Friday, January 23, 2015
The San Francisco Chronicle reports that the ten-year old charity Architecture for Humanity closed its door at the start of this year. A statement from the Board of Directors on the group's website states that the organization is filing for Chapter 7 bankruptcy, having laid off all of its staff as of January 1st and closed its physical office in San Francisco. The closure apparently came as a shock to many, given that the group had at its peak more than 60 chapters and was the recipient of a number of prestigious awards. Its 2012 IRS Form 990, for the year that ended June 30, 2013, reported over $12 million in income, almost all from contributions and grants. Nevertheless, the article indicates that at the end it was a lack of funding that doomed the organization.
Wednesday, January 21, 2015
National Taxpayer Advocate Recommendations: In her 2014 Annual Report to Congress, Nina Olson called on Congress ot create an optional "safe harbor" election for section 501(c)(4) organizations that would give such organizations a numerical test they could use to ensure that their level of political campaign activity is permissible given their tax-exempt status (similar to the existing section 501(h) election for section 501(c)(3) organizations with respect to lobbying) (Legislative Recommendation #5). Ms. Olson also recomended that Congress give groups seeking section 501(c)(4), (c)(5), or (c)(6) status the ability to seek a declaratory judgement in the same manner as groups seeking section 501(c)(3) status now enjoy, and that the IRS adopt administrative review procedures for groups that have had their tax-exempt status automatically revoked (Legislative Recommendation #12).
IRS Modification of Section 501(c)(4) Expedited Application Process: In a memo released just before Christmas, the Acting Director, EO, Rulings and Agreements provided revised and clarified previously issued procedures for applicants seeking recognition under section 501(c)(4) that are given the option of choosing an expedited application process. The new procedures only apply to applicants that are given this option after the issue date (12/23/14) for the memo. Applicants who were told they were eligible for this option before that date are subject to slightly different procedures (included as Appendix B to the memo).
Omnibus Spending Bill Again Limits (?) IRS: As was the case a year ago in Public Law 113-76 (see "Cryptic Legislation" section of this post), Congress has once again included with the funding of the IRS the following limitations (Hat Tip: EO Journal):
SEC. 107. None of the funds made available under this Act may be used by the Internal Revenue Service to target citizens of the United States for exercising any right guaranteed under the First Amendment to the Constitution of the United States.
SEC. 108. None of the funds made available in this Act may be used by the Internal Revenue Service to target groups for regulatory scrutiny based on their ideological beliefs.
It is still unclear what exactly the effect, if any, of these provisions actually is.
House Oversight & Government Reform Committee Staff Report: Released by outgoing Chairman Darrell Issa, the report, not surprisingly, slams the IRS and the Obama Administration, and also promises more fact-finding.
The Shrinking IRS: As numerous news outlets have reported, the IRS faces a shrinking budget - likely at least in part because of the 501(c)(4) mess - even as the demand for its services from taxpayers continues to increase. According to Taxpayer Advocate Nin Olson, the decline is 17.5 percent since 2010, taking inflation into account (see NPR). IRS Commissioner John Koskinen has even said the agency might have to shut down for two days, with employees put on unpaid furlough (see The Hill). For other examples of the flood of coverage, see Forbes, NBC News, the NY Times, and the Washington Post.
It is too soon to make a final call, but at least some positive changes may result - clarification of the standards for political activity by noncharitable 501(c) organizations and clearance of the exemption application backlog come to mind. At the same time, the damage to the Service and the tax system seems greater - trading speed for accuracy in the application process, damaged morale among the remaining IRS employees and greater difficulty in recruiting future such employees, and a collapsing budget even as the tax law continues to become more complex.
Tuesday, January 20, 2015
A number of years ago we reported on the rescue of Oral Roberts University from looming bankruptcy by a generous (to the tune of $70 million) donor after the resignation of the University's President. I recently came across a detailed account of the circumstances that led up to this dramatic event, published by This Land Press, an Oklahoma based media company. While not focused on legal issues, the story provides some fascinating details regarding how the University's Board of Regents - populated by a whose who of televangelists - learned about and reacted to accusations that the University's President, who was also Oral Roberts' son, had received improper personal financial benefits from the institution. It also provides a detailed - and contestable - narrative about the motivations that led Oral Roberts to found the University and other, even less successful nonprofit ventures, and to try to keep leadernship of the Universithy within his family.
