Thursday, August 4, 2016
A recent post on Non Profit Quarterly by Ruth McCambridge explains tensions between nonprofits in big cities (Such as D.C. in this article) and the legislature. In Washington D.C., nonprofits occupy over $10 billion worth of real estate, which could generate over $111 million per year in tax revenue. Instead, the district collects nothing from them.
Two universities in the district alone account for $48 million in uncollectable property tax revenue. The District is considering the idea of making a change requiring payments in PILOT form, but has been pondering this idea for nearly fifty years.
Undoubtedly, these institutions bring an immense amount of revenue to the District, through research, attracted talent, and general expenditures by students and faculty. However, it is not clear if these benefits outweigh the costs of not receiving property taxes.
It is estimated that currently 28 different states have municipalities that collect PILOT payments; however these payments amount to far less than what the property taxes would have been worth.
It will be interesting to see if the legislature changes the current set up. Between the federally owned tax-exempt buildings, and those occupied by nonprofits, the district is missing out on over one billion dollars of tax revenue.
Tuesday, August 2, 2016
A recent development in California leaves the status of a local non-profit blood bank in question. However, Hemopet is not your typical blood bank, it is a blood bank for animals. Founded in 1986, Hemopet was the nation’s first 501(c)(3) non-profit blood bank and quickly grew to national scale. Currently, Hemopet supplies 40% of the nation’s emergency canine blood, and saves the lives of thousands of dogs each year.
In 1965, a law was enacted that exempted blood banks from taxation. Unfortunately, animal blood banks were not around at the time. A recent audit by state officials led to the conclusion that Hemopet should not be considered tax exempt, and that they owed over $80,000 in unpaid taxes. A bill is set to be presented to the California Assembly Committee on Appropriations on August 3rd that will clear up the status of the non-profit. Dr. Jean Dodds, president and founder of Hemopet, believes that if the bill passes requiring Hemopet to pay the $80,000 they will be forced to shut down. In addition to the potential shortage on emergency canine blood, closing Hemopet would leave over 200 Greyhounds homeless and 45 people would lose their jobs.
Hemopet officials are encouraging Californians to contact the Assembly Committee on Appropriations to voice their support for the organization.
Monday, August 1, 2016
Community Basics, a Lancaster, PA non-profit, is challenging the legality of a local zoning ordinance that effectively limits the ability of the Salisbury Township’s residents to obtain affordable multifamily housing. The proposed law would require the re-zoning of a 16.6-acre plot of land that is currently zoned for industrial use. The site would contain six buildings and 138 apartment units.
Currently, less than one percent of the township’s total land is zoned to allow multifamily housing. Township officials deny any wrongdoing and contend the zoning is necessary for critical industrial development. The Supreme Court has invalidated a zoning restriction before that only allotted 1.14 percent of a town’s land for multifamily housing. The Salisbury Township ordinance allows for .74 percent of the town’s land to be used for multifamily housing. To further limit the access to multifamily housing, the township requires four parking spaces per housing unit, an expensive barrier to building new housing units.
The challenge aims to curb the shortage of rental housing available to the Salisbury Township residents. Rent for the new units would be based on income, and would range from $315 to $945 monthly. The hearing for the ordinance is set for Aug. 24.
Sunday, July 31, 2016
Proposed legislation in Massachusetts would potentially shake-up the current state of their local non-profits. The proposal would make it necessary for current non-profits to begin paying property taxes, and continue to do so for the next four years (churches and houses of worship remain exempt). Currently, non-profit organizations are exempted from paying property tax, but occupy more than 13 percent of taxable property within the state. The proposal is a small part of an overall economic stimulus plan that seeks to provide over $700 million in assistance throughout the state.
Proponents of the legislation argue that aggressive land purchases by larger non-profits make it more difficult for smaller entities to find land. They also believe exempting the non-profits ultimately raises property taxes for others in the community. Opponents believe that taxing non-profits will make it necessary for them to cut back on their services provided, and could lead to employees being laid off. This could have a wide impact, as non-profit jobs are an estimated 17 percent of the state’s workforce (approximately 500,000 jobs), and pay more than $30 billion in wages.
