Nonprofit Law Prof Blog

Nobel Foundation Turns to Hedge Funds

A puzzling little piece in the Chronicle of Philanthropy reports that the Nobel Foundation, the group based in Stockholm that gives away the annual Peace Prize, among others, will invest in hedge funds as a way of rebuilding its portfolio.  Earlier this year the Foundation announced that it would have to trim several hundred thousand dollars from the cash total that accompanied each prize.  They now see hedge funds as their road back to prosperity.  Apparently they have not been reading the business pages.

TAK

Boy Scouts' Pedophile Scandal

The Los Angeles Times reported yesterday that its analysis of Boy Scouts of America's "perversion" files indicates that for many years the organization resisted implementing background checks and other measures to weed out pedophiles and actively lobbied against state legislation that would have required them to do so.  BSA did not require criminal background checks for all volunteers until 2008.

I find this story troubling and interesting for multiple reasons.  First, I am the parent of a fifteen-year-old boy who is active in scouting.  (Earlier this year I wrote a letter to the editor of my local paper decrying BSA's ban on participation by gay adults and children.  One galling aspect of BSA's ban is that it unjustifiably conflates sexual orientation with being a pedophile.)

Second, from the perspective of a Nonprofit Law teacher, I find it confounding that such a large organization with access to legal counsel did not adopt better risk management practices.  In the Community Development Law Clinic that I supervise we routinely get requests to help nonprofits manage risk.  Our standard response is that there are three legs to the stool: insurance, waivers, and policies and procedures that reduce risk.  Any organization that pairs adults and children should, at a minimum, do background checks and have policies in place that prevent adults and children from any one-on-one activities.

According to the LA Times article, it was not until after the Catholic Church pedophile scandal that BSA got serious about adopting its own risk reduction policies and procedures.  By then it was too late for many, many children.

TAK

A $71 Billion Tax Break for Churches? Don't Think So

Last summer, several newspapers, blogs, etc. picked up on this article written by Dr. Ryan T. Cragun and two of his students, estimating that tax breaks for churches and other religious organizations cost government $71 billion per year, and like many other crazy things on the web, this doesn't seem to want to go away.

Simply put, the $71 billion number has some very serious problems.

Dr. Cragun gets $35 billion of his $71 billion number by taking the estimated donations to churches from a 2009 survey by Giving USA of $100 billion, and applying the 35% corporate tax rate to that.  But anyone with even a smidgen of knowledge about tax law knows this isn't the way it works.  We don't have a tax on GROSS INCOME; rather, the tax is on net income.

If churches were treated as taxpaying businesses, then they also would get to deduct their operating expenses and depreciation from their gross revenue in order to reach a taxable income number.  Because churches don't have to file a Form 990 or any other financial report, no one really knows what their "net profits" are, but I can verify that the several Catholic parishes I have belonged to during my life have had essentially zero net profits: they spent almost all their revenues on operating expenses, except for the occasional capital improvement (a new parish center or church renovation) which would produce depreciation deductions over time.  In other words, churches wouldn't have $100 billion of taxable income; their "profit" after operating expenses probably is close to zero in most cases.

But let's assume I'm wrong, and churches have pre-tax profits equal to, say, the average pre-tax profit margin of the S&P 500 for the past twelve years.  That pre-tax margin appears to be something like 9.2% (this story notes that the 12-year average net profit margin has been about 6%; if you gross that up to adjust for the 35% corporate tax rate, you get roughly 9.2% pre-tax).  But let's be generous and round that number up to a 10% pre-tax margin.  Now you're talking about net profits of $10 billion, not $100 billion, and Dr. Cragan's $35 billion subsidy suddenly becomes $3.5 billion.

But even that is wrong.  Under current law, donations to churches probably wouldn't be income even absent tax exemption, since donations likely would be considered gifts under Section 102, which are excluded from the income of the recipient (Section 102 applies to all taxpayers, not just charities).  So unless Dr. Cragun is suggesting that we should repeal Section 102, his actual subsidy number is now zero. And that also wipes out the $6.1 billion in estimated STATE income tax subsidy, because states almost always key off Federal tax law in calculating state taxable income (e.g., gifts would be excluded from state taxable income, as well). 

