Friday, July 31, 2009

Sign of the Times: University Removes Donors Name From Business School After Donor Reneges on Naming Gift

Insurance Mogul Barry Kaye, who pledged $16 million dollars to Florida Atlantic University in exchange for naming the business school after him, has reneged on his pledge. Kaye pledged in 2007 to donate the money in several installments. But when the latest installment was delayed, school officials became concerned. According to the Palm Beach Post, Kaye made much of his money in the insurance business which has seen much better days. While it is possible that some portions of the Business School may retain the Kaye name, the name of the school itself will no longer be "Barry Kaye College of Business."

For the entire story, see "Barry Kaye defaults on $16 million pledge to Boca Raton's Florida Atlantic University" in the July 29, 2009, issue of the Palm Beach Post.


July 31, 2009 in In the News | Permalink | Comments (0) | TrackBack (0)

Sign of the Times: What So Wrong with a Nonprofit Loaning Money to Its Board Members or Officers?

Apropos of our blog post on July 28, 2009, concerning a Florida Nonprofit that is in trouble with that state for allegedly loaning money to its President, here is an interesting story from the July 25 issue of Press Democrat which looks at this issue in depth. According to the story, a nonprofit university foundation loaned millions of dollars to individuals. One such loan was made to a board member who resigned from the board just two days prior to receiving a $500,000 loan. The nonprofit now has millions in outstanding loans to individuals and some of these individuals, including the former board member, have indicated that the loans will not be repaid. Here is an excerpt from the Press Democrat story:

The foundation's investment practices came to light after Santa Rosa developer and financier Clem Carinalli, the key recipient of foundation loans, said he could no longer repay a $1.25 million loan from the foundation. Carinalli served on the foundation board and resigned in 1995 — two days before he received his first foundation loan for $500,000.

Carinalli and his mortgage company would arrange more than half of the 19 private loans to local landowners that followed — including one as large as $4.5 million. By 2003, the foundation had placed half of its $40 million investment portfolio in private loans — a policy it continued despite warnings from its auditors and its own board members.

Last week Carinalli returned to the foundation a 10-acre field outside Windsor used to secure the loan he cannot repay. The group's attorney said it now is worth less than the amount of the loan.

Some donors, SSU faculty and foundation experts now question the foundation's governance, asking whether the loans were advantageous deals made at favorable terms that resulted in the foundation being excessively vulnerable to a downturn in property values.

"They were operating as a bank," said county Supervisor Shirlee Zane, a Sonoma State University graduate and donor to the foundation. "It was very careless. The foundation board should be held accountable for this, absolutely."

For the entire story, see "SSU foundation's private land loans" in the July 25, 2009, issue of the Press Democrat.


July 31, 2009 in In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, July 30, 2009

Procedural Glitch Causes IRS to Halt Investigation of a Pulpit Freedom Sunday Church

The Minneapolis-St. Paul Star Tribune reportsthat the IRS has halted its investigation of Warroad Community Church in Warroad, Minnesota because of a procedural glitch.  The church was one of the more than 30 participants in "Pulpit Freedom Sunday," an Alliance Defense Fund organized challenge to the Internal Revenue Code section 501(c)(3) political campaign intervention prohibition.  According to the article, the IRS investigation was not, however, based on the September 2008 sermon delivered as part of that effort but instead was based on a May 2008 sermon that criticized both Barack Obama and Hillary Clinton. 

The procedural problem that IRS cited as the reason for dropping the investigation is almost certainly the Minnesota federal district court decision earlier this year that the IRS had delegated the authority to begin church inquiries to an IRS employee who was too low down in the IRS hierarchy, as we previously blogged about.  As the government has apparently chosen not to appeal that decision (ending an investigation into Living Word Christian Center of Brooklyn Park), it is binding for all Minnesota federal district courts.  It is not yet clear, however, whether the IRS is halting investigations of churches located outside of Minnesota even if they were authorized by the same IRS employee.  Also, the IRS explicitly reserved the right to re-openthe investigation of Warroad Community Church, presumably if the new investigation is authorized by a sufficiently senior IRS employee under the Living Word Christian Center decision.


