Politics Run Amok? Issue Advocacy and Democracy, Wisconsin Style

A long-standing criminal prosecution of “John Doe” targets finally ended with a massive court decision that harshly criticized both the blatant constitutional violations by government operatives and antics such as “paramilitary-style home invasions.”  The Wisconsin Supreme Court issued its decision in July 2015, providing potent reminders about the importance of free speech to our country’s democratic processes, how damaging government abuses can be, and the continued importance of educational “issue advocacy” carried out by nonprofits. 

Background – Search Warrants in Extremis

The underlying facts are complicated.  The controversy began in 2010, when the Milwaukee County District Attorney initiated a “John Doe” investigation into the financial conduct of staff and campaign supporters of Scott Walker, then the Milwaukee County Executive and now Wisconsin’s Governor.  John Doe probes are investigative legal proceedings to determine whether a crime has been committed and, if so, by whom.  This investigation triggered a second John Doe probe to root out allegedly illegal campaign “coordination” between Walker’s staff (during his 2012 gubernatorial recall election) and individuals involved with certain issue advocacy groups.  The term “issue advocacy” typically means educational efforts to raise public awareness about various public policy topics, usually carried out by nonprofit organizations.  Depending on the issues involved, such efforts may intersect with politics, such as environmental causes, pro-life, pro-choice, animal rights, and fiscal responsibility. 

A state judge later authorized the John Doe proceeding and granted a secrecy order covering the investigation.  By August 2013, court permission had been granted to commence John Doe proceedings and secrecy orders in five Wisconsin counties.  A special prosecutor was appointed to oversee the investigation.  By October 2013, 29 subpoenas had been issued, compelling the production of documents relating to coordination between issue advocacy groups and Scott Walker’s campaign committee.  Search warrants were issued for the homes of two individuals and then were executed in pre-dawn hours. 

Congress Approves Form 990 6-Month Auto-Extension

Nonprofits: mark your calendars for 2016 – well, actually soon thereafter.  Starting with tax years that begin after December 31, 2015, IRS Form 990 filings will be eligible for a longer automatic extension of the submission deadline.  Translated from IRS-speak, that means 2016 tax returns filed in 2017 are eligible for the extension. 

On July 31, 2015, President Barack Obama signed an extension of the highway funding bill into law.  The legislation primarily ensures that federal government will continue to reimburse states for highway and mass transit projects.  However, the new law also modifies the due dates for several tax return filings, including the Form 990 series annual information returns for tax-exempt organizations.

Under the current system, nonprofits may obtain a 3-month automatic extension for Form 990 filings simply by filing IRS Form 8868 before the initial due date.  The Form 990 filing due date is four months and fifteen days after the organization’s fiscal year-end (e.g., May 15 for calendar fiscal years, and November 15 for fiscal years ending June 30).  For an additional three-month extension, nonprofits must make a second filing – this time to ask permission for such additional extension and to demonstrate “reasonable cause” therefor.  Given the IRS’s beleaguered condition these days, it can be quite challenging to garner any assistance with such requests.  Further, since the penalties for late Form 990 filings can be quite onerous (measured on a per-day late basis), it is generally best to just get the Form 990 filed by the initial due date or no later than the available automatic 3-month extension.   

New Rules for "Exempt" Employees

More employees may soon qualify for overtime. In newly proposed rules under the Fair Labor Standards Act (FLSA), the Obama Administration aims to substantially increase the minimum salary requirements for qualification as an “exempt” employee.  The new limits should concern both nonprofit and for-profit employers alike, as the current salary threshold is $23,660 and the proposed rules more than double this amount.  Under the proposed rules, an employee must earn at least $50,440 per year to qualify as “exempt” and therefore not be subject to otherwise mandatory overtime requirements.  Exclusions may apply for certain nonprofit activity, but all employers need to understand the proposed rules’ implications and remain attentive to further developments. 

Background:  FLSA Employee Classification – Exempt Versus Non-Exempt

The proper classification of employees for FLSA purposes is an ongoing consideration for many nonprofits.  The FLSA imposes significant requirements for non-exempt employees, including minimum hourly wage requirements, “time-and-a-half” overtime pay obligations for more than 40 hours worked per week, and recordkeeping requirements to comply with the foregoing.  An employer’s misclassification of its employees as exempt can result in serious liability under the FLSA when an employer fails to properly pay overtime wages and related penalties.  Under the Department of Labor’s (DOL) longstanding rules, the test for determining whether an employee is exempt is three-fold. 

First, an exempt employee must perform a specific type of work.  Exempt employees include only executives, administrators, professionals, and certain computer or outside sales employees.  However, title alone does not classify the worker as exempt; the DOL maintains guidelines for exempt classification under each of these types of work.  While factors differ for each, the guidelines generally focus on the employee’s primary duty.

Second, an exempt employee must be salaried.  Workers paid by the hour are generally treated as non-exempt.  An exception occurs only if an employee is highly compensated – that is, receiving compensation of over $100,000 per year when considering certain bonuses and other compensation, with at least $455 per week of this compensation being salary or fees.  In that case, the type of work and salary requirements do not apply.