Wednesday, November 16, 2016
Last month the Supreme Court of the United States denied certiorari to either the NCAA or the plaintiffs in O'Bannon v. NCAA. That decision left in place the decision by the U.S. Court of Appeals for the Ninth Circuit that found an antitrust injury to the plaintiffs from the NCAA's rules but rejected the portion of the district court's remedy that would have allowed student-athletes to receive cash payments that went beyond their full cost of attendance. Since the NCAA had already dropped its prohibition on members schools giving scholarships to student-athletes up to the full cost of attendance, the effect of the now final Ninth Circuit decision is to leave the current situation unchanged. That said, some commentators believe that the finding of an antitrust injury leaves the NCAA vulnerable to future antitrust challenges (see this ESPN story about the decision).
Tuesday, November 15, 2016
As has been documented in this space many times, state attorneys general continue to play a pivotal role in ensuring that charitable nonprofit organizations continue to fulfill the promise of their charitable label.
For example, earlier this fall The Fresno Bee reported that the California Attorney General denied a request from Saint Agnes Medical Center to reduce the amount of charity care it provides and instead ordered the nonprofit hospital to pay $2.1 million to other community nonprofit organizations that provide direct health-care services. The request was an attempt by the hospital to reduce the $7 million in charity care it is required to provide annually pursuant to a three-year old agreement with the AG's office. The hospital only provided $4.9 million in charity care in 2015, however. To make up the deficit, the AG ordered the hospital to pay $2.1 million to other tax-exempt entities that provide direct health care services in the hospital's service area by no later than October 31, 2016. While the hospital reportedly was considering its options for challenging the AG order, there are no news stories or other public reports indicating that it did so before the October 31st deadline.
And just last week, the New York Attorney General announced a settlement with the National Vietnam Veterans Foundation and two of its officers to end that purported charity's operations. The founder and president of the nonprofit, who is himself a veteran and an attorney with the U.S. Department of Vetranss Affairs, admitted that 90% of donations were paid to fundraisers, that contributors were deceived about the use of funds raised, and that he used nonprofit funds for personal expenses. In addition to the organization dissolving, he and another officer agreed to be permanently banned nationwide from handing charitable assets. CNN originally reported problems at the organization last May.
For readers who were not able to attend last month's National Association of Attorneys General/National Association of State Charitable Officials Conference, the conference materials are available here. Here was the conference's agenda:
Non-Traditional Models of Philanthropy
- Richard Feiner, Director of Corporate and Foundation Relations, Weill Cornell Medicine
Donor Advised Funds, Endowments and Donor Restrictions
- David Shevlin, Partner, Simpson Thatcher
Corporate Governance - Top Ten Issues
- Michael Peregrine, Partner, McDermott, Will and Emery LLP
Board Education: Top 10 Ways to Get Investigated and How Board Education Can Help Prevent It
- Vernetta Walker, Vice President for Programs and Chief Governance Officer, BoardSource
- James Joseph, Partner, Arnold & Porter LLP
- Janet Kleinfelter, Deputy Attorney General, Office of the Attorney General of Tennessee
New Tools for the Nonprofit Sector
- James Sheehan, Chief of Charities Bureau, Office of the Attorney General of New York
- Amanda Broun, Vice President of Programs and Practice, Independent Sector
- Meghan Biss, Senior Technical Advisor to the Director, Exempt Organizations, IRS
- Miguel A. Barbosa, Co-Founder & CEO, citizenaudit.org
CyberSecurity/Data Privacy Issues
- Paul Luehr, Managing Director and Chief Policy Officer, Stroz Friedberg
- Abigail Stempsen, Assistant Attorney General, Office of the Attorney General of Nebraska
