Monday, April 11, 2016

Happy National Volunteer Week! Here's the grim legal side of altruistic labor

Happy National Volunteer Week!  We know that volunteering can do lots of good, but what about when volunteering goes bad?  Volunteer law is one of my primary scholarly interests, and in honor of the millions of Americans who volunteer each year, below are just a few of the ways that law CI_boardwalk_Sandy_sweepers_jehdeals with volunteering disasters.  (But don’t be deterred!  Volunteers live longer, happier lives, and these problems probably won’t happen to you or your organization.)

Volunteer Liability:  Who gets sued when a volunteer commits a tort?  The Federal Volunteer Protection Act provides a low level of immunity—with lots of exceptions and caveats—to volunteers for simple negligence. (Ask yourself whether regulation of unpaid labor fits within Congress’s power under the commerce clause.)  Some states also offer immunity of different flavors.  Iowa immunizes volunteers for almost anything they do within the scope of their employment.  Vermont immunizes volunteer librarians. (?!)  Ohio just enacted a law immunizing volunteer architects. (Why architects?  No idea.  Underworked lobbyists, possibly.)

Fortunately, volunteers are rarely sued, and most suits involve intentional torts or accidents while driving (covered by insurance). (So, please don't sue me.)

Organizational liability: Organizations are liable for the acts of their agents under common law master-servant principles.  This applies to employees and volunteers alike.  But volunteers often interact with organizations in less formal ways than employees, and not always as simple to determine scope of “employment.” Notably, immunity for the volunteer does NOT immunize the organization, making charities the prime defendant when suit is brought.  Which, again, is fortunately pretty rare, especially for your small, community-based charity.

Volunteer Discrimination:  Employers can’t discriminate against employees on race, sex, religion, disability, and other protected characteristics.  Sometimes, but not often, these laws also protect volunteers.  (In fact, there is a circuit split about whether unpaid workers are covered under federal employee anti-discrimination laws.)  Still, even if anti-discrimination isn’t the law, be nice to your volunteers.  It’s the right thing to do.

Volunteers and Minimum Wage:  One of the least settled areas of law involves application of minimum wage laws to volunteers.  Cases are all over the place on this, and challenges involving unpaid interns and student-athletes add layers of confusion to the tests for charitable volunteers.  Department of Labor has issued various informal “guidance” (read: no Chevron deference) on the topic of unpaid workers, but their positions are rejected by courts as often as they are upheld.  Nevertheless, it would be pretty weird if your organization violated minimum wage laws by allowing someone to volunteer for your charity.  (Not legal advice: just common sense.)  One caveat is that a paid employee of your nonprofit can’t “volunteer” for your organization performing the same type of services as would normally be paid to perform. (Note that the linked regulation only applies to government, but Department of Labor applies same rationale to nonprofits).

Much, much more could be said, which is why this is a fun area in which to write (not to mention volunteering as a rewarding personal pastime). Happy National Volunteer Week everyone! 

@JosephWMead

April 11, 2016 in Current Affairs, Federal – Executive, Federal – Legislative | Permalink | Comments (0)

Wednesday, March 9, 2016

Zoning Violations and Tax-Exempt Status

When does an alleged zoning violation justify automatic removal of a property's tax-exempt status? New York State Supreme Court --Appellate Division, Second Department, recently had the opportunity to review the issue.

In Community Assn., Inc. v. Town of Ramapo, 2016 NY Slip Op 01458, 2nd Dept 3-2-16, the Second Department, reversing the trial court, determined that an alleged violation, for which the property owner had never been cited, did not justify the automatic removal of the property's tax-exempt status. The property had been tax-exempt for years as low-income property. The court found that the alleged zoning violation -- that the property owner had more than two residential apartments -- was not incompatible with the tax-exempt use. Therefore, the court held, the alleged zoning violation could not justify automatic removal of the tax-exempt status. Said the court:

[E]ven assuming that a zoning violation had been sufficiently established, the defendants have failed to articulate why such a violation, under the particular circumstances presented, should result in loss of the plaintiff's tax exemption. Not all violations of law automatically result in the loss of a tax exemption ... . 'The concern of the taxing authority is not with the observance or non-observance by plaintiff of regulatory provisions relating to a specific building, but to the use to which the real property as an entity is or is intended to be devoted' ... . This is not a case in which the applicable zoning regulation is incompatible with the occupant's tax-exempt use ... . In such cases, the rationale for denying the tax exemption is simple and clear, as compliance with both the tax-exempt use and the zoning regulation is impossible. Here, by contrast, the tax-exempt use of providing residential housing to low-income tenants is consonant with the property's permitted use as a two-family dwelling. Under these circumstances, the defendants have failed to establish, prima facie, that the nature of the alleged violation (i.e., that the plaintiff had more than two residential apartments) can serve as a valid legal basis for denying the property tax exemption ...".