July 30, 2009 in Federal – Executive, In the News | Permalink | Comments (0) | TrackBack (0)

Nonprofit Programs at the ABA Annual Meeting

Below is a listing of the nonprofit and philanthropy related programs at this week's ABA Annual meeting in Chicago:

Thursday, July 30; 2:00 p.m. to 3:30 p.m.; Law Firm Legal Aid: International Humanitarian Opportunity or Lost Year?; Picasso, Bronze Level, West Tower, Hyatt Regency Chicago

The storm of the economic crises continues to rain heavily on law firms across the country. Layoffs, delayed start dates for new associates, furloughs for current associates. Many law firm associates have turned to the nonprofit world for opportunities to do pro bono work until the clouds pass. For many local and international NGOs, the interest in pro bono work has been overwhelming. What are the challenges associated with preparing attorneys for international non-profit assignments? Are these opportunities being offered to a diverse pool of attorneys or a select few? What is the competitive impact on established non-profit lawyers? How will NGOs cope with the end to this "boom" in available talent when the economy turns around? How will this affect attorney career development, and what are the challenges associated with reintegrating? This program will examine these questions and the broader ramifications of the economic crisis on the legal profession.

Saturday, August 1; 2:30 p.m. to 4:30 p.m.; Unique Aspects of Representing Religious Organizations; Sheraton Ballroom I, Level 4, Sheraton Chicago

Do you represent a church, synagogue, temple or other religious organization? Are you aware of the unique legal protections and exceptions that apply particularly to religious organizations? Expert practitioners will discuss representing religious organizations regarding land use and zoning, entity structuring tort litigation and more. Presented by: Committee on Nonprofit Organizations Speakers: Eric Rassbach, Washington, D.C.; Lisa A. Runquist, Northridge, California; James A. Serritella, Chicago, Illinois; Chair: Patrick Sternal, Northridge, California

Saturday, August 1; 4:30 – 5:30 pm; Nonprofit Governance; Parlor E, Level 3, Sheraton Chicago; Corporate Governance; Co-chairs: Michael E. Malamut, Boston, Massachusetts and John Stout, Minneapolis, Minnesota

(No description available)

Sunday, August 2; 8:00 a.m. to 9:00 a.m.; Model Nonprofit Corporation Act; Tennessee Room, Level 2, Sheraton Chicago; Nonprofit Organizations; Chair: Lawrence J. Beaser, Philadelphia, Pennsylvania

(No description available)


July 30, 2009 in Conferences | Permalink | Comments (0) | TrackBack (0)

IRS to Remove Subversive Organizations Section of IRM

On July 17, 2009, Tax Analysts reported that the IRS plans to remove from the Internal Revenue Manual "controversial language that told revenue agents how to handle examinations of tax-exempt organizations suspected of being 'subversive.'" The IRM provision apparently stems from a Communist era law enacted in 1950. Although the so-called "Security Act of 1950" was repealed in 1993, the portion of the IRM concerning "subversive" organizations has remained until now.

For the entire Tax Analysts story, see "IRS will Eliminate Language on Subversive EO's From Internal Revenue Manual" at 2009 TNT 136-6 in LEXIS (July 17, 2009).


July 30, 2009 in Federal – Executive | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 29, 2009

Bloomberg's NIMBY Policy for the Homeless in New York

While in law school, I recall learning about a concept in environmental law class that goes by the acronym "NIMBY."  It means "not in my back yard."  I learned about the concept when we were studying rules that pertain to laws that are spawned by a desire of certain communities not to have certain noxious pollutants near there homes or communities.  Well, it lookslike Mayor Bloomberg has created a NIMBY policy with respect to the homeless in New York City.  Under a new policy adopted by the City, homeless individuals and families in the cities shelters are offered free one-way tickets to and location in the world where they have family willing to take them in.  Here is an excerpt from the July 29, 2009, article in the New York Times:

They are flown to Paris ($6,332), Orlando ($858.40), Johannesburg ($2,550.70), or most frequently, San Juan ($484.20).

They are not executives on business trips or couples on honeymoons. Rather, all are families who have ended up homeless, and all the plane tickets are courtesy of the city of New York (one-way).

The Bloomberg administration, which has struggled with a seemingly intractable problem of homelessness for years, has paid for more than 550 families to leave the city since 2007, as a way of keeping them out of the expensive shelter system, which costs $36,000 a year per family. All it takes is for a relative elsewhere to agree to take the family in.

Many of them are longtime New Yorkers who have come upon hard times, arrive at the shelter’s doorstep and jump at the offer to move at no cost. Others are recent arrivals who are happy to return home after becoming discouraged by the city’s noise, the mazelike subway, the difficult job market or the high cost of housing.

For the entire story, see "City Aids Homeless With One-Way Tickets Home" in the July 29, 2009, issue of the New York Times.


