August 22, 2009
IRS Grants Exemption to Pro-Life Group Protesting Planned Parenthood
Back in July, Darryll Jones blogged about the troubles the Thomas More Society was having getting 501(c)(3) status from the IRS, apparently because it disclosed plans to protest a local Planned Parenthood office. This story reports that the IRS has since dropped its objections to exemption for the group. As Darryll reported earlier, this is clearly the correct result; there is no prohibition in the Internal Revenue Code or elsewhere against an exempt organization protesting or picketing. Such activity would not generally be considered lobbying under the existing regulations (which require activity directed at lawmakers), and as long as the picketing/protesting is legal, there are no grounds for the IRS to assert a denial of exemption under the illegality/public policy doctrine. This is one of those cases where some lower-level reviewing agent went crazy, and fortunately the IRS upper management now appears to have corrected the problem.
August 21, 2009
Fairfax County Schools Drop Automatic Failure Rule
For years Fairfax County Public Schools (the twelfth largest school system in the nation) has had a strict attendance policy: Students who miss three classes in a quarter without a legitimate excuse get an automatic F. That is about to change.
Claiming that the three-strikes policy has provided little motivation for students who had already missed three classes in a quarter to show up for class, school officials have decided to get rid of the policy starting this fall.
Today's Washington Post reports that going forward, Fairfax County principals will instead have a list of ways teachers can punish students who skip classes and reward those who show up. Teachers can, for example, give points for class participation and credit for turning in homework or doing well on pop quizzes. As far as punishment goes, teachers will be able to utilize options such as detention, taking away parking or extracurricular privileges, and meetings with parents.
I wonder whether the new policy will truly motivate Fairfax County students to show up for classes.
Evangelical Lutheran Church in America Loosens Gay Clergy Policy
Earlier this week, we blogged that the Evangelical Lutheran Church in America ("ELCA") was set to discuss the issue of gays and lesbians in committed relationships serving as members of the clergy. Reuters is reporting that the church has indeed taken steps to allow gays and lesbians to serve in ministry. The Reuters report states in part:
The Evangelical Lutheran Church in America also encouraged its congregations to find ways to support or recognize members in "accountable lifelong, monogamous, same-gender relationships."
But it did not give official sanction to gay marriage or approve any rites for such ceremonies.
The report continues:
The resolution, approved by a vote of 559 to 441, said the church was committed to finding ways to allow people in "accountable, lifelong, monogamous, same-gender relationships to serve as rostered leaders of this church."
The measure applies to clergy as well as professional lay leaders.
The assembly still has to approve procedural changes to allow the resolution to go forward. [John] Brooks[, the director of the Evangelical Lutheran Church in America's news service and a spokesman for the church,] said he expected the new policy to be in place by 2010.
August 20, 2009
Brandeis University Settles Donor Lawsuit Over Science Building
The Wall Street Journal is reporting that Brandeis University has settled a lawsuit filed by a nephew of a donor who had been seeking to block the demolition of a science building named after his great uncle.
Pursuant to the settlement, Brandeis has agreed to name a research laboratory after the original donor, Julius Kalman, a Lithuanian immigrant who amassed a fortune in Boston real estate and left the bulk of it to Brandeis when he died in 1956. The university will also place a prominent plaque honoring Kalman in the lobby of a new science center.
Sumner Kalman, the donor's great nephew, had filed the lawsuit in Suffolk County Probate Court in Boston in May to prevent Brandeis from tearing down the building due to disrepair, saying that such a move would violate his great-uncle's will. He has now agreed to drop the suit.
In a statement, Brandeis said the school had made it a priority to update and replace older facilities and was pleased it had reached an agreement thatrecognizes "Julius Kalman's magnificent generosity to the university."
The Journal report continues:
The suit is one of two over gifts to Brandeis filed this year and part of a growing number of conflicts between donors and their descendants and cash-strapped U.S. colleges.
Last month, three overseers of Brandeis's Rose Art Museum sued the college, seeking to halt plans to sell art work from its $350 million collection. The school called the suit frivolous. In January, Brandeis said it would sell the collection because of a decline in its endowment and a steep budget shortfall. After announcing it would sell the collection in January, sparking protest in the art world, the school later backtracked, saying the museum wouldn't close but would become a teaching and exhibition gallery and only a limited number of artworks, if any, would be sold.
Judge Rules U.S. Seizure of Charity's Assets Unlawful
According to a report published in today's Toledo Blade, a federal judge in Toledo, Ohio, on Tuesday ruled that the U.S. government violated the constitutional rights of a Muslim charity when it froze the charity's assets in 2005 and prevented it from adequately defending itself against allegations of ties to terrorism.