Although both sides present compelling arguments, it is imperative for policy makers to thoroughly analyze the true impacts of their decisions. It will be interesting to see what how the good people of Massachusetts respond to this proposal.
Thursday, July 28, 2016
A recent post by Benjamin Leff on The Surly Subgroup highlights the 50+ year ban on 501(c)(3) organizations (here, specifically churches) “intervening” in a campaign for public office. Arguments for and against the ban range from an infringement of free speech, to churches using their power to distort the electoral process. However, the main issue discussed is that although churches want to get in to court to challenge the ban, they believe the IRS won’t let them. For a compelling read on how these organizations may be granted their “day in court” and some possible reform suggestions, read the above linked post.
Monday, June 20, 2016
- Evaluate charities using information from AG offices, IRS filings, and other resources such as Charity Navigator* (UPDATE: see below) or Guidestar
- Beware of sham charities & look-alike sites: some appeals will use similar names to well-established nonprofits
- Be cautious of newly-formed charities: may lack the experience to properly or effectively handle donations
- Investigate how your donation will be used: look for destination of funds and what percentage will benefit specific charitable purpose
- Stay away from crowdfunding or peer-to-peer fundraising: state law typically prohibits soliciting donations on behalf of a charity without charity's prior consent
It is good to be prudent, but do these consumer alerts discourage charitable giving? Are there any tips that you would add or eliminate to the list? (Note that these "tips" go beyond law and offer the Attorney Generals' views on best practices for charity, without distinguishing between law and opinion, the latter of which might not be shared by everyone.)
Editor’s note: A national organization with broad knowledge about local operations of charitable organizations privately shared that Charity Navigator only rates a small number of nonprofits but many people don’t realize this and assume that if a nonprofit is not listed, it is not recommended. Additionally, Charity Navigator has itself acknowledged the downsides of analyzing overhead ratios as a method of rating a charity’s effectiveness, but continues to use a methodology that places emphasis on administrative costs. Consequently, the national organization recommends that donors ideally should get to know the nonprofit first-hand, and learn more by reading about the nonprofit on GuideStar.org.
Monday, June 6, 2016
According to this Chronicle of Philanthropy article (citing arts newsletter Hyperallergic), Senate Finance Committee Chair is continuing his scrutiny of private museums, now by requesting clarification from the IRS regarding its stance on private museums. You may recall that last fall, Senator Hatch sent a letter of inquiry to a number of private museums, requesting details regarding the museum's operation - fellow blogger Nickolas Mirkay detailed those letters here. Hyperallergic indicated that one of Hatch's primary concerns was the public availability of collections (including limited hours and advance reservations) and the continuing role of donor of the art collection in the management of the museums. Much of this scrutiny may stem from a series of New York Times articles regarding private museums, including here and here.
Inquiries of this type bother me somewhat. It seems to me that current law regarding private benefit is probably sufficient to handle many of the perceived abuses (maybe it's an enforcement issue - just throwin' it out there). The drumbeat of the articles and the Senate inquiry may lead to additional regulation - and I suspect they will use a mallet rather than a surgical instrument to deal with the issue, if history is any guide.
Thursday, May 26, 2016
A recent story describes the battle an Iowa casino faces in trying to keep its non-profit status as a 501(c) (4) social welfare organization. The IRS believes that the casino is too commercially successful to be considered a charitable organization, and calls into question how their revenue is truly being used after it is earned. Of course, non-profits may have a commercial enterprise as long as the organization is lessening the burden of the government.
According to the casino, they certainly have a large impact on the surrounding community, paying over $54 million in wages last year. Further, the casino gifted nearly $20 million to local charities, including school districts. According to the casino’s website, they have also given out over 500 scholarships for students to attend state colleges or universities in Iowa. The Casino also gives out “Legacy Grants” to help fund projects that benefit the community, these grants range from $100,000 to $1 million. Lastly, the casino has paid over $800 million in taxes so far.