I recently was looking for some examples of nonprofit colleges and universities becoming for-profits and noticed what appears to an interesting trend - for-profit colleges and universities becoming nonprofits. The most prominent example is Grand Canyon University (GCU), which informed shareholders late last year that it may buy them out and convert to a nonprofit college according to a Bloomberg News article. GCU, which has both a physical campus in Arizona and a strong online presence, is currently worth over $2 billion (based on the market value of its publicy traded parent company). Its stated reason for considering this change is the stigma associated with being a for-profit, which apparently affects its relationships not only with prospective students but also with other institutions of higher education and regulators. For example, it claims that some schools have refused to play sports against them even though it is an NCAA Division I school. One particularly interesting aspect of its history - it was a nonprofit until 2004, when financial struggles led it to become a for-profit entity, while still apparently maintaining its reputation as a strong Christian institution.
GCU is the most prominent example, but not the only one. The Milwaukee-Wisconsin Journal Sentinal recently reported that Herzing University, described as a for-profit career college, has just completed a conversion to nonprofit status. And a July 2014 Inside Higher Ed article noted four other for-profit to nonprofit conversions, although all of those involved relative small institutions that were closely held and so presumable were easier to convert. According to the article, unidentified sources said another four such institutions were considering such a move. The most common mechanism is for the institution to be sold to an existing nonprofit, with valuation and financing being the key issues in such a scenario. And of course there are numerous accreditation, property ownership, and other other regulatory and legal issues to address. Given this complexity, it is not surprising that according to a recent Arizona Republic article GCU officials only give themselves a 50 percent chance of successfully converting GCU to nonprofit status. It also not surprising that the same article highlights how much GCU's current executives would take home (tens of millions of dollars) if the conversion happens.
Thursday, January 15, 2015
With a hat tip to the Chronicle of Philanthropy, see this note on these billboards springing up around the Boston area, sponsored by the Charity Defense Council. The article notes that the head of the Charity Defense Council, Dan Pallota, is at the fore in the debate over the use of administrative costs as a measure of charitable outcomes. Speaking of effectivenss... how effective is a billboard on I-90 on a complicated policy issue? Anyone in the Boston area spot one?
Monday, January 12, 2015
As reported here on your faithful Nonprofit Law Prof Blog by Roger Colinvaux, the IRS issued final regulations under Section 501(r) on the requirements for nonprofit hospitals at the very end of last year.
Over the weekend, The New York Times did a report on these regulations, focusing on efforts to stop "aggressive tactics to collect payments from low-income patients." To me, the most interesting part of the article isn't the summary of the regs with regard to collections - it's the quote (and accompanying picture) from Senator Grassley: "Nonprofit hospitals and for-profit hospitals have often been indistinguishable... The rules make clear that tax-exempt hospitals have to earn their tax exemption."
It seems to me that Senator Grassley has been some what low key on charitable issues in the past few years - I'm guessing we will be hearing more from him with the resurgence of Republicans in Congress.
For other coverage of the final regulations:
-briefly, at Independent Sector
I'm happy to add any other links that people have found useful.
Tuesday, January 6, 2015
With the New Year just six days old, The Nonprofit Times has published its top five fundraising trends for 2015: conversion optimization, or improving donation flow to raise more money; the ability to engage with Millennials; donor retention and treating all donors as if they are major donors; online fundraising and mobile; and the ability to share stories in a very visual way.
The Times quotes Rich Dietz, senior product manager for digital fundraising for Abila Software in Austin, Texas, as saying that “2015 will be a big year and a transitional year for the nonprofit sector as business-minded tactics slowly gain ground and organizations think about increased growth versus simply being sustainable. Engagement strategies will reach new levels as Millennials continue to emerge in importance and nonprofits think about the best way to interact with their supporters.”
Dietz's predictions for 2015 fundraising include:
- Conversion Optimization: Organizations will begin to think about how to better convert existing website visitors versus simply attracting new visitors. This is a business practice that many small businesses have adopted recently and will work well for nonprofits. Conversion optimization revolves around measuring, testing and optimizing the donation flow to raise more money.