- Alissa Gardenswartz, Deputy Attorney General, Office of the Attorney General of Colorado
Multistate Litigation: Cancer Fund of America
- Tracy Thorleifson, Attorney, Federal Trade Commission
- Michael Foerster, Senior Deputy Attorney General, Office of the Attorney General of Pennsylvania
NAAG Charities Committee: Meet the Attorneys General
- Cindy Lott, Program Director, Nonprofit Management Program, Columbia University School of Professional Studies
Volume 45, Issue 5 of the Nonprofit and Voluntary Sector Quarterly is now available. Here is the table of contents:
- , , and From the Editors’ Desk
- : Exploring the Effects of Organizational and Environmental Variables Understanding Nonprofit Financial Health
- and Evolution in Board Chair–CEO Relationships: A Negotiated Order Perspective
- , Carmen Marcuello-Servós, and Youth Volunteering in Countries in the European Union: Approximation to Differences
- and The Internet and the Commitment of Volunteers: Empirical Evidence for the Red Cross
- : Racial Prejudice Affect as a Mediating Factor Perceived Group Competition and Charitable Giving
- and What Big Data Can Tell Us About Government Awards to the Nonprofit Sector: Using the FAADS
- Book Review: Challenging the third sector: Global prospects for active citizenship by S. Kenny, M. Taylor, J. Onyx & M. Mayo and The NGO challenge for international relations theory edited by W. E. DeMars & D. Dijkzeul
- Book Review: The nonprofit world: Civil society and the rise of the nonprofit sector by J. Casey
- Book Review: Faculty work and the public good by G. G. Shaker
Volume 27, Issue 6 (December 2016) of VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations is now available. Here is the table of contents:
- Disentangling the Financial Vulnerability of Nonprofits
Pablo de Andres-Alonso, Inigo Garcia-Rodriguez & M. Elena Romero-Merino
- Exploring the Nexus of Nonprofit Financial Stability and Financial Growth
Grace L. Chikoto-Schultz & Daniel Gordon Neely
- Doing Well by Returning to the Origin. Mission Drift, Outreach and Financial Performance of Microfinance Institutions
Matteo Pedrini & Laura Maria Ferri
- Funding and Financial Regulation for Third Sector Broadcasters: What Can Be Learned From the Australian and Canadian Experiences?
Fernando Méndez Powell
- Funding Civil Society? Bilateral Government Support for Development NGOs
David Suárez & Mary Kay Gugerty
- Resource Dependence In Non-profit Organizations: Is It Harder To Fundraise If You Diversify Your Revenue Structure?
Ignacio Sacristán López de los Mozos, Antonio Rodríguez Duarte & Óscar Rodríguez Ruiz
- Resisting Hybridity in Community-Based Third Sector Organisations in Aotearoa New Zealand
Jenny Aimers & Peter Walker
- NPO Financial Statement Quality: An Empirical Analysis Based on Benford’s Law
Tom Van Caneghem
- A Review of Research on Nonprofit Communications from Mission Statements to Annual Reports
- NGOs in the News: The Road to Taken-for-Grantedness
Angela Marberg, Hans van Kranenburg & Hubert Korzilius
- Understanding Contemporary Challenges to INGO Legitimacy: Integrating Top-Down and Bottom-Up Perspectives
Oliver Edward Walton, Thomas Davies, Erla Thrandardottir & Vincent Charles Keating
- Sensegiving, Leadership, and Nonprofit Crises: How Nonprofit Leaders Make and Give Sense to Organizational Crisis
Curt A. Gilstrap, Cristina M. Gilstrap, Kendra Nigel Holderby & Katrina Maria Valera
- Organizational Crisis Resistance: Examining Leadership Mental Models of Necessary Practices to Resist Crises and the Role of Organizational Context
- Ideology, Practice, and Process? A Review of the Concept of Managerialism in Civil Society Studies
- Toward More Targeted Capacity Building: Diagnosing Capacity Needs Across Organizational Life Stages
Fredrik O. Andersson, Lewis Faulk & Amanda J. Stewart
- Dimensions of Capacity in Nonprofit Human Service Organizations
William A. Brown, Fredrik O. Andersson & Suyeon Jo
- The Effect of Attitudinal and Behavioral Commitment on the Internal Assessment of Organizational Effectiveness: A Multilevel Analysis
Patrick Valeau, Jurgen Willems & Hassen Parak
- Testing an Economic Model of Nonprofit Growth: Analyzing the Behaviors and Decisions of Nonprofit Organizations, Private Donors, and Governments
