What Does It Mean to “Act Like A Nonprofit”?

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July 31, 2016; Des Moines Register

NPQ has covered the recent travails of Prairie Meadows in Iowa. The IRS recently ruled that the $2 billion casino and race track, which received its federal tax exemption more than twenty years ago, is not in fact a nonprofit and owes taxes in its annual profits of about $60 million. Prairie Meadows has appealed the IRS’s decision, and the appeals process may take years to resolve.

In a recent editorial, the Des Moines Register takes Prairie Meadows to task for not “acting like a nonprofit,” by which it apparently means being willing to share all kinds of internal documents and information with the Des Moines Register. The paper’s editors apparently don’t understand that nonprofit organizations are private corporations, albeit with a public benefit purpose. Yes, they have a responsibility to act in the public interest and disclose certain information, such as that required for Form 990 informational returns, correspondence with the IRS, and, in most states, annual state filings. However, they are under no requirement to disclose information such as internal board deliberations and which board members voted for what. They are also under no obligation to disclose compensation information to the public or the media in advance of Form 990 filing deadlines. In the case of Prairie Meadows, with its federal tax exemption currently the subject of ongoing litigation, it is especially important for the nonprofit to be careful about the information it discloses.

The Register is right to follow the Prairie Meadows story, question the facts and circumstances of the case, and speculate about the effects on local government programs if the IRS’s decision is upheld and the casino’s tax exemption is lost.  Journalists are not only likely to resist when told something is unavailable to them, but assume nefarious motives when information is withheld.

Prairie Meadows, like any nonprofit, has a duty to protect itself, including its proprietary information, from excessive intrusion by government, the media, or anyone else. The nonprofit casino also has the opportunity to craft a communications plan that informs the media and public about the organization and the important issues it faces. The directors’ and officers’ duty of loyalty to the nonprofit doesn’t necessarily have to be in conflict with satisfying public curiosity, as long as appropriate boundaries are identified publicly and honored. For example, there’s a big difference between telling a reporter “It’s none of your business” and “I can’t talk about that because it’s a personnel matter and I’m legally required to treat it confidentially.” The media still may not like it, but at least they have a rationale to report.—Michael Wyland