- Millennial Engagement: According to The Brookings Institute, Millennials will make up 75 percent of the workforce by 2025. As Millennials enter the workforce and have money to spend, organizations will need to put strategies in place to best engage this demographic. Many follow a different path to becoming a donor than is traditionally done and nonprofits will need to adapt to these differences.
- Donor Loyalty and Lifetime Value: Tracking donor engagement will be crucial. Organizations will spend more time analyzing characteristics and behaviors of all of their constituents — not just major donors — to better understand what drives their giving behavior. By tracking donor engagement, organizations will be able to further segment their appeals, personalize their outreach to donors, significantly increase donor loyalty, improve lifetime value, and treat all donors like major donors.
- Online and Mobile: Online and mobile have played an increasingly key role for organizations the past few years, and that will continue in 2015. Social will play a key role in the “attention economy,” and responsive design will be necessary to allow supporters to access an organization’s website at any time from any device. 2014 was the tipping point for more web traffic coming from mobile devices than desktop computers. According to Pew Research Center, more than 90 percent of all Americans own a cell phone.
- Storytelling Becomes Visual: Creating a narrative and sharing a story has always been important for nonprofits to successfully engage donors, but doing so in a visual way is becoming essential. Organizations will have to find creative and innovative ways to engage supporters in a world full of distractions, and visual components are key. Web posts with visuals drive up to 180 percent more engagement and research indicates people process visuals 60,000 times faster than text.
Vaughn E. James
Tuesday, December 16, 2014
Although charitable contributions traditionally have been perceived as a contract between the donor and the charity, donors who are displeased with how their funds have been used are asking for refunds according to a recent WSJ article. In fact, some courts are starting to recognize donors’ rights over gifts after they have been given. This highlights the need for greater transparency and accountability in terms of charitable giving. The tools used in impact investing could prevent such drastic donor disappointment. It is really the result of the larger problem of uninformed giving. In an upcoming article, I examine how the tools used in impact investing can solve it. First, we must provide donors with a way to measure “return” on their investment, i.e., social impact. An impact investing tool that provides a standardized set of metrics for measuring social impact is the solution. However, not all charities merit review under this tool, and we must limit the group of charities that will undergo this review by conducting an initial qualitative analysis. Second, we must enable donors to select charities based upon a comparison of their level of social impact. The current rating system used in impact investing will achieve this end in the charitable sector as well. The article proposes a system for evaluating and rating charities by applying the tools of impact investing in order to establish what I have termed an efficient charitable market. It shows the end result will enable U.S. charitable investors to make even smarter decisions that dramatically better our world. In terms of a side note, it will also help prevent donors from seeking refunds.
Saturday, November 29, 2014
Last month I had the opportunity to attend the NYU National Center on Philanthropy and the Law's Annual Conference. The conference was titled Regulation or Repression: Government Policing of Cross-Border Charity and provided an eye-opening overview of restritions imposed by many countries on foreign funding of charities and other NGOs. What made the conference particularly timely was the fact that only a month earlier a prominent member of Congress had publicly attacked foreign donations to think tanks - in the United States. This concern led to a bipartisan legislative proposal to require disclosure of foreign funding from scholars who testify on Capital Hill. The timing was particularly ironic, as at almost the same time the Economist ran two articles raising concerns about autocratic and illiberal governments placing limits on such funding: Donors: Keep Out and Uncivil Society. That said, whatever concerns charities and other nonprofits may have in the United States (including members of Congress criticizing them for accepting foreign donations), they pale in comparison to the concerns that the legal restrictions on both funding and activities raise for NGOs in many other parts of the world.
The New York Times recently reported on the cumulation of the Lincoln Center's negotiations with the family of Avery Fisher to obtain the right to to rename what is currently known as Avery Fisher Hall after an as yet to be determined major donor wo will be sought as part of a major renovation capital campaign. What is particularly interesting about the story is that the Lincoln Center is "essentially paying" the family $15 million, which raises interesting tax issues and so has stimulated an interested discussion on the TaxProf list-serv. See also this TaxProf Blog post regarding a Forbes article on these issues.
More New York Times recent coverage relating to philanthropy can be found its special Giving supplement from earlier this month.
