Friday, January 27, 2012
Nonprofits engaging in public policy advocacy has often been a controversial topic, and a recent mix of reports and articles indicate that there are still widely divergent perspectives on the wisdom, benefits, and costs of such advocacy. Here are some notable examples:
- ARNOVA's Finances of Nonprofits and Public Policy: Focused on the financial challenges now facing nonprofits and related emerging public policy issues, this report is from a June 2011 symposium and describes "the challenges now facing nonprofits in the realm of public policy, especially as they pertain to the financing of nonprofits presently and in the future. The report outlines an agenda for research needed to develop a better understanding of these challenges and issues."
- NCRP Report on Foundation Funding of Advocacy: Titled "Leveraging Limited Dollars: How Grantmakers Achieve Tangible Benefits by Funding Policy and Community Engagement," this report asserts that even modest financial support for nonprofit advocacy can lead to large benefits for marginalized groups. Based on a study of 110 organizations, it concludes that for every $1 invested in such advocacy a $115 in benefits flowed to such groups or over $26 billion in total.
- "Pandering for Profit: The Transformation of Health Charities to Lobbyists": For a more critical perspective on at least one aspect of nonprofit advocacy, there is this article by James T. Bennett (George Mason University - Department of Economics). Here is the abstract:
This study explores the metamorphosis of three major voluntary health agencies — American Cancer Society, American Heart Association, and American Lung Association — from charities supported primary by donations into lobbying organizations seeking taxpayers’ funds and grants from commercial enterprises in exchange for supporting private or political initiatives only peripherally related to their charitable missions. Prior to the 1980s, lobbying was all but nonexistent, limited to seeking increased funding for disease research. Fearing loss of tax-exempt status, health charities largely avoided political advocacy. The AIDS movement revealed that vast sums could be acquired from government by intense lobbying, and this advocacy evidently did not threaten tax-exempt status. All three of these charities copied the AIDS movement and targeted tobacco tax revenues at the state level. The American Lung Association, in particular, has acted as a public relations flack for both government agencies and corporations — selling its charitable reputation as a selfless entity concerned only with public health for self-interested purposes. The implications of this transition for both the charities themselves and the public interest are analyzed and discussed.
Thursday, January 26, 2012
Garth Brooks gave an Oklahoma hospital $500,000 several years ago, but then sued to get it back. Brooks argued that the hospital had agreed to build a women's center and name it after his mother. The hospital countered that Brooks had given it the money with no strings attached and that conversations may have been misremembered. Brooks brought a breach-of-contract lawsuit, and the jury awarded Brooks his $500,000 - and an extra $500,000 in punitive damages. A juror said the decision to award punitive damages came because: "We wanted to show them not to do that anymore to anyone else."
Curiously, the AP story says that Brooks had admitted in a deposition that he could not remember what had been promised. The story does not mention a written agreement.
Thanks to Fred Hopengarten who sent me this link to the story on boston.com.
Zolt: "Tax Deductions for Charitable Contributions: Domestic Activities, Foreign Activities or None of the Above"
Eric M. Zolt (UCLA) has posted Tax Deductions for Charitable Contributions: Domestic Activities, Foreign Activities or None of the Above (63 Hastings L.J. 361 (2012) on SSRN. Here is the abstract:
Warren Buffett, Bill Gates, and sixty-seven other billionaires have pledged to give a majority of their wealth for charitable purposes. The total dollar amount of potential funding for charitable activities is staggering. So is the potential loss of tax revenue. Because of past, current, and future tax benefits, U.S. taxpayers have funded and will fund a substantial portion of these charitable activities without any input in how the money is spent. These billionaires are not just being generous with their own money, but with the money of the American people.
Should we allow tax benefits to subsidize charitable activities and allow donors to dictate how funds are spent? This Article seeks to contribute to the debate on the desirability of charitable tax deductions by focusing on a smaller part of the charitable tax world: charitable deductions for foreign assistance. Tax benefits for foreign assistance raise several of the same issues that arise in the purely domestic context, as well as issues that may be less important or absent in the subsidizing of domestic charitable activities.
Recent scholarship has argued for continuing to allow tax benefits to foreign charitable activities, and for extending charitable tax benefits to foreign charities and to for-profit entities engaged in charitable activities. These arguments rest partly on the notion that there is no meaningful way to distinguish these activities or entities from domestic charities engaged in domestic charitable activities. These scholars may be right in arguing for consistent tax treatment for domestic and foreign charitable activity, but they may be wrong in their conclusions. The best approach may be to consider changes to the current charitable-deduction regime for both domestic and foreign charitable activities and to consider other alternatives for the government to provide financial support and other incentives for charitable activities.
Earlier this week the Supreme Court of the United States denied the petition for a writ of certiorari filed by Catholic Answers (see docket) in its case challenging the Internal Revenue Code section 501(c)(3) prohibition on political campaign intervention. As previously blogged, the lower courts had dismissed the tax refund case as moot because the IRS had refunded the excise taxes assessed on the alleged political campaign intervention expenses under section 4955. For reasons I stated last fall, the denial is no surprise. Nevertheless, it shows how difficult it will be for groups challenging the ban to actually have their day in court, at least as long as the IRS either refuses to penalize their actions (remember All Saints Episcopal Church in Pasadena?) or drops any penalty when challenged, as happened here.
