Nonprofit Law Prof Blog

Comments on January 2008 MNCA Exposure Draft: American College of Parliamentary Lawyers (ACPL)

Here are Comments by the American College of Parliamentary Lawyers to the January 2008 Exposure Draft of the Model Nonprofit Corporation Act.

Download acpl_comments.pdf

Thanks to Professor Karla Simon for providing this to us.

DAB

Call for Comments on Model Nonprofit Corporations Act

As we blogged in April of this year, the June 1, 2008, deadline for comments on the ABA Business Law Section's January 2008 Exposure Draft of the Model Nonprofit Corporations Act.  Below is the Call for comments.  You can view the exposure draft on the ABA website: Part 1 and Part 2.  If you have comments that you have or will make concerning the January 2008 exposure draft, please send them along to us so that we can post on the blog.

Dear Committee Members:

I am pleased to announce that the January 2008 Exposure Draft of the Model Nonprofit Corporations Act (MNCA) is now posted on the Section of Business Law website, on the Nonprofit Corporations Committee homepage http://www.abanet.org/dch/committee.cfm?com=CL580000). The Task Force to Revise the Model Nonprofit Corporation Act is soliciting comments on this draft and will consider any comments received at the June, 2008 meeting of the Task Force. Any additional comments that any committee member would like the Task Force to consider should be sent to the Reporter for the Task Force, Bill Clark at clarkwh@dbr.com, with a copy to the Chair of the Task Force, Liz Moody, at moody@law.stetson.edu and to me, as Chair of the Nonprofit Corporations Committee, at crr@coblentzlaw.com.

The Nonprofit Corporations Committee will accept additional comments on the Act until June 1, 2008. The Task Force will meet on June 14 to review and discuss comments, and will thereafter produce a final version that, upon review and approval by Committee Leadership, will be posted to the Committee website on or before July 31. That version will be considered approved by the Committee unless the Committee Chair receives, before August 8, 2008, a significant number of comments from Committee members expressing new and material concerns of a nature such that, in the opinion of the Committee Chair, further study is required.

Once the new Model Act is finalized, a new subcommittee of the Nonprofit Corporations Committee will be organized to continue to review, consider amendments to and update annotations for the Model Act -- similar to the continuous review process followed by the Committee on Corporate Laws for the Model Business Corporations Act. This subcommittee will be open to all Committee members.

Cynthia R. Rowland Chair, Nonprofit Corporations Committee, ABA Business Law Section One Ferry Building, Suite 200 San Francisco, CA 94111-4213 Tel: (415) 772-5747 Fax: (415)989-1663 crrowland@coblentzlaw.com

DAB

Nonprofit Blog Editor, Susan Gary, Named to Professorship at Oregon

On May 12, 2008, the University of Oregon School of Law announced on its website that a contributing editor to this blog, Professor Susan Gary, has been named Orlando J. and Marian H. Hollis Professor.  Here is the announcement:

Susan Gary, an expert on trust and estate law and the current Associate Dean for Academic Affairs, has been named an Orlando J. and Marian H. Hollis Professor.  Professor Gary's research examines the way inheritance laws apply to changing family structures, regulation of nonprofit organizations, and use of mediation in estate planning and probate.  She currently serves as reporter for the Uniform Management of Institutional Funds Act.

Many congratulations Susan!

DAB

A Word On Charity and Altruism

A few weeks ago, I was on a rant regarding my disbelief in true "altruism" as a motivator for charitable giving.  A few readers legitimately took me to task for suggesting that conservatives give more than liberals because they have more to feel guilty about or that giving is ultimately a self-serving act, regardless of one's political leanings.  One reader stereotypically assume me to be a liberal merely because I dared take a jab a conservatives (as if conservative never criticize each other).  But if you want to see a real rant, check out The Cactus Tax Proposal, Part 2:  Eliminate the Tax Deductions for Charity.  Here is a snippett:

Additionally . . . acts of charity are not truly acts of charity. If I donate money to an organization, and in exchange, they slap my name on the side of a building, and have a dinner in my honor, is it really charity? Or is such behavior merely seeking adulation, and an opportunity to attend yet another event on the social season schedule?