So now we've whittled Dr. Cragun's subsidy number down to $30 billion.  But that's still pretty large.  What about the rest of it?  Well, the largest chunk of what's left is his estimate of a $26 billion loss via property tax exemption.   Here's how he explains his methodology:

The Hartford Seminary estimates that there are 335,000 congregations in the United States. Using forty-seven churches in Tampa from six different religions as our basis (Presbyterians, Mormons, Baptists, Methodists, Episcopalians, and Pentecostals), we estimated that the average value of a church in the United States today is about $1.7 million (land and building). Because property taxes are paid at the state level, we averaged the total number of churches across all fifty states, multiplied the estimated number of churches by the average value, and then calculated the lost state revenues. States subsidize religions to the tune of about $26.2 billion per year by not requiring religious institutions to pay property taxes for property worth about $600 billion.

If a student used this kind of analysis in a paper for my Tax-Exempt Organizations class, I'd give them a "C" at best.  This isn't a serious attempt to value the property tax exemption for churches; a truly serious study would take a locality-by-locality analysis, using available property tax records and individual local property tax rates, which vary enormously.  Such a study would be hard and vastly time-consuming, which is probably why no one (to my knowledge) has done it.  And I don't know where Dr. Cragun gets the approximately 4.3% effective tax rate he is using here (he doesn't explain how he gets to $26.2 billion at all; I reverse-engineered his tax rate).  In one truly serious academic study of the value of tax-exemption for non-church charities - see Joseph B. Cordes, Marie Grantz and Thomas Pollak, What is the Property-Tax Exemption Worth? in Property Tax Exemption for Charities, Evelyn Brody, ed. (Urban Institute Press 2002), the authors use between a 1.3 and 2.1% national rate based on data from the Minnesota Taxpayers Association (1999) and the National Bureau of Economic Research (2000).  I doubt national property tax rates have doubled or tripled in 10 years; so even if I accepted Dr. Cragun's estimate of the total value of church-held property (which I don't; the truth is that we simply don't have a good such estimate because churches aren't required to report this number anywhere), using the Cordes, et. al. methodology yields a tax benefit of $7.8 - 12.6 billion, not $26 billion.  What the real benefit of property tax exemption to churches, however, is simply unknown.  Dr. Cragun's estimate may be low (as he suggests in his footnote 25) or it may be high.  The point is that without better data, any number is pure speculation. 

I have no argument with the basic proposition that churches get substantial tax benefits from property tax exemption and other tax breaks, but there are so many issues with the $71 billion number that I cannot take it seriously.  Neither, in my view, should the press.

JDC

Lancaster Hospital Rulings Show Joint Venture Control Test Still Alive and Well

According to this story from Lancaster Online, last May the IRS denied tax-exempt status to two joint ventures run by Lancaster General Hospital in Lancaster, PA.   One of the joint ventures was a 50-50 deal with a for-profit company to run a rehabilitation center; the other was a 50-50 deal with doctors to run an ambulatory surgery center. According to the story, the IRS denied exemption because the 50-50 arrangement did not give Lancaster General (a tax-exempt 501(c)(3) charity) sufficient control over the joint ventures to assure they were run in a charitable manner.

This result indicates that the IRS's "control" test for determining charitable status of joint venture operations between a charity and a for-profit enterprise is still alive and well.  The control test first surfaced in the "whole hospital joint venture" ruling, Rev. Rul. 98-15, and then was relaxed somewhat in the "ancillary" joint venture ruling, Rev. Rul. 2004-51.   In that latter ruling, which would seem to govern the kinds of transactions involving Lancaster General, the IRS approved a 50-50 ownership arrangement, where the charity (a university in this case) had absolute control over the way in which the substantive services (educational distance learning) were delivered - (e.g., approval of the curriculum, training materials and instructors).  After Rev. Rul. 2004-51, the control test sort of disappeared from view as practitioners learned to draft deals around the requirements.  But the Lancaster General story indicates that it is still very much alive and enforced by the IRS. 

