Saturday, March 15, 2008

Exempt Employer's Tool Kit

The IRS has included on its website an "Exempt Employer's Tool Kit."  The tool kit includes a variety of documents that employers who are tax-exempt might need in order to comply with federal tax laws, including the following:

Form Discussion
SS-4, Application for Employer Identification Number (with instructions) See Employer Identification Numbers, for an explanation of why tax-exempt organizations need EINs, and how to obtain them.
W-2, Wage and Tax Statement (with instructions) This form must be issued to recipients of wages, and copies filed with the IRS.
W-3, Transmittal of Wage and Tax Statements (with instructions) This form is used to transmit Forms W-2 to the IRS.
W-4, Employee's Withholding Allowance Certificate This form must be furnished to each employee upon hiring, to determine correct withholding. An employee may submit a new certificate at any time.
W-9, Request for Taxpayer Identification Number and Certification (with instructions) This form is furnished to a person who receives a payment from an organization, to verify the recipient's taxpayer identification number.
941, Employer's Quarterly Federal Tax Return (with instructions) This form must be filed each quarter by an employer, including an exempt organization, who pays wages during the quarter.
944, Employer's Annual Federal Tax Return (with instructions) This form may be filed by certain employers with small payrolls who have been notified by the IRS that they can file on an annual basis, instead of filing Form 941 quarterly.
945, Annual Income Tax Withholding Return (with instructions) This form must be filed to report withholding on payments other than wages. Examples of such payments are pensions, annuities, and individual retirement accounts.
1099-MISC, Miscellaneous Income (with instructions) Must be filed by a payer who makes certain payments for services to recipients who are not employees.
1096, Annual Summary and Transmittal of U.S. Information Returns Used to transmit Forms 1099-MISC to the IRS.
I-9, Employment Eligibility Verification Required for all newly-hired employees. This form can be obtained from U.S. Citizenship and Immigration Services.

For more information about employer responsibilities, visit the web page for Employment Taxes for Exempt Organizations. This page includes information about employment tax exemptions and exclusions for exempt organizations.

You may also want to consult the following publications:

Publication 4221-PC, Compliance Guide for 501(c)(3) Public Charities [link when available]

Publication 4221-PF, Compliance Guide for 501(c)(3) Private Foundations [link when available]

Publication 1828, Tax Guide for Churches and Religious Organizations
Publication 15-A, Employer's Supplemental Tax Gide
Publication 15-B, Employer's Guide to Fringe Benefits


March 15, 2008 in Federal – Executive | Permalink | Comments (0) | TrackBack (0)

Friday, March 14, 2008


According to the International Center for Not-for-Profit Law, civil society organizations are experiencing a growing backlash from governmental authorities in many parts of the world, especially in the Middle East, the former Soviet Union, Asia and Africa.  The range of obstacles they have encountered include the outright seizure of assets and facilities, dissolution, de-licensing, restrictions or bans on the use of foreign funding and intimidation.    

While affected organizations may have recourse to remedies under local law or international human rights agreements, such remedies can be of limited utility. For example, local courts are sometimes reluctant to rule against the state and not all human rights treaties are enforceable. At times, not-for-profit organizations appear to conclude purpose-built investment contracts or host government agreements to protect their overseas activities.

A less-explored avenue for not-for-profit organizations has been proposed, namely, the existing international regime governing economic activities, consisting of the vast and still-growing network of international treaties for the protection of foreign investments, commonly referred to as bilateral investment treaties (“BITs”).    

Though not conceived primarily as instruments for protecting not-for-profit actors, many investment treaties potentially afford significant protection to not-for-profit actors’ investments. Not-for-profit organizations may be able to rely on such treaties to bring a claim for direct expropriation where a state seizes assets. Organizations may also be able to claim for breaches of treaty obligations requiring the free transfer of capital, fair and equitable treatment, full protection and security and national treatment where states interfere with the transfer of funds, discriminate between organizations, deny re-registration on arbitrary grounds or contrary to prior representations, or intimidate, or fail to prevent non-state actors from intimidating, not-for-profit organizations.

Note, the possibility of asserting a claim under a BIT is a welcome avenue of possible redress.  It is, however, far from perfect.  A claim under a BIT must be brought before an arbitral tribunal and there are some inescapable uncertainties as to the scope of some BITs' coverage.  Moreover, even if a claim is successful, a state may refuse to provide the remedies ordered by the tribunal.  It is not clear what recourse a non-profit would have in such circumstances.  The lack of clarity here, however, may  augur for non-profits somehow teaming up with an inter-governmental organization or sovereign aid agency when planning to carry out activities in a county hostile to non-profits.  This could give it the benefit of political and diplomatic pressure as backing against a recalcitrant governmental authority.