I still think true altruism has nothing to do with charitable donations -- at least not when the giver claims a deduction at the end of the year -- but I would not eliminate the deduction.  The "Angry Bear" (the author of the linked opinion) and others view the world through economic lenses and so the argument goes thusly:  (1) there is no real altruism, (2) altruistic acts are therefore undersupplied by the market, (3) altruistic acts generate public goods, (4) it makes sense, therefore to subsidize -- though not necessarily via the tax code -- altruism that is insufficiently found in the market place that so many law and economic types dictate our daily behavior.  That is, the argument that there is no altruism ultimately proves the need for government subsidy and a deduction is one such subsidy.  The argument against the existence of true altruism does not prove that the charitable contribution deduction should be eliminated.

dkj

Should Tax Exemptions for Big Time College Athletics Be Ended

Former Fightin' Gator President John V. Lombardi posted this provocative opinion to his Reality Check Blog (I would have just linked to it but I couldn't figure out how).  Ok, I can live with keeping March Madness and D-I football tax exempt, but we should at least pay the players a fraction of what the coaches get.  Lombardi, by the way, was President when Spurrier first won a national title for my beloved Gators (who, after back to back March Madness triumphs, will not appear this year).

dkj

Taxing the Sports Factory

By John V. Lombardi 

Since at least the early 20th century, it has been fashionable to attack college athletics as distorting the priorities of American colleges and universities, and there is often much evidence to support the attacks. The difficulty in taking these challenges seriously is that they are often unclear about the context within which college athletics functions and undervalue the significance of the constituencies that support this part of the American collegiate enterprise. The latest issue involves the question of whether the increasing amount of giving to college athletics represents a shift of donor interest from academic enterprise. While it is surely true that athletic giving is increasing it is not necessarily true that it comes at the expense of academic giving, which is also on the rise. To accept this premise, we would need to be sure that those who give to athletics would, in the absence of a tax break or an athletic program, give substantially to academic activities. While evidence on giving patterns is not always entirely conclusive, what we do have appears to indicate that athletic and academic donors are substantially different groups. That is, most of the big donors to athletics do not give much to academics and most of the big donors to academics do not give much to athletics.

This reflects the fact that donors can do what they want with their money. If they want to give it to a political candidate, a church, an international charity, a scholarship fund, and endowed chair, or a college football team, it is their choice and reflects their values. The notion that we, in the university or in the government, can dramatically shift these preferences is charming but not realistic as anyone who has spent time fundraising knows. The donor’s preferences are what matter. They surely like the tax break when it’s relevant and they like matching funds for academic gifts provided by many states, but a matching program for academic gifts does not make an athletic donor decide to give an endowed chair rather than an endow a football scholarship. It might persuade a donor to give an endowed chair to one of their alma maters that has a matching program rather than to another alma mater that does not.

The public benefit of the tax break for college athletics is more complicated than our belief in the value of sports in our universities. If we want to eliminate expensive competitive intercollegiate sports from our colleges and universities, the issue of a tax break won’t make much difference. It will just raise the cost of the enterprise, and since most college sports programs (with the exception of maybe the top ten BCS football schools) run a deficit, the increased cost will fall back on institutional budgets. We can say that money- losing intercollegiate sports programs are a bad thing, but our constituencies (whether at elite private colleges or mega football factories) love their sports.

At the same time, there are many items that big time sports programs do, paid for by their donors, that do not qualify for tax breaks. When donors give money to a sports program, they only get the tax break associated with the gift portion, not the portion that buys a ticket to the game or pays for a meal or provides a team jacket. The rules require that the institution deduct all the products and services that directly benefit the donor, recognizing that these things are commercial transactions, while the gift to the athletic program that sustains its expenses in support of student-athletes and the costs of the non-revenue sports, as well as the losses of football in most institutions, does help the academic enterprise and is deserving of a tax break. These rules may need to be improved, tightened, or otherwise changed to make giving to college sports more expensive to the donors. While this may well affect some donors, the truth is that the people who give in the many-million dollar category (athletic gifts that provoke the most outrage) almost always do not need and cannot use the tax break because they have already used up every imaginable tax dodge available to the rich and super rich. In talking with major donors and extolling the opportunity for a tax break as the result of a gift, many will tell me, “that’s nice, but I can’t use that tax break and I’ll just give the money because I want to help.”