No matter the ultimate outcome of the IRS ruling, it is clear that many will be impacted from the decision. It will be interesting to see if the IRS determines that all of this charitable giving lessens the burden of the government, or if other competing objectives drive them to take away the casino’s 501(c) (4) status.
Tuesday, May 24, 2016
A compelling article from the ABA’s Business Law Today on the risk of loss to client bank accounts from cyber-theft highlights the dangers faced by all bank account holders across the United States, including non-profits. In a technology driven economy, while efficiency is promoted through instantaneous transfers, a door has opened for a new type of cyber-crime.
This article explores some of the inconsistent and unpredictable case law that has developed over who should bear the risk of loss from a cyber-attack, the bank or the customer. Loose standards of “commercial reasonableness” lead to a wide range of possible interpretations. For example, the same banking practice was “reasonable” for one bank, but “unreasonable” for another.
This issue is particularly important for non-profits, who would likely be forced to close their doors if they were to bear the consequences of a large cyber-attack, leaving them without the necessary funds to continue operation.
The article concludes with some practical advice on how an organization should assess their banking needs and what type of protection is best for their own needs.
The new overtime regulations taking place on Dec. 1, 2016, will certainly effect labor decisions across the country. For the first time in twelve years, the threshold amount to determine if salaried workers are exempt from overtime pay will be raised from $23,660 per year, to $47,476 per year. Generally, an employer paid a salary under the new threshold will be required to be compensated for overtime worked, unless an exemption applies. In order to qualify for the new overtime payment rules, an employee must work for a covered enterprise, or be a particular worker who is covered.
If a non-profit meets the “enterprise coverage test,” all employees working for the organization are covered by the new regulations (unless an exemption applies). To be considered a covered enterprise, “an entity must have annual revenues, that is, volume of sales made or business done, of at least $500,000.” However, non-profits are not considered covered enterprises unless they engage in “ordinary commercial activities that result in sales made or business done” that exceeds $500,000. Ordinary commercial activities are those normally associated with operating a business, such as selling products or services. Charitable activities, however, such as providing food, shelter, or clothing, generally are not ordinary commercial activities.
To determine if a non-profit is a covered enterprise, only business purpose activities are considered. Income used to further the non-profit’s charitable activities is not factored into the $500,000 (e.g., membership fees and donations). Organizations can engage in both charitable acts, as well as business activities, and such organizations could potentially qualify as a covered enterprise.
Finally, the new regulations will automatically apply to some entities unless there is a specific exception. These entities include: “hospitals; institutions primarily engaged in the care of older adults and people with disabilities who reside on the premises; schools for children who are mentally or physically disabled or gifted; federal, state, and local governments; and preschools, elementary and secondary schools, and institutions of higher education.”
These regulations will certainly impact the way in which non-profits decide how to earn and spend revenue, attempting to have as much revenue as possible further its charitable activities to keep them below the $500,000 threshold. One thing is for sure, volunteers and donations will be crucial to a non-profits’ success.
For a detailed look at individual exemptions, please see the provided link.
Monday, May 23, 2016
A recent article on proposed Delaware legislation highlights the complexities and competing objectives lawmakers face when deciding if a nonprofit should be exempt from paying local property taxes. Here, the decision is whether or not to add the Milford Housing Development Corporation, EJB Inc., and Martha and Mary’s Place Inc., to the current list of 76 nonprofits in Delaware that currently enjoy being exempt from local property tax. These entities provide housing and/or drug treatment services to community members in need. While these organizations undoubtedly provide essential public services, granting these entities tax exempt status can have negative effects on other public services.
For example, the Milford Housing Development Corporation paid almost $30,000 in property taxes last year. To further add to the conundrum, almost all of those funds were appropriated to a local school district. In times of financial hardship, policy makers are faced with tough decisions and must balance different objectives in deciding where tax revenue should come from, and what that revenue should benefit. A thorough cost-benefit analysis must be undertaken to determine the full reach of granting an entity tax-exempt states, including both positive and negative effects. Granting an entity tax-exempt status, or deciding to appropriate tax funds to a particular area, almost inevitably means that another worthy entity will bear the cost.