March 14, 2008 in International | Permalink | Comments (0) | TrackBack (0)

Economic Downturn Does Not Seem to Be Hurting Charity Fund-raising

The New York Times reported on March 14, 2008, that, according to preliminary results of a survey by the Association of Fundraising Professionals, the general downturn in the economy does not seem to be hurting charity fund-raising.  Here is an excerpt from the article:

In fact, some 64 percent of the organizations that have responded so far to the Association of Fundraising Professionals’ annual survey on fund-raising have reported bringing in more money in 2007 than the year before.

“Our surveys tell us fund-raising has been holding steady,” said Paulette V. Maehara, the association’s president and chief executive, who emphasized that the findings for 2007 were preliminary and that in any case the environment could change over the course of 2008.

For the entire article, see "Weakness in Economy Isn’t Hurting Charities" in the March 14, 2008, issue of New York Times.


March 14, 2008 in In the News, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, March 13, 2008


Writing in Sunday's  New York Times Magazine, James Traub reviews the contributions of celebrities to the world of philanthropy, what he terms the "celebrity/philanthropy complex".  Traub points out that the "intense presentness" of stars in peoples'  lives and their access to the uppermost realms of politics, business and the media offer them a special kind of moral position should they choose to use it.  For those who do grasp the mantle (Bono, George Clooney, Angelina Jolie and Natalie Portman among them) do they help or hurt?   Traub lists many significant advantages of stars' involvement in philanthropic causes. Stars; (i) raise money, (ii) raise consciousness, (iii) bring access (moguls and media barons who follow stars around follow them in their public philanthropic activities also); (iv) have power over public opinion, (v) can make a crucial difference when the goal is to increase public receptivity to a cause or practice; (vi) and can help change policies in Western countries highly sensitive to public opinion.  The downside?  Stars, like activists tend to engage in grand rhetoric; they bring simplicity to complexity that increases awareness but over-simplification can be harmful.  For example, with respect to development issues, celebrities may treat, and refer to Africa as a victim, an attitude which, however well-meaning, is at odds with (and unhelpful to) a view of Africa that holds that what Africa really needs is real democratic governance, trade, investment and an empowered middle class. 


March 13, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Vermont House of Representatives Passes "Low Profit, Limited Liability Company" or "L3C" Act

What is a "low profit, limited liability company"?  According to Americans for Community Development (ACD):

The L3C is a new form of limited liability company (LLC) that combines the best features of the LLC with the socially beneficial focus of a nonprofit.  It uses the concept of Program Related Investment to bring together foundations, businesses and other investors to make important investments that otherwise would not occur. 

ACD's home page (linked to above) has a lot more stuff about L3C's.  The group has been successful in getting legislation passed in Vermont recognizing L3C's.  The legislation requires that the L3C be organized primarily for charitable or educational purposes and not have as a "significant purpose" the pursuit of profit.  According to a March 12, 2008 article in the Chronicle of Philanthropy, an L3C would allow private foundations to immediately recognize entities, investments in which would automatically qualify as "program related investments" as that term is used in IRC 4944(c).  It looks to me as though an L3C is essentially a joint venture between a private foundation and for profit investors for a specific charitable purpose.  Thus, the L3C would be tax exempt if it elected partnership status, see IRC 701, but profits would be taxed to the partners (though presumably not to the private foundation, since any profit would be derived from a program related investment -- i.e., not an unrelated activity).  Under 512(c), the LLC's activities would be attributable to the private foundation.  ACD has an interesting powerpoint presentation online touting the benefits of L3C's.


March 13, 2008 in State – Legislative | Permalink | Comments (0) | TrackBack (0)

Senate Finance Committee Sends Follow-Up Letter to Mega-Churches

On March 11, 2008, the Senate Finance Committee sent out follow-up letters to four megachurches.  The letters once again request financial data.  Various news reports suggest that the second batch of letters is an indication that the Finance Committee may soon rachet up the pressure by issuing subpoenas.  For previous coverage of this issue see this report.  One observer, quoted in the news reported linked to above, suggested that Senate Finance Committee is wasting its time and that donors should take more responsibility for the lifestyles of a visible minority of church leaders: 

Bill Keller, founder of, an interactive Christian Web site, said . . . it's incumbent upon all nonprofit agencies – religious ones as well – to be transparent about their finances, and for donors to take more responsibility. "There's only a small fraction of ministers out there who own private jets and drive Bentleys," he said. "But this investigation is creating a public mistrust of all of us." He conceded there is "absolutely abuse of funds" going on among some ministries, but it's an IRS issue, and not one that Grassley can do anything about unless he intends to change the law. "If people want to buy into this Lotto mentality in hopes of hitting the big religious jackpot, and giving blindly to someone who is a self-appointed messiah, then have at it," he said. "You can't legislate stupidity."


