Sunday, June 2, 2013

Faulhaber: Charitable Giving, Tax Expenditures, and the Fiscal Future of the European Union

Lilian V. Faulhaber (Boston University) has posted Charitable Giving, Tax Expenditures, and the Fiscal Future of the European Union.  Here is the abstract:

This paper focuses on several cases decided by the Court of Justice of the European Union in recent years. In these cases, the CJEU struck down geographic limitations on tax expenditures for charitable giving, thereby leaving Member States with a choice. Member States that chose not to eliminate their tax expenditures entirely would have to extend them to beneficiaries across the European Union. Those that did not want to extend these benefits to the rest of the European Union, however, would have to eliminate their tax expenditures and perhaps replace them with direct subsidies.

The Court has thus effectively forced Member States into either subsidizing each other’s charitable sectors or no longer using their tax systems to encourage charitable giving. This paper shows that most Member States have chosen the first option, meaning that they are engaged in a web of horizontal subsidization. In the absence of any supranational taxing authority in the European Union, this horizontal subsidization represents a new model of fiscal federalism, where taxing and spending decisions are spread between Member States, rather than assigned vertically to a centralized government. This new model could arguably allow the Member States to retain the benefits of both centralization and decentralization, with Member States now paying for benefit spillovers yet still retaining the competition and representation of political preferences generally associated with decentralized systems.

However, horizontal subsidization should raise significant concerns because of the way that the Court reached its decisions in cases considering tax expenditures. In order to arrive at horizontal subsidization, the Court ignored both the economic equivalence of tax expenditures and direct expenditures and the fundamental regulatory and cultural differences between Member State charitable sectors. By prioritizing formalism over functionalism and overlooking the remaining differences between Member States, the Court distorted Member State policy choices, favored certain types of charitable organizations, and created incentives for Member States to increase barriers to entry to their charitable sectors. This paper suggests that the CJEU’s tax expenditure jurisprudence is thus more likely to be a cautionary tale than a model for future integration.


June 2, 2013 in International, Publications – Articles | Permalink | Comments (0) | TrackBack (0)

New Zealand: Family First to Lose Charity Status Over Controversial Positions?

The New Zealand Herald reports that Family First NZ, which identifies itself as a pro-framily organization, has announced that it received a notice that the New Zealand Charities Commission plans to deregister the organization as a charity because it supports a view of the family that was not in the public interest.  Among its many positions, Family First opposes same-sex marriage and a law that apparently criminalizes any form of corporal punishment for children.  A later article indicates that the deregistration is based at least on part on the assertion that Family First's main purpose is political and therefore not charitable under New Zealand law.  The final resolution of the situation will be decided by the courts, as Family First has already filed a High Court appeal.


June 2, 2013 in In the News, International | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 2, 2013

Canadian House Committee Issues Tax Incentives for Charitable Giving Report

Canadian House of CommonsWhile incentives for charitable giving have been a topic of much debate in Washington, DC, this topic is also of interest to our neighbor to the north.  In a detailed report, the Standing Committee on Finance for Canada's House of Commons considered the effectiveness of existing and proposed tax incentives for charitable giving based on evidence provided by numerous organizations and individuals and put forward a dozen recommendations for legislative and executive branch action.  Those recommendations include eliminating or reducing the capital gains tax on charitable donations of certain property and exploring an enhanced tax credit for donors who increase their contributions over time, while at the same time promoting greater accountability and transparency in the charitable sector.

Hat tip: Miller Thomson Charities and Not-for-Profit Newsletter.


April 2, 2013 in International | Permalink | Comments (0) | TrackBack (0)

Thursday, February 14, 2013

UK Charity Commission Battles Religious Organization Over "Charity" Status

Charity CommissionThe Charity Commission for England and Wales has found itself in an ongoing dispute with a Brethren congregation over whether the congregation qualifies as a charity under British law.  As detailed in a recent Parliamentary Briefing, the dispute focus on the status of a Brethren meeting Hall, the Preston Down Trust.  The case involving the Trust is being used as a test case for the status of other, similar meeting halls.  The Commission decided last year that the Trust did not qualify as a charity, which led to highly public criticism from both the Plymouth Brethren church and questions from MPs in Parliament according to a Telegraph article.  The decision is traceable to a statutory change that led a charity Tribunal to conclude that advancing religion is no longer considered to automatically provide a public benefit.  In considering whether the Trust provides a public benefit, the Charity Commission's denial letter indicates that the adherents to this particular faith sharply limit their interactions with those outside the faith and so the Charity Commission concluded that "[t]he evidence is [sic] relation to any beneficial impact on the wider public is perhaps marginal and insufficient to satisfy us as to the benefit to the community."  According to a UK civil society website, the Charity Commission and the Trust are now in negotiations to attempt to resolve the issue short of a full Tribunal hearing, although a recent Charity Commission statement suggests such a resolution may be difficult to reach.




