Charity Law

What are the laws covering non-profit organizations, and if this is not illegal, then why not?

Out of [$12.4 million] paid for Freedom Concert tickets and raised in fundraisers by Hannity listeners, only $596,500 went to college scholarships for [children of] soldiers who died in battle, and only $299,897 went to horribly injured troops.

I think that as long as they’re spending some of the money they raise on the charitable purpose they claimed to be doing when they got their 501©(3), they’re operating within the law; I don’t believe there’s a minimum amount. Guidestar and other non-profit ratings organizations are supposed to help people decide whether an organization is using the money it raises appropriately. I hope the publicity this one is getting will shut it down by persuading donors to spend their money elsewhere.

I dunno, but there are a lot of other situations where this happens.

Yeah. Basically, to be a charity, you must give a certain percentage to the cause, and that percentage is lower than you would expect. Less than 10% seems too low though.

The liberal mediahard at work, in 2007.

From what I’ve heard, the regulations on how charities have to spend their money and conduct their accounting are incredibly lax. This is why you want to be wary of places that claim unrealistically low percentages of their budget dedicated to admistrative costs; generally they’re hiding some of the money through various accounting tricks and misrepresenting their total budget in some way. Then you get to organizations like the one discussed in the OP, in which the money funnelled towards jets and the like was reported under various functions which you can imagine as being necessary for this sort of organization when in reality they were being spent on loosely related functions. With all of the responsible charities out there I’d say it’s less a case for more regulation than for people to pay attention to where they’re sending money, but more transparency would help.

I believe the applicable ruling is found under IRC 4942, which says (if I read it correctly, entirely possible I’m not) they need to donate 5% as long as it’s a private NPO.

Of course, it’s a pretty inefficient and therefore likely bad charity if that’s all they contribute.

5 percent? Wow… So basically, the rules are just there to make sure nobody can get nicked for using charities to cover corruption?

I hope ours are better.

I once thought the business point of having a charity was to give it money and deduct that from taxes, as well as promote yourself indirectly. But apparently the business purpose of having a charity is to have other people give it money, then pay you.

It’s a well-proven business model. Just ask the televangelists.

Or Wyclef Jean, who has been doing it for years.

As seen on the following pages from the foundation’s 2006 tax return, the group paid $31,200 in rent to Platinum Sound, a Manhattan recording studio owned by Jean and Jerry Duplessis, who, like Jean, is a foundation board member. A $31,200 rent payment was also made in 2007 to Platinum Sound. The rent, tax returns assure, “is priced below market value.” The recording studio also was paid $100,000 in 2006 for the “musical performance services of Wyclef Jean at a benefit concert.” That six-figure payout, the tax return noted, “was substantially less than market value.” The return, of course, does not address why Jean needed to be paid to perform at his own charity’s fundraiser. But the largest 2006 payout–a whopping $250,000–went to Telemax, S.A., a for-profit Haiti company in which Jean and Duplessis were said to “own a controlling interest.”

Wyclef? Damn, I just lost a ton of respect for him.