Friday, November 30, 2007
Professor Michael Knoll posted an abstract of his Fordham Law Review article on the unrelated business income tax on SSRN's Nonprofit and Philanthropy Law Abstracting Journal. The article is entitled "The UBIT: Leveling an Uneven Playing Field or Tilting a Level One?" Here is the abstract:
After grateful alumni acquired the Mueller Spaghetti Company on behalf of New York University, and the courts held that the university did not have to pay tax on the pasta maker's income, Mueller's competitors cried foul. Congress responded to their pleas and enacted the unrelated business income tax (UBIT). The UBIT subjects an otherwise tax-exempt entity, such as a charitable institution or a religious organization, to tax on its income from a trade or business that is not substantially related to the organization's tax-exempt purpose. The UBIT is widely viewed as leveling the playing field between taxable for-profit businesses and tax-exempt nonprofits. Although it seems obvious that the nonprofits' tax exemption would provide them with a tax-induced advantage over their for-profit competitors, an across-the-board exemption from tax, such as that granted to nonprofits, does not generally provide such an advantage. Accordingly, the effect of the UBIT is not to level the playing field, but rather to tilt it against nonprofits and to the advantage of for-profit businesses. Furthermore, because nonprofits do not enjoy a tax-induced advantage in competitiveness by virtue of their exemption from tax, there is no benefit that they can leverage by issuing market-rate debt to fund their investments. Accordingly, the UBIT provisions that sweep debt-financed investments within its reach are also problematic.
December 1, 2007, marks the initial launch of Nonprofit Law Prof Blog. This blog is a blog devoted primarily to matters that are of interest to law professors who teach and write in the area of nonprofit law, philanthropy law or related areas. The blog is edited by eight law professors from all over the United States, including University of Georgia (David Brennen), Stetson University (Darryll Jones), Notre Dame University (Lloyd Maher), Ohio State University (Garry Jenkins), University of Oregon (Susan Gary), Texas Tech University (Vaughn James), Howard University (Alice Thomas), and Indiana University - Indianapolis (Robert Katz). The editors teach and write in vast areas of law related to nonprofits and philanthropy, including tax law, estate law, politics and law, charitable giving, charitable and nonprofit governance, religion and law, family law, mediation, corporate leadership and many other areas. Collectively, the editors of this blog represent authors of many books and law review articles, a reporter for a uniform law commission, an adviser to a major nonprofit law reform effort, current and former leaders of a variety of national nonprofits, and former practitioners from nationally renowned nonprofit law firms. We hope that you will regularly visit the Nonprofit Law Prof Blog. And remember, if you teach or write in the area of nonprofit or philanthropy law and publish a book or an article, give a talk, serve on a panel, receive a special appointment, are hosting a conference, have a teaching issue or if you just want to raise an issue for discussion, please feel free to visit the blog or contact me or any of the other editors of the blog (our contact information is on the front page of the blog).