February 14, 2013 in In the News, International | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 13, 2013

NYT: "US Withdraws From Project With Russia on Civil Society"

KremlinThe New York Times reports that in the wake of various measures deemed hostile to nonprofit groups working in Russia, Deputy Assistant Secretary of State Thomas Melia announced that the United States would no longer be part of a "civil society working group" created in 2009.  The article reports the group, which the US and Russia created under the US-Russia Bilateral Presidential Commission, has not met in plenary session for many than a year. We have previously blogged about some of the actions that apparently contributed to the withdrawal, including requiring nonprofits receiving funding from outside of Russia to identify themsevles as foreign agents.

Additional coverage:  Reuters; Washington Post.


February 13, 2013 in Federal – Executive, In the News, International | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 26, 2012

Australian Charities and Not-for-Profit Commission Opens Doors

ACNCCatching up on some of the year's news and scholarship, I will start on the international front with a story from Australia.  In 2012, Australia created the Australian Charites and Not-for-profits Commission and earlier this month the Commission opened its doors.  Here is the Commission's description of its role:

Who we are

The Australian Charities and Not-for-profits Commission (ACNC) is the independent national regulator of charities. The ACNC has been set up to achieve the following objects:

    • maintain, protect and enhance public trust and confidence in the sector through increased accountability and transparency
    • support and sustain a robust, vibrant, independent and innovative not-for-profit sector
    • promote the reduction of unnecessary regulatory obligations on the sector.

What we do

To achieve our objects, the ACNC:

    • registers organisations as charities
    • helps charities understand and meet their obligations through information, guidance, advice and other support
    • maintains a free and searchable public register so that anyone can look up information about registered charities
    • is working with state and territory governments (as well as individual federal, state and territory government agencies) to develop a 'report-once, use-often' reporting framework for charities.

The ACNC is established under section 105-5 of the ACNC Act. Our objects and functions are in section 105-15 of this Act.

Our leaders

ACNC is led by Commissioner Susan Pascoe AM, Assistant Commissioners David Locke and Murray Baird, and a strong leadership team. The ACNC Commissioner's position is established by section 110-5 of the ACNC Act.

Our relationship with other government agencies

The Australian Taxation Office (ATO) remains responsible for deciding eligibility for charity tax concessions and other Commonwealth exemptions and benefits.

There are also many other government agencies that regulate charities and other not-for-profits. For example, government agencies may provide grants and other funding. They may also regulate particular services provided by charities, such as aged care or education.

Additional Information:  Australian Financial Review; Australian Institute of Company Directors; Pro Bono Australia.



December 26, 2012 in In the News, International | Permalink | Comments (0) | TrackBack (0)

Foreign-Funded Nonprofits Reject "Foreign Agent" Label in Russia

We previously blogged about Russia's enactments of legislation requiring nonprofit groups receiving funding from outside of Russia to identify themselves as foreign agents.  The concerns of nonprofits about this new law appear to have born fruit, as the NY Times reported last month that a number of prominent human rights organizations have decided to defy the new law even in the face of fines and other possible penalties.  While defended on the grounds of preserving Russia's sovereignty, the law threatens to stigmatize some of the most active human rights organizations in Russia and so hinder their efforts to defend human rights in that country.  As I detailed in an article on NGO involvement in regional human rights courts, these groups play a critical role in bringing cases of alleged human rights violations in Russia to the European Court of Human Rights. 


