Saturday, June 28, 2008

DC Sues BlueCross BlueShield Affiliate to Force Distribution of Profits

The Washington Post reports that the District of Columbia interim Attorney General has filed a lawsuit against CareFirst BlueCross BlueShield to force it to contribute at least $100 million to the local community.  The D.C. Council Committee on Public Services and Consumer Affairs also launched an investigation of CareFirst, including granting the Committee's chairman the authority to issue subpoenas.  As the article notes, CareFirst has had several previous run-ins with local and state governments, including over both executive compensation and a failed attempt to merge with a for-profit organization. 

The complaint, filed in the Superior Court of the District of Columbia, Civil Division, is against both CareFirst, Inc. and its subsidiary, Group Hospitalization and Medical Services, Inc. ("GHMSI"), which together do business as CareFirst BlueCross BlueShield in the District of Columbia.  Both organizations are nonprofits, although it does not appear from either the complaint or a Guidestar search that either organization is exempt from federal income tax.  GHMSI's federal charter states, however, that it is a "charitable and benevolent institution" according to the complaint.

The complaint alleges that CareFirst, Inc. took control of GHMSI in 1997 and since then has operated it as essentially a for-profit business, leading to a $754 million "surplus" at the end of 2007, which represented almost two-and-a-half times the total adjusted risk-based capital ratio recommended by the Blue Cross and Blue Shield Association.   The District of Columbia asserts that accumulating this, in its view, excessively large surplus is contrary to GHMSI's charter and is a breach of common law charitable trust principles that apply to GHMSI's assets.  The District is requesting that the court grant authority to both the Commissioner for the District's Department of Insurance Securities and Banking and a court-appointed Special Master to rehabilitate GHMSI and rededicate its operations and surplus to its charitable, public health mission.


June 28, 2008 in In the News, State – Executive | Permalink | Comments (0) | TrackBack (0)

Canada Disallows Millions in Donations to Foundation

The Toronto Globe and Mail reports that the Canada Revenue Agency has disallowed $208 million in donations to the Banyan Tree Foundation.  The Foundation apparently used a giving program under which donors, through the Foundation, pledged part of a donation to another charity and supposedly made loans to provide for the rest of the pledged donation.  The Foundation purportedly used the loans to purchase millions of dollars in term annuities from an insurance company, with the payments from the annuities to be used to fund the rest of the pledged donation.  A Revenue Agency investigation found, however, that the Foundation never provided the insurance company with the loan funds to support the purchase of the annuities.  Instead, it appears that just enough funds were provided to the insurance company to ensure that the purported annuity payments would be made to the various charities, but these payments ceased in 2008.  The Revenue Agency's conclusion is that the program was a sham to make it appear that that there were legitimate loans being used for charitable purposes, which apparently would create significant tax benefits for the donors, when in fact those loans never existed.  The Foundation is challenging the Revenue Agency's claims, according to letters available on the Foundation's website.


June 28, 2008 in In the News, International | Permalink | Comments (0) | TrackBack (0)

Politician Taps Charity's Email List Without Its Permission

The Atlanta Journal-Constitution reports that Cobb County Commissioner Joe Lee Thompson sent political emails to the email list of a charity without the charity's permission.  The Friends for the East Cobb Park is a section 501(c)(3) nonprofit formed to support the creation and maintenance of a park in Marietta, Georgia.  According to its website, it has worked closely with Cobb County since essentially its inception in 1998.  This close relationship may have been what led Commissioner Thompson to use the organization's email database, along with legally obtained email addresses belonging to the Police Department and the county, to send a May 12th message seeking re-election support.  The charity's Vice President also designed the Commissioner's website and may have been the avenue for obtaining access to the charity's database.  Commissioner Thompson is facing a challenger in the July 15th Republican primary.

