift to a healthier, less self-protective direction that has long been focused on self-advocacy among industry leaders. Still, some worry that new requirements would have a chilling effect on contributions to foundations and DAFs. Community foundations also argue that the rules are an overreaction to financial firms' misappropriation of DAFs as a revenue-generating machine. But with DAF contributions jumping 86% in 2018, the law is falling behind the time, and the need for change is clear. As the Initiative's co-founder explains, the U.S. gets it right by providing significant tax benefits for charitable giving, but we only get them halfway there. The law simply doesn't do enough to get those monies to the charities they are intended to serve.  Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.  The post The Problem With Donor Advised Funds appeared first on CharityLawyer Blog.

  • It’s Not Too Late to Claim 2020 State Tax Credits

    Did the holidays get in the way of your intentions to round out your 2020 charitable giving? Or perhaps you've recently run up your returns and realized that you could have given a lot (or even a little) more? In Arizona (and many other states), you can still claim donations made after December 31 but before April 15 on your previous year's tax credits. Here's what you need to know. How Do State Charitable Tax Credits Work? Unlike a tax deduction (which simply lowers the amount of your taxable income), state tax credits act as a dollar-for-dollar deduction on the amount of taxes that you owe to the state. For example, if Jane's taxable income in 2019 is $50,000, and her effective tax rate is 10%, she will owe $5,000 in taxes. If she makes qualifying charitable contributions in the amount of $2,500, her taxable income will only be $47,500; so, at an effective tax rate of 10%, her charitable contribution of $2,500 will only reduce her taxes by $250. Under Arizona's tax credit rules, if Jane contributes the maximum allowable amount of $400 to a qualifying charitable organization, her tax state taxes owed would be reduced by the entire amount; she would owe $5,000 in taxes minus $400, or $4,600 total. State charitable tax credits are a win for everyone; qualified charities receive the support they need at no extra expense to the taxpayer beyond what they would already owe to the state in taxes. Note that while credits are non-refundable (i.e., if you don't end up owing enough in taxes to fully benefit from the credits, you will not get a refund from the state), unused credits can be carried forward for 5 years. Arizona state tax credits are only applicable to specific categories of charities, as listed below. List of Arizon's 2020 State Tax Credits Public Schools (AZ Form 322) Credit for contributions of up to $400 for couples filing jointly and $200 for all other filers is available for payments of fees to an AZ public school or charter school for support of extra-curricular activities or character programs. Form 322 with instructions 707 Publications: School Tax Credit Information List of Schools and CTDS County Code, Type Code, and District Code & Site Number Private School Tuition Organizations (AZ Form 323) Credit for contributions to a Private School Tuition Organization (Original Credit) of up to $1,186 for couples filing jointly and $593 for all other taxpayers. The contribution provides scholarships or grants to qualified elementary and high schools. It cannot be designated for the direct benefit of your dependent but can benefit a relative. Form 323 with instructions List of School Tuition Organizations Information about qualifying as a Private School Tuition Organization Certified School Tuition Organizations (AZ Form 348) Credit for contributions to a Certified School Tuition Organization (Switcher Credit) of up to $1,179 for couples filing jointly and $590 for all other taxpayers. This credit is only available to individuals that first donated the maximum amount allowed under the Credit for Contributions to Private School Tuition Organizations (AZ Form 323) above. Form 328 with instructions List of School Tuition Organizations Information about qualifying as a Certified School Tuition Organization Qualifying Charitable Organizations (AZ Form 321) A credit of up to $800 for couples filing jointly and $400 for all other filers is available for contributions to a qualified charitable organization. Form 321 with instructions List of Qualifying Charitable Organizations for 2020 Information about qualifying as a Qualifying Charitable Organization Qualifying Foster Care Charitable Organizations (AZ Form 352) A credit of up to $1,000 for couples filing jointly and $500 for all other filers is available for contributions to a qualified foster care charitable organization. Form 352 with instructions List of Qualified Foster Care Charitable Organizations for 2020 Information about qualifying as a Qualifying Foster Care Charitable Organization Several other tax credits are available (although with different restrictions on the timing of contributions) in addition to the above-listed credits. More information is available at the Arizona Department of Revenue website here. Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.  The post It’s Not Too Late to Claim 2020 State Tax Credits appeared first on CharityLawyer Blog.

