Wednesday, January 16, 2008
The Orlando Sentinel reports that Florida Circuit Court Judge James E.C. Perry has ordered $3.4 million from a class-action settlement pool paid to a variety of nonprofits, including more than $1 million to several Central Florida charities. The settlement arose out of an alleged price-fixing scheme by Bayer A.G. (see the class action notice for more information), but if it were distributed to the approximately 130 million affected consumers they would only receive a few pennies each. The plaintiffs' attorneys, Mark Nation and Kenneth G. Gilman, therefore suggested that the settlement be paid to several consumer nonprofits, including the National Consumer Law Center in Boston, the American Anti-trust Institute in Washington, DC., and Public Citizen. Judge Perry decided instead, however, to pay only $138,000 to the nonprofits recommended by the attorneys and to distribute the balance to a variety of national and local organizations. The national entities include the Make-A-Wish Foundation of America, Covenant House International, Shriners Hospital for Children, Special Olympics Inc. and Ronald McDonald House Charities Inc. The local entities included Safe House of Seminole, which provides for battered women and children, and Seminole affiliates of the Boys and Girls Clubs of America and Habitat for Humanity. The $3.4 million represents the balance in the settlement pool of $4.75 million, after payment to the plaintiffs' attorneys of $1.19 million plus $152,000 for expenses.
Senator Charles Grassley, ranking member of the Senate Finance Committee, applauded the announcement by Yale University of significant increases in financial aid for undergraduate education. At the same time, he criticized other tax-exempt colleges and universities with endowments of $1 billion dollars or more that, unlike Harvard and now Yale, have not made such changes.
According to the announcement, Yale will now not require any financial contribution from families earning less than $60,000, will require contributions of only 1% to 10% of family income for families earning between $60,000 and $120,000, and an average of 10% of income for families earning above $120,000. The changes are expected to reduce the costs for attendance at Yale College, the undergraduate part of the university, by more than 50% for families earning less than $120,000 annually and by 33% or more for most families earning between $120,000 and $200,000.
Tuesday, January 15, 2008
The California Court of Appeal, First Appellate District affirmed the dismissal of a challenge to a partnership between the nonprofit Resources Legacy Fund Foundation and two state government agencies, the California Resources Agency and the California Department of Fish and Game. At issue in Coastside Fishing Club v. California Resources Agency was a Memorandum of Understanding (MOU) between the Foundation the agencies under which the Foundation agreed to provide funding so that the agencies could fulfill their planning responsibilities under California's Marine Life Protection Act (MLPA). The MLPA requires the Department of Fish and Wildlife to prepare a draft master plan relating to California's marine protected areas for consideration by the independent Fish and Game Commission. The California legislature neglected, however, to provide funding for this work.
The Coastside Fishing Club, a nonprofit organization representing recreational fishermen, and a member of the Club challenged the MOU on two grounds. First, that the funds provided by the Foundation were a gift, which the agencies could not accept without approval by California's Director of Finance, which had not bee obtained. Second, that the agencies lacked the authority under the MLPA and under the California Constitution to enter into the MOU. The trial court rejected both claims, and the appellate court affirmed.
(Full Disclosure: The firm with which I am Of Counsel has represented an affiliate of the Resources Legacy Fund Foundation.)
The Baltimore Sun reports that for the second straight year the distributions to states from the U.S. Department of Justice's Crime Victims Fund will decline. The funds are generally distributed to both nonprofits and government agencies that work with crime victims, providing services ranging from legal advice to shelter to counseling. Congress capped the disbursements at $590 million in the recently passed omnibus spending bill, or $35 million less than was spent in the previous year. According to the article, the Crime Victims Fund does not receive any tax funds but is instead supported by fees and fines paid by those convicted of federal crimes. It currently has a balance of $1.7 billion, but Congress apparently capped the distributions anyway as part of an overall effort to reduce federal spending and demonstrate fiscal discipline. For more information about the Crime Victims Fund, see the Department of Justice's fact sheet (dated October 2005).
The New York Times reports that GiveWell's board of directors has fined an employee $5,000 for using a false name online to steer people to GiveWell's website. The board decided not to demote program officer Elie Hassenfeld based on his previous contributions to GiveWell's work. The board previously announced that it had demoted one of GiveWell's co-founders who admitted posing online as a prospective charitable donor to direct people to GiveWell.
For previous blogging on this story, see this earlier post.
