Saturday, February 16, 2013
Alicia Plerhoples (Georgetown) has posted on SSRN the Social Innovation Resource Guide. Here is the abstract:
This Social Innovation Resource Guide is a work-in-progress that attempts to capture various resources that assist, advise, and document social innovation. Social innovation -- defined as "a novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals" -- is drawing widespread academic interest. This Resource Guide began as an instrument for law students enrolled in the Social Enterprise & Nonprofit Law Clinic at Georgetown University Law Center. In it you will find foundations that support social innovation, organizations that are creating metrics to measure social innovation, attorneys who counsel social innovators, centers and incubators that grow social enterprises, and much more. This Resource Guide is meant to be collaborative and dynamic, and useful to all.
- Femida Handy, Jeffrey L. Brudney, and Lucas C.P.M. Meijs, From the Editors’ Desk
Ram A. Cnaan and Daniel W. Curtis, Religious Congregations as Voluntary Associations: An Overview
Chao Guo, Natalie J. Webb, Rikki Abzug, and Laura R. A. Peck, Religious Affiliation, Religious Attendance, and Participation in Social Change Organizations
- Sara Kinsbergen, Jochem Tolsma, and Stijn Ruiter, Bringing the Beneficiary Closer: Explanations for Volunteering Time in Dutch Private Development Initiatives
- Janelle A. Kerlin, Defining Social Enterprise Across Different Contexts: A Conceptual Framework Based on Institutional Factors
- Vladislav Valentinov and Constantine Iliopoulos, Economic Theories of Nonprofits and Agricultural Cooperatives Compared: New Perspectives for Nonprofit Scholars
- Hiromi Taniguchi, The Influence of Generalized Trust on Volunteering in Japan
- Isabella M. Nolte and Silke Boenigk, A Study of Ad Hoc Network Performance in Disaster Response
- Ellen Quintelier, Socialization or Self-Selection? Membership in Deliberative Associations and Political Attitudes
Dyana P. Mason, Putting Charity to the Test: A Case for Field Experiments on Giving Time and Money in the Nonprofit Sector
Judy Freiwirth, Book Review: Joining a Nonprofit Board: What You Need to Know
Friday, February 15, 2013
You can now access the opening statement by Chairman Dave Camp and the uploaded testimony of the 40 or so witnesses on the Committee on Ways and Means Committee website. Video of the testimony is available on UStream in two, two-hour recordings. An initial press report from Reuters indicates that the charity leaders who testified were united in their support for preserving the existing tax incentives for charitable giving. While I have not had the opportunity to review all of the testimony, the witnesses who most supported modifying the deduction in a way that would reduce some tax benefits from charitable giving in the interest of making the deduction a more effective tool for encouraging such giving appear to have been Roger Colinvaux (Catholic University) and Gene Steuerle (Urban Institute).
I was fortunate enough to be invited to present at a conference hosted by Columbia Law School's Charities Law Project last week. Featuring presentations and draft papers (available on the conference website) from a who's who list of charity law experts from the academy, state AG offices and other agencies, and private practice, the conference provided an incredible opportunity to consider and discuss emerging issues in the regulation of charities. Topics covered included:
- Jurisdictional Boundaries: State/Federal, State/State Relationships
- The Fundamental Role Of States In Governance Issues
- Emerging Issue: Political Activity/Advocacy By The Sector & The States' Role
- Transparency, Media And Technology: New Expectations, New Opportunities
- Emerging Issue: Challenges & Interests Of States In Social Mission/Hybrid Organizations
- Mapping The Trajectory: The Changing Role Of The State Regulators
- Emerging Issue: State Jurisdiction Over Religious Organizations
- Emerging Issue: Changing Landscape Of Charitable Solicitation
- Emerging Issue: The Dynamic Role Of States In Nonprofit Healthcare
- Federal Partners
- Envisioning The Future: New Structures
The conference organizers also gathered an extensive set of additional resources that will be helpful to anyone interested in the conference topics.