You Hyun Kim & Seok Eun Kim
- Book Review, David Fishel: The Book of the Board: Effective Governance for Non-profit Organisations (3rd edition)
- Book Review, Block, Stephen R.: Social Work and Boards of Directors: The Relationship Model
- Book Review, Judith McMorland, Ljiljana Eraković, Stepping Through Transitions: Management, Leadership & Governance in Not-for-Profit Organisations
Dyana P. Mason
- Erratum to: Dependent Interdependence: The Complicated Dance of Government–Nonprofit Relations in China
- Erratum to: Institutional Variation Among Russian Regional Regimes: Implications for Social Policy and the Development of Non-governmental Organizations
Thomas F. Remington
- Erratum to: Modernizing State Support of Nonprofit Service Provision: The Case of Kyrgyzstan
- Erratum to: France: A Late-Comer to Government–Nonprofit Partnership
- Erratum to: New Winds of Social Policy in the East
Linda J. Cook
- Erratum to: The Long-Term Evolution of the Government–Third Sector Partnership in Italy: Old Wine in a New Bottle?
- Erratum to: Poland: A New Model of Government–Nonprofit Relations for the East?
Sławomir Nałęcz, Ewa Leś & Bartosz Pieliński
Larry Catá Backer (Pennsylvania State University) has posted Commentary on the New Charity Undertakings Law: Socialist Modernization Through Collective Organizations, The China Non Profit Law Review (Tsinghua University) (forthcoming 2016). Here is the abstract:
China’s new Charity Law represents the culmination of over a decade of planning for the appropriate development of the productive forces of the charity sector in aid of socialist modernization. Together with the related Foreign NGO Management Law, it represents an important advance in the organization of the civil society sector within emerging structures of Socialist Rule of Law principles. While both Charity and Foreign NGO Management Laws could profitably be considered as parts of a whole, each merits discussion for its own unique contribution to national development. One can understand, both the need to manage Chinese civil society within the context of charity ideals, and the need to constrain foreign non-governmental organizations to ensure national control over its own development. Moreover, the decision to invite global comment also evidenced Chinese understanding of the global ramifications of its approach to the management of its civil society, and its importance in the global discourse about consensus standards for that management among states. This becomes more important as Chinese civil society try to emerge onto the world stage. This essay considers the role of the Charity Law in advancing Socialist Modernization through the realization of the Chinese Communist Party(CCP) Basic Line. The essay is organized as follows: Section II considers the specific provisions of the Charity Law, with some reference to changes between the first draft and the final version of the Charity Law. Section III then considers some of the more theoretical considerations that suggest a framework for understanding the great contribution of the Charity Law as well as the challenges that remain for the development of the productive forces of the civil society sector at this historical stage of China’s development.
Kathryn Chan (University of Victoria) has posted (on SSRN) The Function (or Malfunction) of Equity in the Charity Law of Canada's Federal Courts, 2 Canadian Journal of Comparative and Contemporary Law 33 (2016). Here is the abstract:
This essay explores what, if anything, it means for the Federal Court of Appeal to be a “court of equity” in the exercise of its jurisdiction over matters related to charitable registration under the Income Tax Act. The equitable jurisdiction over charities encompasses a number of curative principles, which the Court of Chancery traditionally invoked to save indefinite or otherwise defective charitable gifts. The author identifies some of these equitable principles and contemplates how their invocation might have altered the course of certain unsuccessful charitable registration appeals. She then considers the principal arguments for and against the Federal Court of Appeal applying these equitable principles when adjudicating matters related to registered charity status.