March 13, 2008 in Church and State, Federal – Legislative | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 12, 2008


Following up on the March 11 (dkj) post "Fleishman On The Market Impact of Private Foundations", I want to draw readers' attentions to a study done by the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD) in 2003, entitled "Philanthropic Foundations and Development Cooperation," which supports the March 11 post's contention that the true value-added of foundations is their capacity to fund long term, experimental innovations in the social sector.  The study found that foundations' most effective  interventions in international development have been in long-term investments that were  based on vision and sound  scientific understanding  and well-integrated with local capacities (citing examples in the areas of infectious disease control, family planning and agriculture).  The study also noted that foundations are increasingly involved in public-private partnerships.  It calls upon OECD members* to (i) improve information exchange between their national aid agencies and foundations so as to further the potential for such partnerships; and (ii) to afford foundations "appropriate fiscal encouragement" of their activities to maximize their contributions to development.  The study outlines the main types and typical life cycles of foundations and reviews international grant making activity by American, European and Asian foundations.

*OECD members include the US, UK, Austria, Belgium, Canada,Denmark, France,Germany,Greece, Iceland, Italy, Ireland, Luxembourg, the Netherlands, Norway, Portugal, Spain,Sweden,Switzerland,Turkey, New Zealand, Australia, Japan, Mexico, the Czech Republic, Hungary, Poland, Korea and the Slovak Republic.


March 12, 2008 in International, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Corporate Sponsorship and Grant of Naming Rights By Nonprofit Hospital Draws Protest

Ever since the Mobile Cotton Bowl Ruling, Technical Advice Memorandum 9147007, the nonprofit community has . . . well, lied to itself about corporate sponsorships.  Are corporate sponsorships advertising, the revenues of which ought to be taxed, or are they donations for which the giver expects no quid pro quo?  We all agreed, for the sake of the College Football Bowl Season and March Madness, to call "sponsorships" no-strings attached donations.  IRC Section 513(i) codifies the big lie and I am a big fan of college football and March Madness so I suppose I am complicit in the whole thing.  Anyway, an article in today's New York Times discusses criticisms raised by people who oppose a nonprofit hospital's naming of its emergency department after a big corporate sponsor known for its racy advertising featuring underaged models in sexual themes.  Columbus Children's Hospital (now known as Nationwide Children's Hospital after a $50 million dollar tax free "qualified sponsorship payment" from Nationwide Insurance) recently renamed its emergency room after Abercrombie & Fitch, after the clothing seller and advertising provocateur donated $10 million to the hospital:

A coalition of children’s advocates contends that the hospital went too far by agreeing to name a new emergency department and trauma center after another locally based retailer, Abercrombie & Fitch, in exchange for a $10 million donation. The coalition, which includes the Campaign for a Commercial-Free Childhood, several pediatricians and Parents for Ethical Marketing, is asking the hospital to reconsider the decision made in June 2006 to accept the donation. The plea is being made now because ground is to be broken this year for the building to house the emergency and trauma facilities. The 15 organizations and 80 individuals that compose the coalition contend that naming the new center after Abercrombie & Fitch — known for provocative advertising and revealing clothing — sends a grievously wrong message.  “It is troubling that a children’s hospital would name its emergency room after a company that routinely relies on highly sexualized marketing to target teens and preteens,” the members of the coalition wrote in a letter that was sent on Tuesday to the hospital’s office in Columbus, Ohio.

Officials at the hospital declined to talk about Abercrombie & Fitch's racy ads, preferring instead to focus on the philanthropic aspects of the deal.  Its all good as long as there ain't no tax, I guess.


March 12, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

California to Take Steps to Force Disclosure of Nonprofit "Taxable Expenditures" and Prevent Deductibility of Earmarked "Charitable Contributions"

Internal Revenue Code Section 4945 is one of the excise tax provisions applicable to private foundations.  It was enacted because Congress thought wealthy private foundations were "increasingly active in political and legislative activities" by way of well-funded junkets and the like, generating unintended charitable contribution deductions for polticial supporters.  It is also generally the case that charitable donations are generally not deductible if the donation is actually earmarked for a particular recipient, using the eligible entity as a funneling device.  Recently, the Los Angeles Times has raised similar concerns with regard to gifts by nonprofits to state agencies actually intended for use by a certain politician.  Under current California regulations, the identities of donors to nonprofits who make such gifts need not be disclosed, provided the agency gifts are not explicitly earmarked for any particular politician or individual.  In a July 2007 editorial, the Los Angeles Times complained that Governor Schwarzenegger and other influential politicians at the state and local level were skirting this requirement and that donors were getting undeserved charitable contribution deductions.

