January 19, 2008
Are Private Schools in England "Charitable"? - The People Speak
"Sir, In the context of their concerted and established efforts to contribute to local communities and widen access to the education they offer, calling modern independent schools “exclusive clubs” is almost as out of date as the tediously familiar image of an imperious Etonian in tails, surveyed by picturesque urchins, which appeared — again — yesterday.""Sir, Until we get rid of the majority of independent schools, which, in reality, pay lip service to the idea of “serving the local community” so as to justify their charitable status, nothing of any substance will ever happen in the state sector. Creating two or three bursaries is patronising and is a way of stepping around the real issues."
Local Governments in Africa are Imposing Taxes on Marriages In Order to Widen the Tax Base
On January 18, 2008, Africa News reported that a local government in Uganda plans to impose a new tax on marriages in order to "widen the tax base and fill the gap created by suspension of graduated tax." The tax, which is pending approval, would be imposed on every person who gets married in Sironko District. The new tax is apparently part of a trend because another local government, Bududa District Local Government, passed a similar resolution to tax marriages in its bid to widen the tax base. For the full story, go to "Uganda: Sironko to Tax Traditional, Church Marriages" in Africa News.
Giving to Charity Over The Internet - Disclosure, disclosure
On January 19, 2008, the LA Times had an interesting editorial about new waves of giving to charity over the Internet. The article describes a nonprofit called "FreeRice.com," which will donate up to the cash equivalent of 20 grains of rice to the UN World Food program for site visitors who play an on-line vocabulary game. The editorial indicates that some for-profit organizations are also doing the same thing. The donations come from advertisers whose banners appear on the screen while the site visitor is playing the game. The article raises the issue of accountability, though, especially if for-profit firms are involved. Here is an excerpt:
Sen. Robert Menendez (D-N.J.) has introduced sensible legislation that would require retailers and marketers that promise donations to charity to disclose exactly how much of the purchase price they pledge to donate and to which charity. That's a good start, but charities cannot prevent their names being taken in vain -- or collect the money promised -- unless they know about the solicitations in the first place. So the legislation also would require retailers to obtain the charities' written permission in advance.
January 18, 2008
University Endowments See Strong Returns in 2007; Likely to Fuel Debate Over Tuitions
InsideHigherEd.com and The Chronicle of Higher Education (subscription required for full article) report that the Commonfund's annual Benchmarks Study of Educational Endowments is reporting an average 16.9% return on investments in the 2007 fiscal year. These results are an increase from 10.6% in the previous year and are the strongest results since 2000. The study also found increases in average three-year returns, up to 12.8% from 12.3% last year. At the same time spending from endowments fell slightly, from 4.5% to 4.4%. Another study of endowments, by the National Association of College and University Business Officers is due out next week. In recent years. the results of the two studies have been relatively close.
The strong returns are likely to add fuel to the ongoing debate about tuitions charged by universities and the amount of financial aid they provide. Previous coverage of this debate is available with respect to Harvard, the University of California system, and Yale.
Tax-Exempt Credit Union Sues IRS Over UBIT Bill for Insurance Sales
The Milwaukee Journal Sentinel reports that Community First Credit Union of Appleton, Wisconsin has filed suit in federal court seeking a refund of $54,000 in taxes it paid in 2006 on income from the sale of credit life and credit disability insurance and guaranteed auto protection insurance. The credit union, which has $916 million in assets, is challenging the IRS' position that selling such insurance falls outside of the credit union's tax-exempt purposes and so is subject to the urelated business income tax (UBIT). The article reports that both the Credit Union National Association and the Wisconsin Credit Union League support Community First's position. The Wisconsin organization also lists the American Association of Credit Union Leagues, the National Association of State Credit Union Supervisors, and the CUNA Mutual Group as supporting the lawsuit in a press release. The release also indicates that the case is the lead one in the nation for this issue.
Veterans' Charities' Chief Grilled at Congressional Hearing
Yesterday's blog entries included a posting on the House Committee on Oversight and Government Reform's scheduled hearing on the charity Help Hospitalized Veterans and its President, Roger Chapin. Today's Washington Post reports that during the three-hour hearing Committee members asked Mr. Chapin pointed questions about his and his wife's compensation and about expenses ranging from a $17,000 country club membership to millions in fundraising costs. Committee members also asked about $100,000 paid by a separate charity, also founded by Mr. Chapin, to retired Army Gen. Tommy Franks to appear in that charity's solicitation letters.
