June 5, 2009
Brown University Fights Back: $50 Million in PILOT Payments Over Twenty Years is Enough
The June 4, 2009, issue of Chronicle of Higher Education reports that Brown University is objecting to the prospect of paying more than its "fair share" for local government services in the form of either higher taxes on nonprofits or a per student fee. Here is an excerpt from the article:
Ms. [Ruth J.] Simmons [(Brown's president)], in her letter yesterday to Brown students, alumni, and faculty and staff members, said university officials understood “the city’s need to make tough decisions to balance its budget.” But the university has also had to make sacrifices and difficult choices, she said, including budget reductions, layoffs, and salary and hiring freezes. Brown’s leaders “would be loath to ask the university community to shoulder even greater sacrifices,” she wrote, “particularly not our students and their families, who work hard to plan and save for higher education.”
For the full article, see "Brown U. Already Pays Its 'Fair Share,' Its President Says as City Asks for More"in the June 4, 2009, issue of the Chronicle of Higher Education. Also, for the full text of Brown's president's letter to the city of Providence, go here: http://www.brown.edu/Administration/President/letters/2008-2009/2009-06-legislation.html
Obama Nominates Former Republican Congressman to Head National Endowment for the Humanities
The Chronicle of Higher Education reports that President Obama has nominated a former Republican Congressman from Iowa to head the National Endowment for the Humanities. Here is the official June 3, 2009, White House press release:
WASHINGTON – Today, President Barack Obama announced his intent to nominate former Republican Congressman Jim Leach as Chairman of the National Endowment for the Humanities.
President Obama said, "I am confident that with Jim as its head, the National Endowment for the Humanities will continue on its vital mission of supporting the humanities and giving the American public access to the rich resources of our culture. Jim is a valued and dedicated public servant and I look forward to working with him in the months and years ahead."
President Obama announced his intent to nominate the following individual today:
Jim Leach, Nominee for Chairman, National Endowment for the Humanities
Jim Leach served as a member of the U.S. House of Representatives for the state of Iowa for 30 years. He founded and co-chaired the Congressional Humanities Caucus, which is dedicated to advocating on behalf of the humanities in the House of Representatives and to raising the profile of humanities in the United States. The Caucus worked to promote and preserve humanities programs and commissions such as the Historical Publications and Records Commission. Mr. Leach and his co-founder, Rep. David Price, received the Sidney R. Yates Award for Distinguished Public Service to the Humanities from the National Humanities Alliance in 2005. During his tenure in Congress, Mr. Leach also served as Chairman of the House Committee on Banking and Financial Services (1995-2001), a senior member of the House Committee on International Relations and Chairman of the Committee’s Subcommittee on Asian and Pacific Affairs (2001-2006). In addition, Mr. Leach is a member of the Council on Foreign Relations, the Vice Chairman of the Century Foundation’s Board of Trustees and has served on the boards of the Social Sciences Research Council, ProPublica, the Carnegie Endowment for International Peace and the Kettering Foundation. Since leaving Congress in 2007, he has taught at Princeton University and served as the interim director of the Institute of Politics at Harvard University’s John F. Kennedy School of Government.
June 4, 2009
Issue #5 in Obama's Cairo Speech Today: Religious Freedom and Charitable Giving
Issue number five in Obama's speech today in Cairo, Egypt dealt with religious freedom and charitable giving. Here is an excerpt from the speech:
The fifth issue that we must address together is religious freedom.
Islam has a proud tradition of tolerance. We see it in the history of Andalusia and Cordoba during the Inquisition. I saw it firsthand as a child in Indonesia, where devout Christians worshiped freely in an overwhelmingly Muslim country. That is the spirit we need today. People in every country should be free to choose and live their faith based upon the persuasion of the mind, heart, and soul. This tolerance is essential for religion to thrive, but it is being challenged in many different ways.