Some municipalities try to alleviate this burden by requiring those entities that are designated tax-exempt to pay set fees to contribute back to the greater good. However, this can hinder the accomplishment of the entity’s purpose and cause due to a lack of funds.
Ultimately, it would take an army of professionals to make a “perfect” decision on who should be granted tax-exempt status, and who should bear the cost of that status. Even then, by the time a thorough analysis has been undertaken, the state or municipality will likely be facing different needs as a community. Policy makers must employ great foresight in making these tough appropriation decisions.
Wednesday, May 18, 2016
The California Legislature is currently considering a bill (AB 2855) that would mandate that all nonprofits who are soliciting donations in California to "include a prominent link [on their website] that immediately directs all consumers to the Attorney General’s Internet Web site, which contains information about consumer rights and protections and charity research resources." The bill as initially proposed would have required soliciting charities to prominently disclose the amount of money that the organization spent on overhead and on the executive director's salary and benefits.
The bill has been sharply criticized by many nonprofits, including the California Association of Nonprofits and the National Council on Nonprofits, who argue that the bill essentially attaches a "warning label" to all organizations that would scare off donors. The Bill's sponsor, Assemblymemeber Jim Frazier, defended the bill as a needed tool to protect worthy organizations from the "shadow cast upon them by bad actors." (In something of a jab at critics, Assemblymember Frazier paused to highlight that the "president, executive director, and chief operating officer [of the California Association of Nonprofits] made over $600,000 combined in salary and benefits."). Other critical commentary on the bill comes from Carol Luong (Great Positive) and Gene Takagi (NEO Law Group / Nonprofit Law Blog).
Some of the critics have argued that the bill would raise a First Amendment objection by compelling speech (i.e., including a link to the Attorney General's website on the organization's webpage and in solicitation materials). In Riley v. National Federation of the Blind of North Carolina, Inc., 487 U.S. 781, 795 (1988), the Supreme Court struck down a state mandate that professional solicitors disclose, as part of their solicitation, the percentage of funds turned over to the nonprofit. The Court reasoned that this disclosure would necessarily change the content of the message, and the disclosure would have the anticipated and intended effect of making solicitation on behalf of certain causes less effective.
Although the criticisms have some weight as a policy matter, the California bill is arguably distinguishable from the law struck down in Riley in several respects. Most significantly, the California bill would require only a link to a website, and not the direct disclosure of any particular substantive statement or content in the course of solicitation. See Riley's footnote 11. This makes the compelled speech more akin to a mandate to disclose the phone number of a regulatory body or to display a license. See Dayton Area Visually Impaired Persons, Inc. v. Fisher, 70 F.3d 1474, 1485 (6th Cir. 1995) (upholding limited point-of solicitation disclosures). Such mandates are common in the commercial & professional speech realm, although their application to charitable solicitation is much less certain. (There are lots of unsettled issues in the regulation of charitable solicitation. In fact, we recently filed a successful First Amendment challenge to a set of local restrictions on charitable solicitation, including a licensing requirement.)
Riley and its related cases recognize a distrust of government restrictions sprung from a history of government (typically with the support of established nonprofits) creating barriers to charitable speech in order to burden disfavored causes. Yet the Supreme Court has also recognized the legitimate objective of providing accurate information to facilitate well-informed decisions by donors. Striking this balance is no easy matter, as Assemblymember Frazier is learning the hard way.
Thursday, May 12, 2016
For months now we have been bombarded with stories of the water crisis in Flint, Michigan. The press, politicians, legislators, residents of Flint, even Tax Law professors, have been expressing their opinions on who is to blame for the crisis. Some people have called for the Governor's resignation. The government -- federal and state -- eventually sprang into action by allocating funds to address the problems caused by the water crisis. Meanwhile, the people of Flint are waiting for the money to show up.
Yesterday's Christian Science Monitor brought some good news to the people of Flint: ten charitable organizations have pooled their resources to donate $125 million toward recovery efforts in Flint. Highlighting the fact that philanthropy has bested the government, the Monitor states:
Funds are about to flood into Flint, Mich. -- but they are not coming from the government.