Thursday, February 14, 2013
As I type this post, the House Ways and Means Committee has begun its hearing on Tax Reform and Charitable Contributions. Here is the (long) list of scheduled witnesses:
Mr. Eugene Steuerle, Fellow and Richard B. Fisher Chair, The Urban Institute, Washington, DC.
Mr. Kevin Murphy, President, the Council on Foundations, Arlington, VA.
Mr. David Wills, President, National Christian Foundation, Alpharetta, GA.
Mr. Brian Gallagher, President & CEO, United Way Worldwide, Alexandria, VA.
Mr. Roger Colinvaux, Professor, Catholic University DC Law School, Washington, DC.
Mr. Eugene Tempel, Dean of the Indiana University School of Philanthropy, Indianapolis, IN.
Ms. Jan Masaoka, CEO, California Association of Nonprofits, Sacramento, CA.
Mr. Mark Huddleston, President, University of New Hampshire, on behalf of the American Council on Education, Durham, NH.
Mr. Conrad Teitell, Chairman, Charitable Planning Group, on behalf of the American Council of Gift Annuities, Stanford, CT.
Mr. Jake Schrum, President, Southwestern University, on behalf of the Council for Advancement and Support of Education, Georgetown, TX.
Ms. Diana Aviv, President & CEO, Independent Sector, Washington, DC.
Mr. Vinsen Faris, Chairman of the Board of Directors, Meals on Wheels, Washington, DC.
Mr. Bill Rieth, President & CEO, United Way of Elkhart County, Elkhart, IN.
Ms. Jill Michal, President & CEO, United Way of Greater Philadelphia and Southern New Jersey, Philadelphia, PA.
Ms. Pamela King Sams, Executive Vice President for Development, Children’s National Medical Center, Washington, DC.
Ms. Nicole Busby, Executive Director, the National Association of Free and Charitable Clinics, Alexandria, VA.
Mr. Rand Wentworth, President, Land Trust Alliance, Washington, DC.
Ms. Kim Morgan, CEO, United Way of Western Connecticut, Danbury, CT.
Mr. Terry Mazany, President & CEO, The Chicago Community Trust, Chicago, IL.
Mr. Brent E. Christopher, President & CEO, Communities Foundation of Texas, Dallas, TX.
Ms. Leslie Osche, Executive Director, United Way of Butler County, Butler, PA.
Mr. William Daroff, Vice President for Public Policy, Jewish Federations of North America, Washington, DC.
Ms. Ruth Thomas, Vice President of Finance and Administration, SAT-7, Easton, MD.
Mr. John Ashmen, President, American Gospel Rescue Missions, Colorado Springs, CO.
Mr. John Berry, CEO & Executive Director, Society of St. Vincent de Paul Georgia, Atlanta, GA.
Mr. Larry Minnix, President & CEO, Leading Age, Washington, DC.
Mr. Scott Ferguson, President & CEO, United Way of Chattahoochee Valley, Columbus, GA.
Ms. LaKisha Bryant, CEO, United Way of Southwest Georgia, Albany, GA.
Mr. Mike King, President & CEO, Volunteers of America, Alexandria, VA.
Ms. Jimalita Tillman, Executive Director, Harold Washington Cultural Center, Chicago, IL.
Mr. Tim Delaney, President, National Council of Nonprofits, Washington, DC.
Mr. Bill Kitson, President & CEO, United Way of Greater Cleveland, Cleveland, OH.
Ms. Naomi Adler, President & CEO, United Way of Westchester and Putnam, White Planes, NY.
Ms. Cynthia Gordineer, President & CEO, United Way of Forsyth County, Winston-Salem, NC.
Ms. Karen Rathke, President & CEO, Heartland United Way, Grand Island, NE.
Mr. Earle I. Mack, Retired Ambassador of the United States to the Republic of Finland, Fort Lee, NJ.
Mr. Andrew Watt, President & CEO, Association of Fundraising Professionals, Arlington, VA.
Mr. John Palatiello, President, Business Coalition for Fair Competition, Reston, VA.
Mr. Tony Ross, President, United Way of Pennsylvania, Harrisburg, PA.
Mr. William Hanbury, CEO, United Way of the National Capital Area, Vienna, VA.
