Friday, April 9, 2010
China received more than 33 billion yuan ($ 4.83 billion U.S.) in donations in 2009, according to a government charity report released April 8, 2010, which was discussed in a story by the Xinhua News Agency. The report, jointly released by the Department of Social Welfare and Promotion of Charities under the Ministry of Civil Affairs (MCA) and the China Charity and Donation Information Center, said donations included more than 22.7 billion yuan in funds and goods worth more than 10.5 billion yuan. Domestic and overseas enterprises were the major donors, contributing more than 13 billion yuan to the total, according to the report. Overseas donations amounted to 4.5 billion yuan. More than 40 percent of the donated funds were for education, a survey showed.
The Ministry of Social Solidarity has completed a draft for a new NGO law. According to the latest leaked copy, the bill is more restrictive and draconian than repressive law already in place. The new bill is expected to pass into law with the approval of the government parliamentary majority in the coming month. A press release by 41 NGOs published on the Euro-Med Human Rights Network website suggests that the haste to pass the bill is attributable to a desire to undermine civil society efforts to monitor the upcoming parliamentary and presidential elections. Following the abolition of judicial supervision of elections in the last round of constitutional amendments and the government’s refusal to allow international monitors, this step will facilitate further dishonest elections conducted without any meaningful oversight. Some articles of the new bill aim to limit the activities of human rights organizations or shut them down completely by criminalizing all forms of unregistered civic organization. The bill promises to institute unprecedented control over civil society worse than the crackdown that followed the July 1952 revolution which nationalized political, partisan, syndicate and civic action. It is clear that goal of the bill is to tighten the stranglehold on NGOs and other civic organizations.
Richard Schmalbeck (Duke) presented his draft paper 501(say)(what?): Considering New Exempt Category for Churches yesterday as part of UCLA's Colloquium on Tax Policy & Public Finance. I was fortunate enough to see an earlier draft of this paper, and it raises important (and undoubtedly controversial) issues relating to the current tax status of churches. While Richard and I disagree on some key points relating to that tax status, this looks to be an important and interesting paper.
(Hat tip: TaxProf Blog)
The St. Petersburg Times had done a series of articles and related blog posts questioning the legitimacy of the United States Navy Veterans Association, a charity. The newspaper reports that of 85 listed national and state officers, it could only find one of them, operating out of duplex in Tampa. The article also raises questions about whether that individual has been mixing the nonprofit's funds with his personal political activities. Apparently in response to these articles, Florida officials launched an investigation of the organization this week. What is perhaps most interesting is that the Association appears to have made its required federal and state filings, which formed the initial basis for the newpaper's investigation. It will be interesting to see if these filings were inaccurate and, if they were, if the Association and its leader(s) face any penalties as a result.
The Chronicle of Philanthropy reports that the Corporation for National and Community Service has named nonprofit expert Phillip L. Carttar to head the federal Social Innovation Fund. Mr. Carttar co-founded the nonprofit management consulting firm the Bridgespan Group and currently is an executive at New Profit Inc., which provides funding for innovative social projects, according to the article. According to the press release issued by the Corporation for National and Community Service, a federal agency, Mr. Carttar "brings 30 years of experience across sectors—public, private, and nonprofit—to the Director's position. For more than 10 years, he has been at the forefront of transforming the nonprofit sector by expanding innovative solutions to address national challenges and helping to set a higher standard of results and impact for the sector." The press release also states that the Social Innovation Fund "is an innovative initiative that is expected to generate nearly $200 million in public-private funds to support transformative solutions to major social challenges in communities throughout the U.S" and that the fund has already received more than 200 letters of intent to apply for grants. The deadline for applying for at least the first round of grants was yesterday at 5 p.m.
For more coverage, see the Nonprofit Quarterly interview with Mr. Carttar.
Thursday, April 8, 2010
Miriam Galston (George Washington) has posted When Statutory Regimes Collide:Will Wisconsin Right to Life and Citizens United Invalidate Federal Tax Regulation of Campaign Activity? on SSRN. This article is the most thorough consideration of the effect of recent Supreme Court election law decisions on the political campaign intervention prohibition for charities that I have seen to date. Here is the abstract:
In Federal Election Commission v. Wisconsin Right to Life (2007) and Citizens United v. Federal Elections Commission (2010), the United States Supreme Court dramatically reduced the ability of Congress to regulate campaign finance activities of corporations and others active in elections. Many of the same activities are still subject to restrictions by the Internal Revenue Code, which regulates the type and amount of political campaign activities that certain nonprofits exempt under federal tax law can engage in.
In the wake of the campaign finance decisions, the constitutionality of the tax law’s restrictions on campaign activity is now being challenged in the lower courts. This Article analyzes the two recent campaign finance decisions and campaign finance precedents more broadly to determine how, if at all, the Roberts’ Court’s campaign finance jurisprudence is likely to alter existing tax law jurisprudence in the area of campaign activity. It finds that, for the most part, tax law constitutional doctrines have developed independently of other areas of First Amendment free speech law. Based upon an analysis of the distinctive tax law doctrines, the Article concludes that the tax law provision prohibiting section 501(c)(3) charities from engaging in campaigns is likely to withstand challenges arguing that the provision prevents these nonprofits from engaging in protected political speech. However, there is some likelihood that the tax law prohibition is vulnerable to constitutional attack under traditional doctrines of vagueness or overbreadth due to the lack of precision of the terms of the political prohibition, as these have been elaborated by the IRS and the courts to date.
