Fundraising/Third Party

This thread is organized to answer the following question posed in 2015 by Kelly Trout, a Health Consultant with International WAGR Syndrome Association:

One of the families in our group is apparently planning a fundraiser which will raise money for both her own family's medical expenses and for our organization. I'm sure this is a violation of at least one - probably several - regs/laws. Does anyone know specifically which one(s)? And if so, where - in the labyrinth of IRS rulesnregs can I find it?

This thread does not include joint fundraising information.

This thread covers the following topics:

• How organizations handle requests to publicize events from individuals who are fundraising for personal expenses rather than the foundation. This also includes family fundraisers that have been granted 501c3 status.

• IRS information (See Jim Moore’s response)

• Organizations experiences with families requesting fundraisers or funds set up for their medical expenses

• Nonprofits to help families raise philanthropic dollars for their own medical expenses

• Copyrights on organization logos and use of organization’s logos throughout family/personal fundraisers

The thread answers are based the following question from 2014:

Danna L Mayer, Executive Director of The Cholangiocarcinoma Foundation, was interesting in knowing how other organizations handle requests to publicize events from individuals who are fundraising for personal expenses rather than the Foundation?

→Dawn Williamson, President & Founder of CHERUBS (The Association of Congenital Diaphragmatic Hernia Research, Awareness and Support), replied:

We also get requests from families to fundraise for them specifically or to set up funds for them (funneling money through our charity so donor would get tax breaks). Families sometimes actually get upset when we decline to do this because of legal and ethical implications and go to less ethical groups who will do it. It's a thin line between doing all you can to help struggling families and being the "bad guy" for not doing more.

→Brenda Conger, Executive Director or CFC International, replied:

We don't publicize any personal events and do not allow the use of our logo or website linked to these events.

→Susan L-J Dickinson, Executive Director of The Association for Frontotemporal Degeneration, replied:

Same here. I explain to people that we’d lose our 501(c)3 status--that this is not what our mission covers. Yes, some of them still get angry. There is a nonprofit--HelpHopeLive--whose mission is to help families raise philanthropic dollars to cover their own medical expenses. There may be other organizations like this…

→Jim Moore, Executive Director of AXYS, replied:

Organizations need to be very careful about fundraising for one person’s needs.

http://www.irs.gov/taxtopics/tc506.html

Note that line two states: “Payments to individuals are never deductible..” So asking donors to support an individual not only saps your organization’s fundraising capacity, it also puts your organization in the position of having to explain that any donations to the individual or family are not tax deductible...even those laundered thru a charity.

I realize you are talking about individuals making direct appeals through your organization, but the best answer in those cases is for the organization to have a PROGRAM to assist individuals rather than the organization fronting appeals from individuals to your constituency.

The rules are even more convoluted, because “FEDERAL TAX LAW—Under Federal law, an existing qualified charity gener¬ally must be given full control and authority over the use of donated funds, and contributors may not earmark funds for the benefit of a particular individual or family. Contributions to qualified charities may, however, be earmarked for flood relief, hurricane relief, or other disaster relief.”

http://www.irs.gov/pub/irs-pdf/p3833.pdf

So donors should not be specifically dictating that their donations are restricted to a particular individual or family. The donors give the money to the organization, perhaps earmarked for the “family support program,” and then the organization INDEPENDENTLY doles out the money as the organization sees fit. Complex? Yes...absolutely. Suddenly, the organization is faced with raising the money, setting up reasonable criteria for applying and vetting applications, and for determining the amount of support offered to the individual.

But the rationale is simple. A direct donation from a donor to an individual is NOT a donation. It IS a gift. Individuals can give and receive gifts, but there are sometimes tax implications to gifts that I will not explore here. Gifts are not tax deductible to the giver. They may incur tax liability to the recipient. And charitable organizations should not be laundering gifts, nor should they be enabling donors to “play favorites” with who gets support. That’s the organization’s job. Please don’t shoot the messenger.

Disclaimer: I am not an attorney or a CPA. All comments shared are opinions only, and they are not, nor should they be construed to be counsel. Please seek counsel from an attorney or CPA.

→Sharon Terry, President and CEO of Genetic Alliance, replied:

Indigogo has asked Genetic Alliance to help identify families that need money to cover medical and other expenses… We will be coming to you all with more info soon.