Google Announces Philanthropic Plans
The Washington Post reports that Google has announced its plans for philanthropy, along with $25 million in grants aimed at addressing climate change as well as poverty and health issues in developing countries. The plans arise out of the company founders' previous pledge to devote about 1 percent of Google's equity and annual profit to humanitarian causes. As described on the company's charitable website, Google plans to pursue five initiatives: developing renewable energy cheaper than coal (RE<C); accelerating the commercialization of plug-in vehicles (RechargeIT); predicting and preventing emerging threats such as infectious disease and climate risk; informing and empowering citizens and communities to improve essential public services; and increasing the flow of risk capital to small and medium-sized businesses in the developing world.
January 17, 2008
Donor Intent Collides with the Passage of Time at Notre Dame
On a personal note, I ate lunch numerous times at the University Club before it was demolished late last year. At least us younger faculty were always somewhat perplexed by the presence of the beer steins and tankards, some quite elaborate, on display in the Club. Now we know the story behind them.
Veterans' Charity Target of Congressional Investigation
The Washington Post reports that the House Committee on Oversight and Government Reform subpoenaed the President of Help Hospitalized Veterans (HHV)to testify at a hearing earlier today. The hearing is part of an ongoing investigation by the Committee of veterans' charities but focused in particular on HHV President Roger Chapin. The article states that Mr. Chapin has founded over 20 nonprofit organizations over the past 30 years, at least one of which (the Coalition to Salute America's Heroes) is also under congressional investigation.
A memo prepared by the Committee's Majority Staff states that while Mr. Chapin's charities raised more than $168 million in donations from 2004 through 2006, only approximately 25% of those funds were spent on goods and services for veterans. The charities spent the remainder on fundraising, administration, salaries and other expenses, including $1.5 million in compensation for Mr. Chapin and his wife and over $340,000 for their expenses. The fundraising expenses included millions of dollars paid to direct mail companies owned by Richard Viguerie, who the Washington Post article describes as "a prominent conservative political commentator and advertising consultant." Mr. Viguerie also testified before the Committee today, as did California Senior Assistant Attorney General Belinda J. Johns.
Americans United Asks IRS to Investigage Alleged Church Endorsement of Obama
Americans United for Separation of Church and State announced that it has asked the Internal Revenue Service to investigate a Nevada church whose pastor allegedly called for the election of Democratic presidential candidate Barack Obama. In what will almost certainly be only one of many such complaints this election season from Americans United and others, the request asserts that Pastor Leon Smith of the Pentecostal Temple Church of God in Las Vegas said to his congregation on January 13th that "if the polls were open today, I would cast my vote for this senator." Pastor Smith also allegedly said "I want to see this man in office." Pastor Smith made the comments shortly before a visit from Senator Obama to the church. Americans United apparently learned of Pastor Smith's comments from a Las Vegas Review-Journal article about Obama's various campaign stops in Nevada.
(Full Disclosure: The firm with which I am Of Counsel has represented Amercians United for Separation of Church and State.)
Study Group Led by UC Berkeley Chancellor Urges increasing UC Financial Aid
The LA Times reports that a study group headed by UC Berkeley Chancellor Robert Birgeneau has recommended to the University of California Board of Regents the creation of a $2 billion endowment to provide additional financial aid for undergraduates. The study group's report suggests that the needed funds could be gathered from a variety of sources, including private donations, state support, and student fees, over 10 or so years. The article states that some members of the Board of Regents greeted the report with skepticism, especially since graduates of UC schools generally face much lower student loan burdens upon graduation than students who attend private universities. Chancellor Birgeneau acknowledged that the study group's recommendations are along the same lines as recent proposals from some private universities. Previously blogging is available on the proposal to increase financial aid by Harvard and Yale.
Further Coverage of Former Congressman's Indictment
Further press coverage of former Representative Mark Deli Siljander's indictment is available from the New York Times and USA Today. The Kansas City Star has also published a follow-up story. The indictment is an expanded version of the original indictment of the charity for which Mr. Siljander allegedly lobbied, the Islamic American Relief Agency, and various individuals affiliated with it. Previous blogging is available of the earlier press coverage of this story and the indictment itself.
