Ethics Scenario #80: Women's Advocacy Center of Harristown

80. Hallie is the newly elected Chair of the Women’s Advocacy Center of Harristown, a 501(c)(4) nonprofit organization established in 1973 that advocates on behalf of the healthcare needs of pregnant teenagers. Hallie is relatively new to the organization and to Harristown, having served on the board for just two years. But the membership has been impressed by her dedication to the mission and her indefatigable efforts to raise funds for the cause. Prior to coming to Harristown, she had served on many other boards in a leadership capacity, and the board had no qualms about electing her chair of this all-volunteer-run organization. Hallie dives into the work of the organization, but learns of a serious problem with the organization’s legal status. Apparently, the organization has never filed 990 tax returns for years, and she finds out the IRS had dropped the organization from its Master list of tax-exempt organizations in the 1980s when its communications to the founder of the organization were not responded to, not surprising since the founder had died only a few years after the organization filed its incorporation papers. Hallie knows that the organization has operated quite well for years without knowing of this problem, and would likely continue to fly “under the radar” for many more years, benefitting by the fact that as a c(4), those who make contributions to the organization may not take a deduction for their contributions on their personal income taxes, making it less likely that the IRS will audit them. So, why open a can of worms?

a. Is Hallie’s behavior ethical?