So to answer the question with which we started, When does a zoning violation justify automatic removal of a property's tax-exempt status? New York's Second Department is clear: When the applicable zoning regulation is incompatible with the property occupant's tax-exempt use. 

VEJ       

 

March 9, 2016 in Current Affairs, In the News, Other, State – Judicial | Permalink | Comments (1)

Tuesday, March 8, 2016

NonProfit times: Clinton Tax Plan Supports Charitable Deduction

The NonProfit Times is reporting that under a tax proposal put forth by Democratic presidential hopeful Hillary Clinton, the charitable deduction would be exempt from a 28-percent deduction cap  and the estate tax exclusion would return to 2009 levels.

The report is based on an analysis conducted by the Tax Policy Center (TPC).  TPC is a joint project of the Urban Institute and the Brookings Institution.

According to the Times:

The tax benefit from specified deductions and exclusions would be limited to 28 percent. The cap would apply to all itemized deductions except charitable contributions but would reduce the value of deductions and exclusions for taxpayers in the 33 percent and higher tax brackets.

The proposals also would permanently reduce the tax threshold for estate taxes to $3.5 million ($7 million for married couples) with no adjustment for inflation, increase the top tax rate to 45 percent, and set the lifetime gift tax exemption at $1 million. In 2015, the basic exclusion for the estate tax is $5.45 million and Clinton’s plan would return it back to 2009 levels.

The Times further reports that the Association of Fundraising Professionals (AFP) and the Alliance for Charitable Reform (ACR) have both come out in support of Clinton's proposal.

 

VEJ

 

 

 

 

March 8, 2016 in Current Affairs, In the News | Permalink | Comments (0)

Tuesday, February 23, 2016

Ohio Restricts Government Funding to Planned Parenthood Affiliates

 PpThis weekend, Ohio joined the group of states that have “defunded” Planned Parenthood.  Ohio’s bill follows the model used by other states, and bans certain funding to go to any organization or affiliate that performs or promotes elective abortions. (Before the bill, there was no government funding of elective abortions.) “Affiliate” means any organization that shares common ownership or control, has a franchise agreement, or shares a trademark or brand name. Under this bill, an independently incorporated organization that, for example, licenses the Planned Parenthood logo would be precluded from participating in funding, even if it does not perform or promote elective abortions. Ohio’s restrictions apply to several specific programs, including the Violence Against Women Act and the Breast and Cervical Cancer Mortality Prevention Act. 

Against my better judgment, I’m wading into these treacherous waters because these bills pose interesting legal and theoretical issues about the ability of government condition the receipt of funding to nonprofits based on disagreement with the organizations’ ideology.

Continue reading

February 23, 2016 in Current Affairs, State – Executive, State – Legislative | Permalink | Comments (0)

Monday, February 22, 2016

Pigs, Get Ready to Fly - The Multistate Registration Filing Portal Steps Closer to Becoming Reality

If you've ever been involved in helping  a charity comply with the various state solicitation registration requirements, then somewhere between swearing and tearing your hair out I'm sure you thought, "There has to be a better way!"  Shake your fist at the sky in despair no more!   It is with unbounded joy that I share part of a note I received from Bob Carlson of the Missouri Attorney's General Office, who has been actively involved for some time with NAAG and NASCO's efforts to develop a simplified filing process.   And lo...

The Multistate Registration Filing Portal, Inc. has released our Request for Information (RFI) regarding a Single Internet Registration Portal. ...   The RFI has been posted at http://mrfpinc.org/rfi/.  We welcome all comments and look forward to robust response to the RFI.  We also invite you to share it with anyone you believe may be interested. 

The MRFP will host a conference call on March 15, 2016 from 3:00 p.m. – 4:30 p.m. EST to provide additional background information and answer questions from the public about the registration process. Dial-in: (800) 232-9745; PIN: 3232959. Charities, their registration services providers, and any other interested parties are welcome to participate. ...

The RFI will remain open until April 1, 2016....   Our one-page project summary is still available at  http://mrfpinc.org/project-overview/

Seriously awesome work,  Bob and everyone involved with this process.   I am sure I speak for lots of folks when I say that we can't wait to see this become a reality!