(Hat tip: Election Law Blog)
- Marty Sulek,
- Anne-Line Balduck, Annick Van Rossem, and Marc Buelens,
- Lesley Hustinx,
- Joanne G. Carman,
- Tamara G. Nezhina and Jeffrey L. Brudney,
- Begoña Gutiérrez-Nieto and Carlos Serrano-Cinca,
- Marybeth Gasman and Noah D. Drezner,
- Mark Chaves and Bob Wineburg,
- Guy David,
- Anthony J. Filipovitch,
- Ruth H. DeHoog,
- Yvonne Harrison,
Wednesday, April 7, 2010
Catholic University of America's Columbus Scool of Law will host an event on the evening of April 14 at the Naitonal Press Club. Organized by my colleague Roger Colinvaux, the topic: "Philanthropy in the 21st Century: Should All Charities be Created Equal?" is a stellar one. And the speakers, Diana Aviv, Richard Schmalbeck, Eugene Steuerle, and Russell Sullivan will all offer interesting perspectives.
More information can be found on the CUA website by following this link: http://www.law.edu/res/docs/pdf-documents/2010-pdf-docs/Natl-Press-Club-Series-April.pdf.
Roger and I hope that many of you will be able to attend.
A related note: I have put toegther a program on Religious Freedom in the Former USSR, which will be held Monday afternoon at CUA. If you are interested in this as well, please feel free to attend. It will be simulcast for those who are not in DC. The link for that program is http://www.law.edu/res/docs/pdf-documents/2010-pdf-docs/Religious-Freedom-Program-Web.pdf. The webcast will be available on Monday at 1 PM at live.cua.edu.
We previously blogged about a request by a group of Columbus, Ohio pastors to the IRS that it investigate whether the C Street Center in Washington, DC should be entitled to tax-exempt status as a church. The Center reportedly serves as a residential facility and spiritual retreat for some members of Congress. Now the same group, known as Clergy VOICE, has filed an additional complaint with the IRS asserting that the these members of Congress may have failed to properly report as taxable income the value of the allegedly subsidized housing they received through the Center. Following up on this second complaint, Citizens for Responsibility and Ethics in Washington (CREW) has field a complaints with both the House and Senate ethics committees alleging that members of Congress paid well-below market rates to live in the Center. As detailed in the CREW press release, the specific members involved are Senators Sam Brownback (R-KS), Tom Coburn (R-OK), Jim DeMint (R-SC), and John Ensign (R-NV), as well as Representatives Mike Doyle (D-PA), Heath Shuler (D-NC), Bart Stupak (D-MI) and Zach Wamp (R-TN).
Full disclosure: Caplin & Drysdale, the firm with which I am Of Counsel, is representing Clergy VOICE.
The Boston Globe reports that Root Cause, a research and consulting firm, is partnering with GuideStar to publish Root Cause's rating reports for charities. The first set of reports relate to school readiness programs in Massachusetts, but according to the article Root Cause expects to expand both nationwide and to charities that address other social issues. It is not clear whether GuideStar plans to rely primarily on Root Cause to provide ratings for the numerous charities listed on GuideStar, or whether GuideStar will partner with other charity rating organizations.
Tuesday, April 6, 2010
Numerous states localities are challenging nonprofit tax exemptions, especially given current fiscal pressures. Here are the latest stories from Massachusetts, California, and Illinois:
The Boston Globe reports that a mayoral task forceis on the verge of completing its examination of the uneven system of voluntary payments by the city's tax-exempt, nonprofit institutions. The city is apparently laying the groundwork for having these institutions pay 25 percent of what they would otherwise owe in property taxes, which could triple the current payments in lieu of taxes made by some nonprofits. Alternatively, the city is floating the idea that the nopnrofits could "pay" half of this amount by offering certain community programs such as free health screenings in public housing and scholarships for local students.
The San Jose Mercury News reportsthat the town of Palo Alto may condition approval of a new hospital project at Stanford University on the university paying for $30 million in public works, including a new police building, in addition to $124 million in "community benefits" already offered by the university to the town. While the stated reason for these demands is the strain on community resources, including affordable housing, caused by the planned hospital expansion, the article notes that some have criticized Palo Alto's community benefit list as going well beyond items relating to that strain.
Finally, ABC News reportsthat George Michael of Lake Bluff, Illinois is seeking to exempt his multi-million dollar Lake Michigan front property from property taxes on the grounds that it is a church, based on his family's Armenian Orthodox beliefs, his online ordination, and the inability of his disabled wife and daughter to travel to the nearest church of their faith. So far local and state authorities have prevailed in court, although an appeal is pending. Ironically, such questionable claims for exemption may actually be on the wane given both greater attention to such matters by local authorities and, in at least some jurisdictions, the reduced value of such exemptions.
