Friday, September 19, 2008

Will Impact of Economy on 403(b) and 457(b) Plans Cause Nonprofit Employees to Delay Retirement?

We previously blogged about possibility of retirement investments of nonprofit employees in the wake of the national financial crisis.  Today's issue of Inside Higher Education reports that the downturn in the economy may cause many professors to delay retirement because of the impact on their individual 403(b) and 457(b) retirement plans.  Here is an excerpt from the article:

Rhoades cautioned that many of the tools that appeal to administrators, such as buyouts, aren’t necessarily effective at improving institutions. “Often, you see retirement schemes and the people you want to retire don’t and the people you don’t want to retire do,” he said. “It’s hard to fine tune” the programs.

A particular concern, Rhoades said, is the “squeeze on the young generation.” Not only might jobs be harder to find, but institutions are pushing to offer new faculty members less generous health and other benefits than long-time professors.

Looking broadly, Rhoades said, it is important to go beyond the campus level, and for academic leaders to talk about the potential loss for society of a lack of good job opportunities for younger scholars. “What is really needed at the national and state levels is to get out the message that this really important work force is getting old,” Rhoades said. And higher education needs levels of financial support so that institutions don’t respond to retirement delays by killing other positions and benefits. “We need to make sure that we don’t have a missing generation of knowledge generators,” he said.

For the entire article, see "Will Professors Delay Retirements?" in the September 19, 2008, issue of Inside Higher Education.


September 19, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

The Nonprofit Catholic Charities is Sued for Age Discrimination

On September 19, 2008, the San Francisco Chronicle reported that the nonprofit organization Catholic Charities has been sued by the Equal Employment Opportunity Commission for age discrimination.  Here is an excerpt from the article:

Catholic Charities of San Francisco committed age discrimination when it fired a 71-year-old advocate for seniors and replaced him with an unqualified woman half his age, a federal civil rights agency charged in a lawsuit Thursday.

The nonprofit organization denied the accusation and said the employee had been let go because he refused to take on full-time work.

. . .

The civil rights agency believes the real reason Brigham was let go was because he was just a few months short of "vesting his retirement benefits," Tamayo said.

The lawsuit seeks monetary damages and policies to prevent any future discrimination.

For the entire article, see "Catholic Charities Sued for Age Discrimination" in the September 19, 2008, issue of the San Francisco Chronicle.


September 19, 2008 in Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

Should Nonprofit Lenders Also Get a Government Bailout?

On Friday, September 19, 2008, the Chronicle of Higher Education reported that nonprofit student loan lenders are asking Congress for a bail-out based on terms similar to what Congress did for Fannie Mae and Freddie Mac.  Here is an excerpt from the article:

At a hearing of the House Financial Services Committee on the auction-rate securities market on Thursday, the president of Pennsylvania's nonprofit lender {, James Preston, president of the Pennsylvania Higher Education Assistance Agency,] urged lawmakers to give the U.S. secretary of the treasury the authority to purchase securities backed by student loans.

. . .

The plea from Mr. Preston came a day after the U.S. Senate approved a one-year extension of the original rescue plan for student-loan companies, sending it to the president for a signature. . . .

But nonprofit lenders, for the most part, have not benefited from the program, because they have been unable to obtain the "bridge funding" they need to originate loans in the first place. Simply put, they don't have the cash to make the loans that they could then sell to the department to generate the money to make more loans.

For the entire article, see "Nonprofit Lender Asks Congress for More Help to Stay Afloat" in the September 19, 2008, issue of the Chronicle of higher Education.


September 19, 2008 in In the News | Permalink | Comments (1) | TrackBack (0)

Thursday, September 18, 2008

Are U.S. Disaster Charities Prepared to Handle Large Scale Disasters? GAO Says "No"

On September 18, 2008, the Washington Post reports that a forthcoming GAO study concludes that major disaster relief charities in the United States are unprepared to meet disaster needs in major U.S. cities.  Here is an excerpt from the article:

A large-scale disaster would "overwhelm" the Red Cross and other nonprofit organizations that have federal responsibilities for assisting the government in feeding and sheltering victims of natural disasters, concludes the analysis, which is to be released today by the nonpartisan Government Accountability Office.