Among some Muslims, there is a disturbing tendency to measure one's own faith by the rejection of another's. The richness of religious diversity must be upheld - whether it is for Maronites in Lebanon or the Copts in Egypt. And fault lines must be closed among Muslims as well, as the divisions between Sunni and Shia have led to tragic violence, particularly in Iraq.
Freedom of religion is central to the ability of peoples to live together. We must always examine the ways in which we protect it. For instance, in the United States, rules on charitable giving have made it harder for Muslims to fulfill their religious obligation. That is why I am committed to working with American Muslims to ensure that they can fulfill zakat.
Likewise, it is important for Western countries to avoid impeding Muslim citizens from practicing religion as they see fit - for instance, by dictating what clothes a Muslim woman should wear. We cannot disguise hostility towards any religion behind the pretence of liberalism.
Indeed, faith should bring us together. That is why we are forging service projects in America that bring together Christians, Muslims, and Jews. That is why we welcome efforts like Saudi Arabian King Abdullah's Interfaith dialogue and Turkey's leadership in the Alliance of Civilizations. Around the world, we can turn dialogue into Interfaith service, so bridges between peoples lead to action - whether it is combating malaria in Africa, or providing relief after a natural disaster.
For the text of the entire speech, go to http://www.huffingtonpost.com/2009/06/04/obama-speech-in-cairo-vid_n_211215.html
Attorney Kenneth H. Ryesky publishes "Honorary Board Membership, Real Tax Liability: Limits to Tax-Exempt Organization Honorary Board Member Immunity Under Internal Revenue Code § 6672"
Attorney Kenneth H. Ryesky published "Honorary Board Membership, Real Tax Liability: Limits to Tax-Exempt Organization Honorary Board Member Immunity Under Internal Revenue Code § 6672" in the Akron Tax Journal. Here is the introduction:
Well over half of the Internal Revenue Service's (IRS's) total revenue collections are taxes withheld from by employers from their employees' wages and salaries. To ensure actual collection by the government of the withheld taxes, the Internal Revenue Code imposes personal liability upon the individuals responsible for withholding and paying over the taxes. The withheld monies are commonly known as "trust funds." In 1996, as part of the Taxpayer Bill of Rights 2 (hereinafter referred to as "TBOR2"), Congress provided a safe harbor to protect honorary board members of charitable organizations from liability for trust funds.
Over the past few years, Congress and the Internal Revenue Service (and, for that matter, the state taxation, legislative and law enforcement authorities) have increased their scrutiny over the charities and other tax-exempt entities. 8 The resulting climate change in the charitable sector presents challenges and issues for those who actively involve themselves in charitable works.
This article will discuss the implications of the various governmental trends and initiatives upon the potential trust fund liability of tax-exempt organizations' honorary board members.
Professor Sophie Smyth Posts "World Bank Grants in a Changed World Order: How Do We Referee this New Paradigm?"
Professors Sophie Smyth (Temple Law School and Contributing Editor to Nonprofit Law Prof Blog) posted on SSRN's Nonprofit and Philanthropy Law Abstracting Journal an abstract of her University of Pennsylvania Journal of International Economic Law article on entitled "World Bank Grants in a Changed World Order: How Do We Referee this New Paradigm?" Here is the abstract:
Pressures rippling through the universe of international development aid over the last fifteen years are transforming overseas development aid from a top-down, government-only endeavor into a multi-layered, multi-party endeavor which engages governments and citizens at every level. In addition, aid priorities now reflect the reality that global problems (such as climate change and HIV Aids) need serious attention and that developing countries need grant finance to address these problems and other problems that stem from abject poverty. For the reasons described in this Article, these changes have made overseas development aid heavily dependent on grants channeled through the World Bank (referred to, throughout this article as “World Bank grants”). This dependence poses challenges for an institution set up to provide loans, not grants, and accustomed to thinking of a grant as a form of gentleman’s agreement rather than a binding commitment which may range from millions to hundreds of dollars and which, whatever the amount, reflects a host of interests and voices that clamor to be heard. These challenges set the context for this Article’s inquiry.