EWW

February 22, 2016 in Current Affairs, In the News, State – Executive, Web/Tech | Permalink | Comments (0)

Friday, February 19, 2016

City of San Antonio to Privatize Visitors Bureau by Creating New Nonprofit

The San Antonio City Council plans to privatize its Convention & Visitors Bureau by creating a new nonprofit to house the operations currently conducted by a governmental agency. The plan is that this restructuring will allow the CVB to increase its budget by leveraging additional funding sources from the private sector (including “corporate sponsors, memberships, partnerships and advertising dollars”), which would allow it to be more competitive in its spending relative to other Texas cities. SA_DNH

According to press reports, the Council has not yet finalized the structure of the governing board. Options include having representatives of the council and the mayor’s office sit on the board alongside representatives from the tourism and business community, and/or having board members voted upon by the city council. Although having publicly-appointed and publicly–affiliated board members running a nominal nonprofit is hardly unique to San Antonio, these public-private nonprofit hybrids don’t fit neatly into either public or nonprofit legal regimes. As a result, it is often unclear whether quasi-governmental organizations must comply with state public record laws, which vary from state to state.  (See, for example, the Texas Supreme Court’s 2015 decision regarding the Greater Houston Partnership.)

Moreover, what are the specific fiduciary obligations of board members who are city council members, or who are appointed (and, in many cases, removable by) city councils or mayors? One easy answer might be that all nonprofit directors share identical fiduciary duties to the organization; however, expecting city councilmembers and their representatives to abandon their political perspectives may not be realistic, and arguably would run counter to the very purpose of structuring the board to include city councilmembers. One solution would be for the City to clarify these rules through the process of creating the organization.

-Joseph Mead

PS I’m new to the blog, and thrilled to be joining such a great line-up. I’m in my second year of academia as an Assistant Professor at Cleveland State University, where I have the fortune of holding a joint appointment with the Cleveland-Marshall College of Law and with the nonprofit management and public administration programs at the Maxine Goodman Levin College of Urban Affairs. My research interests include legal issues of volunteering, questions of board governance, and Constitutional rights of nonprofits, with a particular attention to how legal rules change behavior of nonprofit actors. I also continue to practice law from time to time, advising nonprofits and litigating matters pro bono. I’m happy to be on the team.

February 19, 2016 in Current Affairs, In the News, State – Legislative | Permalink | Comments (0)

Saturday, January 9, 2016

First 2016 Issue of Nonprofit Advocacy Matters Previews Challenges for Year

The first issue of 2016 of the National Council of Nonprofits’ Nonprofit Advocacy Matters previews legal and policy issues expected to take center stage in 2016.  Key topics include the expanding efforts to impose PILOTs by local governments, challenges to state charity property tax exemptions, pressures created by state fiscal weakness, regulations threatening the independence of the nonprofit sector in various ways, and reform of government-nonprofit contracting and grant-making. 

JRB

January 9, 2016 in Current Affairs | Permalink | Comments (0)

Friday, January 8, 2016

Don’t Let the Headlines Mislead You on the Reported Endorsement of Hillary Clinton by “Planned Parenthood”

Across the country this morning, millions awoke to news source headlines proclaiming that presidential hopeful Hillary Clinton is receiving the endorsement of “Planned Parenthood.”  The prime exhibit is the headline for the story appearing in today’s New York Times.  The print edition reads, “Planned Parenthood Gives First Primary Endorsement in Its 100 Years to Clinton,” and the online version of the Times story reads, “Planned Parenthood, in Its First Primary Endorsement, Backs Hillary Clinton.“ The story in the latter version opens with these words: “Planned Parenthood, which has become an ideological minefield in the 2016 presidential election, said Thursday that it would endorse Hillary Clinton — its first endorsement in a presidential primary in the nonprofit’s 100-year existence.”  Stories in some other major news sources lead with similar language. See, for example, the stories published by ABC News and CNN

Although its headline is also misleading, the story appearing in the Washington Post actually begins with what appears to be the accurate factual account: “The political arm of Planned Parenthood will endorse Hillary Clinton in New Hampshire on Sunday, a Clinton campaign official confirmed.”  And therein lies the critical distinction.   As the New York Times piece eventually reports, the endorsement is being “technically made through the nonprofit’s advocacy arm, the Planned Parenthood Action Fund.” 

“Technically made,” indeed.   As exempt organization lawyers are well aware, the identity of the entity that supports or opposes a United States presidential candidate matters greatly.  Planned Parenthood Federation of America, Inc. – the health care service-provider at the center of recent controversies over whether it should receive federal funds in the wake of allegations that it has profited from transactions in fetal tissue – is a tax-exempt charitable organization described in section 501(c)(3) of the Internal Revenue Code.  As such, to comply with the requirements for federal income tax exemption, Planned Parenthood must “not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”  Planned Parenthood’s political affiliate is not bound by the section 501(c)(3) limitations.

The reporting of the Clinton endorsement highlights the degree to which, in the minds of many, including journalists, these rules are just “technical” distinctions.  But the distinctions are of enormous importance.  Consider the pastor of a local church who wants to express a political voice on politics.  The pastor is free to do so in appropriate contexts, without having his viewpoint attributed to the legal entity which is the church.  Cecile Richards may do the same, individually or on behalf of a political action organization, without having her statements attributed to the charity.

