June 10, 2011
Weitzel: 501(c)(3) Charitable Organizations After Citizens United
Paul D. Weitzel (an attorney who according to his Bepress description works in the U.S. District Courts) has posted 501(c)(3) Charitable Organizations After Citizens United on SSRN. Here is the abstract:
This paper argues that tax deductible charities have a constitutional right to speak about politics. 501(c)(3) organizations include all tax deductible charities, including religious groups. Citizens United v. Federal Election Commission abrogated the ban on political speech by 501(c)(3) organizations by rejecting the reasoning in Regan v. Taxation with Representation of Washington. Regan found that 501(c)(3) organizations could be prohibited from speaking because they would still be able to speak through affiliate organizations. Citizens United rejected this argument when applied to for-profit corporations, and that reasoning applies equally to non-profit organizations. Citizens United also rejected the distinction between subsidies and punishments, which Regan relied on in its holding.
Appleby: The Justification for Tax Exemption in Intercollegiate Athletics
Andrew D. Appleby (Sutherland Asbill & Brennan) has posted For the Love of the Game: The Justification for Tax Exemption in Intercollegiate Athletics on SSRN (also 44 John Marshall L. Rev. 179 (2011)). Here is the abstract:
Intercollegiate athletics are a fundamental part of the American college experience. Nothing else unites and impassions entire campuses while providing educational opportunities to thousands of students who might not otherwise be able to attend college. Congress and the IRS have long recognized the immense educational value of intercollegiate athletics and have properly exempted intercollegiate athletics from federal income taxation. However, a few vocal critics have overreacted to escalating broadcasting agreements and coaching salaries, often without stepping back to examine these transactions in a broader tax policy context. This Article does just that, and demonstrates that longstanding tax exemption is undeniably justified in intercollegiate athletics.
This Article begins in Part I with an overview of tax exemption fundamentals, including a discussion of the tax policy justifications for tax exemption. Part II provides a brief history of tax exemption for intercollegiate athletics, as well as an overview of the current legislative posture. Part III provides an analysis of tax exemption in intercollegiate athletics. This part illustrates that intercollegiate athletics satisfy all the requirements for tax exemption, and that even activities such as big-time D-I football and basketball very likely avoid the Unrelated Business Income Tax (UBIT). Additionally, this part demonstrates that tax exemption is justified for intercollegiate athletics under several tax policy justifications, and that intercollegiate athletics also fall outside the UBIT justifications. This part concludes with a proposal to clarify that intercollegiate athletics should remain fully exempt from federal income taxation.
June 9, 2011
Help for Nonprofits Hit by Mass IRS Revocation
Following up on my earlier posting regarding the IRS announcement that it has revoked the tax-exempt status of approximately 275,000 organizations for failure to file annual reports for three consecutive years, I have learned that the National Council of Nonprofits has created a very helpful website and related tip sheet to assist still active organizations caught up in this mass revocation to regain their exemption.
IRS Revokes Exemption & Provides Relief Route for 275,000 Organizations
The IRS issued a press release yesterday stating that "approximately 275,000 organizations under the law have automatically lost their tax-exempt status because they did not file legally required annual reports for three consecutive years" (see also Announcement 2011-35). The IRS published the names of the organizations on its website, organized by state.
At the same time, the IRS also provided a route for small organizations (annual gross receipts of $50,000 or less for 2010) that were required but failed to file Form 990-N for three years to regain their tax-exempt status retroactive to the date of revocation by filing Form 1023 or Form 1024 (application for recognition of exemption) no later than December 31, 2012 and paying a reduced $100 filing fee (see IRS Notice 2011-43 and Revenue Procedure 2011-36). Organizations that do not meet the eligibility requirements for this special relief may also apply for reinstatement but such reinstatement will only be retroactive if the organization can demonstrate reasonable cause for its failure to file, takes steps to ensure no such failures in the future, and files the late returns (including filing a Form 990-EZ in place of a required but not filed Form 990-N); such organizations also have to pay the normal exemption application user fee (see IRS Notice 2011-44).
Finally, the IRS also clarified the extent to which grantors and contributors may rely on the listing of an organization in the Cumulative List of Organizations described in Section 170(c) (Publication 78), including noting that revocations may be publicly announced on the IRS website instead of in the Internal Revenue Bulletin (see Revenue Procedure 2011-33).