California's larger-than-life governor is unabashed about living large, but keeping him in luxury sometimes depends on the same taxpayer subsidies granted to hand-to-mouth charities.  Arnold Schwarzenegger, a millionaire many times over, bills much of his overseas travel to an obscure nonprofit group that can qualify its secret donors for full tax deductions, just as if they were giving to skid row shelters or the United Way. Whether journeying to China, Japan or last week's destinations -- Austria, England and France -- Schwarzenegger typically flies on top-of-the-line private jets like the plush Gulfstream models and has booked hotel suites that can run thousands of dollars a night.  Nonprofit watchdogs say using charitable write-offs to pay for sumptuous travel is an abuse of tax codes.

In today's editorial, the Los Angeles Times again points out that California nonprofits are being used to skirt campaign disclosure and charitable contribution deduction laws:

Politicians and their lawyers are often several brainstorms ahead of the law. They seek out loopholes in conflict-of-interest and fundraising regulations, then exploit them. Having done so -- having hidden from the public the identities of the special interests that fund their travel, or their entertainment budgets, or their other expenses -- they protest, truthfully enough, that they never broke any laws.  Gov. Arnold Schwarzenegger, for example, does nothing strictly illegal when he flies around the world using money funneled through a nonprofit corporation by -- well, we don't know. That's the point. And Assembly Speaker Fabian Nuñez broke no laws when he used political contributions to wine and dine his way across Europe, hosting guests with interests then-unknown to the public.  Yes, they obey the law -- but they are hardly on the up-and-up. So it's refreshing when one of our government watchdogs snaps its jaws, especially if that watchdog is someone as unlikely as Ross Johnson.

Of course, these sorts of expenditures would result in a federal excise tax on private foundations and would call a public charity's tax exemption into question under federal law.  Earmarked charitable donations would also not be deductible.  Today's L.A. Times editorial goes on to support a measure pending before California's Fair Political Practices Commission. The newly proposed regulation is designed to shut down the use of 501(c)(3)'s to shield the identities of political donors and will likely have the effect of preventing the deductibility of purported gifts to state agencies that everyone knows are actually earmarked for a certain politician.  Staff members to the FPPC have prepared a useful memorandum explaining the manipulation.  The IRS ought to take a look at the memorandum and the proposed regulations for adoption on the federal level (at least with respect to earmarked gifts to "public agencies" that result in a private benefit to a particular politician).


March 12, 2008 in State – Executive | Permalink | Comments (0) | TrackBack (0)

Should Private Inurement And/Or Excess Benefit Transactions Be Viewed As Prima Facie Evidence of Criminal Behavior?

In yesterday's Houston Chronicle, there was another story about insiders improperly using charitable funds for allegedly personal purposes.  According to the report, two former leaders of the Sickle Cell Association of the Texas Gulf Coast are being tried for felony theft.  They allegedly misused $400,000 of the 501(c)(3) organization's funds over four years.  A few weeks ago, we blogged the story of a New York nonprofit that had engaged in apparent private inurement and excess benefit transactions.  In that case, too, the report noted that the District Attorney's office was looking into bringing criminal charges.  And then way back in December, we blogged the story of the former IRS Commissioner and former CEO of the American Red Cross allegedly using his corporate credit card to engage in some Elliott Spitzer-like meetings.  We wondered then whether doing so constituted private inurement or excess benefit.  These cases caught my particular attention because in my Tax Exempt Organization's class yesterday, one student noted that no insider, disqualified person or organization manager would be stupid enough to just pay themselves exorbitant salaries outright.  The student suggested instead that it would be more likely that private inurement or excess benefit transactions require some sort of "mens rea."  In other words, some sort of prior planning or premeditation, a knowing, intentional, disguised or hidden conspiracy perhaps.  That comment lead to a discussion of whether private inurement or excess benefit transactions very nearly constitute, in each instance, the prima facie case for criminal prosecution, whether for theft, embezzlement or fraud.  I'm not so sure that the statement is too broad.  The insider deals leading to Sarbanes Oxley, after all, were similar to the sort of fiduciary breach Justice Posner implied was necessary to prove private inurement in United Cancer Council v. CommissionerThose behaviors all involved lying about the use of "invested funds" (i.e., donations in the case of nonprofits)and siphoning off the top.  And many of those cases were prosecuted under severe criminal statutes most likely because the market harm justified more severe sanctions than excise penalties such as those imposed under relevant securities laws (or IRC 4958).  Perhaps it would be in the best interest of the independent sector, too, if private inurement and/or excess benefit transactions were more often viewed as prima facie evidence of a crime.  Take the Sickle Cell Association predicament for example.  The Houston Chronicle article notes that because of the siphoning of a few leaders, the organization has lost its United Way Funding and the new executive director is spending much of her time rebuilding  the community's trust in the organization.  In the meantime, those suffering from the debilitating disease suffer:

With a criminal case against a predecessor looming, Lorna Hankins spends her days assuring the public the Sickle Cell Association of the Texas Gulf Coast is legitimate.  Since she took over the association in May, she's been trying to repair the damage linked to accusations that two former leaders took nearly $400,000 from the nonprofit over four years. Some of that damage has been financial — the association has already lost funding from its primary source, the United Way of Greater Houston.