I've frankly never understood why the IRS presses a "control" requirement in the context of ancillary joint ventures.   "Ancillary" joint ventures by their nature are simply business deals done by a charity.  The question involved in these cases should ONLY be whether the deal is a fair one to the charity (to avoid issues of private inurement and private benefit); if so, then the joint venture interest should be treated like any other commercial activity: that is, subject to the unrelated business income tax if indeed the venture's business is "unrelated" (in many cases, I would suggest that joint ventures entered into by hospitals to expand health services in fact are "related," but that's another story).  It is very odd to me that an exempt hospital or exempt university could open a BMW dealership with no ill effects on exemption other than having to pay the UBIT.   And a direct investment in a business corporation via stock doesn't create any exemption issues at all, not even UBIT issues.   But a business investment done as a joint venture suddenly causes us to break out in hives . . .    In my opinion, very odd, and not well-justified by any underlying theory applicable to exempt status.  

JDC   

Leave-Based Donation Programs

As it did with 9/11 and Katrina, the IRS has issued Notice 2012-69 granting favorable treatment to certain vacation/leave donation programs run by employers.  In summary, it appears that an employee may release vacation or similar leave back to the employer.  In return, the employer makes a cash donation to charity.  Under the Notice, the payments from the employer must be made to Section 170(c) organizations "for the relief of victims of Hurrican Sandy" and must be made before January 1, 2014.  (The Sandy Notice is almost exactly the same as the Katrina Notice and the revised 9/11 Notice).

If a program is structured appropriately, then the IRS will not treat the payments as income to the employee or take the position that the employee was in constructive receipt of funds.  Of course, that means the employee cannot take a Section 170 deduction for the donation, since the value of the leave time will be fully excluded from his or her income - allowing the deduction would be double counting!

Interestingly, the Notice indicates that the the IRS "will not assert that an employer will only be permitted to deduct these cash payments" under Section 170 rather than Section 162.   Thus, it appears that the employer may fully deduct the value of any foregone leave, even if Section 170's limitations might otherwise disallow part of the deduction.

I'm curious why the benefit to the employer - I'm also curious as to why there is no requirement that the value given to charity be somehow equal to the value of the leave surrendered.   It seems like a potential "win-win-win" for employers.  They get employees to release their vacation time, potentially for less than a cash out would be worth, and they get to take a deduction for it, without regard to Section 170 limits - as if it were still compensation paid under Section 162.  Wondering outloud, it appears from the language of the Notice that an employer could get a full charitable contribution for other donations, and then take these donations on top.  And they get the good PR to boot.  That seems like a really good deal!  (Don't get me wrong - I think such a program, and anything else that gets funds to our friends on the East Coast, is a good thing). 

Finally, I wonder what an employer would have to do to demonstrate that the recipient charity is "for the relief of victims of Hurricane Sandy."  If one gave a grant to the Red Cross for general operating expenses (or with a partial allocation to general operating expenses), would that be sufficent?

Okay - I'm not done wondering outloud quite yet.  It seems like it is well within bounds of authority for the IRS to act on the assignment of income issue - after all, that's a pretty mushy, facts-and- circumstancy-type test.  But what about the Section 162/170 determination?  (I know,I know... say thank you, IRS.. and move along.  Nothing to see here!)

EWW

 

A hidden football tax exemption

Every year my nonprofit law class has a lively discussion about whether revenue from college football games, including revenues from bowl game broadcast contracts, ought to be exempt from taxation on grounds that the activity is educational.  This discussion is particularly relevant to students attending my university, since our football program has been mired in scandal for more than a year and many of the facts that have emerged indicate that at least some football players are barely engaged in our school's educational program.