Of course, the reporting of the Clinton endorsement raises the issue that the Planned Parenthood brand is now being used to influence a presidential election, reportedly the first time it has ever been so employed during the primary election stage.  The manner in which major media outlets are reporting the endorsement tends to magnify the impact of this brand on the endorsement itself.  But a similar point may be made whenever a prominent personality associated with a tax-exempt charity endorses or opposes a candidate.  Such a person is free under current law to identify herself by reference to her position with the charity, as long as she is not speaking on behalf of the charity.  In each case, a charity’s reputational capital has to some extent been appropriated, either by referring to the charity’s name, or by using a similar-sounding name.

JRB

January 8, 2016 in Current Affairs | Permalink | Comments (0)

Thursday, December 17, 2015

Star Wars, Pedagogy, and You

Every year in my Nonprofits class, in lieu of a standard exam, I give my students a project:  take a hypothetical charitable client through the organizational stages of state law creation and preparation of the Form 1023.    Typically, I give my students a client based on superheroes, comic books, movies, etc.    I do this for a number of reasons - it provides a rich back drop of characters and info for those who wish to use it (but they  need not); it engages some students that are often unengaged; it makes reading 20 Forms 1023 that much more bearable; and most importantly, it teaches students to think about clients as they are and to apply general principles of law to even the most outlandish situations.   So maybe Charles Xavier isn't coming into your office to form a mutants' rights organizations any time soon, but the issues of politics, lobbying and advocacy remain the same.   Clients are clients, the law is the law, and you just never know what will come through the office door.

I really wanted to do a church this year.  With all the news around the Satanic Temple and abortion, the Indiana pot church, and the renewed focus on what is a bona fide religious belief brought to you courtesy of Hobby Lobby, I thought the timing was perfect.   Trying to find a church was rather difficult, however, as you want something robust enough to be engaging as a teaching tool but you also have to tread pretty lightly around the topic.   I toyed with Apocalypse and the Four Horsemen of X-Men fame, but thought it might be too obscure.   The pot church was taken.    

So, in honor of The Force Awakens, this year my class formed the First Church of the Jedi Knights in America.   Many kudos to my colleague Atiba Ellis (go check him out at the Race and the Law Prof Blog) who appeared in class in full Jedi robe as Mace Windu, Jr., the organizer of the First Church, available for student interrogation.     As with every project, it had fits and starts.  For example, the class soon discovered that the West Virginia Constitution prohibits churches from organizing in corporate form.   Who knew?    Most shockingly, I had students who hadn't yet seen Star Wars... oh, the humanity!

Life imitates art.   Some of you may know that there are actual Jedi Churches in the U.K. especially, so this particular fact pattern wasn't quite as far from reality as say, dealing with the corporate governance issues that arise when members of your board morph into evil lizards (I'm looking at you, Doc Connors!)  in that after the final project was done, one of my students emailed me the following article from The Telegraph:

 

 Jedi Church Says New Star Wars Film Leading to a Boom in Followers

 

So who knows?   Maybe one of my student really will represent Mace Windu, Jr. one day....

 

EWW

 

 

 

December 17, 2015 in Current Affairs, Religion | Permalink | Comments (0)

Wednesday, December 16, 2015

Why Are You Reading This? Star Wars, People!

In honor of Star Wars Day 2015, I'm linking to this article from the Tax Foundation, which clarifies that but for taxes, we wouldn't have the entire Star Wars series, thus proving what I tell my students... tax is, indeed, everywhere....

and...

Linking two things I love, cosplay and charities (I'm a really big nerd) ... may I introduce you to one of my favorite things, the 501st Legion, helping a charity event near you (who said all Stormtroopers are on the Dark Side!)

Now, get in costume, get in line, and may the Force be with you!   

EWW

(and for the love of all that is the Light Side of the Force, no spoilers!)

 

 

December 16, 2015 in Current Affairs | Permalink | Comments (0)

Monday, December 14, 2015

Getting the Vapors Over the Chan-Zuckerberg Initiative LLC

There's been an awful lot of pearl clutching going on out there in the media about the Chan-Zuckerberg Initiative, now famously known to be organized as a Delaware Limited Liability Company (LLC - not limited liability corporation, media folks!   And yes, it makes a difference.)     The December 11th Chronicle on Philanthropy update, which I get in my email, had not one but TWO opinion pieces on it.  Personally, I don't quite get all the drama, but I have three working theories, none of which are mutually exclusive.    ( I do have to put one caveat out there  - my comments are based on the structure as I understand it from media reports, which may or may not be reliable.)