This Article begins by describing the changes that recent trends in international development aid have wrought and the reasons those changes have placed the World Bank at center stage of development grant finance. It then focuses on the legal framework governing World Bank grants. Its key inquiry is the extent to which that framework facilitates and effectuates the goals and values that development grant finance aims to achieve. The article is not about whether grants for development aid achieve their targets (for example a reduction of greenhouse gas emissions in a recipient country or in the number of Aids-related deaths), an important question but one for another day. Rather, it is about whether such grants are negotiated, agreed to and delivered in a way that promotes the inclusive, participatory and collaborative approaches that recent trends in development aid hold paramount.
As a starting premise, this Article concedes that the legal framework governing development grant finance is unclear (an inevitable state of affairs given the legal of clarity surrounding the legal status of a grant in the national jurisdictions of most developed countries, and, therefore, in an international legal system built on principles drawn from them). In the face of this lack of clarity the terms of the grant agreements pursuant to which development grants are made, become the operative legal framework. And so, this Article looks to those terms to determine whether such grants comport with current thinking on optimal development approaches.
But not all terms of an agreement are created equal. This Article posits that in the world of development grant finance, the key elements of a grant agreement to evaluate in order to determine whether the agreement reflects an inclusive, participatory and collaborative approach are the elements that deal with the right of the grantor to cancel or suspend a grant and the provisions that apply when things go, or appear to have gone, wrong; namely the dispute resolution arrangements. The grantor is always in a position of power; dispute resolutions arrangements set the parameters within which such power may be exercised. For this reason, this Article examines the dispute resolution arrangements in World Bank grant agreements.
That examination reveals that World Bank grant agreements reflect a top-down, take it or leave it relationship that does not promote or facilitate inclusion, participation and grantor/grantee collaboration. This Article concludes with some suggestions for the principles that should guide the redress of these deficiencies and the re-design of the dispute resolution arrangements that is required.
Professors Clark C. Havighurst and Barak D. Richman Post "Mergers of Nonprofit Hospitals: Rectifying a (Serious) Failure of Antitrust Enforcement"
Professors Clark C. Havighurst (Duke) and Barak D. Richman (Duke) posted on SSRN's Nonprofit and Philanthropy Law Abstracting Journal an abstract of their working paper on antitrust and nonprofit hospital mergers entitled "Mergers of Nonprofit Hospitals: Rectifying a (Serious) Failure of Antitrust Enforcement" Here is the abstract:
Although federal judges have resisted giving due effect to standard antitrust principles in scrutinizing mergers of nonprofit hospitals, the presence of health insurance makes it especially important to oppose monopoly in health services markets. U.S.-style health insurance gives monopolist providers extraordinary pricing freedom, thus exacerbating monopoly’s usual redistributive effects. Significant allocative inefficiencies - albeit not the kind generally associated with monopoly - also result when the monopolist is a nonprofit hospital. Because it is probably impossible to undo past hospital mergers creating undue market power, we suggest another remedy: the application of antitrust rules against "tying" arrangements so that purchasers can more easily frustrate hospitals' profit-enhancing practice of overcharging for large bundles of services rather than separately exploiting each monopoly they possess.
June 3, 2009
FBI Investigating Charity with Rep. Murtha Links
CBS News reports that the FBI is investigating the Commonwealth Research Institute, an obscure charity that reported over $5 million in government grants in 2007 alone according to its Form 990(free registration required). The Institute is located in the hometown of Rep. John Murtha (D-Pa.), Johnstown, Pennsylvania. The article reports that while the Institute represented to the IRS in 2000 that it would publicize the results of 80 percent or more of its research, it has apparently not published any results despite having received tens of millions of dollars in government contracts. The 2007 Form 990 describes the organization as "a national resource committed to assisting industry and government achieve world class competitiveness." It is associated with Concurrent Technologies Corporation, also a charity and also based in Johnston, Pennsylvania, which received over $220 million in government grants in 2007 according to its Form 990.
