Saturday, February 2, 2008
The Chronicle of Philanthropy reports that:
The California Assembly on Tuesday approved legislation to require big foundations to disclose the composition of their boards and employees by race, gender, and sexual orientation, as well as information about the grants and business contracts they award to organizations that help specific minority groups.
The bill was supported by the Greenlining Insitute, an interesting nonprofit out of San Francisco whose goals, according to their website, is to "increase low-income and minority participation in civic participation and policy-making that result in equitable policies that improve the quality of life for all communities." The history and full text of the bill is available here. In the meantime, an op-ed in the Los Angeles Times has condemned the bill as simply too much:
Imagine if the Bush administration proposed that the Internal Revenue Code be amended to require that nonprofit foundations disclose the makeup -- including gender, race, ethnicity and sexual orientation -- of their boards of directors, their trustees, their employees and of all the organizations that receive grants.
The criticism would be swift and unambiguous: This is absurdly intrusive and a violation of privacy. Foundations would organize to oppose any such legislation. The ACLU would not be far behind.
Yet in California, an equally intrusive measure, AB 624, sailed through the Assembly on Tuesday with barely a whisper of protest. The bill, introduced by Assemblyman Joe Coto (D-San Jose) at the behest of the Greenlining Institute, aims to remedy what the institute describes as the lack of diversity in the world of foundations.
Yeah, this may very well be a case of overreaching, particularly since it is applied to a people who, by and large, can be charitably described as a buncha do-gooders. My head says the bill will likely divert sources from good causes to a foundation's overhead. And the objections raised by the LA Times are, as an intellectual matter, indisputable. But, as my father used to say whenever people perjoritively refer to efforts at increasing diversity as "quotas," . . . "when the quota was zero, nobody complained!" It may be a good idea to ensure that Private Foundations not run afoul of Bob Jones University but this bill probably needs some serious retrofitting.
By the way, thanks to Dien Yuen (a picture of humility) for bringing this to my attention. Check out her blog on Asian American Philanthropy. There is a really good post today entitled "5 Challenges Advisors and Gift Planners Face When Working With Asian Donors".
After my rant a few days ago regarding the futility of the ban on political activity by religious organizations, I thought it might be appropriate to draw your attention to two very well written scholarly articles debating the point in better terms than I presented. Donald Tobin recently published "Political Campaigning by Churches and Charities: Hazardous for 501(c)(3)s, Dangerous for Democracy, 95 Geo. L. J. 1313 (2007). Here is the abstract from his article:
Nonprofit section 501(c)(3) organizations are prohibited from participating or intervening in an election on behalf of a candidate for public office. Despite this prohibition, 501(c)(3) tax-exempt organizations have become increasingly active in political campaigns. Many organizations are either ignoring the political campaign ban or are using “issue discussion” or “lobbying” as a means of promoting candidates and testing the limits of the prohibition. Current scholarship surrounding the political campaign ban argues that the ban is either unconstitutional or inappropriate as a matter of public policy. This article argues that the ban is both meritorious and constitutional. It argues that taxpayer subsidized section 501(c)(3) organizations should not be permitted to intervene in political campaigns and that allowing them to do so will pose significant risks for the democratic system in the United States. It further argues that enforcement efforts with regard to the political campaign ban should be made public and delegated to an independent commission, outside the IRS, charged with enforcing campaign related prohibitions in the Internal Revenue Code.