  1.  Tax Deduction?  We Don't Need No Stinkin' Tax Deduction.  So the first line of attack appears to be that it's all a big tax scam - they get the deduction but they give nothing to charity.   As far as I can tell, however (and sort of confirmed in a non-technical way by Zuckerberg himself) is that the LLC is, not surprisingly, not a tax-exempt entity.  As a result, the C-Zs won't get an income deduction for funding the LLC; an income tax charitable deduction might pass through to them if and when the LLC actually makes a contribution to a recognized, qualified charity.   Which makes it no different than any other for-profit business out there that makes contributions to charity - albeit with way more fanfare and more decimal places at stake.

So maybe all of it is just a fundamental misunderstanding of the tax implications of the LLC?   If the notion is that the tax-paying public has a right to certain expectation of a charitable endeavor as a condition of tax exemption, then that notion is misplaced here - at least with respect to the federal charitable income tax deduction and/or tax-exemption from the income tax.   I've seen some speculation that there may be some estate and gift planning going on here - but there is a great deal of speculation on that and even so, what makes that any different than any other wealthy person out there?   I've also seen reference to evading California income taxes - not sure on that one, but it seems unlikely from my rudimentary knowledge of the California income tax.   Would love to hear from anyone from CA with thoughts on that issue.

One set of taxes the Initiative is most certainly dodging is the private foundation excise taxes, which generally were designed to make sure that assets for which a charitable income tax deduction is granted are used for those charitable purposes.   It hardly seems surprising that the private foundation excise taxes don't apply to a for-profit entity, for which no charitable income tax deduction has been granted.

2.  Let The Eat Charitable Cake.    My second theory is a concern over philanthropic oligarchy - in the US, a concern that goes back (at least) to the creation of the first large private foundations during the Industrial Revolution era.      If you've read the legislative history to the private foundation excise taxes, one of the repeated themes is an anti-trust type concern (not surprising, I suppose) - the ultra wealthy concentrating and controlling wealth not only in the business sector, but in charitable vehicles as well.    I couldn't help but hear the echos of the Patman hearings and reports (which formed much of the basis for the passage of chapter 42) in the criticisms of C-Z.      Some also cite to Zuckerberg's recent and widely-criticized foray into donor controlled philanthropic experimentation in the form of the Newark school system.  In the Jacobin article linked at the beginning of this paragraph, the author notes, "People like Zuckerberg and Gates are unelected and unaccountable to anyone and face few, if any, repercussions for the negative consequences of their social experiments."   In my mind, these concerns undergird the suggestions of Pablo Eisenberg in his editorial in the Chronicle of Philanthropy, which suggests that the C-Z Initiative ought to make public reports, have an independent board, and champion issues of poverty.   As Eisenberg states, "The overwhelming majority of superwealthy donors who have signed the giving pledge do not give much, if any, of their money to fight poverty or help marginalized citizens, the neediest nonprofits, or advocacy organizations. Despite what they often claim, tech billionaires are not giving money that disrupts the status quo."

I'm struggling with the question of why?  If this is a private enterprise not subsidized by public funds through the charitable deduction, what standing do we have as a society to demand such things?   If the entity is not itself charitable as a legal matter, then... so what?     Which raises the final  question...

3.  Or Maybe, We Just Don't Know What Charity Is Any More...?     Fundamentally, I really think this is about our fundamental notions of charity as a society.   In the initial letter to his daughter announcing the pledge to the initiative, the C-Zs stated... 

As you begin the next generation of the Chan Zuckerberg family, we also begin the Chan Zuckerberg Initiative to join people across the world to advance human potential and promote equality for all children in the next generation. Our initial areas of focus will be personalized learning, curing disease, connecting people and building strong communities.
 
We will give 99% of our Facebook shares -- currently about $45 billion -- during our lives to advance this mission. We know this is a small contribution compared to all the resources and talents of those already working on these issues. But we want to do what we can, working alongside many others.
 
Education.   Advancement of Health.  Building Communities.   All things that clear fall within traditional notions of charity, both in common parlance and in a Statue of  Charitable Uses/Jackson v. Phillips/Section 501(c)(3) legal kind of way.   What's different, however, is the way that the C-Zs have chosen to go about achieving these otherwise laudable ends.      It shouldn't be surprising that Zuckerberg appears to want to pursue some serious impact investing, which would clearly be hampered by (although not necessarily prohibited by) the strictures of 501c3 and, if applicable, the private foundation excise taxes.   It does sort of turn traditional thinking on its head - do tax incentives encourage giving?  In this case, maybe the cost of those tax incentives actually discouraged giving, or at least traditional endowed grant-making giving?   To the extent that one of the benefits of the private foundation form (or even tax exempt charity, generally) was to create an environment where individual were free to experiment with solutions free from the bounds of shareholders, voters, or other stakeholders, maybe this is just a step back to these roots?
 