(Hat tip: Chronicle of Philanthropy)
Minnesota Governor Signs Law Changing Property Tax Exemption Standard
The Chronicle of Philanthropy reports that Minnesota Governor Tim Pawlenty has signed a bill that changed the statutory criteria required for property tax exemption based on being an "institution of public charity." The legislation comes in the wake of a December 2007 Minnesota Supreme Court decision that found an organization cannot be considered an "institution of purely public charity" as that term is used in the Minnesota State Constitution unless it provides free or reduced cost goods or services. While the decision did not affect the property tax exemption of churches, hospitals, and schools, as exemption for such institutions is provided separately, it did affect other charities such as the day care center that was the subject of the decision. The new law provides that otherwise qualified organizations that charge fees for their goods or services can still qualify as an institution of purely public charity if either "a material number of the recipients of the charity receive benefits or services at reduced or no cost" or if "the organization provides services to the public that alleviate burdens or responsibilities that would otherwise be borne by the government." The Minnesota Council of Nonprofits, which led the campaign for the legislation, has announced it will work with the state Department of Revenue and local Assessors on implementing this new law.
UK Charity Tribunal Denies Catholic Charity's Request to Limit Adoption to Heterosexual Couples
Third Sector reports (free registration required) that the Catholic Care (Diocese of Leeds) has lost its appeal of a UK Charity Commission decision refusing the charity's request to amend its objects so as to limit adoption services to heterosexual parents under an exemption to the UK Equalities Act (Sexual Orientation) Regulations. The Charity Tribunal, a recently created body for hearing appeals from Charity Commission decisions, issued the decision rejecting the appeal. The Charity Commission decision also applied to the Father Hudson's Society, but that charity chose to withdraw its appeal. The decision appears to turn on a technical reading of the applicable regulations, and specifically whether the "adoption services" to be provided by the charity were "pure charitable activity" and so within the exemption, or went beyond that limited category and so were not within the exemption. The Tribunal found the latter to be the case. Because its decision meant that the discrimination was unlawful, the Tribunal appeared to avoid ruling on whether such discrimination would still be contrary to the "public benefit" requirement for UK charities even if such discrimination was not unlawful.
Rhode & Packel on Ethics and Nonprofits
Deborah L. Rhode (Stanford Law School) and Amanda K. Packel (Stanford Center on the Legal Profession) have published an article in the latest issue of the Stanford Social Innovation Review on "Ethics and Nonprofits." Here is the short summary:
Unethical behavior remains a persistent problem in nonprofits and for-profits alike. To help organizations solve that problem, the authors examine the factors that influence moral conduct, the ethical issues that arise specifically in charitable organizations, and the best ways to promote ethical behavior within organizations.
June 2, 2009
AIG Responds to Story About Former CEO's Swiss Foundation
In response to my previous blog post regarding AIG, I received the following email from Mark Herr in AIG's Media Relations department, which I reproduce here with his permission.
I’m assuming you are the contributor to the Nonprofit Law Prof Blog regarding the New York Post story of Sunday.
The Post story is wrong. AIG is not trying to claw-back money from charities. AIG isn’t trying to take anything from charities. It is seeking to recover from SICO more than $4 billion in value that belongs to AIG shareholders and American taxpayers. Instead of using transparent tactics to delay and confuse, Maurice “Hank” Greenberg should return the value he took inappropriately or defend his case in open court, for all to see and hear.
On June 15th Mr. Greenberg will finally have explain in open court why he caused Starr International Company, Inc. (“SICO”) to abscond with 290 million shares of AIG stock after he was forced out of the company for his refusal to cooperate with an accounting investigation.
From 1970 to Greenberg’s ouster in 2005, SICO was the compensation trust for AIG’s employees. The evidence at the trial will show that during his tenure as AIG’s CEO, Greenberg personally and repeatedly promised that SICO’s AIG shares would always be used only for the purpose of compensating current and future AIG employees. Yet Greenberg took the shares when he left AIG amid accounting scandals that marked the beginning of AIG’s downfall. AIG is asking the court to put those shares back into the hands of a reliable trustee who will put the shares to work for AIG and American taxpayers.