Update on Nonprofits & Politics: Aprill and Colinvaux Articles, AALS Program, IRS Controversy Developments & More
While perhaps the congressional attention to the now 18 months old and counting IRS controversy will decline as the focus shifts to governing (we hope) and 2016 (unavoidably), the bubbling pot that is now nonprofits and politics continues to boil. Here are some of the latest developments:
Ellen Aprill (Loyola-L.A.) has posted The Latest Installment of the Section 501(c)(4) Saga: The Section 527 Obstacle to Effective Section 501(c)(4) Regulations, and Roger Colinvaux (Catholic) has posted Political Activity Limits and Tax Exemption: A Gordian's Knot, Virginia Tax Review (forthcoming). (And, as noted by Paul Caron when I presented at Loyola-L.A., I am working on a draft article currently titled Taxing Politics, which I should hopefully be able to post early in the new year.)
At the 2015 AALS Annual Meeting, the Section on Nonprofit and Philanthropy Law and the Section on Taxation are co-sponsoring IRS Oversight of Charitable and Other Exempt Organizations – Broken? Fixable? on Saturday, January 3rd, from 10:30 a.m. to 12:15 p.m. The topic grew out of the IRS controversy, although the panel's scope will be much broader. Marcus Owens (Caplin & Drysdale) will be moderating, and panelists include Ellen Aprill (Loyola-LA), Phil Hackney (LSU), Jim Fishman (Pace), Terri Helge (Texas A&M), Dan Tokaji (Ohio State), and Donald Tobin (Maryland).
In news relating directly to the IRS controversy, the staffs of the Senate Permanent Subcommittee on Investigations issued dueling reports, neither of which said much more than we have already heard (repeatedly) from both sides of the aisle. At the IRS, new TE/GE Commissioner Sunita Lough issued her annual Program Letter, emphasizing accountability and transparency as she continues to try to move the division beyond the controversy (referenced obliquely as "the challenges over the last year for the IRS and TE/GE specifically"). And to the annoyance of her critics, Lois Lerner gave an extensive interview to Politico.
And there is more:
- Pulpit Freedom Sunday 2014 launched on October 5th, to very limited media coverage, although there were a few stories right around election day about the over 1600 participating pastors and churches. See the stories in Politico, a Washington Post blog, and the Washington Times.
- On the election law/FEC side of things, there are lawsuits still pending that asset Crossroads GPS (Public Citzen v. FEC) and American Action Network and Americans for Job Security (CREW v. FEC) should have registered and reported as political commitees. (Hat tip: Paul Barton's article this past week in the BNA Daily Tax Report)
Thursday, November 6, 2014
Last year a privacy debate erupted at Harvard when it was revealed that the university had searched the email accounts of 16 junior faculty members. The debate prompted a major self-examination and promises by the administration to do better.
Today's New York Times is reporting that the prickly topic is back. This time, the university has acknowledged that as part iof a study of attendance at lectures, it had used hidden cameras to photograph classes without telling the professors or the students.
While students and faculty members did not view the secret photography as serious as looking through people's email, it struck them as out of bounds -- or, at least, "a little creepy." It also set off more argument about the limits of privacy expectations.
The Times reports Jerry R. Green, a professoir of economics and former university provost, as saying, "I wouldn't call it spying, but I don't think it's a good thing."
The Times continues:
Some students called the secret photography a violation of trust, while others shrugged it off because cameras are already ubiquitous, said Sietse Goffard, a junior who is vice president of the Harvard Undergraduate Council. “It’s a question I’m still really conflicted about,” he said.
The episode comes as the university is getting familiar with a new honor code that will go into effect next year. That code, Mr. Goffard said, “stresses the importance of transparency and community trust.”
Carolyn O’Connor, a first-year student, said she would be concerned if the pictures were made public. But “if it’s for academic reasons, I don’t have a problem with that,” she said.
Researchers at the Harvard Initiative for Learning and Teaching set up the cameras to investigate professors’ complaints that many students skipped lectures, and that attendance dropped as a semester wore on. (The photos confirmed both points.) The researchers were concerned that letting professors or students know could skew the results.
They received clearance from Peter K. Bol, a vice provost, and took still images in the spring in 10 classes, which have not been identified, with a total of about 2,000 students. Administrators said that students were not tracked, that professors were not judged on the results, and that after attendance figures had been compiled, the pictures were destroyed.