Matthew S. Erie (Oxford) has posted (on SSRN) Sharia, Charity, and Minjian Autonomy in Muslim China: Gift Giving in a Plural World, 43 American Ethnologist 311 (2016). Here is the abstract:
In Marcel Mauss's analysis, the gift exists in the context of a homogenous system of values. But in fact, different types of normative systems can inhabit the same social field. This is the case among Hui, the largest Muslim minority group in China, for whom the “freedom” of the gift resides in the giver's capacity to follow the rules underlying gifting, in this case, the rules of sharia. I call this capacity “minjian (unofficial, popular) autonomy.” Hui follow sharia in pursuit of a good life, but their practices are also informed by mainstream Han Chinese gift practices and by the anxieties of the security state. In their gifting practices, Hui thus endeavor to reconcile the demands of Islamic, postsocialist, and gift economies.
Monday, November 14, 2016
Benjamin W. Akins (Georgia Gwinnett College School of Business) has posted State of Confusion: A Non-Profit's Right to Withhold Information from State Regulators on SSRN. Here is the abstract:
A tempest is brewing, and the non-profit community is sounding an alarm. What started as a simple overlooked regulatory requirement has blossomed into a battlefield as Federal circuits from east to west are weighing the breadth of power state regulators may wield when dealing with charities. The trouble started when some states made the bold move to start enforcing their existing laws. More specifically, the Attorneys General in New York and California started requiring non-profits to disclose the identity of their donors before allowing solicitation activities to occur.
Initially, two organizations filed suit to enjoin the states from collecting their donor information. The charities argued that being compelled to disclose this information would result in a chilling effect, reasoning that donors would shy away from making contributions, which would cause the charities to lose support. Early on in the litigation, courts held that the states had every right to the charities’ donor information and denied injunctive relief.
Then a third organization joined the fray with a similar plan, but in the midst of a wending judicial path, a different course was forged. The organization was granted a full trial and walked away with a win on the merits. While this signaled a temporary change in fortunes for the affected charities, the inconsistent judicial results have left all parties with more uncertainty than when they began. Now, this nascent line of jurisprudence is muddled, and it is up to either the courts or Congress to bring resolution and consistency to this sensitive Constitutional issue.
Brian L. Frye (University of Kentucky), a contributing editor to this blog, has posted Art & the "Public Trust" in Municipal Bankruptcy, University of Detroit Mercy Law Review (forthcoming). Here is the abstract:
In 2013, the City of Detroit filed the largest municipal bankruptcy action in United States history, affecting about $20 billion in municipal debt. Unusually, Detroit owned its municipal art museum, the Detroit Institute of Arts (“DIA”) and all of the works of art in the DIA collection, which were potentially worth billions of dollars. Detroit’s creditors wanted Detroit to sell the DIA art in order to satisfy its debts. Key to the confirmation of Detroit’s plan of adjustment was the DIA settlement, under which Detroit agreed to sell the DIA art to the DIA corporation in exchange for $816 million over 20 years.
The bankruptcy court approved the DIA settlement as fair and in the best interests of the creditors because it found that Detroit could not, would not, and should not sell the DIA art. The bankruptcy court’s conclusion that Detroit could not sell the DIA art was wrong. It could and did sell the DIA art. But the bankruptcy court’s effective conclusion that Detroit was free to sell the DIA art on its own terms was correct.
The Detroit bankruptcy and DIA settlement suggest that art museums should be permitted and even encouraged to sell works of art in order to preserve the rest of their collections and continue operations. Professional standards that prohibit art museums from selling works of art for any purpose other than purchasing works of art are unjustified and should be abandoned.