Judge James Carr (Northern District of Ohio) released a 100-page order late Tuesday in KindHearts for Charitable Development, Inc. v. Geithner in which he agreed with the charity's assertions that it had been denied due process and was subjected to the unlawful seizure of its property. According to the Blade, KindHearts, founded in 2002, was targeted in 2006 by federal agents, who in turn froze the charity's financial assets. Court documents revealed that "the organization was under investigation by the Office of Foreign Assets Control of the U.S. Treasury De-partment and would potentially be labeled as a 'specially designated global terrorist.'"
Earlier this year, Judge Carr ordered the government to produce copies of all materials seized in 2006 from KindHearts' headquarters and the home of its president.
The organization's attorneys had argued that without access to the information, it could not defend itself against charges of terrorism by showing where its money was spent. The government countered that opening access could compromise its investigation.
The organization's attorneys also argued that the government violated search-and-seizure laws when it froze KindHearts' assets without showing probable cause and without obtaining a warrant.
In the order released on Tuesday, Judge Carr wrote:
KindHearts is indisputably one of 'the people' protected by the Fourth Amendment. If the Constitution affords KindHearts no protection from unreasonable searches and seizures, whom among 'the people' does it protect and who among the people can be certain of its protection?
Judge Carr also noted that finding the Fourth Amendment inapplicable to the government's "block actions" would disregard its "role as a bulwark against the abuses and excesses of unchecked governmental power."
In responding to the ruling, Charles Miller, a spokesman for the U.S. Department of Justice Civil Division said that his office will analyze the lengthy opinion so that it is wholly understood. He declined further comment.
Of course, the government can appeal the decision to the Sixth Circuit. The Blade reports that "At a May 1 court appearance before the judge in which both sides argued their cases, the government indicated if the judge ruled the freeze of assets lifted, it would request a stay until the appellate court hears the case."
Time will tell what happens next.
August 19, 2009
Lutherans to Vote on Sexually Active Gay Clergy
The Evangelical Lutheran Church in America ("ELCA") -- one of the largest Christian denominations in the country -- will decide this week whether to allow gay people in relationships to serve as clergy.
Pursuant to church policy, sexually active gay people are not currently permitted to serve in the clergy; however, celibate gay people are allowed to thus serve. Over 1,000 Church delegates -- clergy and laypeople -- meeting in Minneapolis this week might as early as today vote on a 34-page document on human sexuality that would permit congregations to let gay men and lesbians in committed, monogamous relationships serve as clergy.
The ELCA is the latest major denomination to address the issue of gay clergy. Just last month, the Episcopal Church voted to make gay people eligible for any ordained ministry. Earlier this year, the Presbyterian Church (USA) voted against accepting openly gay pastors.
In a news conference in Minneapolis on Monday, ELCA Presiding Bishop Mark S. Hanson predicted "deep, profound disappointment" for the losing side. However, few -- if any -- observers expect large conservative factions to break away from the ELCA if the proposal passes.
UNC Charlotte receives $9.3 Million Gift from Philanthropists
Today's Charlotte Observer is reporting that philanthropists Leon and Sandra Levine on Tuesday announced that they will be donating $9.3 million to the University of North Carolina -- Charlotte ("UNCC"). The gift, which will span a ten-year period, will fund a merit scholarship program aimed at developing community service leaders.
UNCC intends to put the gift to use almost immediately. Fifteen students will receive Levine scholarships in the fall of 2010. School administrators hope to have 60 such scholars on campus within four years.
UNCC Chancellor Philip Dubois called the scholarship "a watershed moment" for UNCC:
A scholarship initiative of this magnitude signals UNC Charlotte's maturation as an academic institution as we seek to compete with the best institutions in this state and this country for academic talent,” Dubois said. “…What makes this initiative so special, and so important, is its goal: To develop compassionate, ethical leadership for our region.
The Levine scholarship will cover all tuition and fees, housing and meals, books, a laptop computer, and funding for four summer experiences, as well as an $8,000 grant to support community service work over four years at UNCC. The value for in-state students will be about $90,000 and for out-of-staters more than $140,000.