Wednesday, January 25, 2012
The IRS has issued a Conservation Easement Audit Techniques Guide. The Guide provides that it is not an official pronouncement of the law or the position of the IRS, and it cannot be used, cited, or relied upon as such. The Guide nonetheless provides a summary of many of the requirements that must be met to be eligible for a federal charitable income tax deduction for the donation of a conservation easement under IRC § 170(h). The Guide also alerts readers to issues that may be considered and raised on audit. The Guide is periodically updated to reflect case law and other developments.
For a general discussion of the IRS’s use of Audit Techniques Guides, see Charles P. Rettig, IRS Audit Techniques Guides and Current Tax Enforcement Priorities. Rettig explains that “[t]he IRS Audit Techniques Guides (ATGs) focus on developing highly trained examiners for a particular market segment or issue.”
Mitt and Ann Romney released their 2010 federal income tax returns (for themselves, three grantor trusts, and a private foundation) and an estimated 2011 federal income tax return for themselves. As highlighted in a Bloomberg article focusing on their charitable giving, the level of their giving at $7 million or 16.4% of their gross income over the two-year period was relatively high even compared to the wealthiest Americans. At the same, time their methods of giving were fairly straightforward for a wealthy family - a mix of cash and (presumably appreciated) stock contributions, including to what is apparently their family foundation (the Tyler Family Foundation). The foundation in turn has given away significantly more than the required five percent annual payout in recent years, although it has also accumulated over $10 million in total assets. As noted by various commentators in the article, including myself and new contributing editor to this blog Miranda Fleischer (Colorado), these are common and widely used philanthropic techniques. The Romney could in fact have been more tax efficient with their giving if they had made proportionately more stock donations and as opposed to cash donations. The primary recipient of the cash contributions - the Church of Jesus Christ of Latter-Day Saints, which received over $4 million during these two years - appears more than willing to accept stock donations. There was no sign in the returns of charitable trusts or other, more sophisticated charitable giving techniques.
Tuesday, January 24, 2012
The Duke Journal of Law and Contemporary Problems has published a symposium edition entitled Conservation Easements: New Perspectives in an Evolving World. The purpose of the symposium is to "avoid restating the conventional wisdom about conservation easements and, instead, to stimulate innovative thinking and reforms in conservation easement law and practice." The symposium articles address a host of interesting and sometimes controversial issues, including the challenges posed to perpetual protection by climate change, the weaknesses in state conservation easement enabling legislation and suggested reforms, the inefficacy of the federal tax incentive program relating to conservation easement donations, the risks state legislatures pose to perpetual conservation easements, and why the doctrine of merger generally should not apply to perpetual conservation easements.
Monday, January 23, 2012
A little over a week ago Professor Vaughn James blogged in this space about the Supreme Court's recent Hosanna-Tabor Evangelical Lutheran Church and School decision unanimously concluding that religious organizations benefit from a "ministerial exception" to employment discrimination laws. I want to focus on one possible ramification of this decision that does not appear to have been noted publicly yet - does the reasoning supporting this exception also support a "pulpit exception" to the tax law prohibition on political campaign intervention? (Shameless self promotion - I explored this possibility in the last part of my 2009 Boston University Law Review article on Politics at the Pulpit.)
The strongest argument for not having such a "pulpit exception" is that the prohibition is a valid and neutral law of general applicability and so does not violate the Free Exercise Clause under the reasoning of Employment Div v. Smith, 494 U.S. 872 (1990). But in Hosanna-Tabor the EEOC and the plaintiff were unsuccessful in making this argument with respect to the Americans with Disabilities Act. Here is the Court's reasoning for rejecting that argument:
It is true that the ADA’s prohibition on retaliation, like Oregon’s prohibition on peyote use [in Smith], is a valid and neutral law of general applicability. But a church’s selection of its ministers is unlike an individual’s ingestion of peyote. Smith involved government regulation of only outward physical acts. The present case, in contrast, concerns government interference with an internal church decision that affects the faith and mission of the church itself. See id., at 877 (distinguishing the government’s regulation of“physical acts” from its “lend[ing] its power to one or the other side in controversies over religious authority or dogma”). The contention that Smith forecloses recognition of a ministerial exception rooted in the Religion Clauses has no merit.
If Smith does not bar the ministerial exception because that exception relates to "an internal church decision that affects the faith and mission of the church itself," it certainly seems reasonable to conclude that Smith also does not bar a pulpit exception, at least if a pulpit-delivered endorsement of a candidate is religiously motivated and communicated to the congregation as part of the minister's role in teaching them how to faithfully live out their beliefs. That this would be the case for many if not most ministers who chose to deliver such a message from the pulpit seems likely, for reasons detailed in my article. The Supreme Court in Hosanna-Tabor appears to have provided solid grounds for arguing that the Free Exercise Clause requires such a pulpit exception.