It is probably the case that donor support decreases and charitable beneficiaries' suffering increases every time an insider or disqualified person is caught with his hand in the cookie jar.  Maybe private inurement and excess benefit ought to be view as a prima facie criminal law matter (in addition to reason for excise taxes under IRC 4958 and in some cases revocation).  Treating such matters as prima facie evidence of criminal behavior does not mean conviction is certain.  It just suggests that that the punishment ought to be commensurate with the harm to the individual charity and the sector as a whole if the insider, disqualified person or organization manager is unable to show that the problem arose out of plain negligence (as, for example, the misvaluation of an asset or service because of a failure to know -- or should have known --certain facts).  A rebuttable presumption of sorts with more severe consequences when the presumption is not disproven.  As my student points out, and as recent events show, private inurement and excess benefit transactions increasingly rely on mens rea and conspiratorial behavior.  Certainly, the damage done to the individual charity, donors, and the whole independent sector is a crime.


March 12, 2008 in In the News | Permalink | Comments (2) | TrackBack (0)

Tuesday, March 11, 2008

Fostering Ethical Cultures in Non-Profit Organizations

John Knapp of the Center for Ethics and Corporate Responsibility at Georgia State College of Business will present "Fostering Ethical Cultures in non-Profit Organizations" today at Georgia State's Andrew Young School of Policy Studies.  Here is the text of the announcement:

Seminar Announcement

What: The Nonprofit Studies Program of the Andrew Young School of Policy at Georgia State University presents its Brown Bag Seminar Series in Nonprofit Research.

Who: John Knapp of The Center for Ethics and Corporate Responsibility at the J. Mack Robinson College of Business will address the topic: "Fostering Ethical Cultures in Non-Profit Organizations"

When: Tuesday, March 11, 2008 at 12:30 PM

Where: Seminar Room #749 at the Andrew Young School of Policy Studies Building at 14 Marietta Street, NW

The purpose of these seminars is to discuss research-in-progress by faculty associated with the nonprofit program.

We invite students, faculty and interested members of the community to join us!

Drinks and cookies will be served.


March 11, 2008 in Paper Presentations and Seminars | Permalink | Comments (0) | TrackBack (0)

Fleishman on the Market Failure Impact of Private Foundations

Sunday's New York Times Magazine had an interesting discussion of the long term impact of private foundations.  The piece discussed whether the spending habits of private foundations ought to be judged by more short term standards producing immediately measurable effects.  Professor Joel Fleischman, who teaches and writes about non-profit organizations, and is active in the Independent Sector is quoted thusly:

In recent years, one guiding idea behind strategic grants, whether from old-money institutions like the Rockefeller Foundation or new-money outfits like the Bill and Melinda Gates Foundation Foundation, is that they fill gaps in the modern economy opened up by the neglect or failures of the marketplace. “They’re the only unrestricted pool of funds to finance innovation in the social sector and to facilitate major social change,” says Joel Fleishman, a professor at Duke who recently wrote a book on the role of private foundations in American life. Fleishman explains that foundations can take risks that private companies might shun and can also finance programs that governments might be unable (or unwilling) to support. Foundations can thus experiment with cures for poverty or disease that are largely unproven, with the hope that evidence of success will entice private enterprises, politicians or other foundations to follow suit.

Of course, the type of "investments" Fleishman talks about bring about results only in the long term.  While sitting on huge mountains of money looking for long term accomplishments, people are dying for basic necessities in sub-Saharan Africa, the story points out.  Others point out that requiring that Foundations show immediate "metrics" may not be the way to go either.


March 11, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

College Cost Reduction and Access Act Helps to Alleviate Nonprofit Leadership Crisis

On March 3, 2008, we blogged about the growing leadership crisis in nonprofits and recent studies that address this phenomenon.  Senator John Sarbanes (D-MD), one of the legislative architects of the recently enacted College Cost Reduction and Access Act, published an editorial in the March 11, 2008 Washington Post explaining that he believes the CCRA will help with this leadership crisis.  Senator Sarbanes' most salient point is that "Linking loan forgiveness to a decade in the nonprofit sector will not only help build careers, it will create future leaders in the field."  To see the full editorial, go to "Letters to the Editor: Nonprofits and New Grads" in the March 11, 2008, issue of the Washington Post.