Red Cross to Cut Up to 1,000 Jobs Because of Funding Deficit
The New York Time reports that the American Red Cross is facing a $200 million operating deficit, which will force it to lay off up to 1,000 of its employees or one-third of its headquarters staff, as well as some regional staff. The Red Cross had a total budget of $3.45 billion in 2007. The organization also has an endowment of $800 million, but it will not be tapped to cover the deficit according to Suzy C. DeFrancis, the Red Cross's chief public affairs officer. Ms. DeFrancis declined to discuss fund-raising problems, other than to state that the organization had not raised enough funds to cover costs. The article notes, however, that the Red Cross struggled with fund-raising in the wake of negative publicity regarding its handling of contributions for 9/11 victims. The article also cites former and current executives as blaming the fund-raising shortfall at least in part on the lack of a major disaster since Hurricane Katrina in 2005, while myriad small and mid-sized disasters that do not attract donors' attention continued to place demands on the Red Cross's budget.
January 16, 2008
Indictment of Former Congressman Now Available
Earlier today, we informed you of the indictment of former Congressperson, Mark Deli Siljander, stemming from his asserted ties to an alleged terrorist wolf wrapped in charitable clothing. Get a copy of the indictment here.
Charity and Pastor Lay Down Gauntlet on Preaching Politics from the Pulpit
The Becket Fund for Religious Liberty has issued a challenge to the IRS to investigate the Calvary Assembly of God in Algoma, Wisconsin based on a sermon delivered by the church's Pastor, Kenneth Taylor. It made the challenge public through an open letter from Pastor Taylor apparently published as an advertisement in today's Wall Street Journal.
According to the letter, Pastor Taylor delivered a sermon about voting based on the salt of the Earth and light of the world passage from Matthew 5:13-16. The church did not broadcast the sermon, but did videotape it. The videotape can be accessed through the Fund's website. In the video, Pastor Taylor indicates he is preaching on the Sunday immediately preceding an election, although it is not completely clear to which election he is referring. The letter, however, refers to his having preached the sermon during the "[l]ast election." The video is also heavily censored, perhaps out of concern that making the more political parts of the video available on the web could undermine the Pastor's position that his sermon only reached his in-person congregation. The letter strongly suggests that the contents of the censored portions would be objectionable to the IRS, as it states "If you didn't like the All Saints sermon, you would have hated mine!" in a reference to the much published IRS audit of All Saints Episcopal Church in Pasadena, California based on a sermon given at that church. That audit ended with the IRS issuing a letter saying the sermon violated the prohibition on campaign intervention by charities but also that the IRS was choosing not to impose any penalties. More information about that audit can be found on the All Saints' website.
(Full Disclosure: The firm with which I am Of Counsel represented All Saints Episcopal Church with respect to the IRS audit.)
Former Congressman Indicted for Allegedly Lying About Lobbying for Charity That Supported Terrorism
According to an article by the Kansas City Star, the U.S. District Court in Kansas City, Missouri has unsealed a 42-count indictment against Mark Deli Siljander, a former member of the U.S. House of Representatives. The indictment stems from his alleged relationship with the now defunct Islamic American Relief Agency (IARA), which was previously indicted along with several of its officers and employees (see the March 2007 press release from the U.S. Attorney for the Western District of Missouri for more details about this earlier indictment). According to the article, Mr. Siljander is charged with money laundering, conspiracy and obstructing justice for allegedly lying about lobbying senators in 2004 on behalf of IARA.
British Charity Commission Defines Public Benefit; May Hurt Private Schools
The Charity Commission for England and Wales has issued much anticipated guidance on the legal requirement that charities be established for "the public benefit." The guidance comes in the wake of a 2006 statutory change that removed the presumption that relief of the poor, advancement of education, and advancement of religion were for the public benefit. The public benefit requirement is in addition to the requirement that charities have "charitable purposes," a term which is defined in the Charities Act of 2006 in a manner similar to how the term "charitable" is defined by U.S. federal tax law.
The guidance states that for a charity to be established for the public benefit it must meet two requirements. First, there must be an identifiable benefit or benefits that is clear and related to the organization's charitable purposes. The benefit or benefits must also be balanced against any detriment or harm. Second, the benefit or benefits must be to the public or a section of the public, with the beneficiaries appropriate to the entity's charitable purposes and with the opportunity to benefit neither denied to those in poverty nor unreasonably restricted by geography, ability to pay, or other restrictions. Any private benefit must also be incidental.