While the article highlights the risk created by this use to the charity's federal tax-exempt status, the apparent one-time nature of the inappropriate use and the statements by the charity that it has taken steps to ensure no such use occurs again suggest it is probably a prime candidate for the warning letters the IRS has been using when it has come across isolated and apparently inadvertent violations of the political campaign intervention prohibition.   Perhaps the most interesting part of the article is the fact that knowledge about the prohibition has now widespread enough that a major regional paper spotted and reported on the apparent violation even though it only involved a relatively small, local charity.


June 28, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Friday, June 27, 2008

Texas AG Sues Nonprofit and its Leaders for Alleged Misuse of Funds

The Dallas Morning News reports that the State of Texas has filed a lawsuit relating to alleged misuse of charitable funds.  According to the Attorney General Greg Abbott's press release, the suit is against People Against Drugs Affordable Housing, Inc., its founders, and three of its directors for alleged violations of the Texas Nonprofit Corporation Act.  The AG's complaint asserts that the charity's primary asset and source of revenue is an apartment complex it acquired in 1993 and that it operates in a manner indistinguishable from a for-profit business.  The complaint further alleges that the charity, under the sole direction of its founder and Executive Director Gene Christensen but with the knowledge of the three directors, used those revenues to (1) operate a NASCAR truck racing team, (2) pay Mr. Christensen annual compensation approaching $200,000 a year plus benefits in exchange for negligible services, and (3) pay for numerous personal expenses of Mr. Christensen, and (4) make no-interest loans to Mr. Christensen and to Mr. Christensen's election campaign for public office.  The AG is seeking the appointment of a temporary receiver for the charity and the replacement of all of its officers and directors.

While the accusations against People Against Drugs and its officers are sadly not unique in the charitable world, what is perhaps surprising is that the charity appears to have operated for almost 15 years "under the radar," thereby allowing the purported abuses to continue for many years.  Perhaps for this reason, the AG is seeking not only to have a receiver take control of the charity and to hold the primary beneficiary - the Executive Director - personally liable, but also, in a relatively unusual step, to hold the three directors personally liable as well.  It will be interesting to see, if the allegations are proven, whether the directors will in fact receive a penalty beyond removal and embarrassment.


June 27, 2008 in In the News, State – Executive | Permalink | Comments (0) | TrackBack (0)

Indictment for Refusing to Testify About Islamic Charities

The Washington Post reports that the Justice Department filed an indictment in U.S. District Court in Alexandria, Virginia charging Sami al-Arian with two counts of criminal contempt for refusing to testify before a grand jury investigating Islamic charities in Northern Virginia.  Dr. al-Arian is a former University of South Florida professor who recently finished serving time in federal prison after pleading guilty to a single county of conspiracy relating to the Palestinian Islamic Jihad group.  He also had been jailed for a year on civil contempt charges relating to his previous refusals to testify.  Prosecutors are particularly interested in what he knows about the International Institute of Islamic Thought or IIIT, a Herndon, Virginia think tank that they believe is one of the key organizations in a Herndon-based network of Muslim charities and other entities that they began aggressively investigating shortly after 9/11.  IIIT denies any terrorist ties.  Dr. al-Arian is represented by George Washington University law professor Jonathan Turley, who has posted his criticisms of the indictment.


June 27, 2008 in Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

NY Legislature Ends Nonprofit Access to Low-Cost Industrial Development Funding

Newsday reports that a dispute between organized labor and industrial development agencies (IDAs) has resulted in nonprofits no longer having access to IDA funding.  Unions objected to IDAs funding nonprofits unless they conditioned that funding on the nonprofits paying union-level wages.  Unable to overcome this objection, the New York State Legislature let the law providing nonprofits access to these funds lapse.  According to the article, the lapsing of the law has put nonprofit plans to build several nursing homes, senior citizen apartments, libraries and schools on hold indefinitely.


June 27, 2008 in In the News, State – Legislative | Permalink | Comments (0) | TrackBack (0)

Further Coverage of Down-Payment Assistance Program Provision

Business Week has published an Associated Press story providing an update on the status of the federal legislative proposal to eliminate nonprofit down-payment assistance programs, initially blogged about yesterday.