Or maybe the C-Z Initiative isn't charity at all.   Yes, it has social benefit as an end.    However, maybe it is just a private business enterprise and should simply be treated as such?  

EWW   

December 14, 2015 in Current Affairs | Permalink | Comments (0)

Friday, December 4, 2015

Chan Zuckerberg LLC Discussion at the Business Law Prof Blog

Just wanted to jump in today to link this post (Back Off the Chan Zuckerbergs and Their Limited Liability Company (NOT Corporation)) from my WVU colleague Josh Fershee, who blogs at our sister site, the Business Law Prof Blog.   There is a lot of discussion (and misinformation) out there about the Chan Zuckerberg Charitable LLC structure, and I thought there were some interesting views over there from our business entity friends.

See you next week!  Happy finals!   EWW

December 4, 2015 in Current Affairs | Permalink | Comments (1)

Wednesday, November 11, 2015

Thanks to Our Veterans

In honor of Veterans' Day, I am simply going to link to this CNBC post on its suggestions for the Top  Ten Charities for Veterans.   Of course, I have no doubt there are other worthy organizations out there - - feel free to mention yours in the comments.    In any event, thank you to all of our vets for your service and sacrifice.

 

EWW

 

November 11, 2015 in Current Affairs, In the News | Permalink | Comments (0)

Wednesday, September 23, 2015

Breaking News! Final Regs on Equivalency Determinations

Good morning all!   I just got an alert in my mailbox that Treasury has issued final regulations on equivalency determinations - you may all recall the proposed regulations that were issued in 2012.

I'm in the process of printing out the final regs and comparing them to the proposed regs, so I'll update the post later today.  Bloomberg BNA's blurb on it says that the final regulations "incorporate the thrust of" the 2012 rules.   I'll try to get some links up as soon as I can find them in a non-subscription database, although I know you can get them in both Bloomberg BNA and Tax Analyst already if you have access.     Citation is T.D. 9740, RIN 1545-BL23. 

EWW

 Update at 6:30 p.m., 9/23/2015

I've not gotten all the way through the final regs to give you all a complete summary, but I wanted to mention a few highlights from the preamble:

  • It appears that the Regulations expand the definition of  "qualified tax practitioner" for purposes of who can make equivalency determinations that can be relied upon in good faith.
  • The Regulations appear to scale back the ability of a charity to rely on a good faith affidavit as the sole means of making an equivalency determination.     Briefly, it appears that you can rely on the information in good faith, but there needs to be an additional showing that the evaluation of the data and the equivalency determination based on that data occurred in a manner that demonstrates a knowledge of US tax law.   In theory, anyway, there are more qualified tax practitioners (including folks that may be in house at the foundation) to help with such a determination, so it shouldn't (in theory again) be a significant bar to international grant making.
  • Some clarification on how long you can rely on written advice, which looks like (a) so long as there is no change in the law or otherwise for most things, except (b) two years for public charity determinations based on financials.
  • It looks like there may be limited opportunity to share equivalency determinations, but it can't be foundation to foundation - it may be that the first foundation has to authorize the release of that information to a second foundation from its qualified tax practitioner because only there would there be reasonable reliance.   So not quite the equivalency determination banking that the sector wanted, but it may be a step in that direction.   
  • Looks like donor advised funds can use these rules, at least for now, for purposes of compliance with Section 4966(d)(4).

EWW

 

September 23, 2015 in Current Affairs, Federal – Executive, International | Permalink | Comments (0)

Friday, September 18, 2015

Carnegie Hall’s Board Chair Will Step Down

Today’s news cycle features developments in the dispute over the governance of Carnegie Hall.  According to the New York Times, Ronald Perelman, who just this year accepted his position as Chairman of Carnegie’s Board, told his fellow trustees at a meeting yesterday that he would leave the Chair role next month, rather than seek re-election. His announced departure is tied to his concerns that Carnegie Hall’s governance practices are legally suspect, and that these concerns have not been adequately addressed.  Says the Times:

 

The climax came on Thursday afternoon at a joint meeting of the board’s executive and audit committees, when Mr. Perelman told his fellow trustees that he believed some of the laws governing nonprofits were not being followed at Carnegie and expressed frustration that no investigation into his concerns had been initiated, according to someone familiar with the proceedings, who was granted anonymity to describe what happened at a confidential meeting.

 

Mr. Perelman criticized board members for placing “a premium on avoiding tension and disagreement,” the person said, and told them that while he would serve out his term, he would not run for re-election as chairman at the board meeting next month. The board then agreed to hire a lawyer to examine his concerns, which involved how Carnegie vetted what Mr. Perelman called “related-party transactions” in looking at deals that posed potential conflicts of interest.