. . .

The report, based on a 13-month investigation, found that a nuclear terrorist attack in Washington could leave 150,000 people in need of shelter, but the Red Cross has the capacity to shelter only about 13,000 in the region.

Similarly, a major earthquake in Los Angeles could necessitate shelter for as many as 300,000 people, but the Red Cross's capacity there is 84,000, the report says.

"Without government and other assistance, a worst-case large-scale disaster would overwhelm voluntary organizations' current sheltering and feeding capabilities," the report says.

This report comes at a bad time for the Red Cross in particular because of recent news reports (blogged here) that Red Cross Funds are running dry due to hurricanes and other natural disasters.

For the entire article, see "Charities Unprepared for Major Disaster, GAO Says" in the September 18, 2008, issue of the Washington Post.  For the GAO Report entitled " Voluntary Organizations: FEMA Should  More Fully Assess Organizations' Mass Care Capabilities and Update the Red Cross Role in Catastrophic Events" go to


September 18, 2008 in In the News, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 17, 2008

Will ADF's "Pulpit Freedom Day" Raise a Debatable Constitutional Question, or is the First Amendment Issue Reasonably Clear Such that No Real Question Exists?

On September 8, 2008, I blogged about ADF's proposed "Pulpit Freedom Day" on Sunday, September 28, 2008.  Since then, my colleague Linda Beale indicated on her ataxaingmatter blog, that she does not see things the way I do.  Linda says, in part, "I simply don't see how a constitutional 'right' to tax-exemption in support of political campaign intervention can accord with freedom from the establishment of a government-sponsored religion."

Well, obviously, Linda and I disagree on this point.  To me, the matter is not so clear as to be a "slam dunk" issue.  When you consider not just the income tax exemption itself, but the myriad of other things that accompany 501(c)(3) charitable tax exempt status, it is conceivable that the "tax exemption is a privilege not a right" argument just might not be enough when religion is involved.  Remember, in Taxation Without Representation, 461 U.S. 540 (1983), the one thing that arguably tripped the scale in favor of the government on the First Amendment lobbying issue there was the presence of the 501(c)(4) alternative - and that case did not involve religion.  As Justice Blackmun explains in his concurrence (joined by Brennan and Marshall):

I also agree that the First Amendment does not require the Government to subsidize protected activity . . . and that this principle controls disposition of TWR's First Amendment claim. I write separately to make clear that in my view the result under the First Amendment depends entirely upon the Court's necessary assumption -- which I share -- about the manner in which the Internal Revenue Service administers [sec.] 501.

If viewed in isolation, the lobbying restriction contained in [sec.] 501(c)(3) violates the principle, . . . "that the government may not deny a benefit to a person because he exercises a constitutional right." Section 501(c)(3) does not merely deny a subsidy for lobbying activities . . .; it deprives an otherwise eligible organization of its tax-exempt status and its eligibility to receive tax-deductible contributions for all its activities, whenever one of those activities is "substantial lobbying." Because lobbying is protected by the First Amendment. . . [sec.] 501(c)(3) therefore denies a significant benefit to organizations choosing to exercise their constitutional rights.

The constitutional defect that would inhere in [sec.] 501(c)(3) alone is avoided by [sec.] 501(c)(4). As the Court notes, . . . TWR may use its present [sec.] 501(c)(3) organization for its nonlobbying activities and may create a [sec.] 501(c)(4) affiliate to pursue its charitable goals through lobbying. The [sec.] 501(c)(4) affiliate would not be eligible to receive tax-deductible contributions.

