Wednesday, December 26, 2012
Thursday, October 25, 2012
I'll confess my ignorance: up to a few minutes ago, I had never heard of "crowd funding." Then this story from Caribbean360 caught my attention. According to Caribbean360, the Grenada Goat Dairy recently announced that its campaign to fund its collaboration with the St. Patrick Anglican School had exceeded its goal of $55,000 (USD) through the campaign's use of the crowd funding website, www.Kickstarter.com. The Grenadian non-profit organization used the method to attract local and international support, with donors giving amounts ranging from $1 to $10,000.
I know nothing about crowd funding and how it works, but if it works for the Grenada Goat Dairy, it can work for other non-profits also. I wonder, however, whether donors' contributions are tax deductible, and whether the various websites hosting these crowd funding "events" are able to give individual donors receipts for their donations.
Tuesday, September 11, 2012
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.
Thursday, August 9, 2012
Stefano 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.
Wednesday, August 8, 2012
Mark 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.
Tuesday, August 7, 2012
Led 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.
Monday, July 16, 2012
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 http://www.globalresearch.ca/index.php?context=va&aid=31901.
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 http://www.chinanpo.gov.cn/1938/55122/index.html. Another story about the event can be found at http://www.chinanpo.gov.cn/1938/55060/index.html.
Wednesday, June 27, 2012
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."
Tuesday, June 12, 2012
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.
Sunday, April 29, 2012
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.
LHM & KWS
Wednesday, April 25, 2012
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 orphans. Reuters 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.
LHM & KWS
Monday, April 16, 2012
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.
Friday, March 16, 2012
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.
Wednesday, March 14, 2012
- Most importantly, Premier Wen Jiabao mentioned charity and civil society in his work report his “State of the Union-style” address for 2012 read out to the National People’s Congress (NPC) on March 5, 2012. His remarks include mention of the need “to accelerate the development of social welfare and charitable / philanthropic pursuits / efforts.” In addition he vowed that the government would “push for innovations in administering rule of law and social management, and put in order (or rationalize) the relationship between government and civic and social organizations.”
- In addition, an interview with Yang Lan about philanthropy was featured prominently on Main Page (an English language CCTV broadcast) during the sessions. Ms. Yang, a former television hostess, current philanthropist and National People’s Consultative Congress (NPCC) member was interviewed during the “2 Sessions” of the NPC, and focused her remarks on philanthropic legal reform. The video is available at http://english.cntv.cn/program/newshour/20120304/112026.shtml
Tuesday, March 13, 2012
The government has withdrawn a controversial draft law on civil society organizations, said Mohamed Esmat al-Sadat, chairman of Parliament’s Human Rights Committee. The draft, which would amend the existing law, was said to be a combination of proposals from a number of NGOs. “No law would be issued if NGOs themselves do not approve it,” Sadat told Al-Masry Al-Youm, adding that the former regime drafted the original law. Critics say that the current Law on Associations (Law 84 of 2002) does not guarantee freedom of association since it gives the government the right to refuse the registration of an NGO and to dissolve its board. “The authorities use strict legislation on registration, regulation and foreign funding to restrict the activities of civil society. Under Mubarak, the law was often used against human rights organizations to punish the reporting of human rights violations,” said Amnesty International in a report published last year. For more information see http://www.egyptindependent.com/node/656141.
Frede Moreno (Western Midanao State University, Philippines and Alliance for International Education, Germany) has posted a short paper on Governance of Microcredit as a Strategy for Poverty Reduction in the Philippines on SSRN. Here is the abstract:
Microcredit can be an effective tool for tackling the global poverty problem. Making microcredit work better for the poor necessitates a framework that integrates the principles of good governance in the design and implementation of a microcredit program. The integration of good governance principles in microfinance is argued to have positive consequences in improving financial viability and increasing social outreach of microcredit programs as well as in widening the livelihood and economic options of Agrarian Reform Beneficiaries within Third World economic and poverty conditions. Governance principles can be applied as implementation strategies of Official Development Assistance (ODA)-assisted microfinance program as a tool for poverty reduction and development. In view of the Philippine government’s limitations, economic and fiscal challenges, the financial and technical support programs of the international donor community provide a big boost to the effectiveness and impact of microfinance in reducing the incidents of poverty in Third World countries such as the Philippines. As a tool for poverty reduction, microcredit is applicable only to the enterprising poor. The use of microcredit to assist poverty groups is recommended to be based on existing livelihood activities and micro-entrepreneurial skills and capabilities. Furthermore, the program design of the Bangladesh Rural Advancement Committee (BRAC) is found to be appropriate for the agrarian reform beneficiaries in Zamboanga Peninsula (Region IX), Philippines. Joe Remenyi’s (1999) Poverty Pyramid reinforces BRAC’s graduated strategy for helping the poor when they are grouped into: (1) micro-enterprise operators or the less poor, (2) enterprising or moderately poor, (3) laboring or very poor, and (4) poorest of the poor and most vulnerable or the ultra-poor.