June 27, 2008 in Federal – Legislative, In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, June 26, 2008

The Next Frontier of Naming Rights

The receipt by substantial donors of naming rights to nonprofit-owned buildings, classrooms, and even entire schools is now so common it hardly raises any eyebrows - at least as long as the donor's reputation remains intact.  Of course, the donor always runs the risk that the named building will eventually be razed or replaced.  But the Christian Science Monitor reports on a new naming trend with greater permanency, at least unless extinction intervenes - having an entire species named after you.  The Scripps Institution of Oceanography at the University of California San Diego will now permit donors to name an as-yet unnamed ocean species in exchange for donations of various sizes - presumably set based on the attractiveness or rarity of the species involved.

As the article details, the Institution is far from alone.  In recent years there have been various auctions selling species-naming rights to raise funds for preservation and research, and Rwanda - yes, the country - annually sells the rights to name individual guerrillas.  Not that selling such rights is always been as successful as hoped.  Amphibian Ark has tried the online auction route for the right to name frog species but only received modest amounts - $5,500 last month, for example - so far.  And the practice is not without controversy among scientists, which could lead to changes in how species are named in the future.  It appears currently that the name for a newly discovered species is generally at the discretion of the discoverer.  One possible legal issue is therefore what will happen if there is some future attempt to re-organize or rationalize species names?  It is far from clear what the rights of these donors or their heirs would be, especially if the original naming institution does not control such a process.


June 26, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Tort Suit by Mother of Church Member Blocked by Charitable Immunity Law

The Newark Star-Ledger reports that a New Jersey state appeals court has ruled that Joan Patterson could not sue a church because her son was a member.  Ms. Patterson slipped on ice outside of the Liberty Corner Presbyterian Church and fractured her wrist in February 2005.  Although Ms. Patterson did not attend the church and was Roman Catholic, not Presbyterian, the court held that New Jersey's Charitable Immunity Act barred her negligence suit because her 17-year old son was a member of the church.  Ms. Patterson was picking him up from a youth event when the accident occurred.  According to court's opinion, while the Act only bars suits by persons who are beneficiaries of the sued nonprofit's works, it found that Ms. Patterson benefited from her son's attendance at the church although she may have preferred to have him attend a Roman Catholic Church instead.  While not stated explicitly, the court's decision may have turned in part on the fact that she apparently had, albeit perhaps somewhat grudgingly, given her permission for her son to attend the church.


June 26, 2008 in In the News, State – Judicial | Permalink | Comments (0) | TrackBack (0)

Unusual Hedge Fund Fee Arrangement Supports Foundation

The New York Times reports that the $1.6 billion Children's Investment Fund Foundation is funded through an unusual fee arrangement with the Children's Investment Fund or T.C.I., a hedge fund.  T.C.I. investors agree to pay a 0.5 percent fee to the Foundation in addition to a 1 percent fee to T.C.I., with the Foundation fee increased by an additional 0.5 percent if T.C.I. earns more than an 11 percent profit.  T.C.I.'s profits are also contributed to the Foundation.  The close relationship between the Foundation and T.C.I. dates from their simultaneous creation in 2003 by Christopher Cooper-Hohn, who runs T.C.I., and his wife Jamie Cooper-Hohn, who runs the Foundation.  The Foundation also invests 90 percent of its assets with T.C.I., with no fees charged and no restrictions on withdrawals.  T.C.I.'s success - a 42 percent annual internal rate of return - has allowed the Foundation to play a major role in shaping programs to benefit children in developing countries.  The Foundation has a smaller U.S. affiliate with current assets of approximately $156 million.


June 26, 2008 in In the News, International | Permalink | Comments (1) | TrackBack (0)

Down payment assistance charities, blamed for housing crisis, targeted for elimination in housing bill

The Senate version of the Foreclosure Prevention Act of 2008 (Section 113) contains the following language, designed to shut down seller-funded down payment assistance charities:  [the quoted provision imposes a down-payment requirement on first time home buyers who seek FHA assistance, but, in effect, prohibits the use of funds from a seller-funded down payment assistance charity]


    Paragraph 9 of section 203(b) of the National Housing Act (12 U.S.C. 1709(b)(9)) is amended to read as follows:


(A) IN GENERAL- A mortgage insured under this section shall be executed by a mortgagor who shall have paid, in cash, on account of the property an amount equal to not less than 3.5 percent of the appraised value of the property or such larger amount as the Secretary may determine.