December 26, 2012 in In the News, International | Permalink | Comments (0) | TrackBack (0)

Thursday, October 25, 2012

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

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

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



October 25, 2012 in Current Affairs, In the News, International | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 11, 2012

World Universities Rankings: Rising Global Student Mobility

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

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

According to the IHT,

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

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

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

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

The IHT continues:

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

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

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


September 11, 2012 in Current Affairs, In the News, International, Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, August 9, 2012

Lombardo on Freedom of Establishment of Non-Profit Entities in the EU

Stefano_lombardoStefano Lombardo (European Corporate Governance Institute and Free University of Bolzano) has posted Some Reflections on Freedom of Establishment of Non-Profit Entities in the EU.  Here is the abstract:

This article deals with the exclusion of non-profit-making entities from the right of freedom of establishment of Articles 49 and 54 TFEU. The article analyses the historical reasons for this exclusion. It is argued that the exclusion from freedom of establishment is no longer justified on the basis of two elements. Firstly, the development of the jurisprudence of the European Court of Justice in the fields of competition law, free movement of capital and tax law makes such exclusion systematically no longer tenable. Secondly, a law and economics treatment of non-profit firms as organisations that efficiently provide goods and services in alternative to for-profit firms weakens the reasons for the exclusion. The article proposes a uniform, European notion of non-profit entity based on a law and economics analysis of this type of firm for the purposes of Article 54 TFUE as opposed to possible different national notions. The article then analyses briefly the hypothesis of regulatory competition among jurisdictions for the provision of the law regulating the corporate governance of non-profit entities.


August 9, 2012 in International, Publications – Articles | Permalink | Comments (1) | TrackBack (0)

Wednesday, August 8, 2012

Hsiao on The Beginning and the End of an Era of Charitable Public Benefit in Hong Kong

Hsiao-wen-hu-markMark W.H. Hsiao (Chinese University of Hong Kong) has published The Beginning and the End of an Era of Charitable Public Benefit in Hong Kong, 3 Conveyancer and Property Lawyer 228 (2012).  Here is the abstract:

As with the UK Charities Act 2006 ('CA 2006'), the presumption of charitable public benefit will likely cease when the Charities Ordinance (“CO”) comes into force in Hong Kong. The reference to the United Kingdom is important in the formulation of the organizing principles of public benefit; this is because the common law cases previously applied in Hong Kong continued to sustain in Hong Kong after the 1997 handover. However, common law cases after 1997 may reflect a different direction. This paper illustrates two things relevant to charitable public benefit. First, it argues against the presumption test in Hong Kong from a comparative perspective, and the present Hong Kong tax policy is compatible with previous English common law cases. Against this comparative background, the author asks how public benefit should be modified in accordance with Hong Kong's tax policy. Secondly, it consolidates the principles of relation, deference, and against capriciousness into the organizing principle of the public benefit test. This organizing principle is subject to the paramount principle of tax distribution. 

With the new CO in Hong Kong, the four headings of charitable purpose under Lord MacNaughten's formulation in the Special Commissioners of Income Tax v Pemsel case will become obsolete. The public benefit test will thereafter reverse the presumption of charitable purpose and create a new regulatory regime. The public benefit test will become a paramount means of assessment for market entry. No entity will be regarded as a legal charity unless it satisfies the public benefit test. This controls the market entry on charitable trust that financial institutions enjoyed in the past.


August 8, 2012 in International, Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 7, 2012

GOP Senators Pressure IRS on 501(c)(4) Rules

ImagesLed by Senator Orrin Hatch (R-Utah), ten GOP senators sent a letter to the IRS yesterday urging it not to revisit its regulations governing section 501(c)(4) organizations in response to outside political pressure without careful (and time-consuming) deliberation.  More specifically, they stated "public confidence in the non-partisan integrity of the agency demands that you issue no sub-regulatory guidance nor engage in any similar efforts that would effectuate immediate changes without a lengthy period of review, separated in time from the current heated political environment."  The Senators were writing in response to a letter the IRS sent last month to two groups supporting campaign finance reform stating:

I am responding to your letter dated March 22, 2012, which supplemented you [sic] letter dated July 27, 2011, urging the IRS to institute a rulemaking proceeding to address the rules related to political activity by organizations exempt under section 501(c)(4) of the Internal Revenue Code.

The IRS is aware of the current public interest in this issue.  These regulations have been in place since 1959.  We will consider proposed changes in this area as we work with the IRS Office of Chief Counsel and the Treasury Department's Office of Tax Policy to identify tax issues that should be addressed through regulations and other published guidance.

This letter underlines the political tightrope that the IRS is walking in this area, especially with countervailing pressure coming from the Democratic side of the congressional aisle.  Whether the Service can successfully walk this tightrope - and where it leads - remains to be seen.

Media Coverage:  Chicago Tribune (Reuters); The Hill blog; Wall Street Journal blog.