→Patricia Wood, President of NBIA Disorders Association, replied:

What does everyone think of a family that started an organization and has been granted 501 c 3 status and this is their mission: “To provide ongoing financial assistance to XXXXX (name of NBIA individual) in her fight against Neurodegeneration with Brain Iron Accumulation (NBIA), a rare neurological disorder, and subsequently support research for a cure.” All board members are relatives of this person they are raising money for – including both parents and aunts and uncles. Did the IRS allow it because they tacked on that they would also raise funds for research? Here are their goals:

•Home Care support

•Wheel Chair Van

•Immersion pool with lift

•Establish fund for research – they are only interested in the disorder their daughter has, so would only be funding that particular one. Our organization’s mission is to support all of the NBIA disorders (10 and counting) and we try not to encourage splintering into separate groups just raising for one disorder. We don’t have any others yet so have been pretty successful up to now.

How can they even make any board decisions without it being a total conflict of interest? They say they plan to raise $500,000 this year for research but I think that is unlikely and anything they raise will go to help their child. They copied some of our information that is on our website word for word and used our logo on their site, all without permission. The logo is under resources and clicking on it sends someone to our site. We do want awareness of the disorders and if people are referred to our site, they will learn much more, but are we giving approval of their organization by letting them use our logo this way?

They sent me an email with a press release announcing their organization and asked us to publicize their organization in our newsletter. I haven’t responded yet and am struggling with what to say. Anyone with experience or thoughts on how to handle this?

→Jackie Clark, with Share and care Cockayne Syndrome network, replied:

We've had several families only raise money for themselves or make a name on Facebook that is their child's name "XXX 's CS journey" that almost acts like a caring bridge site but they ask people to give them money directly in order to pay for medical expenses. But I often see these families take a trip to Europe and get things that are frivolous (tattoos) or that you'd think they couldn't afford. One family has applied for 501c3. We don't feature any of these on our website but we did once try to have a post on our Facebook fan page asking families to share their links to their pages (under the comments section) for their kids, but no fundraisers. I took this idea from MOM's ( mothers of miracles FB page) they also mention that they keep a list of these on their website. Only a few of our CS families posted but I thought it was a nice gesture. Some of the families have started real charitable organizations where it really benefits other people. But we've also seen a lot of shady people in our group. But the organization in this original post obtaining 501 c3 status is scary. I predict they won't do things properly and eventually get lose status in 5 years.

Facebook has been our main way of keeping families connected to help each other.

I'm sorry I dont think I've offered any useful advice. In my opinion id ask them to remove your logo and the link to your website or give them exact wording that you can say you require ( such as description of your org and your mission statement) in order to put a link on their website to yours.

We have families who really need help who can't even afford a computer to access the internet for support.

I love this genetic alliance group, (google group )it has been the best help to me since I've started running share and care in 2006. It makes me feel better when I see that other groups have the same experiences and challenges that we do.. And it's nice to get good advice on ethics too.

→Dawn Williamson, President & Founder of CHERUBS (The Association of Congenital Diaphragmatic Hernia Research, Awareness and Support), replied:

We have had to deal with many ex-volunteers and families creating Facebook pages and claiming to be non-profits or asking for donations to file to become non-profits. They all have logos, their own ribbons, a few even create web sites. They market themselves as if their 5 minute "charity" is at the same level as our 20 year old charity even though they have no experience at all and offer nothing. It's the Facebook trap of people who need attention suddenly getting some on social media - the new era of Munchhausen Syndrome by Social Media Proxy. It would be nothing more than an annoying distraction if other families weren't supporting them and donating to them versus legitimate charities. Because they are "friends" and they want to support "all people raising awareness". They do not see it as dishonest or a con job at all because at the foundation of it is a child / family who is affected who seems to "genuinely" want to help the cause (without following any laws or rules). If we bring attention to that we are the ""bad guys feeling threatening by the new 'charity'". Some even list their "volunteer work" at our charity (down to 1 minute tasks. They conveniently leave out all the work they didn't finish or why they are no longer part of our charity) - just to get the google hits from our name and to make themselves seem part of something legitimate.

Best to just ignore it because those "charities" never evolve into anything real. Unless they infringe upon your trademarks and copyrights - then have your attorney nicely ask them to stop. Good charities cannot afford to be pulled into social media drama or fake charities. And as the "big, bad official charity" nothing you say or do will be perceived as anything short of bullying the "new, little guys". Frustrating, but true. It really is a new era. I wish Facebook would label those who are registered, real and official so that families and donors can tell the difference.