(B) FAMILY MEMBERS- For purposes of this paragraph, the Secretary shall consider as cash or its equivalent any amounts borrowed from a family member (as such term is defined in section 201), subject only to the requirements that, in any case in which the repayment of such borrowed amounts is secured by a lien against the property, that--

(i) such lien shall be subordinate to the mortgage; and

(ii) the sum of the principal obligation of the mortgage and the obligation secured by such lien may not exceed 100 percent of the appraised value of the property.

(C) PROHIBITED SOURCES- In no case shall the funds required by subparagraph (A) consist, in whole or in part, of funds provided by any of the following parties before, during, or after closing of the property sale:

(i) The seller or any other person or entity that financially benefits from the transaction.

(ii) Any third party or entity that is reimbursed, directly or indirectly, by any of the parties described in clause (i).

The red-lettering in section (C) is my own gloss on the language in the statute.  Even most real-estate lawyers would miss the significance of that section without a bit of important context.   For years, the Service has been trying to shut down seller-funded down payment assistance charities.   These are 501(c)(3) organizations that solicit funds from home builders and developers.  The charities then make grant to lower and middle income families sufficient to make a down payment on a home, perhaps built by the same builder or developer who made the contribution.  In essence, the charity convinces the home builder to provide a discount (equal to the down payment necessary to obtain third party financing) for first time home buyers.  Oftentimes those homes are FHA backed, providing the creditor with even more protection.  The Service mistakenly asserts that the seller-funding of the downpayment creates an improper private benefit, nevermind the public benefit gained from encouraging home ownership.  Even if that were true, the answer, of course, would be to deny the seller a charitable contribution deduction not shut down the charity altogether!

The Foreclosure Prevention Act, a monstrous amalgamation of provisions that would make even a tax lawyer blush, does just that, shuts down the charities altogether.  Proponents blame down payment assistance programs for the housing mess, never-mind the greed and graft of lenders, speculators, and adjustable rate mortgage brokers who really caused the mess.  Talk about a regressive policy.  From a Wall Street Journal Article last weekend:

The [no down-payment] offers -- including "100% financing" -- are made possible due to down-payment assistance programs run by nonprofit organizations. These programs are funded largely by home builders and also by private homeowners desperate to sell. The seller-funded groups provide enough down-payment money to buyers that they can qualify for a mortgage backed by the Federal Housing Administration, which requires at least a 3% down payment.  Supporters of the down-payment programs say they help the FHA fulfill its goal of assisting first-time home buyers. But critics say the programs will burden the government agency, and taxpayers, with bad loans. The FHA, which essentially is filling the void left by the collapse of the subprime market, renewed a push to eliminate the programs this month, after warning that above-average default rates for seller-assisted down-payment programs will force the agency to request a government subsidy for the first time in its 74-year history. The agency says it will need $1.4 billion next year. The FHA estimates that down payments provided by nonprofit groups account for 34% of all 200,000 loans backed by the FHA so far this year, up from 18% in all of 2003 and less than 2% in 2000. And the agency says that borrowers are two to three times as likely to default on their payments when they receive a down payment from a nonprofit.

This all seems ridiculous to me.  Blaming the charity and their beneficiaries for the housing mess is like blaming a lowly gas station attendant for price of gasoline.  Everybody knows that the housing market crash is more a result of "irrational exuberance" of better off investors than the poor first time home buyers.  Indeed, most down-payment assistance charities engage in extensive screening and require beneficiaries to attend long hours of budgeting classes before they are granted down payment assistance.  Moreover, most of the homes in default these days were financed through adjustable rate mortgages, which FHA and most down-payment assistance charities do not support!  No wonder both the Congressional Black and Hispanic Caucuses smell a rat:

The nonprofit groups have the backing of several influential members of Congress, including Reps. Maxine Waters (D., Calif.) and Barney Frank (D., Mass.). The Congressional Black Caucus and the Congressional Hispanic Caucus sent letters this month to House and Senate leaders urging that the programs stay intact, citing their role in improving minority home-ownership rates.