Tuesday, February 7, 2012
Egypt—Restrictive Law on Associations and Foundations Proposed by Government; Less Restrictive Draft Submitted to Parliament by Civil Society
The raids on Egyptian and foreign CSOs in December 2011 (and reported on in the February IJCSL Newsletter) were followed on January 17, 2012 by an announcement from the Egyptian Ministry of Social Justice and Solidarity that it had completed a draft Law on Associations and Foundations to amend Egypt’s existing Law 84 of 2002. The proposed law is nearly identical to a draft prepared in March 2010 by a committee composed of members of the now-disbanded former ruling party and chaired by ex-Prime Minister Abdelaziz Hegazy. It places extreme burdens on CSOs. The Ministry announced a fifteen-day public comment period, after which the draft Law on Associations and Foundations is expected to be taken up by Egypt’s newly elected People’s Assembly as one of its first orders of legislative business. More than 55 Egyptian CSOs have refused to submit comments and are instead calling on the Ministry and the People’s Assembly to replace the draft with one endorsed and authored by Egyptian human rights organizations. On January 31, the Egyptian Organization for Human Rights submitted the draft developed by CSOs to the Parliament. For what the civil society draft contains, see http://en.eohr.org/2012/01/31/eohr-submits-the-ngos-draft-law-to-the-parliament/. More information about this will be availabl ein the March 2012 issue of the IJCSL Newsletter.
Saturday, January 14, 2012
A number of leading public charitable trusts and institutions that for years enjoyed tax exemption have lost their 12Aa registration and their total income has been made taxable. Virtually all of them are well established, credible, well governed and contributing to the commonweal of society - be it empowering women and creating self-sufficiency or promoting art and culture, according to an update by Noshir Dadrawla, Chief Executive of the Centre for Advancement of Philanthropy (CAP) (www.capindia.in). He notes that the Finance Act 2008 changed the definition of “charitable purpose” under Section 2(15) of the Income Tax Act so that “advancement of any other object of general public utility” would not be considered as a “charitable purpose” if it involves carrying on any activity in the nature of trade, commerce, or business or any activity of rendering any service in relation to any trade, commerce, or business for any fee, assessment, or other consideration. Later, the Finance Act 2010 attempted to provide some relief by exempting the aggregate value of the receipts from such activities up to Rs. 10 Lakhs and finally under the Finance Act 2011 to Rs. 25 Lakhs from taxation. Nonetheless, some NPOs that engage in consultancies, etc. are now subjected to tax on all their income. Noshir has urged all affected trusts and institutions to write to him at email@example.com.
Wednesday, January 11, 2012
To restore public trust in charities, 112 Chinese organizations are on track to participate in a government-sponsored information disclosure platform, according to Caixin Online. In the wake of immense public backlash against China's charities over millions in misused funds, these organizations have pledged to promote information transparency through a new government disclosure platform. Through the China Charity & Donation Information Center’s (CCDIC) forthcoming online platform, the 112 charities said they will publish their accounting records according to a new set of information disclosure guidelines. The announcement at an annual philanthropy conference sponsored by the Ministry of Civil Affairs—which oversees the CCDIC—comes just three weeks after 24 foundations publicly pledged to ensure the integrity of philanthropy in China. The new standards will also clarify how and when third parties should audit charities, the charities said, although they did not clarify what the exact requirements will look like. The joint effort includes China Charity Federation, as well as the China Youth Development Federation and the Red Cross Society of China. For more see http://english.caixin.com/2012-01-09/100347049.html.