→Janet Long, Executive Vice President of haea (The US Hereditary Angioedema Association), replied:

Wow – I could not have written it better, Dawn! Well-said. We share the exact same rogue FB group experience (clouded even more by the pharmaceutical co. and associated agency FB pages) and have come to the same conclusion – we try to ignore the social media noise and continue to extend our philosophy of caring and compassion to all and trust that our integrity will win the day….

→Kismet1565 replied:

Stickler Involved People does not. However, we were tempted when one of our younger adults could move on her own with an aid dog and she needed $$ for training.

→Lisa Schoyer, Past President and Current Secretary of CSFN (Costello Syndrome Family Network), as well as Founder and President of RASopathies Network USA, replied:

Neither Costello Syndrome Family Network nor RASopathies Network USA do either, having found the same info that Jim posted earlier in this strand.

In the past (pre-FaceBook!) I was told the Boy Scouts of America encouraged individual scouts to fundraise using the Boy Scouts logo and nonprofit status to cover the cost of the individual scout's travel expenses for the annual jamborees - by a seasoned Boy Scout Leader. This gave me a moment of false assurance; I'm still not sure how the Boy Scouts did it (does it? if they still do).

I also knew of a small charity that helped bereaved (and indigent) parents fundraise to cover the cost of their children's funerals. The charity would allow the parent to fundraise using the charity's 501c3 status, receive the funds, and pay the invoiced funeral expenses. I would guess, given the IRS 501c3 rules I've read, that this charity pretty much has (had?) chutzpah.

→Shelley Bowen, Director, Family Services and Awareness of Barth Syndrome Foundation, replied:

Janet, We too have a number of families who have created personal social media sites for personal purposes. It would be wonderful if the funds raised in those appeals were coming to BSF but I can't think of any of these families who aren't completely devoted to our cause. Unfortunately most of those families are struggling financially to keep their head above water. Every one of those boys are there to participate in research opportunities. Their parents are always willing to help another parent and a great many of these families raise funds to attend our biennial conference. We make it very clear that our logo is not to be used in any fundraising effort that is not benefiting our mission. To date, our parents have fully understood our reasoning and been responsive to removing the logo upon request. We have made every effort to harness these families energy to help us propel our mission. They are very savvy about social media and are generally members of numerous social media pages. By educating these families with the facts about Barth syndrome they have become our ambassadors of the mission. They have found awareness opportunities we haven't even heard about and share what they have learned with us. Ultimately we want our boys to thrive and be well and if the family doesn't have the resources to pay for medical care that isn't good for their children. We have benefited significantly by harnessing that energy and directing it toward volunteer opportunities. These are the miners of the Internet and the social media experts. That is what has worked with us. Our group is of the size that I do have the opportunity to communicate with these families on a regular basis.

→ Sharon Terry, President and CEO of Genetic Alliance, replied:

You can be, as Jim pointed out, a grant making organization and be nonprofit – but you need to do so according to strict guidelines and transparent mechanisms…

→Jim Moore, Executive Director of AXYS, replied:

Lisa, You mention the Boy Scouts experience. The fact is that many nonprofits engage in what are technically illegal practices, because they simply don’t know the rules. In scout-leader training, for example, such nuanced and esoteric subjects as nonprofit fundraising tax law simply don’t get the attention they deserve. There are too many other things that need to be prioritized. Then there’s the pragmatic fact of not “asking permission, and asking forgiveness instead.” In a very practical way, scouts could go out and fundraise to support their personal adventures, but the aggregate result would largely support the “group” rather than the “individual.” LOTS of schools engage in the same behaviors to fund class trips, etc. I would not want to respond to an audit addressing those questions, but it’s likely the IRS would “look the other way” for a storied organization like the Boy Scouts. I am not suggesting that the scouts are deliberately circumventing nonprofit law. Instead, widespread ignorance in a volunteer-heavy organization can lead to many unintentional and fairly innocuous breaches. The same is true when organizations fail to understand rules around “fair market value” (FMV) of goods and services exchanged for gifts. Whether it’s the value of the “gala dinner” or the items sold at a charity auction, many nonprofits can’t muster even a basic understanding of FMV, who the donors really are, and what is actually tax-deductible. Fortunately, while propagating false information about these things is not well tolerated, the real responsibility for understanding tax law falls on the donors. And most substantial donors rely on professional accountants to prepare their taxes. In those cases, the tax preparer is professionally obligated to know the rules and apply them appropriately. So a lot of this “misconduct” and misrepresentation slips away unnoticed.