March 11, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Monday, March 10, 2008

Gender and Sustainable Development (OECD Report March 6, 2008)

Just in time for International Womens Day, the OECD issued a report on March 6, entitled
Gender and Sustainable Development: Maximizing the Economic, Social and Environmental Role of Women.
The report echoes the themes discussed at the conference on Women Entrepreneurs in Africa, held in Capetown this February (see earlier post of March 10), namely that sustainable development can only be achieved through long-term investments in economic, human and environmental capital. It points out that the female half of the world’s human capital is undervalued and under-utilised the world over and that the potential contributions of women to economic advances, social progress and environmental protection – have been marginalised.   It maintains that better use of the world’s female population could increase economic growth, reduce poverty, enhance societal well-being, and help ensure sustainable development in all countries.  It notes, however, that closing the gender gap depends on enlightened government policies which take gender dimensions into account.  The report is based on data that pertains primarily to the situation of women in OECD countries, but the insights and policy implications are applicable to all countries. The report illustrates how gender mainstreaming in statistics, studies and statutes can lead to more sustainable government policies and a better world economy.


March 10, 2008 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

International Womens Day

Last Saturday, March 8, was International Womens Day (a day that has been observed since the early 1900's) which prompts us to reflect on the goals of the Convention on the Elimination of Discrimination Against Women and the extent to which such goals are reflected in national and international measures addressing gender disparity.   Last month (Feb. 8-13), women entrepreneurs and lawyers from 12 African countries (Cameroon, Democratic Republic of Congo, Ghana, Nigeria, Kenya, Rwanda, Swaziland, South Africa, Senegal, Sierra Leone, Tanzania, and Uganda) gathered in Cape Town, South Africa, to discuss obstacles facing African female entrepreneurs and possible solutions for reform. The key legal barriers identified as impeding women's entrepreneurship in Africa included (i) lack of access to credit (land is often required as collateral and womens land ownership may be subject to their husbands approval or prohibited by clan law); (ii) lack of property rights; (iii) inferior legal status under family, succession, corporate and commercial law (e.g. husband's permission may be required to register a business); (iv) inadequate implementation of labor law provisions which protect women; (v) and cumbersome, costly systems for enforcing contracts (which have a disproportionately negative effect on women because of their lack of resources (time and cash).

The World Bank Group's Doing Business Gender Project plans to compile a database of legal provisions impeding women's rights and their economic development, scheduled to be launched online in June 2008.  eh


March 10, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Should Tax Exemptions for Big Time College Athletics Be Ended

Former Fightin' Gator President John V. Lombardi posted this provocative opinion to his Reality Check Blog (I would have just linked to it but I couldn't figure out how).  Ok, I can live with keeping March Madness and D-I football tax exempt, but we should at least pay the players a fraction of what the coaches get.  Lombardi, by the way, was President when Spurrier first won a national title for my beloved Gators (who, after back to back March Madness triumphs, will not appear this year).


Taxing the Sports Factory

By John V. Lombardi 

Since at least the early 20th century, it has been fashionable to attack college athletics as distorting the priorities of American colleges and universities, and there is often much evidence to support the attacks. The difficulty in taking these challenges seriously is that they are often unclear about the context within which college athletics functions and undervalue the significance of the constituencies that support this part of the American collegiate enterprise. The latest issue involves the question of whether the increasing amount of giving to college athletics represents a shift of donor interest from academic enterprise. While it is surely true that athletic giving is increasing it is not necessarily true that it comes at the expense of academic giving, which is also on the rise. To accept this premise, we would need to be sure that those who give to athletics would, in the absence of a tax break or an athletic program, give substantially to academic activities. While evidence on giving patterns is not always entirely conclusive, what we do have appears to indicate that athletic and academic donors are substantially different groups. That is, most of the big donors to athletics do not give much to academics and most of the big donors to academics do not give much to athletics.

This reflects the fact that donors can do what they want with their money. If they want to give it to a political candidate, a church, an international charity, a scholarship fund, and endowed chair, or a college football team, it is their choice and reflects their values. The notion that we, in the university or in the government, can dramatically shift these preferences is charming but not realistic as anyone who has spent time fundraising knows. The donor’s preferences are what matter. They surely like the tax break when it’s relevant and they like matching funds for academic gifts provided by many states, but a matching program for academic gifts does not make an athletic donor decide to give an endowed chair rather than an endow a football scholarship. It might persuade a donor to give an endowed chair to one of their alma maters that has a matching program rather than to another alma mater that does not.