Fortunately, the House version of the bill does not contain a prohibition against seller-funded downpayment assistance.  Still, the IRS is nevertheless pursuing its policy of denying or revoking tax exempt status to charities that receive funding from sellers or developers.  For more discussion on the FHA efforts against downpayment assistance charities see this entry in the WSJ's Development Blog.


June 26, 2008 in Federal – Legislative | Permalink | Comments (11) | TrackBack (0)

Another Possible Blue Cross Conversion to For-Profit Status

The Newark Star Ledger reports that New Jersey's largest health insurer is seriously considering converting to for-profit status.  Although Horizon Blue Cross Blue Shield of New Jersey twice before considered but then rejected converting to for-profit status during the past ten years, the political climate may be more favorable now because New Jersey is looking for funding to help it implement universal health insurance.   The conversion would result in payments to the state of $1 billion to $3 billion over five years as compensation for the tax breaks Horizon had previously enjoyed.  The incentive on Horizon's part for converting appears to be a desire to reduce the level of public scrutiny it faces, particularly with respect to executive compensation and the size of its reserves.  Horizon currently covers approximately 3.6 million individuals, including more than million Medicaid participants.


June 26, 2008 in In the News | Permalink | Comments (1) | TrackBack (0)

Another Politician, Another Non-Compliant Charity

The New Orleans Times-Picayune reports that Jefferson Parish Councilman and recently announced 2nd Congressional District candidate Byron Lee sponsored a resolution to send $50,000 of the parish's federal Community Development Block Grant to the nonprofit Jefferson Sports and Scholastic Foundation to pay for two summer camps.  The Parish Council unanimously passed the resolution, despite an earlier public protest about Lee's direction of funds from a landfill settlement to the nonprofit and the nonprofit's apparent failure to file required IRS Forms 990.  Lee started the foundation to fulfill a campaign promise to help low-income children find summer enrichment, and his campaign treasurer directs the group.  In a previous story, the Times-Picayune reported that the Foundation had applied for tax exemption under section 501(c)(3) of the Internal Revenue Code but had never apparently filed a Form 990, even a year after the failure to file had been brought to the attention of Lee's campaign treasurer.


June 26, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Richard Grasso Wins a Round in the Challenge to His NYSE Compensation

The New York Times reports that Richard A. Grasso, the former chairman and chief executive of the then not-for-profit New York Stock Exchange, has convinced New York's highest court to uphold the dismissal of four counts originally brought against him by the Attorney General's office relating to his compensation.  The court upheld the dismissal on the grounds that the Attorney General did not have the statutory authority to bring the claims.  Two other counts remain against Mr. Grasso relating to whether he violated his fiduciary duties to the NYSE by accepting compensation that he knew was excessive, as well as a separate lower court decision that he breached his fiduciary duty to keep the board informed about his pay, a decision that Mr. Grasso is also appealing.

The New York Court of Appeals' opinion provides further details.  The NYSE employed Mr. Gross as its chairman and chief executive officer from 1995 until his resignation in 2003 (caused by the public outrage over his compensation).  That compensation grew to approximately $12 million by 2002, and then leaped to $139.5 million in 2003 plus an additional $48 million payable over four years.  The court characterized the four counts brought by the AG that the lower appellate court had dismissed as "nonstatutory claims . . . premised on provisions of [New York's not-for-profit corporation law] but clothed in the common law."  The counts involved constructive trust and unjust enrichment claims based on the statutory reasonable compensation provisions, a restitution claim based on the assertion that a majority of the Board had failed to approve the compensation at issue as required by statute, and a claim based on the assertion that certain advance payments from a retirement plan violated the statutory prohibition against loan to officers.  The Court of Appeals found, however, that these nonstatutory counts exceeded the AG's authority because they would have required a lower burden of proof than that specified by the legislature in its fault-based enforcement scheme that explicitly gave the AG authority to enforce certain provisions of the New York not-for-profit corporation law.  The two surviving counts, in contrast, are for statutory violations - unlawful transfer of corporate assets and breach of fiduciary duty - that the AG has express authority to pursue in court, although Mr. Grasso is challenging the AG's current standing to bring those claims in a separate pending appeal.