August 7, 2012 in Federal – Executive, Federal – Legislative, International | Permalink | Comments (0) | TrackBack (0)

Monday, July 16, 2012

Russia - New Law Passes Parliament, Goes to Putin for Signature

President Vladimir Putin is expected to sign into law a bill adopted by Russia’s parliament, which labels many foreign-funded, non-governmental organizations operating within the country as “foreign agents.”  The Kremlin has stated that it believes such a bill is appropriate for protecting Russia from external attempts to influence internal politics. The new law has also been given some financial teeth. Human rights activists are already enraged by the legislation, as the Duma also voted to impose fines of up to 5m rubles ($153,000) and a potential two year prison sentence for any organizations or individuals found to be in violation of the new law. Lyudmila Alekseeva, head of the Moscow Helsinki Group, believes that their new ‘foreign agent’ status will force the organization to fold as a result of having to refuse foreign grant money. Alekseeva explains, “The non-wealthy are not used to donating money to non-profit organizations, while the rich fear they may lose their business [by doing so].” In response to his government’s critics, Prime Minister Dmitry Medvedev has assured those affected that state funding will be increased for any NGOs whose activity “as a whole is deemed useful and positive for our country.”  For more see



July 16, 2012 in International | Permalink | Comments (0) | TrackBack (0)

China - First National Charity Fair Held in Shenzhen

China’s first ever charity fair was held in Shenzhen on July 13 and 14.  It was hosted by the Ministry of Civil Affairs and the local Shenzhen government.  Attended by over 400 people, the opening ceremony featured a major speech by Minister Li Liguo, which stresses the importance of charity for China’s development. See  Another story about the event can be found at


July 16, 2012 in International | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 27, 2012

Seventeen Entrepreneurs Receive Grants to Promote African Economic Growth

The United States Agency for International Development (USAID), Western Union, and the Western Union Foundation on Monday announced the names of seventeen U.S.-based entrepreneurs who will receive matching grants to fund innovative business plans and help promote economic growth in Africa through the second African Diaspora Marketplace (ADM II) competition.

Launched in 2009, ADM II is a public-private initiative that works to harness the knowledge and resources of U.S.-based entrepreneurs to advance the ability of small- and midsize enterprises in Africa to secure capital. Forty-four of the nearly five hundred plans submitted — most in the categories of
agribusiness, information and communications technology, and renewable energy —
vied for the top awards.

According to Philanthropy News Digest,

Winning proposals included a Kenyan agribusiness that is implementing
sustainable "zero-waste" practices through the commercial production of
high-efficiency organic fertilizer; the first legal technology provider in
Tunisia; an alternative-power generator in Liberia that utilizes agricultural
waste; and an online medical information delivery system in Nigeria. Each
awardee is eligible for a total investment of up to $70,000, which includes up
to $50,000 in matching cash grants and as much as $20,000 in technical

Commenting on ADM II, USAID administrator, Rajiv Shah, said: "The African Diaspora Marketplace will strengthen and help satisfy demand for locally produced products and services.  These businesses will buy, sell, and hire from within the communities they serve, putting money into the local economy, building local capacity, and fueling broad-based economic development."




June 27, 2012 in Current Affairs, In the News, International | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 12, 2012

Questioning the Charitable Contribution Deduction

The-economist-logo Three recent news stories highlight the growing debate regarding the tax benefits enjoyed by nonprofits and particularly charities. The most recent Economist has an article titled Sweetened Charity: The Idea that the State Should Subsidise Giving to Good Causes is Resilient, But Not Easily Justified.  The Wall Street Journal has an article titled Invasion of the Charity Snatchers focusing on the use and possible abuse of donor-advised funds.  And finally Tax Notes (subscription required) features a special report from the European Association of Tax Law Professors congress on What Should the Tax-Exempt Sector Look Like?, looking not only at the laws in the U.S. but also in various European countries.  In a time of economic uncertainty and strained government budgets such a focus is not surprising.  The question is whether it will lead to sensible modifications of the existing rules.


June 12, 2012 in In the News, International | Permalink | Comments (0) | TrackBack (0)

Sunday, April 29, 2012

Myanmar: US Eases Sanctions on Nonprofit Work

AP reports that the U.S. Treasury Department has eased restrictions on financial transactions in support of groups working in areas such as democracy-building, health and education, sport and religious activities.  This step is part of a larger lifting of sanctions by Western nations in light of recent elections that say sweeping opposition party victories in that country.  A Reuters report quoted a senior Treasury Department official as stating "[w]e are taking this step today to support a broader range of not-for-profit activity in Burma by private U.S. organizations and individuals to promote increased cooperation between the Burmese and the American people."  The actual language of the eased restrictions can be found in Office of Foriegn Assets Control General LIcense No. 14-C relating to Burma.