Attempting to fix what’s believed to be wrong with college sports by manipulating tax policies is likely to produce many unintended consequences, harm the smallest and most vulnerable sports programs at colleges and universities, and have almost no impact at all on the mega sports programs that offend many observers. If these mega programs are a bad thing, we should take them on and fix them directly rather than try to sneak in a fix that won’t work via the tax code. Mega college athletics is indeed a remarkable American invention, it reflects the decisions of academic administrators and governing boards at almost all colleges and universities for over a century. It prospers because for the most part we (our faculty, our staff, our alumni, our legislators, our trustees, our students, and our many other constituencies) want it. We could easily change it, IF MOST OF US WANTED TO CHANGE IT. All protestations to the contrary, we, the colleges and universities of America and our friends and supporters, do not want to change it. What we really want is to imitate the best (often the most expensive) programs in America by winning games and championships.

Does Small Government Mean Big Civil Society?

I ran across an interesting, late 90's era document from the Cato Insitute entitled "Restoring Civil Society."  What fascinated me about it is the notion that big government and vibrant civil society are somewhat mutually exclusive.  It reads like a 90's era Newt style manifesto; it makes some provocative points.  Here is an excerpt from the full document:

The Condition of Civil Society

Restoring civil society is a moral imperative. There is no more important issue on the political agenda today. The picture, however, is not an entirely bleak one, for the retreat of civil society in the face of advancing political society has been uneven. In some areas, civil society has even advanced, as political society has been restrained and pushed back; notable examples are the partial but progressive deregulation in recent decades of telecommunications, which has opened up so many opportunities for people to communicate and form new communities, and of financial services, which has allowed individuals and families greater control over their own investments. Despite all the advances of political society in recent decades, America still has a vigorous and robust civil society that provides employment for nearly 130 million persons, generates $7.5 trillion in annual production, and brings forth technological innovation on a daily basis. And charity and mutual aid are also growing in civil society; Americans gave $125 billion to private charities last year, and mutual aid organizations from Alcoholics Anonymous to the Promise Keepers to shelters for battered women offer mutual support to help individuals become stronger and more virtuous and to resist the temptations of irresponsible or self-destructive behavior.

The overall thrust of the document is that "political society" or government sponsored efforts to deal with social problems and inequalities are bad, grass roots movements to do the same are good.  I wonder if it is really just a sophisticated and disguised argument against redistributive policies.

dkj

Bill Gates' "Creative Capitalism" Speech

For those of you who saw the earlier blog posting about Bill Gates' "creative capitalism" speech at the World Economic Forum, here is an excerpt from the speech:

As I see it, there are two great forces of human nature: self-interest, and caring for others. Capitalism harnesses self-interest in helpful and sustainable ways, but only on behalf of those who can pay. Philanthropy and government aid channel our caring for those who can't pay, but the resources run out before they meet the need. But to provide rapid improvement for the poor we need a system that draws in innovators and businesses in a far better way than we do today.

Such a system would have a twin mission: making profits and also improving lives for those who don't fully benefit from market forces. To make the system sustainable, we need to use profit incentives whenever we can.

At the same time, profits are not always possible when business tries to serve the very poor. In such cases, there needs to be another market-based incentive—and that incentive is recognition. Recognition enhances a company's reputation and appeals to customers; above all, it attracts good people to the organization. As such, recognition triggers a market-based reward for good behavior. In markets where profits are not possible, recognition is a proxy; where profits are possible, recognition is an added incentive.

The challenge is to design a system where market incentives, including profits and recognition, drive the change.

I like to call this new system creative capitalism—an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world's inequities.

For the entire speech, go to "World Economic Forum: Prepared Remarks by Bill Gates (January 24, 2008)," available at the Bill and Melinda Gates Foundation website.

DAB

U.S. Patent Office Issues Patent on Increasing Charitable Donations

On January 22, 2008, the United States Patent and Trademark Office issued a patent to CollegeNet, Inc. for an invention by James H. Wolfston that supposedly increases charitable donation receipts.  Here is the abstract from the U.S. Patent and Trademark Office website:

Charitable donations are increased by automatically providing immediate on-line recognition of on-line donors. A list of donors is maintained on a Web page acknowledging the on-line contributions. Donor names on the list can be links to additional information about the donation or the donor. Information about donor and donation is entered by the donor, who can specify what information is to be published on the Web and what information is to remain unpublished. The donor list can be arranged in order of donation size, and donors can compete for position on the list. The donor information can indicate membership in a group, and donations can also be totaled by group to encourage donation competition between groups.

For more information on this invention, go to the U.S. Patent and Trademark website - Patent #7,321,876.