Now comes word that the citizenry is, at least arguably, further subsidizing college football programs by means of an additional, veiled tax exemption.  According to an item in the Nonprofit Quarterly, which in turn is reporting on an investigation carried out by Bloomberg News, many colleges require charitable donations to the school in return for the privilege of buying season tickets at face value. The donor/ticket purchasers then write off the value of the mandatory donations, costing the U.S. treasury as much as $100 million per year.  Ohio State University and LSU were singled out as particularly successful (or egregious, depending on your point of view) with this quite common strategy.

TAK

Romney Charitable Tax Avoidance Device

I am one that rare species of Nonprofit Law profs who is not a tax expert, so this post falls under the category of "stories that look interesting but I don't really understand."  According to The Chronicle of Philanthropy, Mitt Romney uses a tax sheltering device, called a "charitable remainder unitrust," that "permits him to use a charity's exemption to defer taxes on capital gains from the sale of assets . . .."  The device, akin to "renting from your favorite charity of its exemption from taxation," was outlawed in 1997 but individuals who had existing trusts at that time are permitted to continue benefiting from them.  Perhaps one of our tax experts can explain further.

TAK

A Helpful IRS

I have complained before on this blog about interactions between the Community Development Law Clinic, which I supervise at UNC Law, and the IRS.  Particularly on matters of commercial activities undertaken by charitable organizations, IRS examining officers have been obtuse and inconsistent.  However, we had a recent interaction with the IRS in which it proved flexible and helpful.

We represent a group that owns athletic facilities and organizes a sports league in its community.  The organization, which grew organically in accordance with community needs and which has always been managed by volunteers, incorporated under state law more than forty years ago but never applied for 501(c)(3) status.  During its forty years of existence, it covered its expenses, mostly by charging fees, but rarely produced any surplus.  It maintained financial records, but did not get serious about financial accounting and controls until three years ago when a more professional group of board members took control.  They now wish to apply for (c)(3) status because their facilities are in need of repair and the fee income will not cover the costs.

We approached the IRS with some trepidation, given that the Form 1023 asks for five years of financial information and this organization has only three to offer.  An officer on the technical advice line told us that this sort of thing happens frequently, that the IRS is accustomed to dealing with it and does not wish to penalize well-meaning community groups such as this one, and that they can deal with the required financial information by providing the three most recent years plus a projection for the next two.

I take back at least some of the unkind things I said (or implied) about the IRS and its dealings with exempt organizations.

TAK

Nonprofit Leaders Urge Presidential Candidates to Protect Tax Break

The Chronicle of Philanthropy is reporting that leaders of big nationwide nonprofits on Thursday sent letters to President Obama and former Massachusetts Governor, Mitt Romney, urging the presidential candidates to reconsider their proposals to cut the charitable tax deduction. 

The nonprofit leaders also announced that they have scheduled a gathering on December 4 and 5 to bring hundreds of their members to Washington to tell members of Congress that any tax changes that lead to a decline in private giving would devastate nonprofits and the people they serve.

Among the organizations that sent the letters were the Salvation Army and United Way Worldwide and nonprofit coalitions like the Association of Fundraising Professionals and Independent Sector.  According to the groups, “Any proposed cap would have long-lasting negative consequences on the charitable organizations upon which millions of Americans rely for vital programs and services.” 

President Obama has several times proposed to limit the charitable deduction to 28 percent—instead of the current 35 percent—for individuals earning more than $200,000 and families earning more than $250,000. Congress has never gone along with that kind of limit, in part because of strong charity opposition.

Although Former Governor Romney has not been specific about his tax plan, he has proposed to limit the amount of deductions people could take over all.  The Chronicle reports that in a recent debate, Mr. Romney suggested that people could choose whether they wanted to take deductions for housing or charitable giving if they went over the limit.

We wait to see what will happen after the election season is over.

VEJ

Caribbean Nonprofit Uses Online Crowd Funding to Raise Funds for School Project

I'll confess my ignorance: up to a few minutes ago, I had never heard of "crowd funding."  Then this story from Caribbean360 caught my attention.  According to Caribbean360, the Grenada Goat Dairy recently announced that its campaign to fund its collaboration with the St. Patrick Anglican School had exceeded its goal of $55,000  (USD) through the campaign's use of the crowd funding website, www.Kickstarter.com.  The Grenadian non-profit organization used the method to attract local and international support, with donors giving amounts ranging from $1 to $10,000.