Ms. Lisa Ireland, Executive Director, United Way of Orleans County, Medina, NY.
Ms. Tory Irgang, Executive Director, United Way of Southern Chautauqua County, Jamestown, NY.
The Charity Commission for England and Wales has found itself in an ongoing dispute with a Brethren congregation over whether the congregation qualifies as a charity under British law. As detailed in a recent Parliamentary Briefing, the dispute focus on the status of a Brethren meeting Hall, the Preston Down Trust. The case involving the Trust is being used as a test case for the status of other, similar meeting halls. The Commission decided last year that the Trust did not qualify as a charity, which led to highly public criticism from both the Plymouth Brethren church and questions from MPs in Parliament according to a Telegraph article. The decision is traceable to a statutory change that led a charity Tribunal to conclude that advancing religion is no longer considered to automatically provide a public benefit. In considering whether the Trust provides a public benefit, the Charity Commission's denial letter indicates that the adherents to this particular faith sharply limit their interactions with those outside the faith and so the Charity Commission concluded that "[t]he evidence is [sic] relation to any beneficial impact on the wider public is perhaps marginal and insufficient to satisfy us as to the benefit to the community." According to a UK civil society website, the Charity Commission and the Trust are now in negotiations to attempt to resolve the issue short of a full Tribunal hearing, although a recent Charity Commission statement suggests such a resolution may be difficult to reach.
Wednesday, February 13, 2013
The Pittsburgh Post-Gazette reports that Allegheny County (Pennsylvania) Executive Rich Fitzgerald recently announced plans to send letters to of all 9,000 properties currently identified as non-government, tax-exempt to demand proof that those properties meet the current five-part test for property tax exemption. Ironically, county legislation passed in 2007 required a systematic review of such exemptions every three years, so the letters are actually three years late. This systematic review is only one more avenue being pursued by the county and Pittsburgh to collect revenues from nonprofit organizations, as we have previously blogged about a "voluntary" payment agreement with colleges and universities (2009) and a payments-in-lieu-of-taxes (PILOT) agreement with a coalition of nonprofits (in place from at least 2010 through 2012).
The New York Times reports that in the wake of various measures deemed hostile to nonprofit groups working in Russia, Deputy Assistant Secretary of State Thomas Melia announced that the United States would no longer be part of a "civil society working group" created in 2009. The article reports the group, which the US and Russia created under the US-Russia Bilateral Presidential Commission, has not met in plenary session for many than a year. We have previously blogged about some of the actions that apparently contributed to the withdrawal, including requiring nonprofits receiving funding from outside of Russia to identify themsevles as foreign agents.
Tuesday, February 12, 2013
Nicholas Mirkay, III has recently published what promises to be an interesting read in the North Carolina Law Review regarding the extent to which domestic tax exempt organizations must or should operate consistently with U.S. Foreign policy. The answer seems rather obvious to me. Which is not to say the question is not worth asking. I think exempt organizations have no more obligation to support foreign policy, even "clearly defined foreign policy," whatever that may be, than they do domestic policy. I distinguish legal from illegal acts, of course. My interest is piqued, though, because from the sounds of his abstract below, Mirkay seems to think U.S. exempt organizations are beholding, at least to some extent, to U.S. official foreign policy. Maybe he only means to say that U.S. exempt organizations may not violate law in their international dealings. Somehow, though, I think he means more than that. But what if the United States has a "we don't recognize the legal authority of country X to imprison a U.S. citizen" policy. Or "we don't negotiate with terrorists" policy. In either case, does that preclude a domestic nonprofit from funding a famous ex-politician's trip to that country in an attempt to win the release of the poor victim. It's not called the "independent Sector" for nothing. It's just my opinion, but even tax subsidized organizations ought not to be confined to the political mainstream in their dealings outside the country. The whole purpose of the Independent Sector, it seems to me, is to offer alternatives to orthodoxy, whether in business or government. Too often, perfectly innocent groups that happen to support the collateral victims of unpopular causes find themselves portrayed as a protagonist, one way or the other, and then dragged into whatever conflict is raging around those victims. And inevitably, it seems, the farther an exempt group strays from the proverbial "party line" the more likely it is to be accused of being "un-American" or have its tax exemption challenged. From the abstract below, I gather Professor Mirkay might differ with me to some extent. And I acknowledge a nagging concern in my own intuitive response. If exempt organizations need not adhere to or support clearly defined foreign policy, why should they be required to support clearly defined domestic public policy? Somehow I think there is a qualitative difference in domestic and foreign policy that would justify my differing approaches. I know Mirkay to be a very thoughtful scholar by the way so this is a purely and intentionally provocative, admittedly speculative (since I have not read the article yet) theoretical comment not a "dissing" of his very useful scholarship. I will certainly enjoy reading the article, I'm sure. In the meantime, here is the abstract to Globalism, Public Policy, and Tax Exempt Status: Are U.S. Charities Adrift at Sea?