June 26, 2008 in In the News, State – Judicial | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 25, 2008

Bill Said to Impose Racial Diversity on Charities Withdrawn by California Legislator

The Sacramento Bee reported yesterday, June 24, that legislation, Assembly Bill 624, introduced by a California Legislator, Joe Coto (D-San Jose), was withdrawn by the legislator after 10 of the largest California foundations agreed to a multimillion-dollar, multiyear investment in minority communities.  According to the Assemblyman's website, the "bill requires large foundations to disclose the racial and gender composition of their boards of directors and the number of grants awarded to organizations serving ethnic minority communities."  The bill was introduced following the release of a study in August 2007, Investing in a Diverse Democracy: Foundation Giving to Minority-Led Nonprofits, prepared and conducted by The Greenlining Institute, a California-based research and advocacy nonprofit, highlighting the failure of California foundations to support minority-led nonprofits.  The organization posted a response to the foundations and others who challenged the need for AB 624 on its website. 

Below is an excerpt of the Sacramento Bee story:

Faced with legislation that would require them to disclose their ethnic composition and detail grants awarded to minority organizations, 10 of California's largest foundations agreed Monday to a multimillion-dollar, multiyear investment in minority communities.

In return, Assemblyman Joe Coto, D-San Jose, dropped a bill that opponents said was an effort to impose racial diversity on charities and threatened to drive donors out of California.

Many foundations enjoy tax-exempt status. But according to a 2006 study by the Berkeley-based Greenlining Institute, which sponsored Coto's legislation, only 3.6 percent of grant dollars from the nation's top 24 private foundations went to minority-led organizations.

"The Greenlining Institute provided us some evidence that the level of investment by these foundations in minority communities was inadequate compared to the level of investment they are making elsewhere," Coto said.

Coto said by asking foundations "to shed some light on their investments," he hoped "they would then be in a position to make greater investments."

"They saw this as an opportunity to do what we were suggesting and we've worked out this agreement that I think will be positive for everyone," he said.

The foundations, including the William and Flora Hewlett Foundation, the Ahmanson Foundation and the California Endowment – said in a joint statement that nonprofits play a critical role in addressing the challenges facing minority and low-income communities.

The foundations reaffirmed their commitment to help minority organizations compete for grants and said they would issue annual reports about their efforts.

For the full story, click here.

The comments to the story posted on the Sacremento Bee's website, for me, are the story within the story.  The comments range from supportive to racially antagonistic.  For me, the comments reflect the deeper divide along racial lines that is being brought to light by the presidential race.  A recent Washington Post Story about the significance race will play in the upcoming presidential election captures this divide.

I encourage you to review the comments, too, and to draw your own conclusions.  Click here for the comments.


June 25, 2008 in In the News, State – Legislative | Permalink | Comments (0) | TrackBack (0)

Article Provides an Indepth Look at Nonprofit Mergers Through the Eyes of the Minneapolis/St. Paul Twin Citiies Red Cross

Below is a summary of a recent article entitled, "Putting Good Will To The Test: Nonprofits Find Mergers Can Be A Messy Business At Times," written by Scott Russell, and published through, which is a non-traditional print and web-based publishing source of articles written by professional journalists who exert greater control over their article's content in order to provide more in-depth and comprehensive coverage of a news topic.  Here is the summary:

When nonprofit organizations face mounting service demands and tight budgets, an oft-offered solution from funders and academics is: "think merger."  Though some combinations work out eventually, the process can be grueling if not "pretty awful," says Jan McDaniel of the Twin Cities Red Cross.  McDaniel and other executives from merged nonprofits share what they've learned.