I know nothing about crowd funding and how it works, but if it works for the Grenada Goat Dairy, it can work for other non-profits also.  I wonder, however, whether donors' contributions are tax deductible, and whether the various websites hosting these crowd funding "events" are able to give individual donors receipts for their donations.

VEJ   

 

The Tax Status of the NFL: Why Reporters Ought Not to Write About Nonprofits Until They Talk To An Expert

I spend a fair amount of my working life talking with reporters about tax exemption issues.  I do this not because I think I'll get quoted correctly (I almost never do; nuance, which is part of the stock in trade of an academic, is almost always lost in the translation), nor because I think I'll get famous from the occasional quote in a story, but rather because I hope to influence at the margin the competence of the stories that are written.  And I will say that most of the time (not nearly all), the reporters I talk to write stories that by and large "get it right."  I hope some of that is attributable to their discussions with me, but I think it is more attributable to the fact that reporters who seek out experts in the areas they are writing stories on really are trying to do a good job, and that tends to get reflected in the accuracy of what they write.

Contrast this to stories like this one in the Atlanta Journal Constitution, about the tax-exempt status of the NFL.  Most of the basic facts are correct - the NFL is, in fact, a tax-exempt entity under 501(c)(6).  But the reporter who wrote this story makes no effort to place this status in context, and therefore leaves the impression that this is a huge scandal.  I hate stories like this. 

I've talked many times with sports reporters across the country about this issue, and I invariably find that the reporter in question starts with no understanding about the differences between 501(c)(6) status and "charitable" status under 501(c)(3).  Most of them don't realize that trade associations don't benefit from the Section 170 charitable contributions deduction; to them, "exempt" means the same thing whether you are the NFL or the Red Cross.  When reporters leave this critical difference out, readers come away with the same confused impression: that the NFL enjoys the same tax benefits as the Salavation Army or the local church.  It doesn't.

Second, the reporters invariably fail to distinguish the NFL league entity from the individual teams.  The individual teams are taxpaying, for-profit enterprises (the Green Bay Packers do have a unique ownership structure, in which the corporation is owned by citizens of Green Bay, but it is organized as a for-profit corporation under Wisconsin law).  They are not owned by the league.  Again, notice that the quote used by the reporter from Tom Coburn talks about the value of the individual teams, juxtaposed against the very vague statement that "many" of the NFL's "subsidiaries and teams" are tax-paying entities.  This is classic obfuscation, in which the reader is left with the impression that the NFL is a monolithic nonprofit, classified in the same way as the Salvation Army, with teams that may themselves be exempt.

Finally, the story doesn't point out that 501(c)(6) status doesn't get you very much in the tax world.   In most states (actually, I think all), trade associations aren't considered charities, and their property would not be tax-exempt under general state property tax exemption rules.  So the quote in the story about the NFL having "$1 billion in assets" again leaves the mis-impression that somehow these assets are escaping taxation.  Even the value of the income tax exemption is questionable.  If you look at the NFL's 2011 Form 990, you will see that its expenses for the year exceeded its revenue.  While I can't conduct an audit from afar, it sure looks like virtually everything reported by the NFL as an expense would be deductible if the NFL were a taxpaying entity.  The result: even if the NFL weren't tax-exempt, it probably could easily arrange its affairs to pay no income tax.

Now that's not to say that exempt status is worthless; it must be worth something to the NFL, or else it would have abandoned that status, like Major League Baseball did years ago.  But this whole "shock and awe" tinge to the story makes me want to throw up.  In the overall policy world of exempt organizations, I just don't find the NFL's "trade association" status all that bothersome.   After all, all sorts of local, state and even national business organizations qualify under that same status (e.g., the American Bar Association; the American Medical Association, etc.).  There's plenty of stuff in the exempt organizations world to get worked up over (political expenditures by (c)(4)'s, for example); the NFL's status just doesn't hit my hot button.