Harvard's respect for privacy is a touchy subject because of the email search of last year. When word broke of those searches, many professors were furious, arguing that although the university owned the email system, the professors had an expectation of privacy. In response, the administration adopted a policy on electronic privacy.
This time around, the photography has not drawn the same kind of reactions. "This should have been done better," the Times quotes Wilfried Schmid, a mathematics professor, as saying. "This is not in the same league as the email searches. It's more like a lack of courtesy."
Vaughn E. James
With Republicans poised to take control of the Senate following Tuesday's elections, Alex Daniels writes in the Chronicle of Philanthropy that it is likely that lawmakers will dig deep into the Internal Revenue Code soon after a new Congress is sworn in next year. Daniels continues:
While that means added scrutiny on the charitable deduction and the tax treatment of nonprofits, charity leaders are confident a solidly Republican Congress will keep their cherished provisions intact.
Before the current Congress wraps up its business, however, charity officials expect lawmakers to consider certain items in the tax code, including moving the deadline for claiming the charitable deduction from the end of the year until April 15 as well as a set of tax preferences that are usually renewed each year.
Also, Congress has yet to take action this year on the "tax extenders," expiring provisions of the tax code that include benefits for land conservation, donations to food banks, and contributions to charity made from certain retirement accounts.
Republicans strengthened their hold on the House of Representatives, and will hold at least 52 seats in the Senate. Michelle Nunn, a nonprofit executive who ran for the Senate in Georgia, was among the candidates Democrats were counting on to help them keep control of that chamber, but she was defeated handily by Republican David Perdue.
Next year, when Republicans control the Senate and operate with an even stronger hand in the House, they are likely to consider a much more comprehensive tax overhaul. While the chances of enacting the first major changes to the tax code since 1986 are slim, some say, any legislative action during the next session of Congress will set the stage for future tax debates during the 2016 presidential campaign.
Daniels lists five top issues he says nonprofit organizations are watching for legislation and executive action:
- Internal Revenue Service rules governing 501c(4) social-welfare organizations. The IRS is considering what constitutes political activity by these groups and whether their donors can remain anonymous.
- Foundation excise taxes. The House has passed a measure to simplify and lower this tax to 1 percent.
- A proposal to require donor-advised funds to pay out at least 5 percent of their assets each year.
- The provision of federal support for social-impact bonds that fund "pay for success" efforts at the state and local levels.
- Pending rules that limit how to conduct federated campaigns. The United Way hopes a Republican Congress will remove recently added federal regulations.
Time will tell whether Alex Daniels is correct.
Vaughn E. James
Wednesday, November 5, 2014
Yesterday's NonProfitTimes had some pretty good news: as the economy continues to recover from what the Times labels "the Great Recession," the nation's largest corporations have increased their charitable giving. Between 2010 and 2013, says the Times, nearly two-thirds of these corporations increased their giving. This increase in giving is often driven by performance: "revenue increased a median of 11 percent among companies giving 10 percent or more between 2010 and 2013."
The Times explains that
Those were some results from Giving In Numbers, an analysis of corporate giving by the Committee Encouraging Corporate Philanthropy (CECP) and The Conference Board, both based in New York City. Data comes from 261 corporations representing more than $25 billion worth of giving in 2013. Median total giving was $18.46 million per company.
Central to the study was a matched subset of 144 companies that provided giving data in all four years, 2010 through 2013. More than half of the 64 percent of those companies in the matched set that increased giving increased by 10 percent or more. In that matched set, aggregate giving went up 15 percent, from $15.22 billion in 2010 to $17.55 billion in 2013. Non-cash contributions — product donations and pro bono services — accounted for 90 percent of that increase.
Pro-bono service is the fastest growing employee engagement program. Companies offering pro-bono service jumped from 35 percent in 2010 to 50 percent in 2013. However, pro-bono was only 19 percent of all noncash giving. Product donations were king in 2013, making up an average of 60 percent of noncash giving. Other noncash contributions clocked in at 21 percent of noncash gifts.
