Most, if not all, officially organized charitable organizations are nonprofits, but not all nonprofits are charitable organizations — a maxim that has spurred a local attorney to challenge the Tennessee Department of State.
John Harris, a Nashville-based attorney, contends the department’s division of charitable solicitation and gaming is overreaching on its longstanding definition of “charitable” organization and, in the process, is creating undue requirements on numerous state nonprofits that do not consider themselves to be charities.
Specifically, the division of charitable solicitation, through its Tennessee Charitable Solicitations Act passed in 1976, requires nonprofits that are or bill themselves as “benevolent, educational, voluntary health, philanthropic, humane, patriotic, religious or eleemosynary (i.e., charitable)” to register with the state as charitable organizations. For the first year of operating and after filing its initial registration, a nonprofit must provide the state with quarterly reports outlining contributions and expenditures, among other financials. After the first year, the charitable nonprofit must submit an annual financial report as part of the renewal process.
Harris (pictured), who voluntarily serves as executive director of the nonprofit Tennessee Firearms Association, said filing with the state four times for the first year will require expenses that go beyond those needed to simply comply with IRS requirements.
Harris said the state notified TFA, a 501(c)(4) organization, this year that it considers the association a charity. He added he is aware of other nonprofits that were notified only this year.
Harris said that because the requirements are cumbersome, he recently amended TFA’s state charter to note it is not a charity.
“The TFA conducts no school and no classes, but does have a website to freely and openly disseminate information on the law, AG opinions, etc.,” Harris wrote in a letter to the state. “The TFA also has a handful of leaders who accept requests for public speaking by groups that invite us to speak with them. But we do not do direct teaching.”
In a letter to Ken Marrero, an investigator with the division of charitable solicitations, Harris writes the following:
“Under TCA 48-101-501(1), a ‘charitable organization’ is vaguely defined as an entity that ‘solicits or obtains contributions solicited from the public for charitable purposes.’ TFA does not raise funds for charitable purposes but rather for purposes consistent with its IRS 501(c)(4) designation, which is not classified as ‘charitable.’ Under the TN statute, the term ‘charitable purposes’ is vague and undefined.
In letters to Harris, the division contends the TFA is, in fact, a charitable organization.
Blake Fontenay, communications director with the secretary of state, comptroller and treasurer, said there has been no change in the division’s interpretation of the law since it took effect 38 years ago. He added the state depends on nonprofits to understand the law and meet their responsibilities under it.
“We have 321 501c(4) organizations in compliance with our office, some of which have been registered 20 years or more,” Fontenay said. “We consistently find organizations that are unaware of the requirements of the law and, in such cases, we make them aware of the law.”
Ben Cunningham, founder of the Nashville Tea Party, said the state’s definition of a charity seems a “stretch.”
“The character of John’s group is not charitable as such,” Cunningham said. “The state told us the same thing [as it told TFA] and we went ahead and registered as a charitable organization. But it does seem a stretch to classify us as a charity.”
Harris told the Post he is requesting via letters that the state more clearly defines “what exactly it is they think we are doing that makes us a charity."
“Then, we can deal with that and stop engaging in such actions or we can properly form a real 501(c)(3) charity to engage in those activities if we decide to continue doing them,” Harris said.
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