Deduction Disallowed for Donation of McVeigh Trial Materials
The lead lawyer for Timothy McVeigh, the Oklahoma City bomber, received bankers’ boxes full of documents from the prosecution. The boxes contained FBI memoranda, lab reports, computer discs and photographs relating to the bombing. After the trial, he donated them to the Center for American History at the University of Texas. He claimed a tax deduction based on the appraised value, $294,877, beginning on his 1997 income tax return. The unused portion of the deduction was carried forward for a number of years. In 2004, the IRS caught up with the deduction and disallowed it for the years 2000 ($3675)… Read more
FTC Issues Revised Guides on Use of Endorsements and Testimonials in Advertising
Issued in 1972 and revised in 1980, the Federal Trade Commission’s (FTC) Guides Concerning the Use of Endorsements and Testimonials (Guides) in Advertising assists with compliance and enforcement of deceptive advertising practices. Now, for the first time in almost 30 years, the FTC has issued substantial revisions to its Guides which became effective on December 1, 2009. As a result, trade associations and their members need to review their use of endorsements and testimonials in advertising and adopt the changes made necessary by the final version of the Guides. The general considerations behind the revised Guides are as follows: Endorsements… Read more
Hospital Wins Antitrust Litigation; No Award of Discovery Costs
In December 29, 2009, the U.S. Court of Appeals for the Eighth Circuit affirmed the lower court’s dismissal of the antitrust claims asserted against a hospital by a cardiology group because the group failed to establish a proper relevant market as the necessary predicate. However, the Court also upheld the district court’s refusal to tax discovery-related copying expenses against the cardiology group, noting that district courts are not required to tax discovery-related expenses and a number of Eighth Circuit district courts have refused to do so. Nonprofits involved in antitrust litigation in federal court should be aware that they may… Read more
Hospital CEO Liable for Trust Fund Penalty
In August 2009, the U.S. District Court for the Middle District of Florida held that the President and CEO of a hospital was personally liable for the trust fund recovery penalties in connection with the hospital’s unpaid employment taxes. To be held liable for unpaid payroll taxes collected and not paid over to the government, a person (i) must be a person responsible for paying over the taxes to the government during the relevant fiscal quarters and (ii) must have acted willfully in failing to pay over the taxes. The Court held that a President and CEO is a responsible… Read more
Justice Sotomayor’s Court Opinions Show No Strong Leaning For Or Against Nonprofit Organizations
On August 8, 2009, Justice Sonia Sotomayor was sworn in to serve on the U.S. Supreme Court. We reviewed opinions of panels on which this nominee participated while serving as a Judge on the U.S Court of Appeals for the Second Circuit that mentioned 501(c) organizations or trade associations and determined that these opinions do not demonstrate a strong leaning for or against nonprofit organizations. However, a possible pattern does exist. In some opinions, when trade associations challenged official action or statutes, Justice Sotomayor’s appellate panel ruled against the trade associations’ challenges. First, the New York State Restaurant Association (NYSRA)… Read more
Trade Associations Should Expect Heightened Antitrust Scrutiny in Obama Administration
The Obama Administration’s chief antitrust enforcer has signaled her plan to ratchet up the enforcement of antitrust laws. As one of her first steps, the new Assistant Attorney General for Antitrust, Christine Varney, scrapped as too lenient an antitrust policy on monopolization adopted in the waning days of the Bush administration. Ms. Varney has a substantial background in trade associations. In private practice, she specialized in industry initiatives for self-regulation, especially in online activities. An early test may come from Senator Hatch’s pushing for action against the Division 1 colleges’ Bowl Championship Series. (Senator Hatch has expressed displeasure that the… Read more
Boy Scout Case Doesn’t Help Sex Swingers and Nudists
In a case of potential importance for nonprofit membership organizations, the Supreme Court held in 2000 that the Boy Scouts of America enjoyed a freedom of association that allowed them not to accept avowed homosexuals as adult leaders. Trade-association lawyers expected litigation to follow that would test the limits of organizations’ abilities to exclude persons based on their practices or beliefs. That litigation has in fact occurred. Since the Boy Scout case, courts have seen claims that universities acted wrongly in excluding Christian organizations from campus meetings (focusing on the organizations’ rights to exclude members), that universities acted wrongly in… Read more
Second Circuit Joins Other Courts of Appeal in Holding That Medical Residents May Qualify For Student FICA Exception
Another court has weighed in on whether universities have to deduct FICA from the pay of physicians in residency programs. In 2009, the U.S. Court of Appeals for the Second Circuit held that two district courts had erred in ruling that post-graduate medical residents are ineligible for the student FICA exception as a matter of law. The cases were remanded for the courts to conduct a particularized review based on the facts of the cases to determine whether the student exception would apply. The Federal Insurance Contributions Act (FICA) imposes payroll taxes on wages — “all remuneration for employment” —… Read more
FTC Announces
In 2009, the Federal Trade Commission (FTC) announced a law enforcement sweep called “Operation False Charity.” In this effort, FTC is joined by 49 States in bringing 76 enforcement actions against 32 fundraising companies, 22 non-profits or purported non-profits on whose behalf funds were solicited, and 31 individuals. The FTC also released materials to assist consumers in recognizing and avoiding charitable contribution fraud. The enforcement actions involve complaints and proposed settlement orders against defendants who allegedly tricked consumers into giving by falsely claiming that the contributions would support police, fire fighters, and military families, and by misleading consumers about how… Read more