Given this relationship between [sec.] 501(c)(3) and [sec.] 501(c)(4), the Court finds that Congress' purpose in imposing the lobbying restriction was merely to ensure that "no tax-deductible contributions are used to pay for substantial lobbying." . . . Consistent with that purpose, "[the] IRS apparently requires only that the two groups be separately incorporated and keep records adequate to show that tax-deductible contributions are not used to pay for lobbying." . . . As long as the IRS goes no further than this, we perhaps can safely say that "[the] Code does not deny TWR the right to receive deductible contributions to support its nonlobbying activity, nor does it deny TWR any independent benefit on account of its intention to lobby." . . . A [sec.] 501(c)(3) organization's right to speak is not infringed, because it is free to make known its views on legislation through its [sec.] 501(c)(4) affiliate without losing tax benefits for its nonlobbying activities.

Any significant restriction on this channel of communication, however, would negate the saving effect of [sec.] 501(c)(4). It must be remembered that [sec.] 501(c)(3) organizations retain their constitutional right to speak and to petition the Government. Should the IRS attempt to limit the control these organizations exercise over the lobbying of their [sec.] 501(c)(4)  affiliates, the First Amendment problems would be insurmountable. It hardly answers one person's objection to a restriction on his speech that another person, outside his control, may speak for him. Similarly, an attempt to prevent [sec.] 501(c)(4)  organizations from lobbying explicitly on behalf of their [sec.] 501(c)(3) affiliates would perpetuate [sec.] 501(c)(3) organizations' inability to make known their views on legislation without incurring the unconstitutional penalty. Such restrictions would extend far beyond Congress' mere refusal to subsidize lobbying. . . . In my view, any such restriction would render the statutory scheme unconstitutional.

Thus, while I am not saying that the churches would necessarily WIN a First Amendment Constitutional fight over the right to campaign for candidates while maintaining 501(c)(3) tax-exemption, I do not see the case as clearly favoring the government's presumed position.


September 17, 2008 in Church and State, In the News | Permalink | Comments (2) | TrackBack (0)

Hurricane Ike's Impact on Houston and Midwestern Educational Facilities

On September 17, 2008, the Chronicle of Higher Education published a couple of interesting articles about the impact of Hurricane Ike on educational institutions in Houston and throughout the Midwest.

Regarding Houston impacts, the article explains that:

Campus officials say it could be a month or more before the hospital resumes regular operations and is able to bring all of its students and residents back. In the meantime, administrators are working on temporary placements for 557 medical residents and about 2,400 medical, nursing, allied-health, and graduate students. The hospital has about 12,000 employees, 8,000 of whom work in Galveston.


Department heads are working on finding temporary placements where medical residents and clinical students can practice for at least a month. Even if the hospital reopens sooner, it won't have the patient base those doctors-in-training need. A resident in general surgery, for instance, has to perform a certain number of gallbladder operations, and a resident in ophthalmology needs to operate on a certain number of cataracts.

For the entire article about Houston impacts, see "Damaged Medical School in Galveston Looks for Places for Its Students" in the September 17, 2008, issue of the Chronicle of Higher Education. 

Regarding Midwest impacts, the article explains:

Nearly 1.5 million households in those three states were still without power, according to the U.S. Department of Energy.  Other states struggling to recover from Ike-related damage included Arkansas, New York, and Pennsylvania. The governors of Illinois, Kentucky, and Ohio declared states of emergency this week.

For the entire article about Midwest impacts, see "Midwest Colleges Struggle to Bounce Back From Hurricane's Fury" in the September 17, 2008, issue of the Chronicle of Higher Education.


September 17, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Gerzog Posts "From the Greedy to the Needy"

Professor Wendy Gerzog (Baltimore) posted on SSRN's Nonprofit and Philanthropy Law Abstracting Journal an abstract of her forthcoming Oregon Law Review article which she describes as "propos[ing] a new way to examine 'quid pro quo' charitable gifts and the justification for the charitable deduction."  Here is the abstract:

In some instances when the taxpayer makes a charitable donation, the loss of revenue to the government, and the corresponding gain to the taxpayer, far exceeds the benefit to the charity. Some of these losses may be generated by government sanctioned complex transactions and even government created devices. This article analyzes various charitable donations in terms of the dollars gained by the taxpayer, the dollars lost by the government, and the dollars received by the charity. After considering a sliding scale of benefits to the charities in light of the revenue losses to the government and taxpayer gains, the article makes some normative conclusions about whether the good a donor does justifies his currently available tax benefits and then proposes some solutions.