Growth, however, slowed last year compared to prior years analyzed in the study. Among companies that increased their giving, their change in median giving was 6 percent, down from 17 percent in 2012 and 21 percent in 2011. Companies that decreased their giving did so by 6 percent in 2013, compared to 1 percent in 2012 and 5 percent in 2011.
For the 10 percent of organizations in the matched set that reported a slight decrease (less than 10 percent), many cited a one-time spike in giving in response to Hurricane Sandy in 2012 as the reason for a slowdown in 2013. Those companies giving significantly less (10 percent or more) reported company-wide cost reductions, corporate divestitures and transitioning away from cause areas previously supported.
While respondents classed as Fortune 100 companies (of which there were 52) gave much higher than average, giving fell for those companies between 2012 and 2013, from a median $66.29 million in 2013 to $62.94 million in 2013. “Several (Fortune 100) companies have begun better aligning their corporate giving focus with their business strategy, resulting in a transition away from unaligned partnerships. Several survey respondents cited this as a reason for the decrease in giving,” wrote report author Michael Stroik, manager of research and analytics at CECP.
As giving climbed, the number of corporate grants dropped from a median of 1,000 in 2010 to 701 in 2013. Grantmaking expenses also fell: median $2.2 million in 2010 to $1.8 million in 2013. “Companies are clearly making fewer grants and contributions staff likely have greater bandwidth to monitor and evaluate grants on an ongoing basis.” More than three-quarters of corporate giving departments measured the outcomes or impacts of the grants they made in 2013.
More than one in three survey respondents (38 percent) expect their giving levels to increase for 2014. About half, or 48 percent, expect no change, and only 13 percent expect a decrease. “Two cause areas, Higher Education and Health and Social Services, could have a strong year in 2014, based on the fact that these two areas were supported more in 2013 by companies that expect to increase their giving than by companies that expect to decrease their giving,” wrote Stroik.
Stroik sees the trends found in the Giving In Numbers report as a continuation of business practices established during the recession. “Companies implemented more strategic and business-aligned community investment strategies during the recession, which continue today,” he said via a statement. “They continue to see the win-win of their more strategic — and in many cases increased — community investments as their revenues rise with their societal engagement.”
Vaughn E. James
Monday, November 3, 2014
The Chronicle of Philanthropy is reporting that a recent "Living with Intent" survey conducted by the nonprofit watchdog group BoardSource found that nonprofit leaders gave their boards an average grade of B minus, and judged trustees to be better at technical tasks like financial oversight than at setting strategy or reaching out to the community.
As in years past, the CEOs cited fundraising as a significant concern: 60 percent of them said it was the area their boards most needed to improve.
BoardSource works to improve nonprofit governance.
According to the Chronicle:
In 1994, chief executives said that 60 percent of their board members gave money to the organization, a figure that grew to 85 percent in this year’s survey. But giving by 100 percent of all board members—the gold standard espoused by BoardSource and other nonprofit experts—was reported by only 60 percent of the respondents in this year’s survey.
Many nonprofit organizations set minimum donations expected by trustees and encourage them to contribute at least that amount and ask others to follow their example. But trustees remain challenged when it comes to asking family members, friends, and colleagues for donations; 43 percent of board members in this year’s survey, about the same as in previous years, said they are uncomfortable asking for money.
The survey also found some signs of improvement in boards’ racial and ethnic diversity, which was rated as more important for boards than including equal numbers of male and female trustees or making sure that organizations recruit trustees of different ages. Respondents reported that 20 percent of their board members, on average, are people of color, up from 16 percent in 2010, but a quarter of the respondents said their boards are all white and nearly 70 percent of respondents indicated they are dissatisfied with the racial and ethnic composition of their boards.
Gender representation among the executive ranks of nonprofit organizations in the survey has improved over the years, but women remain underrepresented as chief executives in large organizations. Women accounted for 65 percent of chief executives in groups with budgets under $1-million; 75 percent among nonprofits with budgets of $1-million to $9.9-million. But among groups with budgets of $10-million or more, only 37 percent of chief executives were women.
Nonprofits appear to be recruiting more board members under 40 years old, with 17 percent of respondents in this year’s survey reporting trustees in that age group, up from 14 percent in 2010.
Nonprofits also are recruiting smaller boards, the survey found. In 1994, the first year of the survey, respondents reported 19 trustees, on average. In this year’s survey, that number dropped to 15.