I am willing to concede, for the sake of argument, that the ban may have merit. But then so too would a ban on 527 organizations have merit. Shoot, banning the media from incessantly reporting on Britney Spears has merit. My objection is that not all things meritorious are appropriate for legislation. My bias is showing, I know. This post is supposed to simply direct our dear readers to a more thorough discussion than that provided in my virtual sound bite. The other side of the debate is represented in Johnny Rex Buckles' (what a great name, he shoulda been alive during the old western days! ) forthcoming Richmond Law Review article, Is The Ban on Participation in Political Campaigns By Charities Essential to Their Vitality and Democracy? A Reply to Professor Tobin. Here is Buckles' abstract:
Religious and other charitable organizations are described in section 501(c)(3) of the Internal Revenue Code only if they do not participate or intervene in any political campaign on behalf of (or in opposition to) a candidate for public office. A charity that engages in such political campaign activity forfeits its federal income tax exemption and its ability to receive donations that are deductible by donors in computing their federal taxable income. The two-fold penalty effectively prohibits many charities from supporting or opposing political candidates. In a recent article, Professor Donald Tobin argues in favor of this effective ban by asserting that removing it would threaten the American democratic system and the vitality of charitable organizations. This Paper responds to Professor Tobin's thesis. This Article explains why his arguments do not establish that the ban on political campaign participation by charitable organizations is essential (1) to protect the vitality of the charitable sector in general, and churches in particular, or (2) to maintain a properly functioning democracy in the United States. However, this Article also explains why unfettered intervention in political campaigns by charities would pose some problems. This Article concludes that some electioneering by charities is proper, and that alternatives to the ban would better address the most compelling concerns raised by Professor Tobin.
I've self-appointed myself final and ultimate arbiter in chief between these two and will have more to say about it later. I do want to commend both articles to those who are interested. They are both thoroughly researched, cited, and very smoothly written.
Houston We Have a Problem: One Laptop Per Child Founder Creates Commercial Start-up with Tax Exempt Technology
We previously blogged the saga of Intel vs. One Laptop Per Child (OLPC). OLPC is a 501(c)(3) whose charitable goal was to develop and distribute very low cost laptop computers to children in poor and developing countries. After Intel pulled out, a move that an L.A. Times editorial likened to a virtual knife in the back, it seemed as though OLPC would fold its tent and go home. In fact, in a recorded interview, Nicholas Negroponte (one of the founders of OLPC) seemed to throw in the towel, saying that the idea of marketing low cost laptops to children in poor countries "just didn't work." A recent Boston Globe article, though states that one of the co-founders of the technology had founded a commercial start-up to do that which OLPC could not do:
The scientist who designed a notebook computer for poor children that is being produced and sold by a nonprofit foundation has set up a company to commercialize the technology with a goal of producing a $75 laptop computer. Mary Lou Jepsen, who left her post as chief technology officer of the One Laptop Per Child Foundation at the end of last year, said on a website for her company, Pixel Qi, that her firm is "a spin-out" from the nonprofit group. Jepsen invented a low-cost, low-power, sun-readable screen while at the foundation from 2005 to 2007. She also co-invented its power-management system.
Did you catch those last two sentences? That's public technology she will be marketing. The inventor -- apparently acting as an employee or agent of a 501(c)(3) when doing the inventing -- has acquired the technology (or the use thereof) and will now use it to open her own commercial [i.e., profit-paying] enterprise. Granted, the goal is very laudable but the tax lawyer in me wonders whether this is proper under IRC 501(c)(3). Let's boil this scenario down to a nice law school hypothetical, shall we? Organization applies for and receives tax exempt status as a "scientific" or "charitable" organization. It develops ground-breaking technology that does nobody any good unless that technology is transferred to public benefit. See generally Treas. Reg. 1.501(c)(3)-1(d)(5) (stating, inter alia, that science is in the public good only if knowledge acquired is somehow transferred to the market place). All fine and good. So after a few years, the tax supported entity discovers new technology. For whatever reason, its first efforts at technology transfer fail. Can an insider -- assuming Jepsen is an insider -- take the technology developed by the tax subsidized entity and use it for profit-making purposes? It would be analogous, it seems to me, for a nonprofit old folks transportation company to give away its vans and trucks to an employee who plans to start a commercial delivery company. Even if the insider paid market rates for the technology developed within the 501(c)(3) organization, there still seems to be problems with allowing the insider exclusive or free rights to that technology. The new commercial venture, by the way, states on its dot.com [not "dot.org" mind you] web site that it "will give OLPC products at cost, while also selling sub-systems and devices at a profit for commercial use." Hmmmmmm. Technology transfer is perfectly consistent with tax exempt status under 1.501(c)(3)-1(d)(5), but the individual or company exploiting tax exempt subsidized technology must pay market rates (usually via a royalty to the tax exempt organization). In addition, a 501(c)(3) that intends to fold can't just divide its assets up amongst its employees. I sure hope OLPC and Dr. Jepsen consulted a tax lawyer.