P.S....and the Boy Scouts may incentivize scouts to raise for themselves, but the organization may well pool the money so that they are on the right side of the law.

→Jim Moore also replied:

This is murky, Patricia.

Two things come to mind: 1. No-one has complained to the IRS. You’d need to see their articles of incorporation, bylaws, and their 501 (c)(3) application to see what they told the IRS they intended to do...and how that compares with their stated mission. The IRS does not police this stuff without a complaint to trigger an audit or investigation. 2. They clearly have a charitable mission (research) and a non-charitable mission (support for one individual). It’s important to note, however, that fundraising for individuals, while not a charity mission or tax exempt/deductible, can be done. These happen all the time for, say, house fire victims or for individual injured returning soldiers, or for victims of accidents. “For profit” fundraising is legitimate, but these efforts are often orchestrated under the supervision of a 3rd party that does the accounting, appropriate reporting, and pays the taxes on behalf of the impromptu group. In your case, however, you have a splinter group that is siphoning off support, and based on your description, may be somewhat deceptive in its practices if it’s not elucidating the difference between the efforts for the individual and the efforts for research. If you suspect that they are playing fast and loose with the rules, you may want to take some action, but that’s well beyond my understanding of the specific case in question.

As for the plagiarism and copyright infringement...and misrepresentation of their affiliation with your organization...I’d nip that in the bud, first privately and then publicly if necessary. By your description, they are “trading on” your brand and stealing your work.

→Patricia Wood, President of NBIA Disorders Association, replied:

Hi Jim, Thanks for your insightful comments. This group just received their non-profit status last month and put out their first press release, so perhaps someone will complain about them to the IRS at some point. Are the articles of incorporation and bylaws a public record that anyone can request to see? I hesitate to get involved though for fear what Dawn said will be how it is perceived: “And as the "big, bad official charity" nothing you say or do will be perceived as anything short of bullying the "new, little guys". I understand that families can fundraise to help with their own expenses and have no problems if it is done properly. We do not lend our logos to those efforts, as others have mentioned. I’m thinking of asking the group to acknowledge the source of what they copied from our website and put a link to our site with it, but to remove our logo from their site. We do not have our logo copyrighted, so does that mean anyone can use it and we don’t have much say? I would like to know how many other groups have copyrighted their logos and what other items they have copyrighted and the cost involved. Would you say it was a good investment?

→Dawn Williamson, President & Founder of CHERUBS (The Association of Congenital Diaphragmatic Hernia Research, Awareness and Support), replied:

We created our awareness ribbon and let anyone use it for anything at all without restriction. We do not let others use our logos or name without permission. Be careful to not step on the cause if you copyright or trademark anything. We had a splinter group trademark "Congenital Diaphragmatic Hernia Awareness" and threaten to sue us anytime we said it. They thought this was good business practice somehow and protecting what they "claimed" was "theirs"". 2 years of court battle later, we won. But what a waste of time and energy even though our attorneys were pro bono.

→ Sharon Terry, President and CEO of Genetic Alliance, replied:

Genetic Alliance and PXE International trademark all of our marks – and it is free because I just follow the directions on the TEAS website and file for us.

→Marie Malloy, from CdLS Foundation, replied:

We have had this problem as well -- our families don't understand why we can't "lend" them our 501c3 paperwork and provide logos and materials. Simply put, its misleading to the donors, who may think they are supporting a nonprofit with a tax deductible gift. We also have had issues with people using our logo w/o permission and they do not understand the concept of branding and why its important to follow the guidelines. We recently created a logo use policy and revocable license agreement. We are also in the midst of trademarking our logo. Both give us more ground to stand on if we have to confront someone.

→Jim Moore, Executive Director of AXYS, replied:

Copyright often is more of a declaration than formal registration of ownership. You may be talking about a trademark. AXYS trademarked its name/logo, and we registered the trademark. We paid over $700 to research and register the trademark, and that was only a fraction of the true cost...most of which was donated as pro-bono services.