This article wrestles with whether charitable organizations’ international activities can or should impact such organizations’ domestic tax exemption. It addresses the issues raised by such international activities — if those activities contravene current U.S. foreign policy or international law is a charity’s tax-exempt status adversely affected? Does such contravention implicate the public policy doctrine? On one hand, this article agrees with other legal scholars that the public policy doctrine needs congressional attention, including some codification of the doctrine to provide legislative boundaries and ensure against arbitrary and capricious application by the Internal Revenue Service (“IRS”). On the other hand, this article contends that the automatic inclusion of U.S. foreign policy and international law as components of “established public policy” would be administratively impracticable and onerous and would result in significant compliance difficulties for charitable organizations. Considering all these challenges, this article nevertheless proposes that some codification of the public policy doctrine accompanied by a listed transaction scheme, similar to those employed in other areas of the Internal Revenue Code (“Code”), could provide Congress and ultimately the IRS with the ability to target certain international activities as inherently in conflict with tax-exempt status. In addition, this article proposes that the codification of the public policy doctrine should include an excise tax regime, as an alternative to revocation, to address isolated or small violations of the public policy doctrine in relation to a charitable organization’s overall tax-exempt activities. Although these proposals are not without pitfalls and criticisms, they will nevertheless provide practical guidance to charitable organizations, thereby aiding compliance and ensuring uniform treatment of charitable organizations with international activities or operations.
Last month the New York Times reported on potential conflicts of interest at Dartmouth College relating to connections between its endowment investments and university trustees. The article states that last year an anonymous letter to state officials in New Hampshire, where Dartmouth is located, alleged that such conflicts existed because the endowment has invested in at least six investment funds in which past or current trustees have an interest. It also notes that such apparent conflicts are not unique to Dartmouth, although the number of such conflicts there appeared to be on the higher end for at least Ivy League institutions. The New Hampshire Attorney General's office ultimately determined that an official investigation was not warranted into the allegations.
The articles fails to consider, however, whether these investments were chosen in a manner that complied with Dartmouth's Conflict of Interest Policy or otherwise were adequately vetted. It therefore risks creating the impression that a conflict of interest is always a situation to be avoided regardless of whether the transaction at issue will ultimately benefit the university or other institution, as determined by disinterested parties. While a charity may choose to take that position out of an abundance of caution, such a position is generally not required under the fiduciary duties owed by a charity's leaders to the organization.
Last month the Orange County Register reported that the for-profit Prime Healthcare Services had donated its 131-bed facility in Huntington Beach to its nonprofit arm, the Prime Healthcare Services Foundation. While the article highlighted the benefits to the local community that would come from the change in ownership, it did not go into much depth regarding why a for-profit entity would choose to transfer one of its facilities to nonprofit control other than to note unspecified financial advantages and tax breaks that would come with nonprofit (and presumably 501(c)(3)) status. Nor did the article provide many details regarding the relationship between the for-profit entity and its related Foundation.