The broader point here relates to the current rush to "commercialize" charitable activities. I'm fine with that too. But there is a public subsidy that must be dealt with whenever a tax subsidized entity intends to go commerical in whole or in part.
Friday, February 1, 2008
Darryll K. Jones has published Third Party Profit-Taking In Tax Exemption Jurisprudence, 2007 B.Y.U. Law Rev. 977 (2007). The article argues that the present antipathy to non-insiders getting rich from their market based transaction with exempt organizations -- e.g., physicians who enter into joint ventures with nonprofit hospitals or home builders who fund downpayment assistance programs -- unnecessarily prevents the accomplishement of charitable needs that are also left unmet by government or the for-profit market. The article concludes that it is ridiculous to prohibit necessary, market-based transactions under the guise of the private benefit doctrine just because the transaction results in conspicuous wealth to a vendor, without whose participation the charitable goal would not be met. Ok, maybe the picture linked to my name is not really me (but did I say it was me?).
In doing some background reading on the UK Charity Commission for the most recent prior post, I came upon this tidbit: The head of the UK Charity Commission, Ugandan born Dame Suzi Leather, aka "Sexy Suzi" according to British Tabloids, has a foot fetish. She thinks feet are beautiful. Hmmmmm. If she ever got a look at my own buzzard claws, she might change her mind.
The UK Charity Commission delayed final approval of new guidance on the extent to which UK charities may engage in policital and campaign activities. The Commission delayed final approval only because some members wanted to "wordsmith" the document to better convey the commission's intended meaning. It seems clear though that the UK approach is vastly different from the approach in the United States. IRC 501(c)(3) very clearly frowns on charities taking positions on issues that are the subject of legislative action and, of course, entirely prohibit campaign activities. Compare that approach to the summarized approach in the UK Charity Commission's revised guidance:
To be a charity an organisation must have exclusively charitable purposes whichare for the public benefit. An organisation will not be charitable if its purposes arepolitical. • Campaigning and political activities are legitimate and valuable activities for charities to undertake. •
To be a charity an organisation must have exclusively charitable purposes whichare for the public benefit. An organisation will not be charitable if its purposes arepolitical.
Campaigning and political activities are legitimate and valuable activities for charities to undertake. •
•A charity is free to become involved in campaigning and in political activities where this involvement will further or support its charitable purposes. Aside from political campaigning, a charity can legitimately further
its purposes through campaigning activity alone. Political campaigning, or political activities, however, as defined in this guidance, can be undertaken by a charity only in the context of supporting its charitable purposes.
There may be situations where carrying out political activity is the best way for trustees to support the charity’s purposes. A charity may choose to focus most, or all, of its resources on political activity for a period. The key issue for charity trustees is the need to ensure that this activity is not, and does not become, the reason for the charity’s existence.
Charities can campaign for a change in the law or policy where such change would support the charity’s purposes. However a charity cannot exist for a political purpose, which is any purpose directed at furthering the interests of any political party, or securing or opposing a change in the law or policy either in this country or abroad.
In the political arena, a charity must stress its independence and ensure that any involvement it has with political parties is balanced. A charity must not give support or funding to a political party, nor to a candidate or politician.
A charity may give its support to specific policies advocated by political parties if it would help achieve its charitable purposes. However, trustees must not allow the charity to be used as a vehicle for the expression of the political views of any individual trustee or staff member (in this context we mean personal or party political views).