You can find the full story at by clicking here.


June 25, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Upcoming Conference on Philanthropy in the 21st Century

For those interested in issues regarding wealth and philanthropy, The Center for Wealth and Philanthropy at Boston College ("CWP") will co-host a conference, October 7-8, 2008, entitled: "The Supply and Demand of Philanthropy in the 21st Century: Strategies for Fundraising and Financial Professionals."  This is a multidisciplinary conference, co-sponsored by the Association of Fundraising Professionals.  According to CWP's website, CWP is a "multidisciplinary research center specializing in the study of spirituality, wealth, philanthropy, and other aspects of cultural life in an age of affluence.  Founded in 1970, CWP is a recognized authority on the relation between economic wherewithal and philanthropy, the motivations for charitable involvement, and the underlying meaning and practice of care."  Below is an excerpt of the Conference Overview:

The Center on Wealth and Philanthropy garnered significant media attention from its report Millionaires and the Millennium: New Estimates of the Forthcoming Wealth Transfer and the Prospects for a Golden Age of Philanthropy.  In this report CWP predicts a $41 trillion (in 1998 dollars) intergenerational transfer of wealth during the 55-year period from 1998 through 2052.  For fundraising and financial professionals who wish to better understand and utilize this wealth transfer, this conference will explore (at a level of detail rarely offered) two fundamentally important ideas:

    1. The New Dynamics of Philanthropy: the idea that donors desire greater charitable involvement; and
    2. The Moral Biography of Wealth: the way individuals conscientiously combine two elements in daily life: personal capacity and moral compass.

Paul Schervish and John Havens will discuss the supply (donor) side and the demand (charity and beneficiary) side of philanthropy in the 21st century.  John Havens will provide context for discussion of these ideas by offering an overview of the $41 trillion wealth transfer.  Paul Schervish will discuss important aspects of the supply and demand of philanthropy in the 21st century, and the distinctive traits of wealth holders.  In his unique and effective style, Paul Schervish will elaborate and provide concrete examples of an innovative way of thinking, feeling and acting that constitutes the new physics of philanthropy.  This includes how wealth holders seek (rather than resist) greater charitable involvement, approach their philanthropy with an entrepreneurial disposition, understand that caring for the needs of others is a path to self-fulfillment, and view philanthropy as a way to achieve simultaneously happiness for themselves and others.

An equally important aspect of The Supply and Demand of Philanthropy in the 21st Century is the concept of the "moral biography".  Paul Schervish will discuss and provide examples of the distinctive characteristics of a moral biography of wealth.  Exploration of the moral biography of wealth highlights the philosophical foundations of major gifts by major donors and is a critical tool for anyone who is concerned with fundraising and financial planning.  Over the course of two days you will learn the elements of the moral biography of wealth and how to encourage biographical conversations with clients and donors to generate a new dynamic in philanthropy and more personal, knowledgeable and successful client/donor relationships.

In addition to Schervish and Havens a highly regarded vice president for advancement and a well respected financial professional will also provide insights and answer questions during the conference.

For more information, please click here.


June 25, 2008 in Conferences | Permalink | Comments (0) | TrackBack (0)

Professor Nina J. Crimm Calls for Collaboration in Providing More Accessible Web-Based Training for Nonprofit Board Members

The Chronicle of Philanthropy recently published a letter to the editor written by Professor Nina J. Crimm of St. John's University School of Law.  Professor Crimm calls for greater collaboration in the provision of web-based training materials for nonprofit board of directors who in her experience are generally novice, volunteers motivated by a sense of "doing good."  Her concern is that too many well-intended, board members run afoul of the laws governing tax-exempt organizations out of ignorance, not flagrant disregard of the law.  Below is an excerpt of the letter:

The Chronicle of Philanthropy and other news organizations repeatedly report stories involving conflicts of interest, financial scandals, and other abuses of fiduciary duties by charities' board members. [(for examples of such stories, search this blog for various blog postings).]