The aid will support ongoing testing of lead levels as well as community groups, economic development, and other efforts to revive the largely black and low-income city. "This is the new normal, in terms of how philanthropy can really increase its impact and can be nimble while we wait for the state and federal government" to act, says La June Montgomery Tabron, CEO of the W.K. Kellogg Foundation, one of the participating grant makers.
The responses by the foundations give credence to what some observers see as a trend for philanthropy to step in when bureaucracy and partisanship bog down government's response in times of crisis. "It's great that we have charitable organizations that are willing to step up and try to help," said Charles Ballard, a Michigan State University economics professor. "But the only reason we're talking about this in the first place is that governments, most notably the state of Michigan, just dropped the ball in a huge way."
That's one man's opinion; what's yours?
Tuesday, May 10, 2016
Today's Philanthropy Digest is reporting that while the U.S. high school graduation rate rose to a record high 82.3 percent in 2014, the nation is not on track to reach the goal of achieving a 90 percent rate by 2020. That's according to an annual study from Civic Enterprises and the Everyone Graduates Center at John Hopkins University's School of Education.
Conducted in partnership with America's Promise Alliance and the Alliance for Excellent Education, the report from GradNation, 2016 Building a GradNation: Progress and Challenge in Raising High School Graduation Rates, found that while Iowa has achieved a 90 percent graduation rate and twenty other states are on track to do so by 2020, for the first time in four years the nation as a whole is not on track to meet the goal. According to the study, 2, 397 low-graduation-rate high schools -- defined under the Every Student Succeeds Act as those with at least a hundred students enrolled and an Adjusted Cohort Graduation Rate of 67 percent or lower -- enrolled a total of 1.2 million students nationwide, even as the number of large low-graduation-rate schools with at least three hundred students was halved from 2,000 to 1,000 between 2002 and 2014. In forty-one states, low-income students accounted for more than 40 percent of those enrolled in low-performing schools -- including twelve states where they made up more than 75 percent of the student body. African Americans and Latinos made up more than 40 percent of enrollment in low-graduation rate schools in fifteen and nine states, respectively.
The Digest continues:
The study also found that low-graduation-rate schools account for 7 percent of all district schools (and 41 percent of all low-graduation-rate schools), 30 percent of charter schools (26 percent), 57 percent of alternative schools (28 percent), and 87 percent of virtual schools (7 percent). The report recommends that policy makers set clear definitions and give graduation rates the weight they deserve in ESSA; require all states to report extended-year graduation rates in addition to four-year grad rates; create evidence-based plans to improve low-graduation-rate high schools; and ensure that alternative and virtual schools are included in state accountability and improvement systems.
"As the report points out, raising the graduation rate to 90 percent would require graduating an additional 285,000 students," said America's Promise Alliance president and CEO John Gomperts. "Putting it that way makes the goal appear that much more attainable. But to graduate this additional number of students equitably, the nation will have to focus on getting significantly more low-income students, students of color, students with disabilities, English-language learners, and homeless youth on track to earning a diploma. Persistence is key."
Needless to say, the government -- federal, state and local -- will have to allocate more tax dollars to education, to ensuring that the facilities and personnel are available to guide these students towards earning their graduation diplomas.
Thursday, April 28, 2016
Prince will no doubt have many legacies - musical and otherwise. One can only hope that his philanthropic legacy will be one of them.
During his lifetime, Price quietly supported any number of charitable organizations, mostly in the areas of education, urban renewal and the environment. I, for one, did not know that he was once named one of PETA's sexiest vegetarians. The general consensus appeared to be that he would have supported at death many of the charitable organizations and causes he supported during his lifetime.
Sadly, it appears that the tragedy of Prince's early death may now be compounded by the fact that he may have died intestate. According to news reports, his sister filed a petition for administration without a will. This is likely to cause difficulties because Prince had no direct heirs or ancestors, leaving a number of siblings and half-siblings. In addition, his estate is likely made up a significant amount of difficult to manage and difficult to value intellectual property assets, including unpublished music. Of course, this also means that to the extent Prince intended to benefit charitable causes through his estate, those charities may be out of luck if bulk of his assets pass through intestate succession.