Meanwhile to copyright your material, you can go through a formal process, but few do that. Instead, you simply declare it with the symbol and statement. I worked in television, and we copyrighted every newscast, and all other media respected the copyright...or risked vigorous litigation. We never registered those trademarks...we produced about 8 to 10 live shows per day. Example: ©Copyright 2014...all rights reserved. (the copyright symbol is in your symbols font.)

The simplicity of a copyright is fairly important to managing the huge volumes of original material most organizations produce. Registering a copyright on anything less than a book or movie is too onerous.

One can register a copyright...here’s an illustration: http://zoo.mn/1sYCjsv

As I understand it, trademark protects you from someone else actually stealing your name...as opposed to what is happening...someone trading on your name. They are not pretending to be you, or using your name to describe another organization, they are, instead, pretending your organization endorses or supports their work.

My personal inclination is that you should fully enforce your ownership and enforce “fair use” and “crediting” standards. The use of your logo is absolutely verboten except when legitimately referencing your organization...but not trading on its “good name.”

Fair Use: http://www.copyright.gov/fls/fl102.html

http://www.nolo.com/legal-encyclopedia/fair-use-rule-copyright-material-30100.html

Crediting: http://bit.ly/1rDQZ9X that’s a Google return with lots of resources

The other group is taking advantage of your work and good name to generate revenue, and this truly violates both the letter and spirit of the laws regulating intellectual property. P.S. The fact that you didn’t declare a copyright or trademark may not limit your rights. A college professor was recently fired and sued for plagiarizing a student’s work. Students don’t copyright their work, and yet they own it. This illustrates that a work that exists prior to the plagiarism and can be traced to the owner/author is still owned by the owner/author. It’s a harder struggle, but being able to trace the origins of a work and subsequent “unfair” use by another party is quite compelling. Once again, Disclaimer: I am not an attorney or a CPA. All comments shared are opinions only, and they are not, nor should they be construed to be counsel. Please seek counsel from an attorney or CPA.

→Patricia Wood, President of NBIA Disorders Association, replied:

Thanks for the great information! I’m going to add the copyright line to our website and look into trademarking our logo. Thanks to all who gave input on how to handle this new organization. I will discuss with my board what others have experienced and what our choices are, as to next steps to take with this group.

→Dean Suhr, President of MLD Foundation, replied:

Copyright, Trademarks, etc. [was: Fundraising for Personal Expenses]

In addition to putting the copyright notice on all of your materials, including the footer of each web page, I would also suggest you consider having a usage/reference policy in your website terms of use. We find that having things written down makes it easier to respond to requests, and certainly makes it easier to enforce/notify if someone is stealing/violating/infringing because the policy is written and we can show it pre-dates the infringement (notice that we keep a revision history on that page as well)

Our Legal and Trademark page on our website has the following sections: - Copying, Pasting, and Copyrights (what we have been talking about) - Linking & iFrames (repurposing our website pages) - Trademarks (current topic - note that for clarity we list/show our trademark phrases and logo)

You are welcome to copy any use any and all information on our legal & trademarks page for your own organization(s).

Families, and even some organizations, often copy our disease descriptions word for word to their site. Their hearts are good in terms of education and awareness, but that' simply the wrong approach. We often do a Google search for some key phrases we have embedded in the disease description to find violators.

It is very import that you notify all infringers in writing, Frankly, it's less important from a legal perspective if a family infringer actually removes the content than it is if it's another organization or company, but your obligation is to treat all infringers equally and you must notify them all -- otherwise an infringing organization could say you are selective about or not protecting your ownership rights.

Second to our disease description and research updates, the most commonly copied MLD item is our logo butterfly. Often it's for a private fund raisers (or tattoos!). They equate, thanks to our hard work, our butterfly logo with the disease so it makes sense to them. We usually will grant permission to use the butterfly, as long as our URL and the copyright symbol are both present - and where possible, we try to keep the branding colors intact, too. We often give use permission for private fund raisers as long as they make it clear that donations are not coming to us and are not tax deductible - this builds awareness & credibility of our organization, strengthens relationships, and often nets us some direct or indirect donations.

Some ask how we can copyright a butterfly ... take a close look and you will see this is not an ordinary butterfly. It has a faces in the bottom of each wing. See story here and a large version of the logo here. Notice how we, in a more subtle way than on the legal and trademark page, have also reiterated portions of the usage rules on this page (note that generally it's not a good idea to have a policy printed in two places, unless you are very careful to maintain consistency.)