The U.S. Court of Appeals for the Ninth Circuit has issued an opinion stating that the uncompensated directors of a nonprofit corporation were not employees for purposes of determining whether the corporation had enough employees for the federal Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA) to apply. The court also concluded in Fichman v. Media Center (9th Cir., 1/14/08, No. 05-16653) that volunteers who produced media content for the nonprofit were also not employees for purposes of these laws.
Fred Fichman had served as the Executive Director of Sierra Nevada Community Access Television, Inc. d/b/a The Media Center (Media Center). Media Center is a nonprofit corporation that is tax-exempt under section 501(c) (the court did not specify the relevant paragraph). After he was terminated in late 2003, Mr. Fichman filed suit in federal District Court alleging violations of the ADEA and the ADA, as well as asserting a state law tort claim. The District Court granted summary judgment in the Media Center's favor based on its conclusion that during the relevant time period the Media Center employed less than the 20 employees required for the ADEA to apply and less than the 15 employees required for the ADA to apply. The District Court also declined to exercise supplemental jurisdiction over the state law claim.
On appeal, Mr. Fichman argued that Media Center's nine uncompensated directors and approximately 80 uncompensated producers who supplied broadcast content should be considered employees for purposes of meeting the ADEA and ADA number of employees thresholds. The Ninth Circuit applied a six-factor analysis to determine whether either or both sets of individuals should be considered employees for these purposes. In a unanimous opinion, it concluded that they should not be so considered and therefore affirmed the District Court's grant of summary judgment. The Ninth Circuit also concluded that the District Court did not abuse it discretion when it declined to exercise supplement jurisdiction over the state law claim.
Monday, January 14, 2008
The Financial Times reports that the globalization of philanthropy is leading to more cross-border giving, but also to a growth in local philanthropy in many countries, greater involvement of donors in creating and monitoring charitable programs, and a blurring of lines between for-profit and nonprofit organizations. At the same time technology is making it easier for donors to pursue their altruistic interests anywhere in the world. The article cites in particular the websites of micro-lending organization Kiva.org, education-oriented DonorsChoose.org, and GlobalGiving.com, founded by two former World Bank executives.
(Full Disclosure: The firm with which I am Of Counsel represents the GlobalGiving Foundation, Inc., the charity that receives donations made through GlobalGiving.com.)
The Chronicle of Philanthropy lists the top 50 donors in 2007 based on amounts given or pledged last year. The top five were William Barron Hilton ($1.2 billion), John M. Sr. and Karen H. Huntsman ($750 million), T. Denny Sanford ($475 million), George Soros ($475 million), and John W. Kluge ($400 million). In an accompanying article, the Chronicle notes that for the first time in seven years all of the top five donors were living. It also stated that the 20 donors made total gifts of $100 million or more, almost tying the record of 21 such gifts in 2006. The bulk of the contributions from the four largest donors went to foundations they had established, although many of the other contributions went to higher education, including Mr. Kluge's $400 million pledge to Columbia University. Missing from the 2007 list were two bequests - from Leona M. Helmsley and Helen R. Walton - that would probably have made the list except their estates have yet to be settled.
The Atlanta Journal Constitution reports that the Southern Christian Leadership Conference has acknowledged failing to file timely IRS Form 990s for one or more years. The article states that the IRS has no record of a filing by the 50-year old civil rights organization for any year after the fiscal year that ended in June 2004. SCLC officials said that the SCLC had filed a return for the year that ended in June 2005, but acknowledged that the SCLC had not filed returns for later years. SCLC President Charles Steele noted that the group had been in transition for 18 months and based in temporary housing as new offices were being built. He said the SCLC would file the late documents within 45 days and make them public, as required by law. According to the article, the SCLC has raised more than $6 million over the past three years, including $3.3 million for its new headquarters.