April 29, 2012 in Federal – Executive, In the News, International | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 25, 2012

NYT: "Egype Rejects Registration Bids From 8 U.S. Nonprofit Groups"

In its continuing coverage of troubles U.S. nonprofit organizations are having with the Egyptian government (previously blogged about here and here), the NY Times reports that the Egyptian Insurance and Social Affairs Ministry has rejected registration applications from eight U.S. nonprofits.  The grounds for the rejections are reported to be that the groups' activities violated Egyptian sovereignty.  The groups ranged from the well known Carter Center to a Mormon missionary group to an organization for Coptic Christian orphansReuters also reports that this week Interpol denied a request from Egypt to issue worldwide arrest warrants for 15 employees of U.S. non-governmental organizations, including 12 who are U.S. citizens.  The reported grounds for the denial was that the request was not in line with Interpol's rules that forbid political, military, religious or racial interventions.


April 25, 2012 in In the News, International | Permalink | Comments (0) | TrackBack (0)

Monday, April 16, 2012

Effect of Increased Limits on Charitable Contributions - Look to the U.K. for a Preview

A recent flurry of articles (see here, here, and here) address the tax relief policy announced last month in U.K. that would limit a taxpayer's donations to £50,000 or a quarter of their income, whichever is larger.  A U.K. Treasury spokesperson stated that the policy "was justified to stop very wealthy people arranging their finances to pay very little tax."  The government is further asserting that the proposed ceiling will only affect donors, not charitable recipients.  Philanthropists are cautioning that the government's proposed caps on charitable contributions would create a "funding crisis" for the country's charities and philanthropic efforts.

It appears that Prime Minister David Cameron is retreating from the proposed limitations.  Nevertheless, the discussion is very similar to the one that has taken place in the United States with respect to President Obama's proposed limitations on the charitable contributions deduction for wealthier Americans, as previously blogged herein.


April 16, 2012 in Current Affairs, In the News, International | Permalink | Comments (0) | TrackBack (0)

Friday, March 16, 2012

Kwak: The Impact of Taxes on Charitable Giving (South Korea)

Sungil Kwak (Korea Institute for International Economic Policy) has posted The Impact of Taxes on Charitable Giving: Empirical Evidence from the Korea Labor and Income Panel Study on SSRN.  Here is the abstract:

Households’ or individuals’ decision regarding charitable giving may differ by type of recipient of the gift. In light of the relative paucity of empirical research on the impact of tax incentives on charitable giving outside Western countries, empirical research on this topic in South Korea is valuable in order to compare effects across difference tax regimes and in different institutional environments. We use the Korean Labor and Income Panel Study (KLIPS), whose panel structure helps alleviate the omitted variable bias that has often appeared in previous literature using cross-sectional data. This study aims to perform a robust estimation of tax price and income elasticities for charitable contributions in South Korea. First, we use exogenous changes in tax rates resulting from Korean Tax Reform to construct instrumental variables (IVs) for the change in the price of giving. Two tests are undertaken to determine whether the IVs are weak or not: a size-corrected test of a weak IV robust inference for the linear instrumental variable model with autocorrelation and heteroscedasticity recently devised by Finlay and Magnusson; and the LIML CUE-GMM estimation. We find that our instruments are not weak. Following Smith and Blundell, and Rivers and Vuong, we then estimate the random effect (RE) Tobit Model using a control function based on the IVs. Using the procedure developed by Mundlak, we estimated a fixed effect model from the RE Tobit model. The tax price and income elasticities from the pseudo-fixed effect Tobit model are found to be significant and the magnitudes are similar to those from the GMM fixed effect and CUE-GMM models. To investigate additional features of the conditional distribution of charitable giving in South Korea, we use the Censored Quantile regression with instrumental variables (CQIV) recently proposed by Chernozhukov, Fernandex-Val, and Kowalski. These estimate indicate that the price elasticity of charitable giving is very heterogeneous among donors, while income has a quite uniform and positive effect over the whole range of the giving distribution significantly.


March 16, 2012 in International, Publications – Articles | Permalink | Comments (0) | TrackBack (0)