Brian Galle (Georgetown) has posted Valuing the Right to Sue: An Empirical Examination of Nonprofit Agency Costs on SSRN. Here is the abstract:
Do stakeholder suits against managers reduce agency costs? I examine this question using a large panel of private foundation tax returns, together with hand-collected data on state-law variations in the right of donors to sue wayward nonprofit managers. In both difference-in-differences and triple-difference estimations, I find on average that standing to sue substantially increases donations and reduces the share of firm expenses devoted to administrative costs among private foundations. These outcomes are robust to other estimating strategies, such as propensity-score matching and regression adjustment with inverse probability weights. Coefficients are smaller and less precise among large operating charities. I argue that my results weigh in favor of expanded donor standing to sue, at least for foundations. My findings also suggest that the agency costs of philanthropic organizations are substantial, which has implications for, among other policy debates, tax policies that encourage perpetual-lived philanthropy.
Robert Shireman (The Century Foundation) has published Public and Nonprofit Higher Education as the Optimal Second-Best, 76 Public Administration Review 758 (2016). Here are the first two paragraphs:
A reporter who covers Wall Street recently asked me whether the for-profit college industry has hit bottom yet. She meant the stock price, but my mind went immediately to the predatory behavior—aggressive and misleading marketing and low-quality programs leading hundreds of thousands of students into crippling debt—that has plagued the industry. Those egregious practices were at their worst precisely when the stock prices of for-profit colleges were at their highest. And therein lies the market failure that burdens for-profit higher education: While in other industries consumer value and shareholder value can move in tandem, with products and services like education, the guiding light of the enterprise—the stock price—can lead to the worst outcomes for students.
Education exhibits a problem known as contract failure, in which the buyer cannot reliably evaluate the quality of the promised or provided product or service. As a consequence, profit maximization fails to produce optimal outcomes because the profit-seekers’ drive to overpromise and underdeliver is rewarded rather than punished by the market, causing other firms to emulate the bad behavior. The problem becomes particularly severe if the firms target the least sophisticated or most desperate customers, those who are least able to evaluate the quality of the service provided. Contract failure is common in enterprises with ambiguous goals like building character, developing critical thinking skills, or spiritual fulfillment, or in industries involving vulnerable populations like children (schools) and the elderly (nursing homes).
Kenya J.H. Smith (Arizona Summit) has published Charitable Choice: The Need for a Uniform Nonprofit Limited Liability Company Act (UNLLCA), 49 University of Michigan Journal of Law Reform 405 (2016). Here is the abstract:
Uniform laws serve an important role in our society, balancing state autonomy and the need to provide consistent solutions to common problems among the states. The Uniform Law Commission (ULC) is the preeminent authority that promulgates uniform laws. To date, the ULC has promulgated over 150 uniform and model acts. ULC tackles a wide array of issues, including child custody and protection, probate, electronic records, and commercial law. The ULC aims to “provide[ ] states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.”
Joannie Tremblay-Boire (Georgia State University Andrew Young School of Policy Studies), Aseem Prakash (University of Washington Political Science), and Mary Kay Gugerty (University of Washington Evans School of Public Policy & Governance) have published Regulation by Regulation: Monitoring and Sanctioning in Nonprofit Accountability Clubs, 76 Public Administration Review 712 (2016). Here is the abstract:
Nonprofits seek to enhance their reputation for responsible management by joining voluntary regulation mechanisms such as accountability clubs. Because external stakeholders cannot fully observe nonprofits’ compliance with club obligations, clubs incorporate mechanisms to monitor compliance and impose sanctions. Yet including monitoring and sanctioning mechanisms increases the cost of club membership for nonprofits. What factors account for the variation in the strength of monitoring and sanctioning mechanisms in voluntary accountability clubs? An analysis of 224 clubs suggests that stringent monitoring and sanctioning mechanisms are more likely in fund-raising-focused clubs, clubs that offer certification (as opposed to only outlining a code of conduct), and clubs with greater longevity. The macro context in which clubs function also shapes their institutional design: clubs in OECD countries and clubs with global membership are less likely to incorporate monitoring and sanctioning mechanisms than clubs in non-OECD countries and single-country clubs, respectively.