August 18, 2009
India--Other Aspects of the Direct Taxes Code for Non-profit Organizations
Chapter IV of the draft Direct Taxes Code contains “Special Provisions Relating to Computation of Total Income of Non-profit Organisations.” Some of the important features of this chapter are as follows:
1. The new regime will uniformly apply to all non-profit organizations irrespective of the nature of their activities.
2. An organization will be treated as a non-profit organization if:
(i)It is established for the benefit of the general public;
(ii) It is established for carrying on permitted welfare activities;
(iii) It is not established for the benefit of any particular caste;
(iv) It is not established for the benefit of any of its members;
(v) It actually carries on the permitted welfare activities during the financial year and the beneficiaries of the activities are the general public;
(vi) It does not intend to apply its surplus or other income or use its assets or incur expenditure, directly or indirectly, for the benefit of any interested person;
(vii) Any expenditure by the organization does not inure, directly or indirectly, for the benefit of any interested person;
(viii) The funds or assets of the organization are not used or applied, or deemed to have been used or applied, directly or indirectly, for the benefit of any interested person;
(ix) The surplus, if any, accruing from its permitted activities does not inure, directly or indirectly, for the benefit of any interested person;
(x) The funds or the assets of the non-profit organization are not invested or held in any associate concern or in any prescribed form or mode;
(xi) It maintains such books of account and in such manner, as may be prescribed;
(xii) It obtains a report of audit in the prescribed form from an accountant before the due date of filing of the return in respect of:
The accounts of the business, if any, carried on by it;
(B) The accounts relating to the permitted welfare activities; and
(xiii) It is registered with the Income-tax Department under the Code.
There are also complex rules for the computation of income of non-profit organizations; the generally applicable tax rate is 15%. Surprisingly, the gross receipts to be taken into account include contributions, unless they are designated as being made to the endowment. In addition, passive investment income is included. On the other hand, the amounts paid out to carry out "permitted welfare activities” or capital expenditures for such purposes are deductible from gross receipts in order to arrive at the income of an organization.
Azerbaijan—Parliament Adopts Law on Voluntary Activities
The Parliament of Azerbaijan has adopted the Law of the Republic of Azerbaijan On Voluntary Activities, according to a posting on ICNL’s website. Primarily a declaration of the government's support of volunteerism, the new law is considered an improvement in the regulatory environment for volunteers in Azerbaijan. Specifically, it states that the unpaid work of volunteers is not illegal. The present Labor Code of Azerbaijan prohibits paying workers less than the established minimal salary, and under this prohibition, volunteers can be considered “workers.” Even though the government has not been enforcing this prohibition against non-governmental organizations (NGOs) and volunteers, both groups were concerned that they might be subjected to the government’s harassment if the government decided to impose the prohibition. This new law clearly states that the unpaid work of volunteers is both legal and supported by the state, and requires the government to bring other legislation, including the Labor Code, in compliance with the new Law on Voluntary Activities. This law was initiated by the Not-For-Profit Law Coalition established within the Civil Society Project, whose members drafted, and advocated for, adoption of the law for over two years.
India -- New Direct Tax Code 2009 to Affect Charities
A new Direct Tax Code has been proposed by the government of India to overhaul the outdated and cumbersome tax system that has existed until now; a draft and a discussion paper were recently released by the Union Finance Minister, Mr. Pranab Mukherjee. Among other changes, the new Code will have an effect on charities, as outlined here. The Code replaces the term "charitable purpose" with the term "permitted welfare activities.” “Permitted welfare activities” has been defined to mean any activity involving relief of the poor, advancement of education, provision of medical relief, preservation of environment, preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility. The scope of Section 2 (15) of the Income Tax Act has been broadened. Prior to this amendment, “Charitable purpose” included: “relief of the poor, education, medical relief and the advancement of any other object of general public utility.” Finance (No.2) Act 2009 has now added: “preservation of the environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest”.
Advancement of any other object of general public utility will not include any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a fee or for any other consideration, irrespective of the nature of use, application or retention of the income from such activity.
The finance ministry has uploaded on its website (www.finmin.nic.in) the draft Direct Tax Code, a discussion paper, a comment on the code, and a place for people to respond to it.
Zambia—Restrictive NGO Legislation Introduced in Parliament
IRIN news service has reported that Zambia joined a growing list of countries seeking to restrict civil society through controversial legislation. Although one of the stated objectives of the Zambian bill is to enhance the transparency, accountability and performance of NGOs, questions regarding the motives behind this push by the Movement for Multiparty Democracy (MMD) government, which has held power in the country since 1991, are being raised. Key provisions of the bill restrict the independence of NGOs and subject them to excessive and unwarranted controls. If the bill becomes law it would empower the Interior Minister to form a 10-member board, comprised of government members and two representatives from civil society, which would “receive, discuss and approve the code of conduct [of NGOs], and ... provide policy guidelines to NGOs for harmonizing their activities to the national development plan of Zambia.” A more detailed analysis of the provisions of the bill in Zambia is available at http://www.iccsl.org/pubs/Detailed_additional_Analysis_of_NGO_Bill_in_Zambia_by_Mandeep_Tiwana.pdf.
