Friday, June 3, 2011
As part of the Law, Society, and Taxation portion of the Law and Society Association's annual meeting in San Francisco, the following nonprofit-related papers were presented yesterday or are being presented today. To see the abstracts of these papers, click on the above link, click on "Search the Preliminary Program" of the left side of the page, and then search for the author of the paper. For those papers with publicly available drafts, I have provided a link to those drafts below.
- Nicholas A. Mirkay (Widener), International Philanthropy and the Public Policy Doctrine: A Modern Conundrum
- Heather Elliott (Alabama) & Grace Soyon Lee (Alabama), Zoning for Dollars: What Is the True Value of Donated Real Property?
Hat tip: TaxProf Blog
Thursday, June 2, 2011
Effective yesterday, the assets of the struggling Religion News Service (RNS) were transferred to a new section 501(c)(3) organization affiliated with the section 501(c)(3) Religion Newswriters Foundation, which in turn is affiliated with the section 501(c)(6) Religion Newswriters Association. RNS' mission statement is "RNS' first priority is to provide intelligent, objective coverage of all religions-Judaism, Christianity, Islam, Asian religions and private spirituality. RNS also provides commentary from a diverse array of all points of the political and theological spectrum."
According to an RNS press release, the Lilly Endowment facilitated the transfer by making a three year, nearly $3.5 million grant to help with the transition. The transfer was apparently delayed by a lengthy IRS application process of the new entity, showing the timeliness of calls as far back as 2009 for the IRS to provide guidance regarding nonprofit new sources. The eventual IRS approval also demonstrates, however, that such conversions are at least sometimes possible without new legislation. The for-profit company Advance Publications, Inc. had owned RNS since 1994, and was paid an undisclosed amount for transferring RNS' assets to the new owner, Religion News LLC. Professor Debra L. Mason (Missouri School of Journalism), who also serves as the Executive Director of RNF and RNA, will manage the new organization.
Adam Chodorow (Arizona State) has posted Charitable FSAs: A Proposal to Combine Healthcare and Charitable Giving Tax Provisions on SSRN (forthcoming BYU Law Review). Here is the abstract:
This article considers two unrelated tax provisions – healthcare Flexible Spending Accounts (FSAs) and the charitable deduction. FSAs permit eligible taxpayers to set income aside tax-free to use for medical expenses. However, these accounts have a “use-it-or-lose-it” feature that discourages participation and creates incentives for unnecessary spending at year-end. The charitable deduction is available only to those who itemize their deductions, thus negating the incentive to give for the 65% of taxpayers who take the standard deduction. Prior attempts to fix these provisions separately – by allowing taxpayers to rollover unused FSA amounts to the next year and moving some or all of the charitable deduction “above the line” – have failed.
I propose combining the two provisions by allowing taxpayers to donate unused FSA amounts to charity. Doing so would lower a key impediment to participation in FSAs while giving a functional above the line deduction (and relief from payroll taxes) to those who donate through this mechanism. Not only would this reform increase the efficacy of both provisions, but it should also avoid many of the pitfalls of prior stand-alone reform efforts.
There have been occasional scholarly calls to prohibit discrimination on the basis of sexual orientation as a condition for receiving federal tax benefits. For example, Nicholas Mirkay (Widener) has written extensively on this topic (Losing Our Religion, 17 Wm. & Mary Bill Rts. J. 715 (2009); Is it 'Charitable' to Discriminate?, 2007 Wisc. L. Rev. 45), while Shannon Weeks McCormack (UC Davis) has written more generally about not subsidizing organizations that generate significant negative externalities, including by having exclusionary practices such as ones based on sexual orientation (Taking the Good With the Bad, 52 Ariz. L. Rev. 977 (2010)). Whatever the merits of these arguments, there appears to be little political traction for such changes.
What has gained political traction, however, is tying more direct government financial support to not discriminating on the basis of sexual orientation. The most recent example of such a condition is in Illinois, where the Huffington Post reports that Catholic Charities of Rockford, Illinois has stopped providing foster care services because a new state law would have required it, as a recipient of state money, to treat people in civil unions as it would treat married couples. The Rockford Diocese announced the decision at a press conference last week, noting that approximately 350 children would be immediately affected. According to the Huffington Post article, if Catholic Charities statewide followed suit another entity would need to be identified to handle approximately 2,500 foster care cases annually. For a helpful summary of similar decisions by Catholic Charities in other states and recent scholarship for and against religious exemptions in this context, see this Concurring Opinions post by Courtney Joslin (UC Davis).
Additional Coverage: Chicago Tribune.
Wednesday, June 1, 2011
Yesterday I blogged about legislation in Massachusetts that would prohibit charities from compensating directors without Attorney General approval. At the time I did not have access to the actual bill text and and so relied on press reports. Thanks to Evelyn Brody, I now have access to that text (Amendment 204.2 and Amendment 209 to bill S00003).
Tuesday, May 31, 2011
TVNZ reports that the New Zealand affiliate of Greenpeace has lost significant tax breaks that are now only available to recognized charities. While the affiliate maintains it qualifies as a charity, the New Zealand Charity Commission has rejected that claim based on the level of the affiliate's political involvement. It was only six years ago that the Charity Commission was established and purported charities had to formally register with the Commission. While most applicants have successfully registered, the Commission has rejected registration for a number of organizations, including Greenpeace of New Zealand. The tax benefits at issue include exemption from income tax and tax rebate elibility for donors. The affiliate is making an argument that will be familiar to U.S. readers, that the law fails to provide a clear line regarding how much political advocacy is too much and that such advocacy can be an essential part of fulfilling a charitable mission.
More specifically, in rejecting the registration application, the Charity Commission concluded: "the Commission considers that if the promotion of disarmament and peace [one of the affiliate's stated purposes] is done in a way that is considered political, for example, by requiring a change of law or government policy in New Zealand or abroad, it will not be charitable." The Commission also concluded that a general purpose statement that the affiliate would "[p]romote the adoption of legislation, policies, rules, regulations and plans which further the objects of the Society and support the enforcement or implementation through political or judicial processes as necessary" also demonstrated an independent, non-charitable purpose. The Commission further concluded that these two purposes demonstrated a non-ancillary, political purpose and so disqualified the affiliate from charity status under New Zealand law, which is based in large part on English law.
The Boston Globe reports that the Massachusetts state Senate added an amendment to the state budget which would prohibit public charities from paying their directors without prior approval of the state Attorney General's public charities division. The Attorney General could also rescind that approval if the compensation was deemed unreasonable. The bill containing the amendment is now on its way to conference committee for reconciliation with the state House's budget bill. The text of the amendment is not yet available on the state legislature's website, as the relevant bill (H03401) has not yet been updated to reflect the amendment.
As detailed in the article, Attorney General Martha Coakley begun pushing for this legislation after the board of Blue Cross Blue Shield of Massachusetts approved an $11 million compensation package for the health insurer's departing chief executive. The members of that board each receive compensation in the five figures annually, and the board members of three other major Massachusetts health insurers also compensated their board members. As explained in a press release issued by her office, AG Coakley issued a report finding no justification for this compensation. Blue Cross Blue Shield and another health insurer in fact suspended compensation for their board members in the face of AG and public criticism of this practice. The amendment appears to reach all public charities, however, and not only health insurers.
Additional coverage: Boston Herald.