JDC

Charitable Deduction Under Fire

Many people are talking about comprehensive tax reform.   There are lots of different flavors of tax reform,  but the charitable deduction seems to be on the block in most of them.  We all know about the Administration's proposal that would limit the charitable deduction.   It was striking to me that some of the panelists at the recent Ways & Means Subcommittee hearings  felt the need to speak out in a pre-emptive way about the negative effects of tax reform on the charitable deduction.  I don't think this talk is going away any time soon.

Today's article in Bloomberg News outlines the possible impact of the new Romney tax proposal, which also would limit the charitable deduction.  According to this article on CNN, here is the Romeney quote:

You could do something, for instance, as an option you could say everybody's going to get up to a $17,000 deduction, and you can use your charitable deduction, your home mortgage deduction, or others – a healthcare deduction, and you can fill that bucket, if you will, that $17,000 bucket that way. And higher income people might have a lower number," Romney said.

From that quote, all we know is that the charitable deduction is a potential target of an itemized deduction cap, as well as many other deductions of various sizes and costs.   It would be easy to say that maybe this is just a Pease limitation under another name, but the capping of the healthcare exclusion for employer provided insurance would be mostly new (if that's what he meant).  It really isn't clear what else would be in the "bucket."  Certainly it seems like there might be enough other stuff in the bucket that you MUST pay (like your property taxes and your mortgage interest), that things that you COULD pay, such as charitables, would be crowded out IF.. and it's a big IF... you are a tax motivated donor.

If we take the Forbes report from the post I made yesterday to heart, it does appear that many high net worth donors are, at least in part, tax motivated.   They may still give, but they may give less.  My guess is these types of tax reform proposals will impact charitable giving, but it is really hard to know in a vaccuum how signficant those impacts will be.

Who knows if this tax reform stuff is all just talk and none of it will come to pass?  It is easy for the cynic in me to see it all as so much posturing.  But, It is a policy debate worth having - is the tax expenditure cost of the charitable deduction "worth" the private philanthropy that it theoretically encourages?  Is the charitable deduction the same as other deductions, or is it different?  In my personal opinion, which is worth next to nothing, the frustrating thing about both the Obama and the Romney proposals is that they are numerical caps.  They sidestep the hard, subsantive discussions about whether all deductions were made equally by their Creator and therefore should be thrown together in a bucket - maybe, sadly, that's the price to be paid for tax reform, should it happen.

Sorry for the gloom and doom.  I'll try to be more chipper tomorrow.

Yours Despairingly, EWW

Pulpit Freedom Sunday to Again Challenge Political Campaign Prohibition

Over 1,300 religious leaders are prepared to deliberately violate the section 501(c)(3) prohibition on political campaign activity this Sunday, October 7, 2012, by endorsing or opposing a political candidate for public office from their pulpits.  Sponsored by the Alliance Defending Freedom, the purpose of Pulpit Freedom Sunday is to openly exercise their claimed First Amendment freedom of religious expression, which participants claim is violated by the "1954 Johnson Amendment" to section 501(c)(3).  Since its origination in 2008, the Alliance has sought a test case that can be brought to the U.S. Supreme Court, with the desired result of the Johnson Amendment being declared unconsitutional as to churches.

However, the IRS is presently unable to adequately respond to participant churches hoping for the commencement of a legal battle over the statutory prohibition.  As reported by the Daily Tax Report, the proposed regulations to the church tax inquiry rules under section 7611 have not yet been finalized to name the IRS official responsible to carry out the statutorily prescribed inquiry rules.  The current proposed regulations would name the IRS Director of Exempt Organizations, a position currently held by Lois Lerner.