September 17, 2008 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 16, 2008

What About 403(b) and 457 Retirement Investments of Nonprofit Employees?

As many of you know, the financial markets are a mess these days.  The major newspapers are replete with various angles on the situation.  Like many of you who work for nonprofits, my employer also makes available to me and my colleagues a variety of 403(b) and 457 retirement savings vehicles.  Is there anything that we should be concerned about regarding our retirement savings?  I say it never hurts to take a close look at what you have and where you have it.  Ask PLENTY of questions.  Some of the major 403(b) and 457 providers have on their websites information about the stability of their particular retirement investment holdings: TIAA-CREF (; AIG Retirement (; Fidelity Investments (; and others.  Individual investors can monitor market performance at  If anyone has any thoughts about this issue, please let us know.


September 16, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

21 Indonesians Die Awaiting Charity Handouts As Part of Islamic Tradition

On September 16, 2008, the New York Times reports that 21 people died as nearly 10,000 people  awaited handouts that amounted to about $4.  the handouts are a part of an Islamic tradition during the holy month of Ramadan.  Hospital officials in the small Indonesian town reported that, in addition to the 21 dead, there were dozens of people treated for injuries - all of them women.  For the entire story, see "21 Indonesians Die in Stampede for Aid" in the September 16, 2008, issue of the New York Times.


September 16, 2008 in In the News, International | Permalink | Comments (0) | TrackBack (0)

A Questionable Public Television Pitch Made to Nonprofit Groups

On August 16, 2008, the New York Times reports about a questionable public television pitch that is directed solely at nonprofit groups.  In order to take advantage of the opportunity, the nonprofit organization is required to put up over $20,000.  Here is an excerpt from the article:

Community foundations and universities around the country are raising questions about a sales pitch being directed their way this summer.

Representatives of Vision Media Television, a production company based in Boca Raton, Fla., have been calling leaders of such organizations over the last few months with an offer to be part of a television program with Hugh Downs, the retired broadcaster, as its host.

The caller suggests that the production will be shown on public television and major cable news stations. But the initial pitch, foundation representatives said, does not mention that the production would cost the university or foundation $20,000 or more.

PBS, the national public broadcasting program provider, has had a warning on its Web site for the last three years that it “is not associated with and does not endorse, distribute programming for, review underwriting for or otherwise have any business relationship” with a list of productions companies that includes Vision Media Television.

For the entire article, see "Company Pitches a Television Production, and Nonprofit Groups Are Wary" in the August 16, 2008, issue of the New York Times.


September 16, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Eighth Circuit Rules that Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Violates Attorneys' Free Speech

On September 4, 2008, the Eighth Circuit ruled in Milavetz, Gallop & Milavetz v. U.S. that a provision of the Bankruptcy Prevention and Consumer Protection Act of 2005, 11 U.S.C. sec. 526(a)(4), is unconstitutionally overbroad as applied to attorneys who are also "debt relief agencies."  Here is an excerpt from the opinion:

Plaintiffs assert that the prohibition against advising an assisted person . . . to incur more debt in contemplation of bankruptcy violates the First Amendment. The parties disagree as to the level of scrutiny we apply to the constitutional analysis of this limitation on speech.

. . .

