Nonprofit Law Prof Blog

European Philanthropists Help Charities Become More Entrepreneurial

The Wall Street Journal recently reported that a growing number of European philanthropists are encouraging the charities they support to run more like a businesses during these recessionary times in order to garner their support.

Philanthropic endeavours are usually one of the first things to fall by the wayside when the wealthy are faced with tougher times.

There are no Europewide statistics on philanthropic giving. But trends are likely to mirror what has being happening in the U.S., experts say -- and the picture there isn't good. The American Philanthropic Giving Index, produced by the Center on Philanthropy at Indiana University, revealed giving fell dramatically in the first half of the year. The PGI, similar to a Consumer Confidence Index for charitable giving, is now 64.8, a 21.7% decrease from just six months ago and a 27% decrease since December 2007. The index found that fundraisers' assessment of the current giving environment fell to its lowest level since records began in 1998.

Lena Schreiber, a senior consultant at the London-based consultancy New Philanthropy Capital, believes that the fall in giving has moved across the Atlantic. "Professional advisers tell us that wealthy individuals who may have intended to set up philanthropic foundations are delaying this decision, along with other decisions about their wealth management," she says.

Still, it's not all doom and gloom. Those at the forefront of the industry say many of the wealthy continue to give, but are often looking for a more hands-on approach, demanding greater transparency and a return on their money. Outright giving is being replaced by social investing, and philanthropy is becoming more efficient and entrepreneurial as a consequence.

For the full story, please click here.

AMT 

The House Passes Bill To Retain 2009 Estate Tax Levels Permanently

On December 3, 2009, The Chronicle of Philanthropy reported that the U.S. House of Representatives passed a bill to retain 2009 estate tax levels permanently.

The House of Representatives has passed a bill that would permanently keep the estate tax at levels that are in effect this year.

The approach is one that many charities have been seeking because they say it will help them appeal to donors.

The Senate has not yet voted on estate-tax legislation.

Under the current estate-tax law, heirs in 2009 can exempt $3.5-million from taxes ($7-million for couples), with amounts above that taxed at 45 percent.

For the full story, please click the link above.

AMT

 

ICCSL Publishes December Newsletter

ICCSL has published the December IJCSL Newsletter, which is available at http://www.iccsl.org/pubs/09-12_IJCSL-N.pdf.  You can subscribe to the Newsletter to receive all the latest updates on laws affecting civil society around the world.

kws

New Director for Office of the Third Sector in U.K.

The Office of the Third Sector announced that Rolande Anderson has been appointed as the new Director General for the Office of the Third Sector (OTS).  She joins the OTS from the Office for National Statistics (ONS) where she was Director General for Transformation and Corporate Services.  Before joining ONS, Rolande was Regional Director of the Government Office for the South East, England’s largest region.  Rolande has two family members with hearing disabilities and is a member of RNID.  Throughout her career she has championed diversity, and she has mentored on various schemes for BME and disabled civil servants.

 

kws

IRS Issues Exempt Organization Agenda for 2009-2010

The Treasury Department and the Internal Revenue Service have issued their joint priority guidance plan for the 2009-2010 year, and the IRS Exempt Organizations Division has identified the following items as being of particular interest to tax-exempt organizations:

Revenue procedure to provide terms for hosts of Cyber Assistant software (used to generate Form 1023 exemption applications eligible for reduced user fee). Final regulations on the new requirements for Type III supporting organizations, added by the Pension Protection Act of 2006; proposed regulations were published in September 2009. Notice under Code section 4943 (excess business holdings), as amended by the Pension Protection Act. Guidance on program-related investments of private foundations (Code section 4944). Final regulations on excise taxes on prohibited tax shelter transactions and related disclosure requirements; proposed regulations were published in 2007. Proposed regulations on new excise taxes on donor advised funds as added by the Pension Protection Act. Regulations on group returns (Code section 6033). Proposed regulations to update regulations under Code section 6104(c), relating to disclosure to state charity agencies for changes made by the Pension Protection Act, Final regulations on church tax inquiries and examinations (Code section 7611); proposed regulations were published in 2009. Revenue procedure on prototype plan documents for section 403(b) tax-sheltered annuity plans, and guidance on termination of such plans. Guidance for ruling requests for church plans (Code section 414(e)). Several items on guidance for deferred compensation plans of tax-exempt organizations and state and local governments (Code section 457). Final regulations on appraisal requirements for certain charitable contributions of property; proposed regulations were published in 2008. Guidance on charitable lead trusts (Code section 642(c)) and charitable remainder trusts (Code section 664). Regulations addressing the application of the lookback interest rules (Code section 460) to certain pass-through entities with tax-exempt owners. Final regulations regarding the disclosure of certain administrative actions that are required to be made available to the public (Code section 6104). Proposed regulations were published in 2007. Regulations under section 6109 regarding the use of preparer tax identification numbers (PTINs) by tax return preparers. Regulations regarding interest on tax overpayments by tax-exempt organizations (Code section 6611). Update of guidance concerning user fees. Regular updates to procedures for letter rulings, technical advice, and user fees.

LHM

Public Benefit v. Private Gain

In our basic income tax classes, we teach that a taxpayer is supposed to receive a charitable contribution deduction only for transfers for charity for which the taxpayer receives no benefit in return (except, of course, for the warm glow that comes from helping others).  But most of us that this distinction is not a bright line and that even the dim line is blurred in practice.  In her recent article, "From the Greedy to the Needy," published at 87 Ore. L. Rev. 1133 (2009), Professor Wendy C. Gerzog of the University of Baltimore School of Law faculty, examines the application of the public/private distinction under recent amendments to the Internal Revenue Code, decisional law, and Internal Revenue Services determinations.  She makes some interesting suggestions for changes that would improve the government's return on its investment of lost tax dollars on certain types of contributions.  Here is the abstract:

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

House Votes on Federal Estate Tax Bill

The House of Representatives today passed a version of the bill that originally was introduced as HR 4154.  The bill that was passed repeals the one-year estate tax repeal that would have taken effect on January 1, 2010 and substitutes a permanent extension of the current federal estate tax.  It freezes the exemption at its 2009 level -  $3,500,000 (without providing for indexing the exemption for inflation) - and also caps the tax rate at 45% for estates larger than $3,500,000. Not much that is surprising here, but no really bad news, either.  Of course, the Senate has not acted yet. 

I'm working from a summary.  I'll post more details as soon as I can find them.  

AMH

Cass Business School Study Recommends 5% Payout for UK Foundations

The Centre for Charitable Giving and Philanthropy at City University London's Cass Business School recently issued a new report on grant-making foundations in the United Kingdom.  While applauding their role in supporting philanthropy, the report's authors make several recommendations for increasing that support, including considering a 5 percent payout requirement based on the existing United States and Canadian payout requirements for such entities.  For summary of the report, see the School's press release.

LHM

China -- Tax Rules for NPOs and Donors Announced in Circulars

The Ministry of Finance (MoF) and the State Administration of Taxation (SAT) issued two circulars in November to clarify the tax treatment of CSOs/NPOs and to provide rules for donors to them.  Both circulars are retroactive to January 1, 2008, the effective date of China’s new Enterprise Income Tax Law.  With respect to the former, Circular [Caishui] 122 says that exempt items include gifts, state subsidies, membership fees, interest on bank accounts, and other income as determined by the MoF and the SAT.  The second Circular [Caishui] 123 describes the procedures whereby CSOs/NPOs seeking to qualify themselves as appropriate donees of tax deductible contributions can do so.  It also describes attributes of such NPOs, including governance and conflict of interest rules.  This is a reissuance of a Circular first issued in 2007, and it is described in detail in Karla W. Simon, Regulation of Civil Society Organizations in China: Necessary Changes after the Olympic Games and the Sichuan Earthquake, which was published 32 Fordham International Law Journal 943 (2009).  The translated texts of the Circulars will be available on the ICCSL website in the Documentation Center.

 

kws