As with any decision they make, when considering campaigning and political activity charity trustees must carefully weigh up the possible benefits against the costs and risks in deciding whether the campaign is likely to be an effective way of furthering or supporting the charity’s purposes.
•When campaigning, charity trustees must comply not only with charity law, but other civil and criminal laws that may apply. Where applicable they should also comply with the Code of the Advertising Standards Authority.
The UK Charities Commission was established by the UK Charities Act of 2006, the full text of which can be obtained via the prior link.
Thursday, January 31, 2008
Some time ago, we reported on the hearing regarding veterans' charities before the House Committee on Oversight and Government Reform. The video of one of the hearing involving Roger Chapin of "Help Hospitalized Veterans" is now available.
Americans United For Separation of Church and State (AUSCS) today called on the IRS to investigate the voter guides of two religious nonprofits. Here is the opening statement from the groups press release:
The Internal Revenue Service should investigate two prominent tax-exempt Religious Right groups that produced biased voter guides for the presidential election, according to Americans United for Separation of Church and State.
AUSCS. AUSCS has previously called for the investigation of a church that allegedly endorsed Obama. In today's complaint, the organization asserts that the voter guides published by the American Family Association and Wallbuilders are [in the case of the AFA voter guide] "clearly constructed to persuade the group's audience, which is made up almose exclusively of conservative evangelical Christians, to cast ballots for Mike Huckabee" and [in the case of Wallbuilder's voter guide,] "intentionally designed to promote the candidacy of Mike Huckabee." The complaint against AFA is available here and the complaint against Wallbuilders is available here. Both sources provide links to the organizations' allegedly improper voter guides. From the looks of things last night, Huckabee could use all the help he can get, frankly. But of course, federal law prohibits this sort of help [if the allegations are true]. I've been meaning to write an op-ed of sorts ever since we posted the saga regarding the Becket Fund's open challenge to the IRS to sanction a Wisconsin Church for an openly poltical sermon. AUSCA condemned that action as a publicitiy stunt. I actually think there is a larger objection. Pretty much anybody with any interest in these matters acknowledges in their heart of hearts that the prohibition against campaign intervention is unenforceable, if not unconstitutional, as applied to places of worship. Thus, the Becket Fund "publicity stunt" actually demonstrated how the prohibition breeds disrepect for the law. Why should we maintain a prohibition in the law that nearly everyone -- even the IRS for Christ's sake -- agrees cannot be enforced!? Perhaps it is a good thing in theory to prohibit all nonprofits from campaign intervention, but not everything can be achieved by law. So long as we maintain a prohibition that is clearly unenforceable, we stoke the fires of disrespect that seep into other areas of the code and for the IRS. Now, I know that some very smart people have proposed ways to police the prohibition even against houses of worship. But those efforts are bound to fail, so long as we recognize the right to freedom of religion -- religion which, as stated in many a judicial opinion is inherently intertwined with governance of the masses. Religion inherently involves the governance of the masses so its religious to talk about government. Sheeesh, we should get over it already and let religious organizations say whatever they want to say! We only feed righteous indignation by pretending they are doing something wrong. That's just my two cents. I just haven't had time to write a more scholarly op-ed piece.
Wednesday, January 30, 2008
Wendy Gerzog has published an article discussing an article that might be categorized under the headline "No good deed goes unpunished" or maybe "Tax traps for the unwary." Here is the intriguing opening paragraph:
Now that we have finished the season of gift giving, which, for the tax-minded, includes the season of tax savings through charitable gifts, we should remember a few words of caution. When giving both to your family and to your charity, you must follow the rules carefully to qualify for a charitable deduction. Those who believe you really don’t have to be vigilant until after the audit letter arrives should rethink the costs of procrastination. Such is the sad story of Anthony J. Tamulis, a priest who wanted to leave most of his fortune to the Roman Catholic Diocese of Fall River, Mass
The rest of the article is as interesting and instructive as the opening paragraph.