July 29, 2009 in In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 28, 2009

Recent 501(c)(3) Tax Exemption Revocations

For a list of 501(c)(3)'s that recently lost federal tax exemption status, go to this location on the IRS website.  Although the IRS publishes in Publication 78 a list organizations exempt from tax under 501(c)(3), Publication 78 does not immediately reflect revocations due to publication lag time.  Instead, the IRS publishes recent revocations in the Internal Revenue Bulletin.  Here are just a few of the organizations noted on the IRS website that were recently revoked, including name of the organization, location and date of publication of the notice of revocation:



Publication Date

Advance Practice Foundation, Inc.

Basking Ridge, NJ


Alternative Care, Inc.

Gainesville, FL


Ammend Credit Counseling and Debt Consolidation

Cincinnati, OH


Brucker Charitable Foundation

Mountain Home, TX


Consumer Budget Counseling, Inc.

Port Charlotte, FL


Consumer Debt Management Services

Deerfield Beach, FL


Credit Counseling, Inc.

Sunrise, FL


Debt Free Foundation, Inc.

Provo, UT


Dunn-Mason Foundation

Farmington Hills, MI


Ellen Stephen Hospice & Home Care

Kyle, SD


GIK Foundation

Bellevue, WA


Goodwill Industries of Greater Cleveland, Inc.

Cleveland, OH


Homebuyer Gift Charity, Inc.

Greensburg, PA


Hoodland Community Childrens Center

Welches, OR


Housing Development Group

Denver, CO


Innovative Womens Network, Inc.

Houston, TX


Kuumba Trust

Pittsburgh, PA


Ladoras Family Services Inc.

Compton, CA


Leszinski Family Support Organization

Atlanta, GA


National Business Fellowship Foundation

Raeford, NC


A New Goal Credit Counseling Agency

San Francisco, CA


N.U. Yoga Ashrama in America

Winter, WI


Pecan Park Learning Center

Jackson, MS


Realty America.Org, Inc.

Indian Harbour Beach, FL


Reliable Cash Management Association

Buffalo Grove, IL


Robert and Donna Herbolich Charitable Supporting

Hudson, OH


Rocky Mountain Big Horn Sheep Foundation

Red River, MN


Ronsard Foundation

Statesville, NC


Sandton Lifestyles

Los Angeles, CA


Skippers Learning Center

Lake City, SC


Starfish Foundation, Inc.

Richardson, TX


Sweet Life Program

Las Vegas, NV


Three Point Volunteer Fire Department, Inc.

Williamsburg, KY


Trans-Atlantic Health Organization

Gaithersburg, MD


Urban Light Community Development

Houston, TX


Walter E & Romell A King Foundation

Gary, IN


World Project Inc.

Temecula, CA



July 28, 2009 in Federal – Executive | Permalink | Comments (0) | TrackBack (0)

Weisbord and DeScioli Publish "The Effects of Donor Standing on Philanthropy: Insights from the Psychology of Gift-Giving"

Reid Weisbord (Law Clerk, US District Court, Eastern District, PA) and Peter DeScioli (Post Doctoral Research Associate, Chapman University Economic Science Institute) have published "The Effects of Donor Standing on Philanthropy: Insights from the Psychology of Gift-Giving" inthe Gonzaga Law Review.  Here is the abstract from the SSRN Nonprofit and Philanthropy Law Abstracting Journal:

Societies have long struggled with contradictions between the ideals of philanthropy and the real motives of philanthropists. Cultural artifacts such as traditional Jewish legal codes and the legend of Saint Nicholas of Myra show that societies especially revere philanthropists who give anonymously, without expectation of repayment. But contrary to these ideals, donors often use philanthropy to obtain personal rewards, such as the wealthy patrons of ancient Greece whose opulent displays of benefactions were aimed at social status and political dominance. The gap between ideals and reality creates a dilemma: Societies wish to promote philanthropy but offering incentives taints the authenticity of the donor’s intent.

This dilemma is central to the recent policy debate about the enforceability of donor-imposed gift restrictions. The law has traditionally allowed donors to pursue their personal charitable goals by imposing restrictions on the use of charitable gifts, but until recently, donors lacked legal standing to enforce their restrictions in court.

In this Article, we describe the detrimental effects of donor enforcement rights on the public’s shared interest in charitable assets. We then investigate the issue of donor standing by reviewing and comparing economic and psychological models of gift-giving behavior. On the basis of research from experimental psychology, we propose the novel hypothesis that, contrary to the intended effect, donor standing is unlikely to promote charitable giving and may cause a decrease in charitable contributions.