I hope that Prince's estate does not devolve into another sad case study for estate and charitable planners everywhere.
Friday, April 22, 2016
A handful of professors have sued their professional society, claiming that the association’s boycott of Israel exceeds the organization’s mission under its charter. According to the Complaint, the American Studies Association’s constitution says:
The object of the association shall be the promotion of the study of American culture through the encouragement of research, teaching, publication, the strengthening of relations among persons and institutions in this country and abroad devoted to such studies, and the broadening of knowledge among the general public about American culture in all its diversity and complexity.
In 2013, the association adopted a resolution boycotting “Israeli academic institutions.” The plaintiffs are current or former association members who disagree with the boycott. In addition to a procedural complaint about the way the vote was held, the plaintiffs argue that the decision to boycott Israel exceeds the purposes of the organization under their charter since it does not further the scholarly objective of the association (breach of fiduciary duty and ultra vires action). (You may recall a similar dispute about this organization arose in 2014, when a professor challenged the organization's tax-exempt status--a challenge John Colombo predicted on this blog was going nowhere fast.)
h/t: Volokh Conspiracy via Jonathan Adler (@jadler1969)
From the perspective of nonprofit law, it will be interesting to see what level of judicial deference gets applied to the board’s decision: does Business Judgment Rule apply or is it a more searching review? And would plaintiffs' argument pass either of these standards?
My quick take is that this suit seems like a stretch. To begin, the boycott causes the association to NOT do something (i.e., decline to engage with one nation’s academics), and I don’t think I’ve ever seen a nonprofit successfully sued for not engaging in some programmatic activity or with some set of prospective clients, even if it is selective, arbitrary, or policy-driven. Also, food banks decline to buy from producers who don’t use environmentally-friendly methods; housing organizations decline to contract with organizations that don’t have certain personnel policies. It’s hard for me to imagine any of these purchasing decisions being successfully challenged in court on the grounds that they exceed the organization’s mission.
Second, judicial review without deference in this case would essentially ask a Court to override the judgment of a group of scholars on what types of activities further their scholarly mission, which I suspect most courts are ill-suited and reluctant to do. Moreover, judicial involvement here could set a precedent of second-guessing nonprofits when they wade into policy disputes or controversial areas, which would undercut the independence of the nonprofit sector. The mere fact that there is passionate disagreement on the issue suggests it is better to be hashed out by nonprofits within the confines of their organizations without courts getting involved. (I'm reminded of the Supreme Court's admonition in Boy Scouts v. Dale, when a lot of people (including me) couldn't understand how excluding gay scoutleaders furthered the organization's mission, yet the Supreme Court heavily deferred to the organization's judgment in the process of concluding that the organization had a constitutional exemption from state laws. If deference is warranted in a constitutional case, then surely it is warranted under usual corporation law principles.)
Finally, while there is often a compelling argument for keeping nonprofits close to their mission, the need for judicial involvement here is minimal. Exit is cheap and easy for association members who don’t like the direction of the organization. There’s no forced membership, as in a union or Home Owners Association. Nor are monitoring costs excessively high, as might be the case for a financial donor contributing to a social service charity. Nor is there a huge stockpile of donated money being held in trust for past donors and future beneficiaries. With the ample opportunities of voice (voting) and exit (quitting), the policy argument for courts treating this as a reviewable decision is relatively weak.
This case seems like a tough sell under the usual standards of nonprofit corporation law. I wouldn't have voted the way that the Association did, but a main reason we have the nonprofit sector is to let people freely associate themselves, without me or anyone else agreeing with their choices. I don't think the burden has been met that this association has departed enough from its charter to warrant judicial override.
Readers, what do you think? Does this case state a claim for ultra vires or breach of a fiduciary duty? Should courts review associations’ actions in cases like this?
Monday, April 11, 2016
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 deals 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!
Wednesday, March 9, 2016
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.
Tuesday, March 8, 2016
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.
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.
Tuesday, February 23, 2016
This 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.