June 8, 2011
Mass. Asst. AG Eric Carriker and Attorney Marty Martin Join IRS TE/GE Advisory Committee
The IRS announced yesterday the new members of its Advisory Committee on Tax Exempt and Government Entities (ACT). With respect to Exempt Organizations, the new members and their IRS provided bios are:
- Eric B. Carriker, Massachusetts Department of the Attorney General, Boston. Carriker is an assistant attorney general and the senior litigation manager in the Non-Profit Organizations/Public Charity Division of the office of the Attorney General. He conducts and supervises investigations and litigation covering a broad spectrum of issues connected with the Attorney General’s oversight of charities. He is a board member of the National Association of State Charity Officials (NASCO) and previously served as NASCO president.
- Marty Martin, Marty Martin Law Firm, Raleigh, N.C. Martin focuses his legal and consulting practice on all aspects of an exempt organization’s life cycle, including start up, operations and management, board governance, merger, bankruptcy and closing. In addition to his Juris Doctor degree, he received a master’s in public administration with concentration in internal management of non-profit/public sector organizations and networks. Martin is an instructor for the Duke University Nonprofit Management Intensive and Advanced Certificate in Nonprofit Leadership programs and is affiliated with North Carolina State University’s Institute for Nonprofits.
The continuing ACT Exempt Organizations members are J. Daniel Gary (administrative counsel to the United Methodist General Council on Finance and Administration), James P. Joseph (Arnold & Porter), Karien Gries (Larson Allen) and Celia Roady (Morgan, Lewis & Bockius).
Another Politician Allegedly Behaving Badly (No, Not That One)
The Washington Post reports that District of Columbia Attorney General Irvin B. Nathan has filed a civil lawsuit against D.C. Council member Harry Thomas Jr. alleging that Thomas diverted more than $300,000 in public funds in major part through a charity to a nonprofit that Thomas apparently controls, and from there to his personal use. The DC AG has also asked U.S. Attorney Ronald C. Machen to consider filing criminal charges against Thomas.
The funds allegedly flowed from the city to the Children and Youth Investment Trust Corp., a public-private intermediary, and then to the Langston 21 Century Foundation, the foundation associated with the Langston Golf Course amd that supports educational programs. Langston 21 in turn granted most of the funds to a nonprofit allegedly controlled by Thomas - Team Thomas - and a for-profit company - HLT TeamThomas/Swingaway, LLC (also known as HLT Development) - also apparently controlled by Thomas, supposedly to fund youth sports programs. According to the DC AG's press release, Team Thomas also separately raised more than $80,000 from private donors, even though it appears never to have obtained federal tax-exempt status or to have registered with DC to solicit charitable contributions. Team Thomas allegedly spent a significant portion of both the public and private funds on personal expenses for Thomas, including vacation travel and a mailing his Councilmember work, and HLT Development allegedly purchased a luxury SUV for Thomas' personal use. The alleged issues came to light because a political opponent of Thomas raised questions last fall about Team Thomas. Langston 21 has already agreed to repay the funds that it retained, subject to a reduction for any funds actually spent on youth sports programs, and its principals have agreed to cooperate in the case against Thomas.
June 7, 2011
CORRECTED LINKS for Law, Society & Taxation Nonprofit-Related Papers
A reader alerted me that the links I previously provided for these papers were not working. I have now corrected those postings (first set of papers and second set of papers) with updated information for accessing the abstracts and, where available, drafts of the papers. My apologies for the problematic links.
UK: Number of Charities Down Despite Gov't Push for More Charity Provision of Public Services
The Guardian reports that despite the Conservative Party government's "big society" initiative to involve more charities in providing public services, the number of registered charities actually declined by 1,600 over the past year. The reasons for the decline are unclear, although the Charity Commission noted that its merger unit has seen a 150 percent increase in cases since 2009. The shrinkage represents approximately one percent of registered charities, of which there are currently 162,346. Charity leaders also expressed concerns that the decline may only foreshadow a more substantial contraction of the charitable sector as government budget cuts begin to hit charity revenues and a long-term shrinkage in the number of UK households that donate to charities continues.
June 6, 2011
Law, Society & Taxation: More Nonprofit-Related Papers
The following authors presented nonprofit-related papers at the Law and Society Annual Meeting over the weekend. 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.
- Ellen Aprill (Loyola-L.A.), Regulating the Political Speech of Noncharitable Exempt Organizations after Citizens United
- Brian D. Galle (Boston College), The Normative Basis for Legal Restrictions on Nonprofit Political Activities
- Jill S. Manny (NYU), Lobbying: Hear the Public Voice of Public Charities
Hat Tip: TaxProf Blog