Legislation

I took a seat in the Grand Ballroom in the Waldorf=Astoria on the second day of the DMA Nonprofit Federation’s 2006 New York Nonprofit Conference in early August with my coffee and bagel just as Heath Slawner began his general session on the power of influence. Slawner’s presentation shed light on the topic of influence and ethics in a fresh, new way that had me on the edge of my seat even before the coffee had a chance to kick in. A partner at Montreal-based training and development firm Hart Resource Development, Slawner outlined six principles of ethical influence developed by Dr. Robert B.

If you have a gnawing sensation in the pit of your stomach, you just might be doing something unethical. So says Elizabeth Schmidt, president of nonprofit management consulting firm Southpoint Social Strategies and professor of nonprofit law and practice at the College of William and Mary Law School. Schmidt says conflicts of interest having to do with board members are very common in the nonprofit world, e.g., board members doing business with the organization where they stand to make a financial gain. She stresses that the entire board should always be aware that a board member (or an organization affiliated with a board

A donor owns property that he rents to third parties — property that a charitable organization could use to house its offices or one of its programs. The donor would like to benefit a charity and claim a federal income- and gift-tax deduction for the donation but doesn’t want to part with the property. What options are available?

For a few months now, you’ve been hearing about plans by companies such as AOL and Yahoo! to apply a new business model to Internet communications to afford e-mail senders a secure way to communicate with potential customers. Goodmail recently unveiled a certified e-mail program that AOL and Yahoo! plan to make available to e-mail senders that allows them to bypass spam filters for a fee and get guaranteed access to recipients’ inboxes.

The rate of return that determines income earned on trust assets — term interests, life interests, annuities and remainders — is established through IRC Code Section 7520. Published each month by the IRS based on the previous month’s weighted average market yield for marketable treasure obligations of the same duration (short-term, mid-term and long-term), this rate is 120 percent of the “applicable federal rate” for mid-term obligations with semiannual compounding.

More than 50 million consumers have had their personal data compromised this year, a statistic grim enough to elicit spasms of paranoia in donors’ hearts about identity theft, data security and privacy. But, in reality, there have been few cases of privacy infringement reported in the nonprofit world — not enough to spawn a skittish donor pool.

It does, however, raise two important questions for nonprofit fundraisers. First, with the explosive growth in data collection and compilation, to what extent is it moral, ethical or legal to mine data on potential donors? And secondly, what proactive measures can be taken to safeguard donor privacy?

You’ve been hearing about proposed postal-rate increases; rules against personalizing mail pieces with your donor information and thanking donors; new, expensive accountability measures; and rules against e-mailing potential donors.

So is it time to hit the panic button? No, but this also is no time to allow yourself to continue on, unfamiliar with the legislation and other changes that could affect your organization’s fundraising efforts.

Following is an update on some of the issues the Direct Marketing Association Nonprofit Federation is monitoring.

Stock options are a source of significant wealth — both the options themselves and the stock acquired upon the exercise of the option can be valuable assets. But stock options do not always lend themselves to effective charitable giving. They’re subject to complex taxation rules and, to a lesser extent, rules under the Securities Exchange Act of 1934. It’s important to understand when and to what extent these assets make effective charitable gifts.

Has your organization planned for federal or state legislation addressing financial governance of charities?

As noted in an earlier column, a charitable remainder trust (CRT) is a valuable tax-planning tool. However, Revenue Procedure 2005-24, issued on March 30, adds new rules to CRTs to address the problem of spouses “electing against the will,” which can arise in certain states.

A basic tenet of a CRT is that only the unitrust or annuity trust payment may be made to a non-charitable recipient.