 

The Times further reports that one member of Carnegie’s Board speculated that Mr. Perelman would not likely have been re-elected as Chair, and that “the trustees had felt blindsided this summer” when Mr. Perelman briefly suspended Carnegie’s executive and artistic director, Clive Gillinson.  The same board member reportedly voiced that the board did not share Perelman’s view that Carnegie had governance or transparency problems, but that the board would investigate the matters raised.

 

JRB

September 18, 2015 in Current Affairs | Permalink | Comments (0)

Thursday, September 17, 2015

GAO Report on American Red Cross Released; Federal Legislation Proposed

NPR reports that the “American Red Cross is facing new criticism today as government investigators and a congressman call for independent oversight over the long-venerated charity.”  NPR explains that Representative Bennie Thompson has introduced a bill called the American Red Cross Sunshine Act on the heels of the release of a report by the United States Government Accountability Office (“GAO”) that examined the charity’s operations.  The GAO report, says NPR, “finds oversight of the charity lacking and recommends that Congress find a way to fill the gap.”

 

The “Conclusions” section of the GAO report states as follows:

 

The nation’s disaster response system relies to a significant extent on the nonprofit sector, which harnesses the public’s generosity to provide funding for disaster response and recovery efforts. This approach can support the nation’s efforts to assist disaster victims, but it also has limited accountability for disaster assistance. The Red Cross, the organization most responsible for providing shelter and other mass care services to disaster victims, exemplifies this tension. It has been designated by law as an instrumentality of the United States and has a critical, formalized role in coordinating and providing disaster response services across the nation. At the same time it remains a nonprofit organization that generally makes its own decisions about what services to provide. This reliance on an independent organization can be effective if government and the donating public have confidence that [the] Red Cross is providing the services that are most needed in an effective and efficient manner. Further, in disasters in which the federal government is involved, the extent and effectiveness of the Red Cross’s activities could have a direct impact on the nature and scope of the federal government’s activities.

 

With regard to oversight, while the Red Cross has some internal evaluation processes in place, such as after action reviews and surveys of state emergency managers and other stakeholders, Red Cross officials told us that the results of their internal evaluations are typically not made available to the general public. The absence of regular, external evaluations of its disaster services that are publicly disseminated could affect the confidence of both the donating public and the federal agencies that rely on the Red Cross. This is especially true in light of questions raised by the federal government and others in recent years about the organization’s performance in disasters. Given the Red Cross’s status as an instrumentality of the United States and the critical responsibilities assigned to it by its federal charter and by federal policies, the federal government has a clear stake and role in ensuring that proper oversight takes place.

 

In a section entitled “Matters for Congressional Consideration,” the GAO report further recommends legislative action:

 

To maintain governmental and public confidence in the Red Cross, Congress should consider establishing a federal mechanism for conducting regular, external, independent, and publicly disseminated evaluations of the Red Cross’s disaster assistance services in domestic disasters in which the federal government provides leadership or support. This mechanism might involve annual evaluations of whether the services achieved their objectives or of their impact on disaster victims. This evaluation could be performed, for example, by a federal agency such as DHS, by an IG office such as the DHS IG, or by a private research firm under contract to a federal agency.

 

The American Red Cross Sunshine Act, according to its preface, would “enhance oversight of the American National Red Cross by the Government Accountability Office and Inspectors General at the Departments of Homeland Security, Treasury, and State,” and would require the Department of Homeland Security to conduct a pilot program with the charity to research and develop mechanisms to improve the charity’s preparedness and response capabilities through social media.

 

Additional Coverage: The Chronicle of Philanthropy

 

 

JRB

September 17, 2015 in Current Affairs, Federal – Executive, Federal – Legislative | Permalink | Comments (0)

Governance Concern at Carnegie Hall

The New York Times reports that the Chairman of the Board governing Carnegie Hall, Ronald Perelman, is calling out the nonprofit’s executive and artistic director, Clive Gillinson, for operating without adequate transparency, and fellow board members for failing to exercise proper oversight of the iconic nonprofit.  These details appear in the story:

 

Mr. Perelman wrote to the board that he had initially grown concerned over “an inability to obtain a full picture of Carnegie Hall’s financial operations, especially as it related to profits and losses involving performances,” according to a copy of the email obtained by The New York Times. He wrote that he had become “troubled by the manner in which related-party transactions” — essentially deals presenting potential conflicts of interest — “were being identified, vetted and approved.”

 

The story further reports that, according to Perelman, although “an agreement had been reached last month to hire an independent lawyer to investigate his concerns” about governance, no investigation has yet begun, and that Perelman “was calling a joint meeting of the board’s executive and audit committees” to handle the matter.