For the entire article, go to


July 28, 2009 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Taking Money from Poor Blind Children?: The Florida Vision Quest Situation

In Florida, a nonprofit group that provides eyeglasses to the poor (Florida's Vision Quest, Inc. - has been charged with improperly using more than $100,000 in state money.  Here is a list of a few of the alleged improper uses and the nonprofit's response:

*??$28,500 as a retainer to Hebrock Steiner, a Tallahassee lobbying firm. Jeppesen said the firm provided fundraising advice, not lobbying.

*??$3,100 in travel expenses for Jeppesen and a co-worker to go to the 2007 International Vision Expo in Las Vegas. Jeppesen said the expo resulted in the donation of $30,000 in equipment.

*??$27,000 to forgive a 2005 loan from Vision Quest to Jeppesen and her ex-husband, who was Vision Quest's president. Jeppesen said the loan was beyond the scope of the state's review.

Now, with respect to the loan, I am not so sure that just saying that the loan was "beyond the scope of the state's review" resolves very much. Given that Florida's Vision Quest is a 501(c)(3), I wonder if this loan to these "insiders" furthered the charitable function?

For the entire story, see "Nonprofit eyeglasses provider refuses to reimburse state for flagged expenses"in the July 28, 2009, issue of the St. Petersburg Times.


July 28, 2009 in In the News | Permalink | Comments (1) | TrackBack (0)

Lobbyists Contribute Millions to Foundations Affiliated with Congressional Caucuses

USA Today reports that lobbyists and businesses that employ them donated $5.8 million to charitable foundations that are affiliated with various congressional caucuses.  Using lobbying report data, the article found that almost all of the funds - $5.7 million - went to two groups: the Congressional Black Caucus Foundation and the Congressional Hispanic Caucus Institute.  The caucuses themselves are barred from using private funds to operate and receive only a limited amount of public money.  According to its website, the Foundation is "a nonprofit, nonpartisan public policy, research and educational institute that aims to help improve the socioeconomic circumstances of African Americans and other underserved communities."    Its Chairperson is Rep. Kendrick B. Meek, and nine other members of Congress sit on its board along with representatives of many prominent business such as Citi, Ford Motor Company, and Microsoft.  As for the Institute, it describes itself as "the premier Hispanic non-profit and non-partisan 501(c) (3) leadership development organization in the country."  Its Chair is Rep. Nydia Velázquez, and numerous members of Congress and representatives of major companies also sit on its board.


July 28, 2009 in In the News | Permalink | Comments (0) | TrackBack (0)

Monday, July 27, 2009

Defining "Church": Foundation of Human Understanding v. U.S.

Last week, the Court of Federal Claims held that a religious group that was once properly recognized as a "church" for tax exempt purposes lost its "church" status.  According to Chief Judge Hewitt's opinion, the organization lost its "church" status because the extent to which it "brings people together to worship [became] incidental to its main function . . .[of] dissemination of its religious message through radio and internet broadcasts, coupled with written publications."  Here is the courts conlusion:

To qualify as a church, "an organization must serve an associational role in accomplishing its religious purpose."  The associational test is a "threshold" standard which religious organizations must satisfy in order to obtain church status. Id. In creating the associational standard, the United States District Court for the District of Columbia stated that demonstrating associational aspects is the "minimum" requirement necessary for a religious organization to gain church status.

During the tax years in question, Foundation's activities were similar to the activities of those plaintiffs whose suits for church status were unsuccessful primarily because their activities lacked the associational aspects which convinced the Tax Court to grant church status to Foundation in its prior declaratory judgment action. . . .