Danaya C. Wright of the University of Florida Levin College of Law and Scott A. Bowman have posted a new article on SSRN titled "Charitable Deductions for Rail-Trail Conversions: Reconciling the Partial Interest Rule and the National Trails System Act." Here is the abstract of the article:
This article examines an undeveloped legal topic at the intersection of tax law and real property law: charitable deductions from income tax liability for donations of railroad corridors to be converted into recreational trails. The very popular rails-to-trails program assists in the conversion of abandoned railroad corridors into hiking and biking trails. But the legal questions surrounding the property rights of these corridors have been complex and highly litigated. In 1983, Congress amended the National Trails System Act to provide a mechanism for facilitating these conversions, a process called railbanking. In essence, a railroad transfers its real property interests in its corridor to a trail sponsor for interim trail use and retains a right to reenter in case rail service needs to be reactivated on the line. Thus, the dual purposes of the statute - interim trail use and rail preservation - are furthered by a process that prevents the corridor from being broken up and irrevocably lost. An important element of railbanking and trail conversion is the prospect for the railroads of a deduction from their income tax liability when they donate these corridors for public trail use. Recently, however, the Internal Revenue Service has begun to question the donations by invoking the so-called partial interest rule Should the IRS prevail in applying this rule, the deduction would be entirely disallowed under current Internal Revenue Code provisions. This article examines the intersection of these two areas of law and proposes ways the railroads can draft their trail use agreements to minimize the likelihood of being challenged by the IRS, and ways the IRS, the STB, Congress, and the railroads can work together to reconcile the conflict in these different laws. In the end, we believe that the rail preservation function is critical to the public welfare and that it is in everyone's best interest to further railbanking and interim trail use. But doing so requires careful drafting and perhaps regulatory changes to ensure that railroads do not unfairly take advantage of the tax system, while at the same time maintaining an incentive for railroad to railbank and offer their corridors for future public use.
Conflicts of interests are not a purely U.S. phenomenon. The Sunday Telegraph reports that the Tate Gallery purchased art from many of the artists who serve as trustees of the London art museum. Documents obtained by the newspaper under the U.K.'s Freedom of Information Act revealed that the Tate acquired 73 works from 20 serving trustees over the 50-year period from 1955 to 2005. According to the article, these revelations follow the disclosure in 2006 during an investigation by the U.K. Charity Commission that the museum had bought seven works over eight years from five different artist trustees. According to a Times article, these purchases included The Upper Room for 600,000 pounds from then trustee Chris Ofili. At that time, critics condemned the charity not only for the purchases but also for its failure to seek independent valuations and the failure of some of the artist trustees to recuse themselves from the decision to purchase their own artwork.
Sunday, January 13, 2008
Christianity Today has published an editorial critical of Senator Grassley's inquiries. In early November, Senator Charles Grassley, ranking minority member of the Senate Committee on Finance announced that he had asked six ministries with significant media presences about their finances, including the compensation, benefits, and expenses of their executives. He also publicly released copies of the letters he had sent to the ministries, which are available on his 2007 press releases website. As of the December 6, 2007 deadline for responding to these letters, Senator Grassley reported that only some of the ministries had provided the requested information, and it was unclear how much of that information even the ones who had responded had provided.
The Christianity Today editorial raises concerns about both the accuracy of some of Senator Grassley's accusations against the ministries and the First Amendment concerns raised by Senator Grassley's criticisms of the ministries' apparent theology. Not that Christianity Today is sympathetic with the theological views held by at least some of the targeted ministries - it calls the "health-and-wealth gospel" a heresy and urges other churches to push for push for financial accountability by these ministries. But it argues that a Senator is not the right person to be making this theological inquiry.
(Full Disclosure: The firm with which I am Of Counsel represents one of the ministries targeted by Senator Grassley, World Changers Church International, with respect to this inquiry.)
The Wall Street Journal reports that there is a growing trend of large donors seeking to remain anonymous according to analysis by the Center on Philanthropy at Indiana University, but that it is often a difficult wish for receiving organizations to honor, especially public universities. It cites, among other examples, the case of University of California at Irvine, which revealed the source of a $20 million donation for its new law school after public criticism for not disclosing the donor's identity. Concerned that such disclosures could reduce charitable giving, the article reports that both Colorado and Georgia recently passed laws to allow publicly funded schools to keep anonymous donors' names private - presumably to avoid any claims that state freedom of information laws could require disclosure. The article also reports that a similar law in Kentucky is currently being challenged before that state's Supreme Court.
Further inquiry determined that this case is University of Louisville Foundation, Inc. v. Cape Publications, Inc. (Case No. 2005-SC-000454). The University of Louisville Foundation raises funds for the University of Louisville. Cape Publications, which publishes the Louisville Courier-Journal, sought access to the Foundation's donor records under Kentucky's Open Records Act. The Foundation, relying on the above-mentioned statutory exception for donor information, refused. The appellate court, in an unreported opinion available the Kentucky Supreme Court's website (search for the 2003 Court of Appeals opinion involving the "University of Louisville Foundation"), ruled in the Foundation's favor, finding that the exception protected all donor information from public release. Cape Publications appealed, and the Kentucky Supreme Court heard oral arguments in March 2007 but has yet to issue an opinion.