DAB

Tony Bryk Named Carnegie President

The Carnegie Foundation board has named Tony S. Bryk (Standford) as its next president, effective August 2008.  Here is an excerpt from the announcement:

The Board of The Carnegie Foundation for the Advancement of Teaching has named Anthony S. Bryk, whose work has informed and inspired school reform efforts, the next president of the Foundation, effective August 2008.

Bryk has held the Spencer Chair in Organizational Studies in the School of Education and the Graduate School of Business at Stanford University since 2004. He came to Stanford from the University of Chicago where he was the Marshall Field IV Professor of Urban Education in the sociology department, and where he helped found the Center for Urban School Improvement, which supports reform efforts in the Chicago Public Schools. Bryk also created the Consortium on Chicago School Research, a federation of research groups that has produced a range of studies to advance and assess urban school reform. His current research and practice interests focus on the organizational redesign of schools and school systems and the integration of technology into schooling to enhance teaching and learning.

"Tony is a perfect match for the Foundation," said David S. Tatel, the chairman of the Carnegie Board, and a United States Circuit Judge for the U.S. Court of Appeals for the District of Columbia. "He has a tremendous ability to think and act across disciplines and to bring together theory and practice. I have no doubt that he will maintain Carnegie's rigorous intellectual standards, while further advancing its national presence."

To see the full announcement, go to the Carnegie Foundation website.

DAB

Effective Charitable Giving

Money Magazine's January 2008 issue has several articles about charitable giving, geared toward the typical year-end donations many of us make.  An article by Jean Chatzky discusses ways to evaluate a charity's effectiveness.  A typical approach is to look at program ratio - the amount of a charity's budget that goes to its charitable program as opposed to administrative costs.  Chatzky notes several problems with using this tool: 

• First, the program ratio simply looks at spending and not at effectiveness.  A charity may spend a lot of money on its program without being effective. 
• Second, different categories of charitable work have different levels of overhead.  Quoting Trent Stamp of Charity Navigator, Chatzky reports examples: an effective food bank should spend 95% on its program, while an effective museum should spend 75%.   
• Finally, as with any other statistics, manipulation is possible.  A charity may report part of an executive directive's director salary as a program expense, which may not be what a potential donor means by program expenses.

In the end, the best way to ensure that charitable gifts are a good investment is to do some digging using sites like Charity Navigator and Guidestar, as well as information from the charity itself.  That takes time, something in short supply in December, so make a New Year's resolution to start early for next year.

sng

Statistics and More

The National Center for Charitable Statistics contains a treasure trove of statistics on the nonprofit sector.  Stats can be useful for reminding one's Dean why nonprofit courses matter.  For example in the US summary, the total number of public 501(c)(3) charities increased 68.7% from 1996 to 2006 and the number of private foundations increased 86.9% during that same period.  Stats on each state are available as well.

sng

New Blog by Professors of Nonprofit and Philanthropy Law

December 1, 2007, marks the initial launch of Nonprofit Law Prof Blog. This blog is a blog devoted primarily to matters that are of interest to law professors who teach and write in the area of nonprofit law, philanthropy law or related areas. The blog is edited by eight law professors from all over the United States, including University of Georgia (David Brennen), Stetson University (Darryll Jones), Notre Dame University (Lloyd Maher), Ohio State University (Garry Jenkins), University of Oregon (Susan Gary), Texas Tech University (Vaughn James), Howard University (Alice Thomas), and Indiana University - Indianapolis (Robert Katz). The editors teach and write in vast areas of law related to nonprofits and philanthropy, including tax law, estate law, politics and law, charitable giving, charitable and nonprofit governance, religion and law, family law, mediation, corporate leadership and many other areas. Collectively, the editors of this blog represent authors of many books and law review articles, a reporter for a uniform law commission, an adviser to a major nonprofit law reform effort, current and former leaders of a variety of national nonprofits, and former practitioners from nationally renowned nonprofit law firms. We hope that you will regularly visit the Nonprofit Law Prof Blog. And remember, if you teach or write in the area of nonprofit or philanthropy law and publish a book or an article, give a talk, serve on a panel, receive a special appointment, are hosting a conference, have a teaching issue or if you just want to raise an issue for discussion, please feel free to visit the blog or contact me or any of the other editors of the blog (our contact information is on the front page of the blog).

DAB