For additional perspectives and opinions on Pulpit Freedom Sunday, see the following:

Steve Siebold, "Pulpit Freedom Sunday - Should the Church be Tax-Exempt?"  (Huffington Post's The Blog)

Meredith Bennett-Smith, "Pastors to Challenge IRS Ban on Political Speech with 'Pulpit Freedom Sunday'"  (Huffington Post, containing Fox News video)

NAM

 

The Fiscal Cliff

Congress has folded its tent until after the election and, by most peoples' lights, has accomplished extraordinarily little, leaving untouched a profusion of urgent matters.  One unresolved issue is the looming "fiscal cliff": massive automatic budget cuts that will take place if Congress and the president cannot agree on an alternative plan for reducing the budget deficit.  Last week, the White House issued a report on how it will execute the massive cuts if no agreement is reached.  According to a recent analysis published in The Nonprofit Quarterly, the picture is grim for the nonprofit sector.  There will be crippling cuts in support for programs that 1) provide housing for the elderly and disabled, 2) focus on juvenile justice, 3) combat violence against women, 4) spur community economic development.  And so on.

TAK

Mother Jones and Nonprofit Journalism

I find that it is a slow news day in the world of nonprofit law.  I have, however, noticed several articles about the role that the nonprofit magazine Mother Jones Journal (which might now go by the shorter name Mother Jones) played in revealing Mitt Romney's comments about the "forty-seven percent" of us who are moochers and slackers.  One article in The Nonprofit Quarterly points out that Mother Jones obtained its tax exempt status more than thirty years ago when it was much easier to convince the IRS that (c)(3) status for a journalism outlet was a good idea.  As we all know, it has become much harder in recent years because the business models for nonprofit news outlets are so similar to those of for-profits.  As others have blogged about, it's an interesting conundrum for the IRS that an entire industry has become so unprofitable that it is in heightened and direct competition with organizations that want to provide the same valuable services as nonprofits.

TAK

Nature Conservancy Edges Toward Social Enterprise?

The Chronicle of Philanthropy reports that the Nature Conservancy has created a new investment vehicle, called Conservation Notes, as a way defraying the costs of its land transactions.  Investors/supporters who provide at least $25,000 to the Nature Conservancy for a term of one, three, or five years will earn somewhere between 0 and 2 percent in interest and get all of their money back at the end of the term.  The article implies that private foundations will be able to count these Conservation Notes as program related investments, though it does not mention whether the IRS has already weighed in. 

TAK

UNC-Chapel Hill Chancellor Resigns

Yesterday Holden Thorp, the Chancellor of the University of North Carolina at Chapel Hill, resigned after only four years in the position.  He was and is a thoroughly decent person, a renowned Chemistry Professor before he entered academic administration, who was swept up in an interminable series of scandals all of which can be traced to the university's revenue sports programs, football in particular. 

The scandal began when a UNC football player revealed on Twitter that he was having a great time at a sports agent's lavish party.  The investigation that followed revealed that there was systematic contact between football players and agents, and that at least one member of the coaching staff knew about it.  That initial scandal led to revelations that football players were receiving inappropriate academic assistance from tutors provided by the university, and that at least one football player had engaged in blatant plagiarism on an academic paper.  Then it was discovered that football players and other athletes were being guided toward "no-show" courses in the African and Afro-American Studies Department and were receiving inflated grades.  And so on.  The scandals are summarized in today's issue of the campus newspaper, The Daily Tar Heel. 

UNC's scandal is yet another dreary example of a  great educational institution losing its way in the hunt for big-time sports legitimacy.  It also provides yet more evidence that the IRS's rationale for exempting athletic program revenue -- the quaint notion that sports are inextricably tied to schools' educational missions -- is absurd, at least when applied to big-time sports.

TAK

The Tea Party

This post does not focus on any breaking news about the Tea Party.  It is only that I had been content to ignore that particular group until recently but now I find that they are affecting my work.

For several years I have been observing and chronicling the rise of the 4th Sector in the U.S., including the spread of certain hybrid entities such as B Corporations.  Two weeks ago, I ran into a colleague who had been involved in efforts to pass B Corporation legislation in our home state of North Carolina  When I asked for an update, he grimaced and said that the proposed law was moving through the North Carolina legislature until Tea Party activists intervened and claimed that B Corporations and the whole notion of social enterprise were part of a United Nations plot to achieve world domination.  The objections were taken seriously and the legislation stalled.