Lawrence Zelenak (Duke) has made available a draft article titled The Tax-Free Basis Step-Up at Death, the Charitable Deduction for Unrealized Appreciation, and the Persistence of Error. Here are the opening paragraphs:
As every student of the federal income tax well knows, two of the system’s most glaring conceptual errors are the tax-free step-up in basis at death and the deduction for unrealized appreciation in property donated to charity. The two errors are closely related in both character and history.
As for character, both permit taxpayers to claim benefits which should be conditioned on the recognition of income, despite the absence of any recognition event. A basis step-up at death would be appropriate if gains were taxed at death, and a deduction for the fair market value of an appreciated asset donated to charity would be appropriate if the donation triggered taxation of the appreciation. The provisions are errors because the income tax does not treat either transfers at death or transfers to charity as gain recognition events.
As for history, both mistakes originated very early in the development of the modern federal income tax, and in similar ways. In each case, Congress enacted a statutory provision so vague and general that it did not address the issue, and shortly after enactment the Treasury Department promulgated a regulation introducing the conceptual error. There was no apparent intent on the part of either Congress or Treasury to subsidize bequests of appreciated property, or to subsidize charitable donations of appreciated property more heavily than cash donations; the overly-generous rules resulted from the failure of Congress to consider the issues, and from errors of tax logic made by Treasury when it addressed the issues left open by Congress.
Hat Tip: TaxProf Blog.
Thursday, November 10, 2016
The Philanthropy 400 is the Chronicle of Philanthropy's annual ranking of charities based on private fundraising. This year, for the first time, the Fidelity Charitable Gift Fund was ranked first, bypassing the United Way, in private fundraising. According to the Chronicle, it marks "the first time an organization that primarily raises money for donor-advised funds has held the top spot." Author's aside: Given the growing popularity of DAFs, wouldn't it be super if we had some regs? Just sayin'...
I happened to teach DAFs this morning in my Nonprofits class, right after having done a fairly comprehensive unit on the private foundation excise taxes. It is only after one understands the complexity and burden of Chapter 42 (even after the 2006 PPA changes) can one appreciate the simplicity of the DAFs. We went through a sample DAF agreement from a well-known community foundation, reviewing the restrictions on distributions and the private cy pres power. Even with these limitations, my class seemed pretty convinced that as compared to a private foundation, the DAF is the way to go. Happily from a teaching perspective, they were able to identify the private benefit issue with the commercial providers pretty quickly, although I had few answers on why the IRS didn't originally see it as an issue and continue not to do so.
In any event, the Chronicle has a pro/con opinion section in front of its pay-only firewall, which can be found here (pro) by Howard Husock of the Manhattan Institute and here (con) by Ray Madoff of Boston College. Husock's article teases a forthcoming report by the Manhattan Foundation on donor advised fund fees and spending, which the Chronicle article says will be released this month, so more to come on that. While we wait, I think that Husock's answer to the private benefit issue is somewhat weak ("they have to be managed by someone, so why not Fidelity?' seems disingenous) but I do think that he does a better job addressing some of Prof. Madoff's DAF distribution issues.
You know what else would address some of these issues? Regulations. Just sayin'.
Wednesday, November 9, 2016
This is my week to blog. No matter whether you cheer the results of last night or despair over them, the campaign highlighted a deep divide in this country that goes beyond mere policy disagreement. The existence of that divide was evident (or at least, should have been evident) far earlier than 2:30 am EST last night.
I sat at my keyboard last night and the night before, preparing to write one thing, then preparing to write another thing, and ultimately staring at a relentlessly blank page, wordless. Not that I didn't have a ton to say, mind you - but it's not for here. Not for this blog, which is dedicated to the role of nonprofits and the rule of law. So I went looking today - looking for insight and cool reflection, for direction and structure, looking for a way to process that which divides us so we can, at the very least, talk to one another again. Is there a role that we, the nonprofit sector, can play in that process?