Early press reports indicate that fee-charging private schools may be at greatest risk of not meeting the newly defined public benefit standard. A report by the Guardian quotes the Commission's chair as saying "If you are an education charity, you have to show that it's possible for people on low incomes to benefit from education." She insisted, however, that charitable status would be removed in only the rarest of circumstances. The article also states that the Commission is planning to issue specific guidance for schools later this year. Other coverage of the guidance's possible effects on private schools can be found in the Independent and the Mirror. More general coverage of the guidance is available in an article by the Guardian.
501(c)(4) Organization Loses Round One in Fight to Air "Hillary: The Movie"
Yesterday, the United States District Court for the District of Columbia rejected Citizens United's request for a preliminary injunction against enforcement of the Bipartisan Campaign Reform Act of 2002. The conservative 501(c)(4) organization has produced a movie entitled "Hillary: The Movie" (trailers, ads, and how to order the movie) and seeks to advertise and distribute the movie around the date of "super Tuesday," then again within 30 days of the Democratic National Convention, and finally within 60 days of the November general election (assuming Senator Clinton is the democratic candidate). The movie is obviously a negative, politically inspired portrayal of Senator Clinton, complete with JAWS-like foreboding music. It promises to be a real thriller! Anyway, Citizens United claims that it has decided not to advertise and distribute the movie as described above for fear of violating BCRA's provisions. Citizens United claims that the ban on corporate disbursements of electioneering communication violates the First Amendment to U.S. Constitution. For the full text of the opinion denying preliminary relief, see here.
Indiana Bill Would Impose PILOTS on Nonprofit Organizations
PILOTS, or payments in lieu of taxes , are generally considered "semi-voluntary" payments made by nonoprofit organizations in hopes of forestalling legislative or judicial scrutiny of a nonprofit organization's property tax exemption. When cities become strapped for cash and begin looking at large nonprofits the way Wyle E. Coyote used to look at the roadrunner (longlingly, as if he had stumbled upon a turkey dinner with all the fixin's), nonprofits would "voluntarily" offer some sort of payment to make the cash-strapped city administrators go away. A bill in the Indiana House, though, would remove whatever semblance of voluntariness" from PILOTS. According to today's Indianapolis Star:
Hospitals, museums, fraternal clubs and many other nonprofit organizations now exempt from property taxes could have to chip in under a bill in the Indiana House. Nonprofit groups that want to avoid the "payment in lieu of tax," or PILOT, would have to show the state they truly serve a charitable purpose, defined as providing "relief from human want."
The sponsors of a bill (summarized in a sidebar to the article) to make PILOTS mandatory -- essentially repealing the property tax exemption in Indiana -- argue that "senior citizens struggling to pay property taxes should not have to subsidize nonprofit hospitals that generate millions in annual revenues, or organizations that essentially operate as social clubs, such as Elks clubs or college fraternities."
This bill and the recent decision by the Minnesota Supreme Court suggests that state and local governments -- wary of raising property taxes on voters -- are beginning to look upon nonprofit organizations as politically easy sources of revenue.
Tony Bryk Named Carnegie President
The Board of The Carnegie Foundation for the Advancement of Teaching has named Anthony S. Bryk, whose work has informed and inspired school reform efforts, the next president of the Foundation, effective August 2008.
Bryk has held the Spencer Chair in Organizational Studies in the School of Education and the Graduate School of Business at Stanford University since 2004. He came to Stanford from the University of Chicago where he was the Marshall Field IV Professor of Urban Education in the sociology department, and where he helped found the Center for Urban School Improvement, which supports reform efforts in the Chicago Public Schools. Bryk also created the Consortium on Chicago School Research, a federation of research groups that has produced a range of studies to advance and assess urban school reform. His current research and practice interests focus on the organizational redesign of schools and school systems and the integration of technology into schooling to enhance teaching and learning.
"Tony is a perfect match for the Foundation," said David S. Tatel, the chairman of the Carnegie Board, and a United States Circuit Judge for the U.S. Court of Appeals for the District of Columbia. "He has a tremendous ability to think and act across disciplines and to bring together theory and practice. I have no doubt that he will maintain Carnegie's rigorous intellectual standards, while further advancing its national presence."
To see the full announcement, go to the Carnegie Foundation website.