The public benefit of the tax break for college athletics is more complicated than our belief in the value of sports in our universities. If we want to eliminate expensive competitive intercollegiate sports from our colleges and universities, the issue of a tax break won’t make much difference. It will just raise the cost of the enterprise, and since most college sports programs (with the exception of maybe the top ten BCS football schools) run a deficit, the increased cost will fall back on institutional budgets. We can say that money- losing intercollegiate sports programs are a bad thing, but our constituencies (whether at elite private colleges or mega football factories) love their sports.

At the same time, there are many items that big time sports programs do, paid for by their donors, that do not qualify for tax breaks. When donors give money to a sports program, they only get the tax break associated with the gift portion, not the portion that buys a ticket to the game or pays for a meal or provides a team jacket. The rules require that the institution deduct all the products and services that directly benefit the donor, recognizing that these things are commercial transactions, while the gift to the athletic program that sustains its expenses in support of student-athletes and the costs of the non-revenue sports, as well as the losses of football in most institutions, does help the academic enterprise and is deserving of a tax break. These rules may need to be improved, tightened, or otherwise changed to make giving to college sports more expensive to the donors. While this may well affect some donors, the truth is that the people who give in the many-million dollar category (athletic gifts that provoke the most outrage) almost always do not need and cannot use the tax break because they have already used up every imaginable tax dodge available to the rich and super rich. In talking with major donors and extolling the opportunity for a tax break as the result of a gift, many will tell me, “that’s nice, but I can’t use that tax break and I’ll just give the money because I want to help.”

Attempting to fix what’s believed to be wrong with college sports by manipulating tax policies is likely to produce many unintended consequences, harm the smallest and most vulnerable sports programs at colleges and universities, and have almost no impact at all on the mega sports programs that offend many observers. If these mega programs are a bad thing, we should take them on and fix them directly rather than try to sneak in a fix that won’t work via the tax code. Mega college athletics is indeed a remarkable American invention, it reflects the decisions of academic administrators and governing boards at almost all colleges and universities for over a century. It prospers because for the most part we (our faculty, our staff, our alumni, our legislators, our trustees, our students, and our many other constituencies) want it. We could easily change it, IF MOST OF US WANTED TO CHANGE IT. All protestations to the contrary, we, the colleges and universities of America and our friends and supporters, do not want to change it. What we really want is to imitate the best (often the most expensive) programs in America by winning games and championships.

March 10, 2008 in Other | Permalink | Comments (0) | TrackBack (0)

C-Span Airs 2 hour, 29 Minute Conference on University Endowment Spending

We have previously reported on the ongoing pressure to force colleges and universities to spend more of their endowments on tuition support for poor and middle class students.  Last Month, C-Span recoreded a two hour and 30 minute conference sponsored by the American Enterprise Institute entitled "The Role of University Endowments."  Of course, I'm too busy playing golf and lounging in the pool to have listened to the entire 150 minute event but the panelist (shown below) included Dan Zerbe, fomer Chief Legislative Counsel for the Senate Finance Committee and a pretty staunch critic of the college and university hording (I mean, "spending") practices.  A word of caution.  When you get to the link with the video, read and follow the instructions closely after clicking on the "Flash Video" or "Windows Media" icons.  Otherwise, like me, you will click on one or the other and then just sit there watching a blank screen.  Essentially, you have to click on the icon, then (e.g., the windows media) right click on the arrown next to "now play" then click on "play" in the pop-up menu.  Those of you who are more technology savvy than me can just ignore my help.

  • Baum, Sandy
  • Senior Policy Analyst
  • College Board
  • -
  • Frey, Donald E.
  • Professor
  • Wake Forest University
  • Economics
  • Hartle, Terry
  • Senior Vice President
  • American Council on Education
  • Public Affairs
  • Miller, Charles
  • Chairman
  • Commission on the Future of Higher Education
  • -
  • Munson, Lynne
  • Research Fellow
  • Center for College Affordability and Productivity
  • -
  • Vedder, Richard
  • Visiting Scholar
  • American Enterprise Institute
  • -
  • Zerbe, Dean
  • Chief Investigative Counsel
  • Senate Finance Committee
  • -
  • Zywicki, Todd J.
  • Professor
  • George Mason University
  • School of Law


March 10, 2008 in Paper Presentations and Seminars | Permalink | Comments (0) | TrackBack (0)

Wall Street Journal Predicts Passage of California Private Foundation Diversity Bill

We have previously reported on a California Bill that would not only require large foundations to divulge the race, gender, and sexual preferences of both their boards and their charitable recipients.   In at least one report, we agreed that Diversity would not be an issue but for the continuing existence of its evil stepbrother, Discrimination.  We also agreed though with a L.A. Times Op-Ed that suggested that perhaps the problem could be addressed a little better (to put it mildly) thinking.  For other previous posts see here.  A recent Wall Street Op-Ed piece -- perhaps flaming the hysteria fires -- predicts that not only will the bill pass and be signed by the Terminator, it will also be introduced on a national level in Congress:

Lest you think this idea is too wacky to go anywhere, it is also expected to pass the California Senate and could soon land on Governor Arnold Schwarzenegger's desk. The Greenlining staff is already lobbying House Ways and Means Chairman Charlie Rangel for Congressional hearings. Foundations and charities that don't want to start apportioning their donations by skin color, or between gays and heterosexuals, had better start describing this idea as the political shakedown it is.