My search brought me to this 1988 article by Barbara Bucholtz entitled "Reflections on the Role of Nonprofit Associations in a Representative Democracy," published well before the tumult of this election cycle. In the introduction, Professor Bucholtz states as follows:
This article concludes that the nonprofit sector makes a significant, probably pivotal, contribution to the American form of representative democracy in at least three respects. First, the nonprofit sector teaches the skills of self-government. Second, it inculcates the habits of tolerance and civility. Finally, it mediates the space between the individual and the other two sectors of society, that is, the "public" or governmental sector and the "private" or "entrepreneurial" or "proprietary" sector. Thus, the nonprofit sector acts as a counterpoise against excessive displays of power emanating from the public or private sectors.
I do recommend the article in full (cite: Cornell Journal of Law and Public Policy, Vol 7, Iss. 2, Article 8, available both on SSRN and at the Cornell website ((linked above)). One might agree or disagree with the theories espoused therein, or take (or not take) the lessons from the Slovakian example described in the Article, but all of that is a bit beside the point at this immediate moment. For me, the article is a welcome reminder that what we do in the nonprofit sector is important, and will continue to be important as we try to bridge the divide that separates us over the coming months and years.
Wishing all of you peace and grace, EWW
Sunday, November 6, 2016
James Fishman (Pace) has the written the following commentary (posted with his permission) on recent news stories relating to charitable solicitation reporting issues involving the Bill, Hillary & Chelsea Clinton Foundation and the Donald J. Trump Foundation:
In a pallid imitation of David Farenthold’s work in the Washington Post on the Trump Foundation, a Scripps News investigation has reported that charity regulators in Mississippi cited the Clinton Foundation for three years beginning in 2001 for failure to register to solicit funds in that state, and the charity did not disclose those instances to some other states as required.
While the Clinton Foundation justifiably can be criticized for inattention to possible conflicts of interest as well as a lack of concern with good nonprofit governance norms, a failure to register in one state for several years followed by the Foundation’s failure to mention it some years later in other states’ annual filing forms are minor infractions equivalent to reporting someone was issued a traffic ticket for parking fifteen inches from the curb, instead of twelve as required by an ordinance.
Almost all of the states require registration in order for a charity to solicit funds. This is accompanied by a requirement of filing a financial report at the end of the year. The registration process is simplified in that almost forty states accept a unified filing statement, which means the charity has to fill out one form and can submit it to all states in which it will try to raise funds. This task is usually done by firms that specialize in fundraising registration and compliance services. The financial reports are likely prepared by the charity’s accountants, who may have no knowledge of the registration process. The charity may not know that a mistake was made in one state, and neither would the accountant. And, as the story indicates, the charity officials who sign the forms may rely on others to prepare them and so not catch inconsistencies between them.
Professor Linda Sugin of Fordham inspected the Trump Foundation’s 990-PF and wrote in a New York Times op-ed piece that there were misstatements made in answering questions whether the foundation engaged in any self-dealing or political activities. That form was likely prepared and filed by Mr. Trump’s accountants, who had little knowledge, like everyone else, of what the Foundation’s activities really were. (The Trump Foundation is registered as a private foundation. Despite its name the Clinton Foundation is a public charity.) So, as was likely the case here with the Clinton Foundation and its charitable solicitation filings, those reporting failures probably reflect more a lack of communication than intentional errors.
Failures of registration by charities to solicit funds are common as many small and new charities are unaware of the requirement. Even larger and more sophisticated charities often make mistakes when completing the many state forms; while a growing number of states accept the unified filing statement, many require additional, state-specific information. When such failures occur, the state’s attorney general or other responsible official will contact the charity, give a period of time to correct the failure, perhaps impose a minor fine, and that’s the end of the situation. Repeated violations may lead to somewhat larger fines, but absent evidence of fraud on the public or other substantive legal violations that is as far it usually goes, although on occasion an attorney general will order a charity to stop soliciting in their state until the filing failures are corrected.