New Law on Associations in Serbia
The Serbian Parliament has approved the Law on Associations, according to a post on ICNL’s website. The Parliament’s decision marked the culmination of long efforts to bring the legal framework for associations in Serbia closer to international standards and regional best practices. Among other issues it addresses, the Law requires only three natural or legal persons to establish an association, permits informal associations to operate, and sets out rules governing the establishment of branch offices of foreign associations operating in Serbia; currently, those branch offices operate in a legal vacuum. The Law envisages the Agency for Registration of Commercial Companies as a registration body of associations. This novel approach gives rise to a number of issues, including the Agency’s non-exposure to international standards pertinent to freedom of association.
August 17, 2009
Rooney to Nonprofits: Learn the Triple P
The current economic climate and its effect on nonprofit organizations form the basis for another article in today's press. Today's NonProfitTimes published an article by Patrick M. Rooney, Executive Director of the Center on Philanthropy at Indiana University, in which the author counsels nonprofit organizations that rather than giving up in these difficult economic times, they should learn the triple P: be positive, pragmatic and proactive.
The article gives sound advice to nonprofit administrators on how to weather the current economic storm. The following paragraph stands out:
Openness, honesty, transparency, accountability and communication are more vital than ever. As you examine budgets, processes and programs, make sure that key stakeholders, especially staff at all levels and board members, are invited into and engaged in an ongoing dialogue about difficult decisions. This will generate good ideas and good will, and will help create buy-in when tough decisions are made. When you tackle problems head on, openly and honestly, that in itself gives staff hope and confidence and contributes to trust, loyalty and perseverance.
The article ends on a positive note:
Thoughtful, foresighted decisions in this difficult environment will increase the chances of survival now and build toward the organization’s long-term health and success.
Recovery for Newspapers?
An opinion published in today's Atlanta Journal-Constitution suggests that newspapers, hard-hit by the current economic climate, could well recover if they began operating as nonprofit organizations. According to the op-ed piece, today's newspapers are struggling because they are losing out on advertising revenue. As a result, many newspapers "simply do not have a profit incentive to engage in significant watchdog or accountability journalism."
That said, the article has a proposal:
One possible solution to rescuing the watchdog function of the press is to allow newspapers to operate as nonprofits. If a newspaper were run as a nonprofit, this would allow people who valued the impact of its stories to donate and receive a tax deduction.
According to the article:
Media and nonprofit leaders recently . . . identified several steps the federal government could take to make it easier for struggling daily newspapers to transition to nonprofits. For example, the Internal Revenue Service currently has the power to issue tax guidelines that would make clear that metro daily newspapers could be run as nonprofits.
Additionally, Congress could speed the development of new forms of media organization, such as the low-profit limited liability (L3C) corporation. L3Cs are companies with low profits but high positive spillovers on their communities.
A newspaper run as a L3C could draw many different types of investors. Foundations interested in accountability coverage could make a program-related investment in the L3C and state up front they did not expect a high rate of return. Socially conscious investors who care about local news could also invest in the L3C and accept only a modest rate of return. With these two sets of investors accepting lower rates, a third set of investors in search of a market rate of return also could be willing to invest in a newspaper.
In the final analysis, this development would ultimately help newspapers return to their watchdog role:
If a metro newspaper were run as a L3C, the presence of investors who focused on the quality of public affairs coverage would help managers make the case for watchdog stories. And if the L3C ended up doing well and doing good at the same time, the taxes on any profits would be paid as they were distributed among the investors.
This is not a bad idea at all!
August 16, 2009
Philadelphia Charter Schools Under Investigation
Federal authorities have been investigating five charter schools in the Philadelphia area. Although the federal government will not confirm the investigations, the Philadelphia Inquirer reports that the investigations are reviewing concerns over spending controls and management oversight. The federal investigation began after the Philadelphia Inquirer reported a district-level investigation of the Philadelphia Academy for alleged financial mismanagement, nepotism, and conflicts of interest at the school. The school's former CEO and the school's former board president have both pled guilty to charges of fraud and have admitted to taking substantial sums of money in kick-backs from contractors or directly from the school. One of the other schools currently under investigation, Germantown Settlement Charter School, faces allegations that some of the school's funds were used for other nonprofits managed by its sponsor, Germantown Settlement. The charter school has received some $31 million in taxpayer money over the past nine years.