[R]egardless of whether the government's interest in prohibiting the speech was legitimate (Gentile standard) or compelling (strict scrutiny standard), [sec.] 526(a)(4) is unconstitutionally overbroad as applied to attorneys falling within the definition of debt relief agencies because it is not narrowly tailored, nor narrowly and necessarily limited, to restrict only that speech that the government has an interest in restricting. Instead, [sec.] 526(a)(4) prohibits attorneys classified as debt relief agencies from advising any assisted person to incur any additional debt in contemplation of bankruptcy; this prohibition would include advice constituting prudent prebankruptcy planning that is not an attempt to circumvent, abuse, or undermine the bankruptcy laws.  Section 526(a)(4), as written, prevents attorneys from fulfilling their duty to clients to give them appropriate and beneficial advice not otherwise prohibited by the Bankruptcy Code or other applicable law.

Importantly, the questioned provision, sec. 526(a)(4), does not apply to 501(c)(3) debt relief agencies because of a specific exemption at 11 U.S.C. sec. 101(12A)(B).For the entire text of the opinion, see Milavetz, Gallop & Milavetz, P.A. v. United States, No. 07-2405 (8th Cir.) (September 4, 2008).


September 16, 2008 in Federal – Judicial | Permalink | Comments (0) | TrackBack (0)

Monday, September 15, 2008

What if College Professors Charged Nothing for Textbooks and Made Them Available for Free Via the Internet?

In the September 15, 2008, issue of New York Times, there is an interesting article about the future of college textbooks sales.  Here is an excerpt from the article:

In protest of what he says are textbooks’ intolerably high prices — and the dumbing down of their content to appeal to the widest possible market — Professor McAfee has put his introductory economics textbook online free. He says he most likely could have earned a $100,000 advance on the book had he gone the traditional publishing route, and it would have had a list price approaching $200.

“This market is not working very well — except for the shareholders in the textbook publishers,” he said. “We have lots of knowledge, but we are not getting it out.”

. . .

In true economist fashion, he has allowed two companies, Lulu and Flat World Knowledge, to sell print versions of his textbook, with Lulu charging $11 and Flat World anywhere from $19.95 to $59.95. As he said on his Web site, he is keeping the multiple options to “further constrain their ability to engage in monopoly pricing.”

For the entire story, see "Don’t Buy That Textbook, Download It Free" in the September 15, 2008, issue of New York Times.


September 15, 2008 in In the News | Permalink | Comments (1) | TrackBack (0)

Sunday, September 14, 2008

Congress Likely to Tinker with the Charitable Deduction and Exemption Laws Next Year

On September 4, 2008, the Chronicle of Philanthropy reports that charities should be concerned about the fate of the charitable contribution deduction and other charity-friendly policies.  Here is an excerpt from the article:

No matter who wins November's elections, Congress will be looking for ways to rein in the country's enormous budget deficit and pay for new programs. Many states have been hit hard by the economic downturn and are looking for new revenue. Social-service charities are struggling to meet growing demand while big universities and arts groups report record gifts.

Sentiment is growing in both political parties to encourage "giving that will meet the enormous unmet human needs that are out there," says Dean Zerbe, a former top aide to Senator Grassley who is now national managing director for Alliant Group, in Washington. "It's difficult, it's going to take a real rethink to say, Can we define what is a charity?"

Diana Aviv, president of Independent Sector, an association of big charities and foundations, sees the writing on the wall. Last spring, she assembled 16 foundation and nonprofit leaders to form the Advisory Group on Defining the Charitable Sector. Its mission: to examine the roles of charities and foundations and the rationales for their tax exemptions, as well as the charitable tax deduction.

"We decided to take a deep and hard look at every aspect of nonprofit practice for the purpose of understanding whether the sector as we know it is the sector as it should be," she says.

The article also quotes our very own contributing editor, John Colombo:

John D. Colombo, professor of law at the University of Illinois, says he believes nonprofit hospitals have become such business-likeoperations that they probably should no longer be labeled "charitable." However, he adds, stripping them of their tax exemption cannot be done in isolation.

For the entire story, see "Paying it Forward - and Back: Nonprofit Leaders Worry as Congress Rethinks Tax Breaks for Donors and Other Charity Policies" in the September 4, 2008, issue of the Chronicle of Philanthropy.


September 14, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)