As we reported yesterday, the President's state of the union address contained a plea to Congress that it formally enact provisions of law allowing exempt religious organizations to receive direct grants from the federal government in support of their secular social welfare activities. Today, the President continued to talk about his proposed "Faith Based and Community Initiative Act" at a religiously sponsored social welfare program known as Jericho. The White House issued a fact sheet on the topic, in which it touted the successes attributable to government funding of religious organizations pursuing secular social welfare goals:
FBCI Has Led A Quiet Revolution In The Way Government Addresses Human Need
The FBCI works to place locally-rooted solutions at the center of Federal efforts to help those in need. The Initiative has:
- Removed barriers and launched innovative programs to enable the government to partner with small, community-based nonprofits as never before.
- Established a level playing field for faith-based organizations, and set clear, Constitutional guidelines for their use of public funds.
- Delivered in-person training to more than 100,000 social entrepreneurs, by teaching them how to better track their outcomes, write grants, and develop other key skills that help their organizations maximize impact for the people they serve.
Federal competitive awards are expanding the good work of both faith-based and community organizations across America and beyond.
- In 2006 alone, the Federal government provided more than 18,000 direct, competitive awards to America's nonprofit organizations to aid the homeless, at-risk youth, recovering addicts, returning offenders, AIDS victims, and others.
- These grants totaled more than $14.7 billion to boost services to people in need. Faith-based organizations were welcomed as a central part of this work, winning more than 3,000 grants in 2006 totaling nearly $2.2 billion.
To see a video replay of the President's entire comments regarding the "Faith Based and Community Initiative" at a function in Baltimore earlier today, click here.
The Congressional Research Service has issued a legal analysis of the proposed Conservation Easement Tax Credit in the 2007 Farm Bill. Download it here: Download conservationeasements.rtf . Deductions for the grant of a conservation easement are particularly attractive because the property owner gets the deduction under IRC 170(h) even though she may still own the property subject to the easement. A credit, of course, is worth more than a deduction. Notice 2004-41 gives more background on conservation easements and also explains a potentially abusive transaction. Here is the CRS conclusion with regard to the proposed credit:
Section 12204 of the Food and Energy Security Act of 2007 (H.R. 2419, as passed by the Senate) would create a new tax credit for taxpayers who agreed to protect a qualified species for a specified amount of time under an approved plan. The intent of the proposed credit is that, in exchange for forfeiting the development right to property, the landowner will receive a tax benefit, the habitat of endangered or threatened species will be protected, and the public will have the benefit of conserved property and protected species. While environmentalists and landowners appear united in wanting a method of conserving property in exchange for a tax credit, some aspects of this proposed legislation could complicate the public benefit intended. Those factors include an uncertain enforcement scheme in which several agencies could be involved, difficulty in monitoring compliance due to the scope of the program and uncertain provisions allowing access to the property, and the temporary nature of some of the protections provided.
We continue to monitor the Senate Finance Committee's scrutiny of college and university endowment spending. For our most recent previous blog on the topic see Grassley Probes University Riches. That post referred to Senator Grassley's inquiries to over 136 colleges and universities with endowments greater than $500 million. The actual letter, containing 11 detailed questions regarding endowement spending and financial aid, is now available here. A recent study by the National Association of College and University Business Officers, detailing double digit growth in endowments, is available here. That link will also take you to previous informative studies on the topic.
What Does Bill Gates' "Creative Capitalism" Have in Common With the Thinking of Nobel Peace Prize Winner Muhammad Yunus?
On January 30, 2008, the New York Times published an interesting "tid bit" on the relationship between Bill Gates' "creative capitalism" speech (previously blogged here) and the ideas of Nobel Prize Winner Muhammad Yunus. Here is an excerpt from the story:
Bill Gates’s bold Davos challenge to the world’s capitalists last week should have come with equally bold footnotes.
“There are billions of people who need the great inventions of the computer age,” he asserted. “Breakthroughs change lives only where people can afford to buy them.”