According to the Foundation's Forms 990-PF (available on Guidestar), Dr. Prem Reddy, who is the Board Chairman and CEO for Prime Healthcare Services, formed the Foundation in December 2006. Since that time Prime Healthcare Services has donated five hospitals to the Foundation, including the Huntington Beach Hospital, and as of October 1, 2009 began the 60-month termination period required for it to convert to public charity (as opposed to private foundation) status. Based on the Foundation's website, Dr. Reddy currently serves as the Chairman of the Foundation's Board, as well as leading his Family Foundation to which he has donated more than $20 million since its founding in 1989.
The audited financial statements attached to the Foundation's 2011 Form 990-PF note that some of the Foundation's subsidiaries (which own specific hospital facilities) have management agreements with related, for-profit entities that also bear the Prime Healthcare name, but on their face the fees paid under those agreements appear reasonable. While the Prime Healthcare system has apparently been the subject of various investigations over its long history, including two current federal investigations relating to Medicare billings and patient confidentiality, none of the investigations appear unusual for a large healthcare system. Overall, these entities may provide an interesting case study of interactions between related for-profit and nonprofit entities in the healthcare area.
Monday, February 11, 2013
We previously blogged that while the charitable contribution deduction dodged a bullet (for the most part) in the fiscal cliff agreement, charities remain concerned that the deduction may be vulnerable in future budget and debt ceiling negotiations. What is worth also highlighting, however, is the extent to which charities benefited from the American Taxpayer Relief Act of 2012. While the Act reinstated the overall limitation on itemized deductions, it also extended several charitable giving incentives that had expired, specifically:
- The charitable IRA rollover provision;
- The enhanced charitable deduction for contributions of food inventory; and
- The basis adjustment to stock of S corporations making charitable contributions of property.
For more details about these provisions and the likely effect of other aspects of the Act on charitable giving see the report by the Tax Policy and Charities project of the Urban Institute.
In its annual Revenue Procedure covering determiniation letters and rulings for tax-exempt organizations (Rev. Proc. 2013-9), the IRS made an interesting change this year relating to applications for recognition of exemption by most entities not required to file such applications. Here is the IRS' explanation of the change:
The provisions in section 11.01 regarding the effect of determination letters or rulings recognizing exempt status of organizations described in § 501(c), other than §§ 501(c)(3), (9), (17), and (29), have been revised. Prior to this year, and back to 1962, when such organizations applied for recognition, the IRS would usually recognize such organizations as tax-exempt from the date of formation, no matter how long the interval between the date of formation and the date of application. In addition to the practical difficulties of ascertaining an organization’s purposes and activities for this period, such recognition is now potentially inconsistent with the provisions of § 6033(j), which automatically revokes the exempt status of an organization that fails to file required Form 990 series returns or notices for three consecutive years. The new procedure adopts a practice similar to the rule for § 501(c)(3) organizations for these organizations, generally permitting recognition from the date of formation if the organization has always met the requirements for exemption, has applied within 27 months from the end of the month in which it was organized, and has not failed to file required Form 990 series returns or notices for three consecutive years.
The effect of this change is to encourage such entities to file their application for recognition of exemption (IRS Form 1024) within 27 months of formation or face the risk that the IRS will not grant such recognition retroactively and may seek to collect taxes owed for the period before the application is filed. This change therefore represents a possible tightening up of the rules relating to non-501(c)(3) tax-exempt organizations, although a relatively mild one.
IRS Exempt Organizations Division has issued the its annual report for Fiscal Year 2012 and its workplan for Fiscal Year 2013. Highlights include:
- Staffing declined slightly from FY2010 (900) to FY 2012 (876).
- Examinations also declined slightly during the same period from 11,449 returns to 10,743 returns (not including compliance checks).
- Disclosures from the IRS to the states remain limited, with only eight agencies in seven states apparently able to meet the disclosure eligibility requirements for such disclosures, although those eight agencies received approximately 27,000 disclosures (which includes 501(c)(3) exemption application approvals).
- Seventy percent of the approximately 60,000 applications were reviewed and closed within 120 days.
- Among its projects for FY2013 is sending a questionnaire to "self-declared" section 501(c)(4), (5), and (6) organizations that filed Form 990 in 2010 or 2011, presumably to determine to what extent there may be questions regarding their claimed tax-exempt status among these groups.