 

JRB

September 17, 2015 in Current Affairs | Permalink | Comments (0)

Wednesday, September 16, 2015

Latest Nonprofit Advocacy Matters

In the latest issue of Nonprofit Advocacy Matters, published electronically by the National Council of Nonprofits, two entries caught my eye.  In one, it is reported that the United States Department of Labor has received nearly 250,000 comments to its proposed amendments to overtime regulations issued under the Fair Labor Standards Act (FLSA). The proposal would, in part, increase the minimum salary level that employers must annually pay their administrative/executive/professional employees in order to exempt the employers from paying overtime wages to those employees; the proposal would raise that minimum from $23,660 to $50,400. Readers interested in reviewing the full text of the proposal, as well as comments to it, may link to this website.

 

Another item of note in the recent Nonprofit Advocacy Matters is a description of how the State of Indiana “is experimenting with the creation of nonprofits to enable government to secure greater returns on investments and to fund key programs.”  Under one new state law, cities can create and fund special foundations with the proceeds of government property sales.  The charities can then invest in corporate stocks more liberally than can most governmental bodies. Secondly, the state has founded a nonprofit organization to raise money “from private investors to pay for public health initiatives.”  Noting that Indiana is one of the states that devote the least resources to public health programs, the piece explains that lawmakers hope the newly minted nonprofit will help redress the situation.  

 

JRB

September 16, 2015 in Current Affairs | Permalink | Comments (0)

Tuesday, September 15, 2015

Nonprofit Hospital Exercising Rights to Religious Accommodation Threatened with Lawsuit

The Washington Post reports that, after Catholic hospital Genesys Regional Medical Center denied a request from Jessica Mann to perform a tubal ligation following the future delivery of her baby by Caesarean section, Mann “sent a letter through the American Civil Liberties Union threatening legal action.”  The hospital denied the request, reports the Post, because “Catholic mandates forbid procedures that cause sterilization … and officials said she did not qualify for an exception.”  

 

Fellow law professor Robin Wilson of Illinois is quoted as saying that “[f]ederal law provides an ‘iron-clad’ exemption for medical providers who do not want to provide abortion or sterilization services.”  Professor Wilson is further quoted as articulating a reason for the statutory accommodation:

 

Wilson said judges must tread especially carefully in situations such as Mann’s, which are not acute emergencies.

 

“If it’s not an emergency, why should you wash out the religious character of that hospital?” she said. “You want a diversity of providers so people who have different values can actually find providers who match those values.”

 

The post reports that ACLU officials “argue that the federal protections cited by Wilson do not apply in the Mann case.”  The grounds for the ACLU’s argument are not entirely clear from the Post’s coverage.

  

JRB

September 15, 2015 in Current Affairs | Permalink | Comments (0)

Monday, September 14, 2015

Scientology Accountant Calls for Removal of Key Leader

The Tampa Bay Times is running a story that may interest those familiar with the legal battles involving the Church of Scientology.  According to the story, certified public accountant and former church attorney James J. Jackson, still a Scientology adherent, is seeking to remove David Miscavige from his position as Chair of the governing board of the Religious Technology Center (“RTC”).  The RTC reportedly owns the intellectual property rights in Scientology's practices.  The article is interesting on multiple counts, including its discussion of Jackson’s representation of leading scientologists and its description of the reorganization that the church undertook in the 1980s and the institutional culture that developed after the death of founder L. Ron Hubbard.  As to the attempted ouster of Miscavige, the Times states as follows:

 

Like many critics, Jackson sees the church's leader as a dictator steering Scientology toward ruin. Allegations over the years that Miscavige mentally and physically abused church staffers continue to yield public scorn, even though repeatedly denied by the church. While other detractors have tried to pressure Miscavige in civil court and on the Internet, Jackson is pursuing a novel, perhaps quixotic strategy: He believes Miscavige can be toppled by insiders.

 

After studying corporate bylaws the church presented to the IRS to gain tax exempt status and hiring three non-Scientology lawyers who specialize in matters regarding religious organizations, he argues Scientology's nearly three dozen trustees, directors and officers have the power — whether they know it or not — to exercise oversight over the lucrative corporate enterprise.

 

They have a legal right and responsibility to investigate, or even remove, Miscavige, Jackson says.

 

But can they do their job? Or is Miscavige running everything, as defectors have alleged?

 

"Fights over control of the board, failing to follow bylaws, all this is proper subject matter for a California court," said Mark Cohen of Fremont, Calif., one of Jackson's lawyers.

 

The Times further reports that Jackson has appeared in a video in which he calls upon the two trustees of RTC (besides Miscavige) to remove Miscavige from office.  The piece also links to various items of correspondence relevant to the controversy.

 

 

JRB

September 14, 2015 in Current Affairs | Permalink | Comments (0)