Then, last week, I heard something similar when I was leading a workshop for nonprofit leaders in South Carolina.  At lunch, one of the workshop participants who works for a council of governments (often referred to as COGs) told me that her efforts to coordinate transportation planning among several local governments in rural South Carolina had been blocked by protesters claiming that such planning was also part of the grand U.N. conspiracy.

A quick google search revealed that this assault has been going on for a while and that it arose in reaction to an innocuous U.N. report called "Agenda 21" that urged governments, among other things, to focus on encouraging dense development near transportation corridors as a way of reducing energy consumption.  I had heard vague rumblings about fringe groups that focused on Agenda 21, but I had no idea that the wacky conspiracy theory was actually affecting public policy.

What is the world coming to?

TAK

New Initiative to Address Homelessness and Keeping Families Together

The Administration for Children and Families, Casey Family Programs, and the Robert Wood Johnson, Annie E. Casey, and Edna McConnell Clark foundations have announced $25 million in grants as part of a $35 million initiative to address homelessness and keep families together.

According to the Philanthropy Digest:

Through the initiative, three nonprofits and two government agencies will receive funding to demonstrate the effectiveness and potential cost savings of projects that incorporate stable housing for low-income families and services focused on child well-being, positive family functioning, and reducing foster care placements. Launched in June, the initiative is modeled after the Keeping Families Together  program in New York City, which paired supportive housing with on-site case management and comprehensive services for families experiencing chronic homelessness, substance abuse and mental health problems, and child welfare involvement.

Local partners in the initiative include Kids in Distress, Inc. in Wilton Manors, Florida; Four Oaks Family and Children's Services in Cedar Rapids, Iowa; the Community Alliance for the Homeless in Memphis, Tennessee; the San Francisco Human Services Agency; and the Connecticut Department of Children and Families.

The Digest continues:

ACF will provide $1 million annually over five years to each of its partners to implement a project in their communities. The remaining $10 million from the four foundations will be used to provide technical assistance and to formally evaluate the projects for their impact on housing stability, health, and social and emotional outcomes among children and their caregivers and the need for child welfare involvement.

VEJ

World Universities Rankings: Rising Global Student Mobility

The International Herald Tribune (IHT) is reporting that the compilers of a leading league table of the world's top universities on Tuesday reported an “unstoppable rise” in the numbers of students choosing to travel abroad to study.

“Global student mobility is on a seemingly unstoppable rise, with those seeking an overseas education targeting the leading universities,” wrote John O'Leary, an academic adviser to the London-based Quacquarelli Symonds, which produces the annual QS World Universities Rankings.  O'Leary continued: “Even after considerable growth in recent years, the latest rankings show an extraordinary rise of almost 10 percent in international student numbers at the top 100 universities.”

According to the IHT,

This year’s listings saw Massachusetts Institute of Technology (MIT) overtaking Britain’s Cambridge University as the top place in the influential league table, which is based on a range of factors that include the opinions of academics and prospective employers.

American and British institutions continued to dominate the QS rankings, which were launched in 2004, occupying all 10 top places.

QS factors foreign student and faculty numbers into the rankings.  This practice is reflected in this year’s listing.  According to O'Leary, “Cambridge, for example, has seen a significant increase in international students, but has dropped five places in this measure, contributing to its fall from first to second place in the overall ranking.”

Similarly, a drop in the ranking of the University of California at Berkeley — down to 22nd place from 2nd in 2004 — reflected not only a comparatively poor faculty-to-student ratio, but also “low attractiveness for international faculty and students,” said QS adviser, Martin Ince.

The IHT continues:

QS noted that the most successful universities competed to attract the world’s best students and faculty. “Simple evaluations of the proportion of international students and international faculty serve as indicators of an institution’s diversity and international attractiveness,” it said.

Traveling abroad to study has obvious attractions for students who want the very best education available globally. There is also an economic incentive for the institutions themselves, and the countries that host them, in terms of fees and foreign earnings.

However, the IHT notes, mobility depends on the readiness of governments to allow access to foreign students.

VEJ