April 1, 2011
Civil Society in Developing Countries
Civil Society has been much in the news as pundits debate the role that it has played in the uprisings in Northern Africa and the Middle East, and whether civil society institutions are strongly enough implanted in those parts of the world that they will be able guide nascent democracies into stable and prosperous futures.
Our colleague, Karla Simon, will soon be coming out with a book on civil society organizations in China. A section of that book is currently available on SSRN, and further information regarding civil society abroad can be found on the website of the International Center for Civil Society Law.
I, too, have done a bit of recent writing on civil society in the developing world. In my case, the focus is Africa, and my take is mildly cynical. In an brief article, entitled Wait! That's Not What We Meant by Civil Society!: Questioning the NGO Orthodoxy in West Africa, which will appear in a symposium edition of the Brooklyn International Law Journal, I argue that when we in the West say "civil society," what we really mean is a thriving, mostly secular, mostly educated and West-leaning NGO sector. What repeatedly happens, at least in Islamic Africa, is that we help create a space for our version of civil society, which then is almost inevitably filled by Islamic religious organizations who agitate for laws that we find repugnant. My conclusion is that there is not much that we can or should do about it.
Should College Bowls Be Nonprofit?
A recent New York Times article reports on scandal swirling around the Fiesta Bowl. As we all know, college sports, even big time sporting events like the Fiesta Bowl that generate tens of millions of dollars each year, are tax exempt due to the supposedly close connection between college athletics and education. In recent years, more commentators and politicians have been question the validity of that supposed connection.
Now comes word that the Fiesta Bowl organization has been spending lavishly on strip clubs and personal expenses and has, to boot, been funneling political campaign donations to favored politicians. This has every appearance of sordid mess that undoubtedly will add impetus to efforts to tax college sports revenues.
For those interested in the topic, our Duke colleague, Charles Clotfelter, has just come out with a book entitled Big-Time Sports in American Universities.
For my part, I have often wondered why we don't come up with a rule that universities that fail to graduate their athletes must abandon the pretext of educational connection and pay corporate income taxes on all revenues generated by those programs.
The Chronicle of Philanthropy reports that three Congressional Republicans, all members of the House Ways and Means Committee, have asked the IRS to investigate whether the AARP abused its tax-exempt status by lobbying for the new health-care law when it stood to profit from one of the law's provisions. The report is worth a glance, if only for its amusingly inflammatory graphics. Two Ways and Means subcommittees will hold a hearing on Friday.
March 31, 2011
Compensation for Nonprofit Board Members
I often tell my students that, in many states, enforcement of nonprofit law happens only when a newspaper reporter sniffs out a scandal or the A.G. wants to be governor and thinks he/she can get mileage out of whipping up public outrage. In Massachusetts, the Boston Globe reports that the state's A.G., Martha Coakley, is putting pressure on nonprofit health insurance providers to stop paying generous fees to their board members. This recent focus on nonprofit health insurance companies arose when it was revealed earlier this month that Blue Cross Blue Shield of Massachusetts graced its departing chief executive with an $11 million payout. Under pressure from Coakley, BCBS and another large health plan announced that they would suspend paying fees to their board members.
In recent days, the state's second largest health insurer, Harvard Pilgrim Health Care, along with Tufts Health Plan, threw it back in Coakley's face and announced that they would not stop paying generous stipends to their nonprofit board members. The now controversial payments range from $19k to $83k annually for part-time work. In the seemingly clueless words of Thomas P. O'Neill III, former Massachusetts lieutenant governor who now serves on the board of Tufts Health Plan, "[t]hese are people from various walks of life who bring a skill set. These are not political hacks . . ."
It would be interesting to know how these payments would be evaluated under the federal Intermediate Sanctions Doctrine. I suspect they would pass muster, and I suspect the companies have already paid high priced lawyers to give the payments a stamp of approval.
A market for kidneys?
As we all know, newspapers and law journals have been filled for at least a decade with stories and debates over whether it is a good thing or a bad thing to allow the market to intrude in areas that typically have been considered charitable. Now the LA Times reports on debates over whether there ought to be a market for spare kidneys. As the story reminds us, each of us has two kidneys but we only need one, as long as it functions properly. I have never researched the deductibility of medical expenses related to donating a kidney. If this article is correct, perhaps that question will become mute: the market will determine how much we (or, more likely, a poor person from a developing country) will be paid for giving up an organ.