The Trump Foundation, which failed to register anywhere, including its home state of New York, was ordered by New York Attorney General Eric Schneiderman to halt fundraising in New York until it registered, which it later promised to do. What was unique was that the failure to register was the subject of a press release, perhaps the first one ever issued for such an infraction. See Joseph Mead’s post in the Nonprofit Law Prof Blog. Whether the high profile nature of the Trump Foundation may have justified this step, unusual as it was, could certainly be debated.
Given the size and scope of the Clinton Foundation’s activities, not to speak of some legitimate issues for journalistic inquiry, are such inconsequential miscues worthy of the Scripps’ investigative reporters? One the many great things about the election finally taking place will be that the media can return to its normal stable of non-news stories. Kim Kardashian can’t wait.
Friday, October 28, 2016
Yale Daily News, the oldest student newspaper at Yale--and a separately organized 501(c)(3) tax-exempt organization--found itself under criticism for violating tax law when it endorsed Hillary Clinton for President. The Paper issued an opinion piece entitled "NEWS' VIEWS: Hillary Clinton LAW '73 for President," arguing:
We do not endorse Clinton solely because of the disqualifying flaws of her opponent, Donald Trump, whose campaign has disgusted and astonished our board. ... We endorse her because we, as young people, recognize this election is a turning point for our country. And the choice couldn’t be more clear. Voting for Clinton is our obligation to ourselves and to future generations.
The Yale Record--a student humor magazine--responded swiftly and hilariously:
The Yale Record believes both candidates to be equally un-endorsable, due to our faithful compliance with the tax code.
In particular, we do not endorse Hillary Clinton’s exemplary leadership during her 30 years in the public eye. We do not support her impressive commitment to serving and improving this country—a commitment to which she has dedicated her entire professional career. Because of unambiguous tax law, we do not encourage you to support the most qualified presidential candidate in modern American history, nor do we encourage all citizens to shatter the glass ceiling once and for all by electing Secretary Clinton on November 8.
The Yale Record has no opinion whatsoever on Dr. Jill Stein.
Wednesday, October 26, 2016
Rather than talk about news or scholarship, I want to pose a question about experiential approaches to teaching nonprofit law. What are some of the innovative teaching techniques that you have used or heard of in nonprofit law?
One program that I run is a policy advocacy course that puts a mix of law, MPA (public administration) and MNAL (nonprofit management) students to work as lobbyists seeking changes to state and local policies. The catch: students are not allowed to threaten litigation--they have to navigate political structures as a lobbyist (without any cash) would. Our named partner this semester is United Way of Greater Cleveland, but students work with a range of community based organizations on issues ranging from animal cruelty to policy responses to the Heroin crisis, to local nuisance laws that lead to the eviction of victims of domestic violence. The class has proven successful in accomplishing pedagogical goals, enhancing student career opportunities, and making a positive difference in the community.
More common courses/practices in experiential nonprofit law include:
- Board Fellows – several schools (including Cleveland State) run a program where students are placed as trustees on community boards in a non-voting capacity for an academic year
- Start-up Workshop – the number of requests for assistance for creating a new nonprofit can be overwhelming, and law schools might offer advice on filing creation documents and seeking federal tax-exempt status. (Although, for a lot of these requests, the best and most honest advice is that the requester might want to rethink creating a new nonprofit.)
- A Tax or Transactional Clinic -- assist nonprofits with a particular issue or transaction, e.g., Georgetown Law Clinic
- UVa's Nonprofit Clinic - provides a "legal health checkup" to nonprofit boards
Personally, I would like to see more interdisciplinary projects--students from law, business, social work, policy, etc.--to provide a deeper, richer analysis of an issue facing a nonprofit, while also giving students a more complete understanding of nonprofit practice (but disciplinary silos can be hard to break down.)
Other ideas? How else can we get students engaged in meaningful work in nonprofit law?