In explaining its rejection of plaintiff's declaratory judgment action in VIA, the Tax Court summarized the key characteristics exhibited by plaintiff in Foundation I which were sufficient to support recognition of church status: plaintiff conducted services "three to four times a week by ordained ministers for congregations of no less than 50 to 300 members[;] [Foundation] ministers were ordained only after having completed a three-year apprenticeship under the tutelage of [Foundation's] founder and leader[;] [and] Foundation operated a regular school for children in which the teaching of [Foundation] principles formed part of the curriculum."  There is no evidence in the record presently before the court in this case to show that the distinguishing characteristics of plaintiff in Foundation I, as delineated by the Tax Court in VIA, continue to exist. See supra Part IV.B.1.a-n. In fact, the evidence before the court shows that plaintiff's primary activities are those which caused the most concern for the Tax Court in Foundation I and subsequent cases. In VIA, the resemblance between plaintiff in VIA and Foundation I which cut against the plaintiff in VIA was the plaintiff's use of the mass media and commercial activities. The court noted that Foundation's use of mass media and commercial activities in order to spread its beliefs, including radio broadcasts, a magazine, and the sale of audio tapes and books, were "of concern" to the court in Foundation I. Id. It appears that the Tax Court decision relied on the fact that Foundation also exhibited "associational aspects" which were "much more than incidental" when the court recognized plaintiff in Foundation I as a church. The evidence now before the court presents a picture of Foundation that resembles the plaintiff in VIA much more closely than it resembles the plaintiff described in the court's findings in Foundation I. Plaintiff no longer provides religious services to an established congregation. See supra Part IV.B.1.m-n. Plaintiff's primary activities are internet and radio broadcasting, activities which are no longer supplemented by the associational activities in existence at the time of the Tax Court's decision in Foundation I. See supra Part IV.B.1.n (discussing the irregularity of plaintiff's Sunday meetings, seminars and weddings). The court in VIA stated that VIA, unlike plaintiff in Foundation I, exhibited a form of worship which was only incidental to petitioner's other activities, and was therefore insufficient to obtain church status.

In Spiritual Outreach I, the Tax Court entertained a declaratory judgment action in which petitioner contested the IRS's initial determination that petitioner did not qualify as a church under I.R.C. sections 509(a)(1) and 170(b)(1)(A)(i).  The court held that petitioner failed to satisfy the associational test. In that case, petitioner maintained an outdoor amphitheater on its grounds at which petitioner held bimonthly musical programs. Petitioner held a total of twenty gatherings during the two years at issue in the case. The musical programs always included congregational singing, and opened and closed with a prayer facilitated by a minister. Id. Also during the two years at issue, petitioner held several retreats on the church grounds "wherein followers of different religions met for the purpose of meditation study and spiritual advancement." Id. A total of five wedding ceremonies were conducted in petitioner's chapel by ministers from guest churches. Id. The court was unpersuaded that "musical festivals and revivals . . . and gatherings for individual meditation and prayer by persons who do not regularly come together as a congregation for such purposes" was sufficient to satisfy the "cohesiveness factor which . . . is an essential ingredient of a 'church.'" Id. The court distinguished petitioner in Spiritual Outreach I from plaintiff in Foundation I, describing the associational factor as "critical." Id. The court stated that the presence of the associational factor in Foundation I was essential to resolving what was a "close question" in that case. Id. The record before the court describes an organization similar to the petitioner in Spiritual Outreach I, and is therefore similarly distinguishable from plaintiff's record presented in Foundation I.

In Church of Eternal Life, the court held that plaintiff failed the threshold associational test based on a finding that petitioner's principal activities included "the operation of a library containing about 4,000 items, bi-monthly meetings, the distribution of literature, the sale of merchandise and the publication of a newsletter."  Based on the court's factual findings in this opinion, Foundation is an institution that closely resembles the plaintiff in Church of Eternal Life. Foundation similarly fails to satisfy the associational standard.

Here, as in First Church of In Theo, plaintiff is a "self-described non-membership organization" whose "religious purposes were accomplished through the writing, publishing, and distribution of religious literature rather than through the regular assembly of a group of believers to worship together."  In addition to failing to meet most of the fourteen criteria, the court in First Church of In Theo also concluded that plaintiff "fail[ed] to satisfy the threshold criteria of communal activity necessary for a church." Id. Accordingly, here, as in First Church of In Theo, the court finds that plaintiff is not a church within the meaning of section 170(b)(1)(A)(i) as interpreted by the weight of persuasive authority.

Because plaintiff no longer exhibits the associational characteristics which were critical to convincing the Tax Court to grant church status to Foundation in 1987, what may have been a "close question" on the facts before the court in Foundation I is more readily determinable in this case.

The extent to which Foundation brings people together to worship is incidental to its main function which consists of a dissemination of its religious message through radio and internet broadcasts, coupled with written publications. "When bringing people together for worship is only an incidental part of the activities of a religious organization, those limited activities are insufficient to label the entire organization a church."

The case is Foundation of Human Understanding v. U.S. (July 21, 2009) (available on LEXIS in the Tax Analysts at 2009 TNT 139-8).

(Hat Tip:  Ellen Aprill)


July 27, 2009 in Federal – Judicial | Permalink | Comments (0) | TrackBack (0)