Now, with the trial only days away, Greenberg is trying to convince the world that SICO is a charity. SICO certainly wasn’t a charity before this lawsuit began. In fact, SICO only donated 0.005% of its worth. Only after AIG brought this action did SICO suddenly and cynically show charitable tendencies. Mr. Greenberg is dressing up SICO in a veneer of philanthropy just like a defendant who buys a new suit for the courtroom.
Please correct your blog.
AIG Media Relations
AIG Tries to Claim $490 Million from Former Chairman's Swiss Foundation
The NY Post reports that the mostly government-owned insurance company AIG is trying to claim 290 million AIG shares now held by the Starr International Foundation, which is apparentlybased in Switzerland. According to the article, the Foundation received the shares from Starr International Co., a company established to provide AIG retiring executives with bonuses that would not be reflected on AIG's books. The transfer occurred in 2005, when former AIG Chairman Hank Greenberg, who controlled the company and apparently controls the Foundation, was forced off the AIG board. The stock was then worth $20 billion, but now is only worth an estimated $490 million. AIG is also seeking the return of $27 million in grants made by the Foundation over the past three years to various charities.
California Sues Dozens of Charity Fundraisers
The Los Angeles Times reportsthat California has sued 17 telemarketers, 12 other organizations, and 53 individuals as part of the national crackdown on fraudulent charitable fundraising about which we previously blogged. Attorney General Jerry Brown is asking for remedies ranging from forcing the defendants to pay funds raised to legitimate charities, to pay civil penalties, and, in the case of allegedly fraudulent charities, to end operations. [The California Attorney General's website appears to be down, so I will link to its press release about these lawsuits when it becomes available.]
Pressure to Require Hospital Charity Care Continues
Even with the prospect of major health care reform looming, debate continues in both Congress and at the state and local level about requiring nonprofit hospitals to provide a minimum level of charity or give up some of the tax benefits they enjoy. At the federal level, the New York Times reports that the American Hospital Associationhas begun a major lobbying campaign to derail a bipartisan proposal for such a requirement that is currently in the Senate Finance Committee. According the AHA health reform website, its effort is driven by the belief that "[t]he 'community benefit' standard for tax exemption should be retained because it allows hospitals to meet the diverse needs of the different communities they serve. Formula-driven approaches prevent flexibility and innovation in responding to the unique needs of different populations."
The Boston Globe published a lengthy report that concludes nonprofit hospitals are receiving more from tax breaks than they are providing in charity care. It found that the ten leading Massachusetts hospital companies received an estimated more than $600 billion in tax benefits in 2007, as compared to free charity care provided that totaled substantial less than this amount. The report acknowledges, however, that some of the hospitals themselves provide a much lower estimate of the tax benefits they enjoy and that the charity care figure does not include other community benefits, such as medical education and research and community outreach programs. The article describes both the Senate Finance Committee deliberations and proposals by various state and local officials to require nonprofits, including hospitals, to pay more to support local government, whether in the form of payments in lieu of taxes (PILOTs) or through a partial repeal of their property tax exemption.
Beldon Fund Closes Doors - And Not Because of Financial Troubles
The New York Times reports that a major environmental foundation has shut down after a decades of work, just as its founder intended. The Beldon Fund has spent approximately $120 million supporting environmental organizations in five states and on environmental educational. From its founding in 1998 its founder, John Hunting of the Steelcase office furniture fortune, intended to spend down the foundation's initial $100 million endowment to address the pressing environmental issues. Its websitestill exists, but now with a list of lessons learned from its ten years of grantmaking with the knowledge of its limited lifespan. These lessons may be one of the most valuable aspects of its legacy, in that the article reports almost 12 percent of family foundations plan to end their existence at some point in the future and another 25 percent are at least open to the possibility of doing so. Examples of prominent foundations that have or plan to spend down their endowments include the Aaron Diamond Foundation, the John M. Olin Foundation, and the Atlantic Philanthropiesthat is planning to spend down its multi-billion endowment by 2016.