According to the Chronicle, 850 chief executives and 246 board chairs responded to questions posed by the survey. A free coipy of the findings are available online. BoardSource says it will publish a more complete report on its website in December.
Vaughn E. James
Thursday, October 16, 2014
An insightful Wall Street Journal commentary addresses the likely outcome for the IRA Charitable Rollover Provision. This provision allows taxpayers aged 70.5 and older to make deductible charitable contributions (up to $100,000) from their IRAs without having to include such charitable contributions in their income. In addition, the charitable contributions count against minimum IRA distribution requirements. The Wall Street Journal concludes that while Congress is likely to extend the provision this year, it is unlikely to do so before the November election. At the same time, it is possible that Congress will restore this break retroactively. The commentary provides a good balance of the implications should Congress choose to extend or not to extend.
Wednesday, October 15, 2014
A concept that I have introduced through scholarly writing and blogged about here is the need for a more efficient charitable market. In August, I commented upon a Vanguard Charitable study that found millennials are more likely to see their charitable giving as a form of investment and thus promote a culture of giving that demands more transparency and accountability, two hallmarks of a more efficient charitable market. A recent NPR broadcast that examined the work of Scott Harrison’s nonprofit, Charity: Water, confirmed just that.
In the segment, Harrison spoke about his dual purpose in forming Charity: Water. First, he wanted to provide clean water to the almost 800 million people globally who lack access to it by building wells. Second, he sought to make an example of how a nonprofit could do its work in a way that would resonate with the next generation of givers. He recounted his own experience of being hesitant to give to charities prior to starting Charity: Water, which stemmed from the absence of information on how a charity would use the funds. Today the nonprofit world is concerned with how approximately 80 millennials make their decisions about giving, and not surprisingly, it is different from the prior generation(s). As stated in my prior post, it is widely accepted that millennials want to view their “donation” as “investment,” and at least one commentator recommends that nonprofits refer to the latter. Another salient point is how technology intersects with millennial giving. Millennials value their time, and as a result, any form of technology that makes it easier for them to invest is preferable. Moreover, the Ice Bucket Challenge that swept through social networks over the summer shows that the desire of millennials to share the details of their lives extends to their giving. In response, Charity: Water is utilizing a birthday campaign where donors can ask their network to donate one dollar for each year celebrated, i.e., $25 dollars to celebrate a 25th birthday. Charity: Water is also placing sensors on its wells, so donors may interact with the impact of their investment in a novel manner. Charity: Water’s innovative approaches are proving successful. They have helped over 4 million more people in twenty-two countries gain access to clean water. Millennials and nonprofits like Charity: Water may just help move giving into the next century and towards a more efficient charitable market.
Monday, October 13, 2014
As the Ebola threat looms, many observers are considering whether the responses of the U.S. government, the CDC, and the World Health Organization, inter alia, are appropriate. Similarly, nonprofit commentators are considering whether private donations of funds and resources from the U.S. are adequate. As one commentator reports, there have been several U.S. private foundations that have made large-scale contributions to the fight against Ebola; in addition, the experience of two U.S. Christian organizations operating in West Africa evinces that publicity helps generate more donations. The U.N. has estimated that $1 billion is necessary to effectively combat the Ebola virus.
A recent article in The Chronicle of Philanthropy has predicted that the first confirmed case of Ebola in the United States will lead to greater charitable donations to stop a further outbreak of Ebola abroad. Several U.S. private foundations have already made multi-million dollar gifts to combat a spread of the virus. The Bill & Melinda Gates Foundation has decided to contribute $50 million to U.N. agencies and other organizations. The Paul G. Allen Family Foundation donated $9 million to the CDC, $2.8 million to the American Red Cross, and $100,000 in the form of matching funds to Global Giving. The William and Flora Hewlett Foundation contributed $5 million to various international health organizations. Moreover, the U.S. government has provided numerous resources, including, inter alia, individuals to build treatment units and training for health-care providers. The USAID has expended over $100 million in an effort to quell the outbreak and is on record for the contribution of an additional $75 million.