Conspicuously missing from the appeal, which asserted that human nature is not just driven by greed but also by concern for our fellow beings, was any reference to the work and thinking of the Nobel Peace Prize winner Muhammad Yunus.
The microfinance innovator, who is known as the “banker for the poor,” recently wrote a book, “Creating a World Without Poverty: Social Business and the Future of Capitalism,” that foreshadows Mr. Gates’s newfound social philosophy.
For the entire article, go to "Many Are Already at Work on Fulfilling Gates’s Vision" in the January 30, 2008 New York Times. For more information about the work of Muhammad Yunus, you can visit the website of a nonprofit that he supports, Results, Inc., with particular focus on this press release by Results.
On January 30, 2008, the New York Times contained an article about how philanthropists are funding think tanks that are, in turn, having an real impact of Presidential campaigns. Here is an excerpt from the article:
The research institutions say the boom is fueled by three major factors: big money from Wall Street, a post-Sept. 11 sense that foreign policy matters and anger at the Bush administration.
“While President Bush was bad for the world, he was good for our business,” said John Podesta, the chief executive of the Center for American Progress, a liberal research institution financed by, among others, the investor George Soros and his Open Society Institute. Mr. Podesta’s annual operating budget is now $23 million after barely four years in business.
But Mr. Podesta’s group is hardly the only one flush with cash. Operating budgets are up at all of Washington’s top two dozen research organizations — liberal, conservative or bipartisan — and philanthropy is feeding them. As the very richest Americans have given away record amounts of money, the organizations have become prestigious and relatively well-priced recipients of largess.
For the entire article, see "Research Groups Boom in Washington" in the January 30, 2008, New York Times.
Tuesday, January 29, 2008
Some seven or eight years ago, the President proposed the Community Solutions Act (aka, the Faith Based Initiative or "Charitable Choice"), under which the government would be allowed to make direct grants to nonprofit religious organizations to assist them in their secular, social welfare activities. In last night's State of the Union address, President Bush sought to reinvigorate the effort by specifically extolling the Congress to pass the Faith Based Initiative. Here is the President's brief mention of the issue:
In communities across our land, we must trust in the good heart of the American people and empower them to serve their neighbors in need. Over the past seven years, more of our fellow citizens have discovered that the pursuit of happiness leads to the path of service. Americans have volunteered in record numbers. Charitable donations are higher than ever. Faith-based groups are bringing hope to pockets of despair, with newfound support from the federal government. And to help guarantee equal treatment of faith-based organizations when they compete for federal funds, I ask you to permanently extend Charitable Choice.
The Charitable Choice provisions of current law are today rather limited. See here for the HHS regulations pertaining to religious organization's receipt of federal funding. The whole idea seems a worthwhile effort even if, as noted by Justice Douglas' dissent in Walz v. Commissioner, 397 U.S. 664 (1970) there is simply no way to separate the religious and secular activities of religious organizations. The reason I think it is nevertheless ok, is that so long as grants and direct subsidies for secular activities are dolled out in a non-discriminatory fashion, (a large order, I readily admit, but not impossible to achieve) there will be no danger of government "establishing" religion. In addition, there is also little danger of government regulating or entangling itself in religion because those religious organizations that want nothing to do with government need not apply for government grants. For more on the debate, see today's op-ed piece in the New York Times. For more pros and cons on the 2001 version of the Faith Based Solutions Act, see here and here and here.
Following up on the recent blog post about defining "charity" in the U.S. and abroad, on January 29, 2008, the San Francisco Chronicle reported that two nonprofit hospitals in San Francisco were recently criticized for delivering little "charity care" to its patients. Here is an excerpt from the article:
San Francisco's five nonprofit hospitals received $79 million last year in tax breaks intended to compensate them for providing free care to the city's poor and uninsured, but they spent just $16 million on charity care, according to a new city report.
California Pacific Medical Center, with campuses in Laurel Heights, Pacific Heights and the Castro, was responsible for the vast majority of the disparity, the report by the city Department of Public Health said. California Pacific received close to $70 million in tax breaks - $67 million in state and federal income tax exemptions and $2.8 million in local property tax exemptions - while spending $5.2 million on charity care, the report said.