Will wonders never cease?  I must say, these types of "white guilt" enactments (it will take more than votes of the few people of color in the legislature to get this passed -- assuming people of color even vote for this bill -- (see the comments of the former NAACP Counsel against it in the Wall Street Journal link above) -- do more harm than good.  Anyway, all of the links above contain all the information you will need to completely inform yourselves of the Bill's progress through the California legislature on its way to the Govenor's desk. 


March 10, 2008 in In the News, State – Legislative | Permalink | Comments (0) | TrackBack (0)

Aprill and Tobin Weigh In on Obama Speech in WSJ Article

Two prominent nonprofit tax prof experts Ellen Aprill and Donald Tobin, weighed in today on the Barack Obama's speech before the United Church of Christ last June.  A story in today's Wall Street Journal states:

Ellen Aprill, an associate dean at Loyola Law School in Los Angeles and a former adviser to the Treasury Department on matters including nonprofit tax law, says she believes those sermons are "clearly a violation. They're naming names.'' Donald Tobin, an associate dean at Ohio State University law school, who formerly worked for the Justice Department on nonprofit tax matters, adds that nonprofits cannot make endorsements or engage in a "pattern and practice that is designed to support one candidate over another." After being read sections of the Trinity sermons by the Journal, he said, "There does seem to be a pattern of attempting to tip the scales in a way for Barack Obama. And churches shouldn't be doing that."

The story seems clear in indicating that it was the separate sermons of a United Church of Christ Pastor at a different church in Illinois -- not Obama's talk at the UCC 50th Anniversary Synod in Connecticut  -- that may have constituted unlawful campaign intervention.  It also makes clear that nonprofits can invite candidates to speak so long as they do not discriminate and, through their discrimination, engage in campaign intervention.  In a press release, Americans United for Separation of Church and State, take credit for the IRS's more aggressive policicng of the prohibition.  I still say this is much ado about nothing and will give better than even money that this too will go the way of dial-up internet.  The watchdog group notes, however, that  “the IRS has indicated,” Lynn continued, “that public officials can appear at religious gatherings to address issues even if they are candidates. However, the sponsoring group may not use the occasion to officially endorse or otherwise support the candidate’s campaign.”   Perhaps Hillary and John should request equal time.

Hat tip to loyal reader "Drew" for the link to the WSJ article.


March 10, 2008 in Church and State, In the News | Permalink | Comments (0) | TrackBack (0)

Pittsburghers Bemoan Lack of Nonprofit Support

Pittsburgh is no longer the city of rotting steel mills and out-of-work coal miners.  Its now much more inhabited by hospitals and universities and, as such, home to some of the largest nonprofits in the nation.  Not to mention PNC Park and Heinz Field, the constructions of which received large tax breaks.  It is a downright beautiful place from April to November.  A recent Pittsburgh Post-Gazette story, though, bemoans the lack of support provided by large tax exempt institutions like the University of Pittsburgh, Univeristy of Pittsburgh Medical Center, Carnegie Mellon University and many other beautiful, well endowed nonprofits located mostly in the Oakland section of the city:

Pittsburgh, like every other Pennsylvania city, is powerless to muscle any payments in lieu of taxes from tax-exempt organizations -- even those with grand offices, rich executive compensation and enormous surpluses.  It's all due to a 1997 state law that protects nonprofits and punishes municipalities. Until the Legislature addresses this costly imbalance, Pittsburgh and its peers will be forced to rely on the kindness of tax-exempts.  More than 100 tax-exempt universities, hospitals, health insurers, foundations, arts groups and religious organizations were kind enough, through the Pittsburgh Public Service Fund, to contribute $13.98 million in the last three years. Since it was $411,000 more than pledged, it was all the better for a financially distressed city with too much property that cannot be taxed to support public services.  Still, other cities in other states do better by their tax-exempt groups, and Pittsburgh, which is not out of the dark financial woods, deserves stronger support.

The editorial calls on the legislature to adopt laws requiring "real" payments in lieu of taxes.  As long as the many tax exempts in Pittsburgh take up large swaths of exempt property and attract large sums of exempt income, there will always be calls for PILOTS.  One supposes that the Pittsburgh Public Service Fund ought to err on being more generous in its voluntary payments, less the city, county or state impose the levels of generosity these insitutions thrive on.


March 10, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)