President Trump Ordered to Pay Damages for Misuse of Foundation

• Published date: 01 February 2020
• DOI: http://doi.org/10.1002/npc.30688
• Date: 01 February 2020

Bruce R. Hopkins’ NONPROFIT COUNSEL

February 2020 7

THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc

the 15th day of the fifth month after the tax-year-end.

Thus, Forms 990 and 990-PF with tax years ending July

31, 2020, or later must be filed electronically. Form 990

and 990-PF filings for tax years ending on or before June

30, 2020, may still be on paper. In the case of a short tax

year or certain other circumstances detailed in the 990 or

990-PF instructions, the IRS will continue to accept paper

filing, as its systems are not yet able to receive these

forms electronically.

Form 990-EZ

For smaller exempt organizations, the new law

allows a postponement (transitional relief). For tax years

ending on or before July 31, 2020, the IRS will accept

either paper or electronic filing of Form 990-EZ. For tax

years ending August 31, 2020, or later, Forms 990-EZ

must be filed electronically. (Generally, this annual infor-

mation return is filed by organizations with annual gross

receipts that are less than $200,000 and total assets at

tax-year-end less than $500,000.)

Forms 990-T and 4720

In 2020, the IRS will continue to accept paper forms

that are pending conversion into electronic format.

These include Form 990-T and 4720. The IRS plans to

have these returns ready for e-filing in 2021 (reporting

on tax year 2020).

Form 8872

The IRS will no longer accept paper Forms 8872

reporting on periods after 2019. Form 8872 report-

ing information for periods starting in or after January

2020, will be due electronically by political organizations.

(These include political parties, political action commit-

tees, and campaign committees of candidates for fed-

eral, state, or local office.) Among other requirements,

most exempt political organizations must file this form

semiannually, quarterly, or monthly. To file electronically,

the organization must have the username and password

it received from the IRS after electronically filing its initial

notice (Form 8871).

Form 1065

The annual information return for partnerships is

included in this e-filing mandate when filed by an apos-

tolic organization. [28.2, 28.7, 28.9] ◆

PRESIDENT TRUMP ORDERED

TO PAY DAMAGES FOR

MISUSE OF FOUNDATION

The New York State Supreme Court, by decision dated

November 7, ordered President Donald Trump to pay

$2 million in restitution for spending Trump Foundation

money for political campaign purposes (People of the

State of New York v. Trump). The court stated that one

of Trump’s breaches of fiduciary duty occurred when he

“allow[ed] his campaign to orchestrate” a fundraising

event, “allowing his campaign, instead of the founda-

tion, to direct distribution of the funds, and using the

fundraiser and distribution of the funds to further Mr.

Trump’s political campaign” (see the analysis of this

lawsuit in the August 2018 issue). The court declined

to order payment of damages, because the funds were

ultimately distributed to charitable organizations.

The Office of the New York Attorney General, in a

December 10 press release, stated that the $2 million will

be distributed to eight different charities, amounting to

$250,000 for each of them. These charities are identified

in the release. The attorney general is quoted as saying

that “[c]harities are not a means to an end, which is why

these damages speak to the president’s abuse of power

and represent a victory for not-for-profits that follow

the law.”

The press release states that the president was forced

to reimburse the Trump Foundation in the amount

of $11,525 for sports paraphernalia and champagne

purchased at a charity gala, which was added to the

$1,797,598.30 in the foundation’s bank account. The

resulting $1,809,123.30 was recently transferred to the

eight charities, with each charity receiving a total of

$476,140.41.

The release also states that the president was

required to agree to 19 admissions, “acknowledging his

personal misuse of funds at the Trump Foundation, and

agreed to restrictions on future charitable service and

ongoing reporting to the Office of the Attorney General,

in the event he creates a new charity.” The settlement

“also included mandatory training requirements for

Donald Trump Jr., Ivanka Trump, and Eric Trump, which

the three children have already undergone.” Further, the

settlement required the foundation to “shutter its doors

last December and dissolve under court supervision.”

[23.2(b)] ◆

UNIVERSAL CHARITABLE

GIVING ACT INTRODUCED

Rep. Mark Walker (R-North Carolina), on December

3 (Giving Tuesday), introduced legislation to provide a

charitable contribution deduction for nonitemizers —

labeled a “universal charitable deduction” (the Universal

Charitable Giving Act of 2019). This above-the-line

deduction would be up to one-third of the standard

deduction — about $4,000 for individuals and $8,000

for married couples.

In a statement, the congressman said that “[p]eople

not the government offer the best solutions to solve the