The Chicago Tribune reports that a prominent refugee resettlement organization has formally adopted a requirement that employees affirm the group's Christian statement of faith, leading to employee departures, questions from funders, and inquiries from government agencies. World Relief, a 65-year old organized formed to help the poor and hungry, accepts both federal funds to resettle refugees and private donations from churches, foundations, and individuals. While the organization has always been a Christian entity and is "the compassionate service arm" of the National Association of Evangelicals, it apparently only recently required employees to affirm its mission statement "to follow Jesus by living holy, humble and honest lives." According to the article, some employees have left because they could not do so, while others have left because of disagreements with the new policy and how World Relief implemented it. The situation has drawn the attention of the Illinois Bureau of Refugee and Immigrant Services, and if may also draw federal attention as President Obama has referred the issue of religious hiring by federally funded groups to the Department of Justice. It could present a particularly difficult situation for the federal government, not least because World Relief handles 40 percent of U.S. refugee arrivals.
The Philadelphia Inquirer reports that after more than ten years of investigations, two individuals and their companies have agreed to resolve numerous charity scam allegations by paying $18.8million to the federal government and accepting a lifetime ban on telemarketing and soliciting for charities. According to the Federal Trade Commission's press release, Scott Pasch, David Keezer, and their companies allegedly misled contributors regarding the amount of their donations that were reaching legitimate charities, claiming 100 percent was when in fact the true figure was 10 to 15 percent. Neither the individuals nor their companies admit any wrongdoing as part of the settlement, however, and there is no indication that there will be any criminal proceedings against them.
Monday, April 5, 2010
Several initial observations on the impact of health care reform on charities:
* New Charity Hospital Requirements: Section 9007 of the Patient Protection and Affordable Care Act(H.R. 3590) requires section 501(c)(3) hospitals to conduct tri-annual community health needs assessments, implement strategies to meet the needs identified in those assessments, adopt and publicize a written financial assistance policy, and follow certain billing and collection practices.
* New Tax-Exempt Qualified Nonprofit Health Insurance Issuers: Section 1322 of the same bill creates a Consumer Operated and Oriented Plan (CO-OP) Program to encourage the creation of nonprofit health insurance issuers that will be tax-exempt under new Internal Revenue Code section 501(c)(29). Such issuers must meet certain requirements, including (1) substantially all of their activities must "consist of the issuance of qualified health plans in the individual and small group markets in each State in which it is licensed to issue such plans," (2) their "governance" must be subject to a majority vote of its members, (3) their governing documents must "incorporate ethics and conflict of interest standards protecting against insurance industry involvement and interference," (4) they must "operate with a strong consumer focus, including timeliness, responsiveness, and accountability to members," and (5) their profits must "be used to lower premiums, to improve benefits, or for other programs intended to improve the quality of health care delivered to [their] members."
* Uncertain Effect on State Charity Care Requirements: As this Chicago Tribune article highlights, if health care reform is ultimately successful in sharply reducing the rolls of the uninsured, that change will only magnify the uncertainty that charity hospitals in Illinois and a number of other states face regarding what level of free or discounted care they must provide to qualify for various state tax exemptions.
* And Let's Not Forget that Charities are Employers Too: As the IRS has already highlighted, Section 1421 of the bill provides a health care tax credit for small business. As the Chronicle of Philanthropy reported, this tax credit is also available to smaller nonprofits - even though tax-exempt - because it applies against payroll taxes. The size limit is no more than 25 full-time employees with average wages below $50,000, and the credit is phased in from 25 percent in 2010-2013 to 35 percent in 2014, subject to certain conditions. Of course, large nonprofits (with more than 50 workers), like their for-profit counterparts, will be subject to penalties if they fail to provide health insurance to their workers.
In a much anticipated decision, Chief Judge Vaughn R. Walker of the United States District Court for the Northern District of California ruled in favor of a former charity and its attorneys on their claims against the federal government for illegal wiretapping. The case involves the Al-Haramain Islamic Foundation, Inc., an Oregon nonprofit corporation, and two of its lawyers. They alleged that they had been subject to warrantless electronic surveillance and sought civil damages under the Foreign Intelligence Surveillance Act, 50 U.S.C. § 1810. Ruling on cross-motions for summary judgment as well as a government motion to dismiss, the court concluded that based on the non-classified evidence in the record there was no genuine issue of material fact regarding either the standing of the plaintiffs to bring their claims or that the challenged actions were unlawful. The court has asked the plaintiffs to choose to either pursue their other claims or to voluntarily dismiss those claims and proceed to entry of judgment.
The New York Times reports that the newly formed not-for-profit Bureau of Investigative Journalism will provide investigative reporting stories to a variety of newspapers, including the Financial Times. The David & Elaine Potter Charitable Foundationhas jump-started the effort by contributing the equivalent of $3 million to the Bureau. The Bureau is modeled after ProPublica, a U.S. nonprofit that produces investigative journalism stores for various newspapers, including the New York Times.