March 30, 2011
A Compelling Social Enterprise Story
The Community Development Law Clinic that I supervise recently represented Carolina for Kibera (CFK), a nonprofit organization that focuses on public health and community development in Kibera, a sprawling slum just outside of Nairobi, Kenya. (For those who are curious, we performed a standard legal audit for the organization and determined that it is in fine legal condition.) CFK was founded a decade ago by a UNC-Chapel Hill undergraduate, Rye Barcott, with a decidedly grassroots approach. Residents of Kibera told Rye and his collaborators that young people in the community needed healthy activities, so they founded a soccer league that has grown into an important institution. Soccer provided a way into the lives of young people and their families, and today CFK is a thriving, million-dollar-a-year NGO that runs several heralded programs including an extremely successful health clinic. As CFK grew, Rye became somewhat of a social enterprise celebrity. It did not hurt his reputation that he entered the Marines after graduating from Chapel Hill and continued to act as a principal of the organization while he was on active service in Iraq.
Now Rye has written a book, It Happened on the Way to War: A Marine's Path to Peace. Available on Amazon, the book is being advertised as the next Three Cups. I have not yet read the book, so I cannot endorse it (I hope it has more literary merit than Three Cups), but I can tell you that Rye's story is compelling and that, if he comes through your town to do a reading or a CFK fundraiser, it would be worth the trip.
A Charitable Baldwin
I don't mind admitting that I'm more drawn to celebrity gossip than C-Span. In that spirit, a recent item in the Wall Street Journal reports that actor Alec Baldwin intends to donate his profits from his gig as spokesperson for Capital One to nonprofit arts organizations. Thus far he has given $1 million to the New York Philharmonic and $500,000 to the Roundabout Theater Company, where he sometimes performs. In a brief interview with the WSJ, he asks "How can I get my hands on more money [to donate]? How can I set up a food company like Paul Newman that prints money? Could I sell hair gel?"
So, it turns out that Alec Baldwin, in addition to being a celebrity, is a budding social entrepreneur. I'm sure many of us could help advise him on his hair gel venture.
March 29, 2011
Commerciality Doctrine Frustrations
I write on Commerciality partly because it is fresh in my mind and partly because I only now (on Tuesday afternoon) realized that I'm supposed to be blogging this week and I can write this without further research.
I often tell my Nonprofit Law students that the Commerciality Doctrine is like a "bludger" in a game of quiddich. For those not familiar with the Harry Potter series of books, the bludger is a small, hard ball that flies through the air knocking quiddich players off of their broomsticks when they are concentrating on other aspects of the game. Like the Commerciality Doctrine, the bludger produces anxiety in players because it is utterly unpredictable. No one knows when it will strike and what kind of damage it will cause.
Recently, a client of the Community Development Law Clinic that I supervise was very nearly felled by the Commerciality Doctrine. The client was a start-up organization that wished to form a nonprofit 501(c)(3) to promote public health and good nutrition, focusing particularly on a low-income, primarily African American community in North Carolina. The stakeholders included representatives from the community and a group of Public Health Ph.D. researchers and practitioners affiliated with a large, nearby university. The centerpiece of their charitable plans involved launching a fast-food restaurant that would be a gathering place and classroom for their public health/education interventions, and would also model good nutrition by featuring a menu of delicious, cheap, nutritiously sound dishes.
To make a long, frustrating story short, the IRS considered the restaurant to be too commercial. The examining officer told us that the only way to get it approved was to make it look more like a soup kitchen: no fixed prices, no fixed menu, no professional staff, and food served to anyone who walked in the door. We replied that the stakeholders did not want to launch a soup kitchen; that this was a social enterprise that intended to be partly self-sustaining as it pursued its educational and charitable goals. We cited Presbyterian and Reformed Publishing Co. V Commissioner for the proposition that profit-generating activities -- even those that appear similar to commercial activities -- are permissible if they are in furtherance of a charitable goal. The officer's response was "yea, but that's about books, and we're talking about food."
In the end, when it became clear that we would appeal an adverse decision, we arrived at a compromise whereby the examining officer would grant c3 status and the new organization would, among other things, post suggested donations rather than fixed prices.
What does this experience prove? The Commerciality Doctrine is nonsensical and probably unconstitutional. In a world of social enterprise, we need new laws.