August 27, 2011
Nonprofit Converts to "B Corporation" Status to Take Investment Funds
Forbes reports that nonprofit CouchSurfing.org has become a "B" or "Benefit" Corporation in order to receive $7.6 million in funding from Benchmark Capital and the Omidyar Network. The now former nonprofit connects global travelers with locals throughout the world and has a user base of three million people in 81,000 cities. The B Corporation is an invention of the nonprofit B Lab, which certifies for-profit corporations as B corporations if they meet social, environmental performance, and legal accountability standards and "build business constituency for good business" according to the Certified B Corporation website. B Lab is also working to enact B Corporation legislation in at least three states (California, Michigan, and New York).
Hat Tip: Tactical Philanthropy
August 26, 2011
NJ Supreme Court Rules Extensive Gov't Ties Renders Nonprofit a "Public Agency"
In a decision earlier this week, the Supreme Court of New Jersey ruled that the New Jersey State League of Municipalities, an unincorporated nonprofit association, is a a "public agency" for purposes of that state's open records laws because of its creation and control by municipal officials. Reversing two lower court decisions, the Supreme Court found that the New Jersey Open Public Records Act applied to the League's records because the definition of "public agency" under that Act includes an instrumentality created by a combination of political subdivisions, which the League is, and does not require the carrying out of a traditional government function. The court also concluded that the League's records qualified as government records. Critical facts included that the League was created pursuant by state statute to serve as an association of municipalities and was controlled by elected or appointed officials from New Jersey's municipalities, all 566 of which are represented by the League. The court carefully distinguished New Jersey's Open Public Meeting Act, which only applies to "public bodies," the definition of which requires either the performance of a governmental function or authorization to expend public funds.
Coverage: New Jersey Star-Ledger.
August 24, 2011
WSJ: "Tax Break for Clergy Questioned"
Earlier this year, the Tax Court held in Driscoll v, Commissioner, 135 T.C. No. 27 that minister Phil Driscoll could claim a housing allowance under Internal Revenue Code section 107 for expenses related to his second home as well as for expenses related to his first home. Mr. Driscoll had previously been convicted of tax evasion.
Now an article in the Wall Street Journal reports that Senator Charles Grassley, who previously questioned the compensation and other financial practices of six megachurches, is asking whether the ruling violates the spirit, if not the letter, of section 107. Especially in the era of concerns about the debt, it will be interested to see if Congress decides some tightening of the housing allowance's generosity is appropriate.
August 23, 2011
Tobin on 501(c)(4)s and the Gift Tax
Donald Tobin (Ohio State) has written a letter to the editor of Tax Notes Today regarding the recent decision by the IRS to drop gift tax audits of donors to section 501(c)(4) social welfare organizations in the face of congressional criticism. Unlike some commentators, he does not fault the IRS either for opening the audits in the first place or for making what he views as a "practical and pragmatic" decision to end them while it reexamines it position on this issue. Rather, he criticizes the members of Congress who sent public letters to the IRS criticizing the audits for seeking to "harass and intimidate" the IRS in order to protect "powerful and politically connected donors" rather than letting the IRS apply the law as written. In Tobin's view, "If Congress does not want the IRS to engage in audits of (c)(4)s, Congress should not impose those responsibilities on the IRS. What is unfair is to impose those responsibilities on the agency and then accuse it of playing politics when it enforces the very provisions passed by Congress."
Hat tip: Tax Prof blog.
August 22, 2011
Chicago Tribune: "Catholic Charities Loses Ruling on Foster Care"
The Chicago Tribune reports that a state court has ruled that the state of Illinois can refuse to renew its contracts with Catholic Charities of the Diocese of Springfield-in-Illinois to provide publicly funded foster care and adoption services in that state based on the charity's turning away of openly gay parents. I previously blogged about this dispute, which was trigged by a new state law requiring recipients of state money to treat people in civil unions as they would treat married couples. The court concluded that despite a contractual relationship stretching over four decades, the charity did not have a legally recognized protected property interest in the renewal of the contracts at issue. The court therefore did not reach the question of whether the decision not to renew violated due process or, according to the article, the charity's argument based on free exercise of religion and a religious exemption in the new state law.