My involvement with various nonprofit organizations and their boards — as a consultant, board member, and law professor — convinces me that a considerable proportion of these breaches of fiduciary duties are by inexperienced or untrained board members who have admirable intentions.

Because many charities are small, have little money for legal advice, and often have novice, volunteer board members, their board members are particularly susceptible to inadvertently violating their fiduciary responsibilities. More often than not, those board members lack a comprehensive appreciation of their fiduciary duties, relevant state (nontax and tax) and federal (tax) laws, and these laws' application in the everyday scenarios encountered.

. .  .

State attorneys general, knowledgeable charity leaders, academics, and practicing lawyers should join together to develop a Web-based training course providing a comprehensive package of useful lessons that board members of charities need to master to properly fulfill their fiduciary functions throughout charities' life cycles. (Where state laws differ, a portion of the material could be tailored to account for the variation.) Development of the training course might be underwritten financially by insurance companies that provide director and officer liability policies and that stand to benefit economically in the future if more-knowledgeable board members translate into lower payouts.

The training course should be accessible online at the convenience and command of charities' board members. State legislatures should enact laws requiring each new board member to complete the Web-based course within three to four months of appointment to a charity's board. At the end of the lesson series, a prompter should enable each "graduating" board member to complete a form attesting to completion of the entire course. At the click of a "submit" button, the form should be submitted automatically to the office of the state's attorney general (or other appropriate official) that has enforcement jurisdiction over the charity.

For the complete letter, please click here.


June 25, 2008 in In the News | Permalink | Comments (1) | TrackBack (0)

Halperin: Does Tax Exemption for Charitable Endowments Subsidize Excessive Accumulation?

Dan Halperin has posted a timely piece -- given the recent attention paid to university endowments -- entitled, Does Tax Exemption for Charitable Endowments Subsidize Excessive Accumulation?"  Here is the abstract:

This paper examines the concern over large endowments from the perspective of tax policy as it applies to the income tax exemption for charitable organizations. It suggests that because unlike other subsidies, income tax exemption only affects those charities that accumulate funds for the future, such exemption does not follow automatically from the charitable deduction but requires a showing that accumulation is appropriately treated. The paper concludes that unlike the treatment of gifts and income from related goods and services, exemption of investment income from an endowment, represents a departure from normal tax principles. Whether a subsidy is nevertheless appropriate depends upon whether one believes that current accumulation is likely to be excessive. I believe that the bias of donors, trustees and key employees indicates that endowments may well exceed the level that public policy would suggest and recommend a tax based on assets and a reduced limit on the charitable deductions for the largest endowments. While a mandatory distribution level is considered, I conclude that such a requirement is both intrusive and unlikely to have a significant impact on the level of accumulation.


June 25, 2008 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Automobile Donations to Charities that Use the Car - Not Really So Bad

Last month we blogged about a recently released IRS report that notes that while number of donations of automobiles to charities has decreased since the more restrictive rules were implemented in 2005 (by 60%), the dollar amount of these donations has dropped even more (by 80%).  As a result of the legal change that took effect in 2005, if the donors claims more than a $500 deduction the donor is limited to the actual sales price that the charity receives from the sale of the car.  Before 2005, donors could get fair market value.  Even after 2005, a donor can still get fair market value if the charity gives the car to a needy person, uses it itself, or renovates and sells the car.

Professor Linda Beale remarks on A Taxing Matter blog that "[t]he latter two exceptions don't appear reasonable--hard to see why the donor should get a bigger donation for cars that the charity uses or renovates and sells."  I was struck by this when I first read it and thought that maybe she's right.  But I recently discovered one "uses it itself" exception circumstance that seems quite reasonable - donating an auto to your local nonprofit (often volunteer) fire department.  I checked with my local fire department and they told me that they accept any vehicle (working or not) and destroy it in fire training exercises.  Seems pretty reasonable to me.  Are there other circumstances?


June 25, 2008 in Federal – Executive | Permalink | Comments (0) | TrackBack (0)