At the same time, commentators have denounced U.S. donors as not donating enough. The Director of International Communications at the Red Cross has stated that the Ebola outbreak is not “top of mind as a place to donate” precisely because of the involvement of the U.S. government, the CDC, and the World Health Organization. Nevertheless, SIM USA, a Christian mission organization who had two health-care workers infected with Ebola in Liberia late in the summer, has received sizable donations to support its work in West Africa. SIM USA has seen an increase in volunteers, and although these actions are later than anticipated, they show promise for a mobilization of donors and volunteers to fight the deadly virus. Additionally, Samaritan’s Purse, also a Christian organization working in West Africa, experienced a 13% increase in cash contributions (when compared to last year’s donations) after one of its doctors was infected with Ebola and successfully treated at Emory University Hospital. (For more on Samaritan’s Purse, see JRB’s insightful post). Thus far, $4.4 million of its donations has been designated for fighting the Ebola outbreak. As the speculation about a U.S. outbreak grows, the public’s attention has become more focused on donating to assist with the global efforts already underway, e.g., see the following article on UK donations. For a complete list of non-governmental organizations responding to the Ebola outbreak, see here).
Tuesday, September 30, 2014
Preliminary planning is underway for a group of donors to form a nonprofit organization that would own the U-T San Diego, according to the U-T itself. It looks like the newspaper would stay as a for-profit organizaton, and the nonprofit would own the equity of the for profit. Random thoughts:
- I'm not sure that such a structure would insulate the for profit from political and lobbying concerns. It's an interesting question, however - one they recognize as they state that the editorial policy would be "as inclusive and community-focused as possible. 'Almost by definition, if not be law, a nonprofit has to be nonpartisan.'" Hmmm.
- Could they make the media company an L3C? That would automatically read in the prohibition on lobbying and political activity.
- It looks like a handful of donors would fund the nonprofit. Query whether that means that they would be a private foundation or whether they tried to form as a supporting organization). Either way, they would have to deal with the excess business holdings rules - I would presume they would try to say that it is a functionally related business under Section 4943(d)(3)(A), and therefore, not a "business enterprise" covered by the rules.
- If a private foundation - presumably operating foundation status would be necessary to avoid mandatory distributions under Section 4942.
- Looks like they went ahead and started the Form 1023 process to get approval for the nonprofit, even though the actual transaction to purchase the media company hasn't been consummated.
Anyone have any details?
Friday, September 26, 2014
Reuters is reporting that over 120 Islamic scholars from around the world have issued an open letter denouncing Islamic State militants and refuting their religious arguments. Many of these scholars are themselves leading Muslim voices in their own countries.
The 22-page letter, written in Arabic and heavy with quotes from the Koran and other Islamic sources, strongly condemns the torture, murder and destruction Islamic State militants have committed in areas they control.
The Reuters report states in part:
"You have misinterpreted Islam into a religion of harshness, brutality, torture and murder," the letter said. "This is a great wrong and an offense to Islam, to Muslims and to the entire world."
[The letter's] originality lies in its use of Islamic theological arguments to refute statements made by self-declared Caliph Abu Bakr al-Baghdadi and his spokesman Abu Muhammad al-Adnani to justify their actions and attract more recruits to their cause.
The letter is addressed to al-Baghdadi and "the fighters and followers of the self-declared 'Islamic State'", but is also aimed at potential recruits and imams or others trying to dissuade young Muslims from going to join the fight.
Nihad Awad of the Council on American Islamic Relations (CAIR), which presented the letter in Washington on Wednesday, said he hoped potential fighters would read the document and see through the arguments of Islamic State recruiters.
"They have a twisted theology," he said in a video explaining the letter. "They have relied many times, to mobilize and recruit young people, on classic religious texts that have been misinterpreted and misunderstood."
Reuters describes the 126 signatories as "prominent" Sunni men from across the Muslim world -- from Indonesia to Morocco, and from other countries such as the United States, Britain, France and Belgium.
Among those who signed are "the current and former grand muftis of Egypt, Shawqi Allam and Ali Gomaa, former Bosnian grand mufti Mustafa Ceric, the Nigerian Sultan of Sokoto Muhammad Sa'ad Abubakar and Din Syamsuddin, head of the large Muhammadiyah organization in Indonesia. Eight scholars from Cairo's Al-Azhar University, the highest seat of Sunni learning, also put their names to the document."