Monday, June 27, 2011

Corporate Sponsorship in the NonProfit World: Everybody has a Price!

The blogosphere is abuzz about GLAAD and other tax exempt organizations' sudden, and apparently well coordinated support of a proposed merger between AT&T and T-Mobile.  Anybody with half a brain knows that corporate sponsorships, as defined in IRC 513(i), constitute gross legal fictions.  The fiction is that the tax exempt organization that is being "sponsored" is not engaged in the sale of advertising and thus subject to the unrelated business income tax.  IRC 513(i) perpetuates that fiction so that college football and basketball can make billions of tax free dollars while at the same time absolutely vilifying poor but talented athletes for daring to sell their memorabilia for pizza and beer money.  But I digress.  According to the Boston Globe and other media outlets, GLAAD and several other "liberal" exempt organizations received substantial donations from AT&T, ($50,000 in the case of GLAAD), and sometime thereafter GLAAD sent this letter in support of AT&T's proposed merger with T-Mobile.  Over the weekend, and after the blogosphere began asking what the heck the proposed merger has to do with gay rights, Jarrett Barrios and several GLAAD board members resigned, according to this report

Wireless phone service has about as much to do with gay rights as zebras have to do with waterskiing. So gay bloggers were justified in hounding Jarrett Barrios, who until this past weekend was president of the Gay & Lesbian Alliance Against Defamation, after he wrote the federal government on behalf of AT&T, a corporation that had donated $50,000 to Barrios’s watchdog group.

 It should be noted that at least one AT&T executive sits on GLAAD's board of directors.  Corporations, of course, are theoretically incapable of altruism.  The law allows the charitable contribution to corporations but everyone knows that corporations make contributions to polish their image all for the purpose of selling goods or services.  Still, explicit quid pro quo is prohibited, except in the case of college athletics which is different right?  The quid pro quo in this instance -- what might also be referred to as prohibited private benefit which should (but probably doesn't) jeopardize the organizations' tax exemptions -- resulted in eight other GLAAD board members resigning.   For more on the story, see this report in Politico.com.  One of the board members is reported to have severely condemned GLAAD's apparent trading on its name:

But when former GLAAD board co-chairwoman Laurie Perper appeared on Michelangelo Signorile’s Sirius XM radio show earlier this month, she alleged that Barrios had traded favors with Coronado for his support and then backed the AT&T/T-Mobile deal in return.  GLAAD immediately condemned Perper’s comments during the show, calling them “factually inaccurate, uninformed and misleading.”  “We are saddened and shocked that Laurie Perper would distort the truth to this degree


GLAAD shot back with this press release denying any impropriety and suggesting that its interest in media matters arises from its efforts to eradicate gay slurs from public discourse and tying those efforts to its support of the AT&T/T-Mobile merger: 

Finally, GLAAD is accomplishing extraordinary results in its programmatic work. AT&T and Time Warner Cable pulled advertising after GLAAD and the National Hispanic Media Coalition (NHMC) asked advertisers to drop advertisements from Jose Luis Sin Censura, a Spanish-language talk show where the audience frequently chants the word f*ggot and violently assaults LGBT guests. This campaign is continuing. We are now working with the NBA, Major League Baseball and World Wrestling Entertainment to combat homophobia in sports and training announcers, coaches and players to be LGBT inclusive.

Much of GLAAD’s work does not make headlines such as our People of Color Media Institute where 30 LGBT people of color and allies were trained on ways to speak to Americans about LGBT issues and GLAAD’s hard-working and dedicated staff are now getting them national attention. And GLAAD is working with local organizations to amplify powerful stories of LGBT couples and allies in New York, Minnesota, Oregon and many states where our equality is being debated – these are the voices that Americans need to hear from and who are at the heart of GLAAD’s mission.

All of this comes under the dedicated and dynamic leadership of GLAAD President Jarrett Barrios, whom we wholeheartedly support. We are saddened and shocked that Laurie Perper would distort the truth to this degree. She is entitled to her opinion, but she cannot change the facts, including the fact that GLAAD is much healthier today than while she was at the helm.

There is not as much on the internet about other groups who seemed to suddenly pay interest to such mundane matters as corporate mergers but those groups also sent in letters of support after getting hefty donations from AT&T.  Here is the NAACP's letter and statment, the League of United Latin American Citizens (LULAC)'s statment, the Japanese Americans Citizens (JACL)'s letter and even the Sierra Club's letter!  A regular rainbow coalition, I'd say.

Now, I am willing to suspend normal brain functioning just like the next American (especially when it comes to political campaigns, Americans are very good at it then), but this whole mess is a stain on some otherwise reputable tax exempt organizations and ought to be condemned everywhere. I rather doubt much can be done about it though from a legal standpoint.  The problem is, the sale of the organization's support is not quite unrelated business income (since it presumably lacks the regularity necessary to impose UBIT), nor it is it private benefit enough for anybody to do anything about it, since the classic definition of private benefit compares the degree to which the organization has sold its soul with the degree to which it has faithfully pursued its charitable goal.  If the oranization is only an occasional sell-out, its ok, according to the private benefit doctrine.  But make no mistake, these organizations have sold thier proverbial souls and in doing so can no longer claim the indignant high ground against the slimy capitalists of the world!  Shame on all of you!

dkj

http://lawprofessors.typepad.com/nonprofit/2011/06/corporate-sponsorship-and-corporate-capture-of-the-nonprofit-world-everybody-has-a-price.html

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