  • Charity Scams (and How to Avoid Them)

    The act of giving triggers the release of feel-good endorphins in the brain, a “helper’s high,” as some call it. And scammers know it. That’s why they prey on people’s inherent predisposition to give, literally hi-jacking our human behavior to profit themselves.  Here are some of the ways they do it—and our best tips to avoid common scams so you can ensure your donated dollars actually do the good you intend.  Common Charity Scam Tactics Imposter Charities. Fake charities sometimes set up a site or send emails that closely mirror a commonly known charity. An email or website that doesn’t end in “.org” is a red flag. If you receive a solicitation from a charity, independently Google, their organization ensures that the link you use to donate is legitimate. Creating a Sense of Urgency and Other High-Pressure Tactics. Many scammers are experts at hacking the human brain; they use “social engineering” to psychologically manipulate people into giving to fraudulent causes or divulging personal information that can be used to later steal. Scammers will often create a sense of urgency, or make highly sentimental claims, sometimes posing as a person affected by a recent natural disaster or emergency. Legitimate charities typically do not employ such high-pressure tactics. Bottom line...beware of sob stories and urgent pleas. They might be a scam in disguise. Vague Promises. Fundraising appeals from scammers often come with fuzzy promises about what they will actually do with your money. A legitimate charity should point to specific outcomes that they expect to accomplish with your donated dollars. Even legitimate charities are sometimes well-intended but fail to or poorly deliver on their promises. That’s why it’s important to thoroughly research a charity before giving. Promising a Prize. Some schemes will guarantee sweepstakes winning for donating. The FTC advises that this not only a scam but also illegal.  Bypassing Banks. Illegitimate schemes will often ask money to be sent via money order, wire transfer, gift cards, cryptocurrency (like Bitcoin), or a foreign bank. The safest way to make a donation is by credit card or check.  Real Charities Not Doing Much Good. Unfortunately, some tricksters have figured out how to straddle the grey line between fraud and not. They set up legitimate charities but pay themselves a hefty salary to “administrate” the charity. That’s why it’s important to research a charity to determine what percentage of donations go to actually serve their cause versus lining the pockets of their founders. When choosing a charity, look for those that spend no more than 30% of total costs on administration and fundraising expenses. How to Avoid Charity Scams Make Sure the IRS Recognizes the Charity. Tax-exempt organizations are required to register with the Internal Revenue Service. You can search their database of tax-exempt organizations at https://apps.irs.gov/app/eos/. Do Your Research.  Thoroughly research a charity before giving. What are they doing to serve the community, and do they actually do what they say they will do? How much of their costs go to overhead and administration versus providing actual services to the community they serve? The following organizations provide reputable information on how charities do business and spend their donations. BBB Wise Giving Alliance Charity Navigator CharityWatch GuideStar Check Your State's Solicitation Registry. Most states require nonprofits to register with the state if they plan to solicit charitable donations. You can find yours at nasconet.org. Report Suspicious Organizations. Help others avoid being victimized by charity scams. You can report scams to FTC.gov/complaint. You can also report to them to your state's charity regulator. Make sure you include specific information, like the organization's name, contact information, and any specifics of your conversation or communications with the fundraiser. Need Help With Your Charitable Solicitation Registration. If your charity solicits donations, you will likely need to register with your state AND any other state in which you solicit donations (even online). Failure to register can result in fines and penalties against directors and officers and even barred from further fundraising activities within a state. Caritas Law Group can help with your charitable solicitation registration needs. Contact us at info@caritaslawgroup.com for an estimate. Caritas Law Group serves nonprofits of all types and sizes and files registrations in all states that require them. Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on corporate, tax, and fundraising regulations nationwide. Ellis also advises donors with regard to major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.  The post Charity Scams (and How to Avoid Them) appeared first on CharityLawyer Blog.