June 2009 Issue of International Journal of Civil Society Law Newsletter
The International Center for Civil Society Law has just published its June 2009 Newsletter. It is available on-line at http://www.iccsl.org/pubs/09-06_IJCSL-N.pdf Here is a listing of the topics addressed in the newsletter:
CITIZEN PARTICIPATION AND FREEDOM OF INFORMATION
Arab World—International Idea Publishes Report On State Of Local Democracy In Four Progressive Countries
Brazil—FOI Legislation Submitted To Congress
Caucasus--May 2009workshop In Georgia Compares FOI Laws And Practices Across Region
Ghana—Action Urged On FOI Law
Guatemala—FOI Law Goes Into Effect
Latin America—Paper Published On Role Of Media In Passing FOI Laws
Sri Lanka—USAID Program Promotes Citizen Participation
Venezuela—Reform Of Popular Councils Law Begun
U.K.—Is There A Potential Threat To Charity Tax Breaks?
U.S.—Finance Committee Proposes Changes In Tax Exempt Status Criteria For Hospitals
Freedom Of Association And Peaceful Assembly
Egypt—EOHR Again Subjected To Harassment
Uganda—Petition Distributed Claiming 2006 Ngo Act And 2008 Regulations Are Unconstitutional
U.S.—Conservative University Stops Students From Organizing Club Affiliated With Democratic Party
FREEDOM OF EXPRESSION
China—Human Rights Lawyers Being Censored Because Of Their Work
Global— World Press Freedom Day Celebrated
Egypt—Freedom Of Expression Still Outlawed
Kenya—Government Responds To Journalists’ Requests To Eliminate Controversial Provision Of Media Bill
The Philippines—House Addresses Right Of Reply Bill
Thailand—New Regulations For Control Of On-Air Content Raise Alarms
Tunisia—Government Takes Steps To Reduce Press Freedom
Turkey--Filiz Kalayci Arrested For "Aiding An Illegal Organization"
Venezuela—HRW Calls For End To Harassment Of Private Media
FREEDOM OF RELIGION AND BELIEF
Azerbaijan—Controversial Religion Law Amendments Continue Course Toward Adoption
France—Scientology Sued For Fraud
Kyrgyzstan—New Commission To Assess Controversial Provisions In Religion Law
Russia—New Expert Council On Religion Includes Activists Opposed To Minority Religions
U.K.—Sikh Police Officers Seek Development Of Bulletproof Turban
U.S.--Christian Attorneys Urge Senate To Vote Against "Hate Crimes" Bill
England And Wales—Charity Commission Publishes Guidance Update On Elections
Ethiopia--World Bank Extends $540million Loan And Says Country Should Ease Regulations On NGOs
Kyrgyzstan--Compact-Like Agreement Signed By Government And NGOs
Lao PDR--International NGOs Welcome New Law Allowing Local NGOs To Register And Operate As Independent Entities
Tanzania—Mainland And Isles CSOS Seeking Common Legislation
China— New Public Service Program Announced By The Government
China - Amnesty International Report Details Intimidation Of Quake Victim Families By Chinese Authorities
Egypt—Appeals Court Overturns Conviction Of Saad Eddin Ibrahim
Israel--Proposed Legislation Raises Issue Of Loyalty
Malawi—Peaceful Election Campaign Program Being Developed
North Korea--Defectors Say Human Rights Situation Worsening
Russia—New Commission Formed To Attack "Falsifiers Of History"
U.S.--Social Networking Tools Stimulate Government Operational Efficiency And Transparency, Government Insights Research Finds
Canada--Revenue Agency Issues Anti-Terrorist Checklist For Charities
U.S.—New Right-To-Know Network Website Launched