. . .
Kevin McCormack, California Pacific spokesman, countered that the hospital's three campuses are located in wealthy neighborhoods where poor and uninsured people aren't likely to seek treatment.
"Those neighborhoods are not ones where you have a large low-income community," McCormack said. "We still have the responsibility, but ... it's not asked of us as much."
For the entire article, see "2 hospitals got millions, spent little on charity" in the January 29, 2008, San Francisco Chronicle.
Monday, January 28, 2008
The Economic Times (India) reports that India is considering adopting new legislation that would narrow the definition of charitable. Earlier today, I reported on a seeming international trend to restrict the types of organizations who obtain charitable tax exemption. The article provides further evidence:
NEW DELHI: Charity sees the need, not the cause, it is said. However, the government now wants to see the cause before extending tax benefits. It is examining a proposal to narrow the definition of charitable purpose to ensure only the trusts that carry out charitable activities are able to benefit from tax exemptions. dkj
NEW DELHI: Charity sees the need, not the cause, it is said. However, the government now wants to see the cause before extending tax benefits. It is examining a proposal to narrow the definition of charitable purpose to ensure only the trusts that carry out charitable activities are able to benefit from tax exemptions.
The Tulsa College of Law has started a new law clinic experience, called the "Social Enterprise and Economic Development (SEED) project, designed to give students real world experience with the organization and operation of nonprofit organizations. Here is a snippet from a recent online article.
[Professor Patience] Crowder said there is a trend among law schools to go “beyond the traditional notion of what lawyers are and what folks are familiar with, recognizing that once people graduate, practice is often very different from what they experienced in law school.”TU’s new clinic allows enrolled students to practice transactional law with small businesses, community groups and nonprofits as clients. Crowder said clinic students will do everything from tax-exempt applications to working with nonprofit organizations that have social entrepreneurship or business-minded missions.
We previously told you of the case regarding a Canadian nonprofit whose exempt status was suspended because it could not prove its claim that it existed to serve the needs of people living in poverty. The CRA (Canadian Revenue Agency) effectively suspended the tax exempt. The organization, "International Charity Association Network" challenged the suspension but the Canadian tax court recently rejected the challenge. Read more about it here.
A brief comment on the meaning of charity: Our sister Blog, Taxprof, reports this morning that the U.S. Census Bureau has released a report stock full of statistics regarding the extent to which tax policy can effect levels of poverty. You may recall that we previously reported that both the Supreme Court of Minnesota and the UK Charity Commission have, each in their own ways, taken a new look at the idea of "charity". The ironic thing is that two independent and separately convened groups have both come to the conclusion that "charity" necessarily involves relief of the poor and anything that excludes relief of the poor, though it may be worthy and good, perhaps is not charity. It is something else worthy and good but not charity deserving of our highest form of tax support (exemption!). The operation of expensive private schools, exclusive opera houses and the like are no doubt good for everyone but their direct benefits are dispersed rather regressively, are they not? Anyway, that two independent bodies from both sides of the Atlantic would make the same seemingly "radical" suggestion might suggest a trend towards a return to the more traditional idea of charity. I'm not so sure that relief of the poor ought to be the penultimate criterion (there are many exempt organizations that simply pursue a social good not implicitly related to relief of the poor -- such as environmental groups) but In an age of increasing income disparities and vastly proliferating exempt organizations sitting on piles of money, it is worth expressing some indignation that wealthy organizations exclusively (save for a few tokens here and there) serving the admittedly legitimate and underserved wants (not "needs"), i.e., art and leisure, of wealthy patrons are nevertheless subsidized by tax exemption.
I asked my exempt organizations students about this and, after much discussion, we have solved the world's problems in this regard. There should be a special preferred class of exempt organizations comprised exclusively of those organizations that actually and directly provide relief to the poor. All other organizations should be treated separately, they said.