By Carol Grob, Cullen, Weston, Pines & Bach
A local police association in Wisconsin recently had the unexpected good fortune of receiving a substantial gift from one of the citizens its members serve. The money, however, came with conditions. The unexpected contribution raised a number of questions for the local association, such as: can the association accept a donation, especially with conditions attached? Should they accept it? What are proper ways for a local police association to raise money? What are proper ways to spend the association’s new funds?
Here is information that will help your organization answer these questions.
The majority of local police associations affiliated with the WPPA (1) have members with a rank below that of sergeant, (2) are non-profit, and (3) are recognized as exempt from taxation as labor organizations. This means that the associations exist for the purposes of promoting and protecting the interests of law enforcement officers and improving the conditions of employment for its members. If your association has not reviewed its constitution or articles of incorporation and bylaws recently, your board of directors should review those core documents to make certain the purposes of the association are like those stated here.
When the association faces decisions about spending money, raising funds, or accepting donations, the fundamental question is whether the expenditure or reason for raising funds furthers the purposes of the organization. As long as the activities serve the purposes of the association, the association’s tax exempt status will not be put at risk and no member will have a legitimate complaint that the association is not acting in the best interests of members.
There are countless activities which can be viewed as improving working conditions and protecting the interests of police officers. Here are some activities your association can engage in which obviously serve its core purpose:
• representing members in negotiating collective bargaining agreements;
• investigating members’ employment-related complaints, assisting in settling disputes, and ensuring employer compliance with collective bargaining agreements;
• publishing a newsletter addressing law enforcement issues;
• maintaining an office or website;
• establishing a carefully defined program to pay death, sick, accident, or similar benefits to members;
• providing members with educational and training opportunities; and
• researching methods of law enforcement, training, employee benefit plans, and other employment-related issues.
Many local police associations also engage in social, fraternal, and charitable activities which do not directly — or at least only indirectly — serve the association’s primary purposes. These activities may include assisting with Special Olympics, raising money to buy band instruments for school students who cannot afford to buy their own, holding a civic memorial service, or hosting an annual picnic.
There is no law prohibiting a local police association from engaging in these types of activities or raising money to fund these activities. As long as the activities are non-profit (not paying income or dividends to owners, members or shareholders), such activities will not jeopardize the association’s tax exempt status. In fact, members usually demand that their associations sponsor a certain amount of charitable and social activities. But if an association starts to spend more financial and human resources on these types of activities versus improving the wages, working conditions, and professionalism of police officers, then the association needs to ask itself whether it is properly serving its members.
An organization recognized as charitable by the IRS may be a better vehicle than your association when it comes to fund-raising for charity. Donors who contribute to charitable organizations can actually deduct their donations from their taxable income — the result: less tax for the donors. Some of the better known charities include the American Cancer Society, Habitat for Humanity, Special Olympics, churches, and schools. Local police labor associations are not charitable entities, even if they engage in some charitable activities; thus, donations by individuals to police associations are not tax deductible. In the case of the association that received a sizeable gift from a citizen, the association made sure the citizen knew the gift would not be tax deductible. (However, a sponsorship donation by a business may be deductible to the business not as a charitable donation, but as a legitimate marketing/business expense of the business — a different issue.)
Because of the availability of the charitable donation deduction for potential donors, a better approach may be for a local police association to provide manpower and publicity to a charitable organization’s activities and fund-raising efforts, rather than for the association to raise money itself and then donate to the charity. In the case of the association which received the sizeable gift from a citizen, the citizen specifically instructed that the money not be funneled through the association to charities, but that it be used to improve the job safety and efficiency of law enforcement members.
Another reason for associations to be careful about charitable fund-raising is Wisconsin’s own charitable solicitations law, Section 440.41 of the Wisconsin Statutes. This law requires that organizations which ask the public to donate money, purchase a product or purchase a ticket to an event, and who are told that the money will be used for a charitable, benevolent or civic purposes, register and periodically report its activities to the Department of Regulation and Licensing. Organizations which hire professional fund-raisers to conduct charitable solicitations must also register and report, and the professional fund-raiser must separately register and report. A police association which raises funds stating only that the funds will be used for the association and its members is not engaging in charitable solicitations.
Also, an association must be careful to use the funds raised consistent with the representations made at the time the funds were received. An association should not risk its reputation and good name by saying one thing in order to raise funds, then using the money for something else. If a donation is made subject to a condition, the association should decide before it accepts the gift whether the condition can be met. If the gift is significant, and the association uses it other than as instructed by the donor, the association could face a legal claim that it breached its duty of trust to the donor. If the conditions of the gift cannot be met, the gift should be returned or a written agreement should be reached with the donor about alternative ways to use the donation.
A professional association of law enforcement officers can be a powerful thing. Those who volunteer to serve as directors and officers of the association are the stewards of the cause and purpose of the organization. They need to make wise decisions about which activities to undertake and fund, and when and how to raise funds.
[Look for follow-up articles by Carol Grob in upcoming issues of the Wisconsin Police Journal on associations’ tax and regulatory reporting obligations, financial management, effective boards, and dealing with professional fund-raisers.]