Thursday, March 5, 2015

Cummings on Citizens United and the Tea Party Controversy

Readers interested in a non-inflammatory piece on the Tea Party controversy should take a look at "Citizens United Spurs Social Welfare," published in Tax Notes Today (subscription required) and authored by Jasper L. Cummings, Jr.  Jack is legal counsel in the Federal Tax Group of Alston & Bird and has an impressive record of legal service, including academic service as an acting assistant professor of tax at NYU and as a visiting professor of law at my home school, the University of Houston Law Center.  In the article, Jack discusses the predictable rise in the use of social welfare organizations following Citizens United, and offers a measured perspective reflecting willingness to consider the best intentions of the Internal Revenue Service in regulating section 501(c)(4) entities in the wake of Citizens United.

In the piece, Jack presents a “short summary” of his article advancing the following points:


(1)  To “expect an explosion of independent expenditures on federal elections after Citizens United” was reasonable.


(2)  To expect that section 501(c)(4) entities “would receive a significant amount in additional contributions for such spending” was also reasonable.


(3)  The new level of funding politically oriented 501(c)(4)s “could be so different in quantity that it would explain and justify a new look at the woefully inadequate published tax guidance for those organizations, and, in the meantime, at the administration of the tax law as it existed.”


(4)  “We know now that the IRS did not carry out that new look in the right way,” but because of the “politically charged” nature of the relevant issues, “it is reasonably possible that the new look itself might have been a proper response to changing circumstances, as opposed to evidence of political bias.”


Electronic cite:  2015 TNT 43-10




March 5, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 4, 2015

Donations to LA Mayor’s Charity Present Policy Question

The Los Angeles Times is running a piece that calls into question the creation and use of charitable nonprofits by political leaders to raise money funding activities that accomplish the leaders’ agendas.  The focus of the article is the charity established by Los Angeles Mayor Eric Garcetti, the Mayor’s Fund for Los Angeles.  There is no allegation that the fund is intervening in political campaigns or otherwise unlawfully influencing the political process.  The concern is that big donors to the fund can obtain influence by supporting the Mayor’s pet projects.  The story explains:

The contribution is one of dozens the Mayor's Fund has received, from companies with a stake in City Hall decisions and from charitable foundations, according to records reviewed by The Times. Modeled on similar nonprofits in New York and other cities, the fund provides a financial boost for civic programs — as diverse as environmental initiatives and summer jobs for thousands of inner-city kids — that might otherwise fall victim to city belt-tightening.


But the nonprofit, which took in about $5.2 million between its formation in June and last month, can also offer a discreet destination for special-interest money that is not subject to campaign finance restrictions. City law caps contributions by individuals or businesses at $1,300 per election for mayoral candidates. By contrast, the average donation to the Mayor's Fund has been $111,000.

According to the Times piece, “Garcetti's fund has benefited from donations of as much as $1 million from prominent charities as well as manufacturing, engineering, telecommunications, software and financial firms, or foundations linked to those companies.”  The Times also reports that “some donors to the fund said they had enjoyed one-on-one meetings with the mayor and dinner receptions at his official residence.”  The mayor, for his part, is reported to have insisted that “he keeps his distance from the organization's operations and that donors are dealt with by the nonprofit's staff.”



March 4, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Governance Reforms of the Bernie Mac Foundation

The Chicago Tribune reports that the Bernie Mac Foundation (“BMF”) has adopted numerous reforms to improve its governance following an audit by the Illinois Attorney General prompted by a journalistic probe by the Tribune. The need for change is perhaps best captured by the following fact reported by the Tribune: Only $152,000 of $900,000 worth of the BMF’s expenditures from 2009 to 2013 “went to charitable programs.”

The late comedian Bernie Mac created the BMF to combat sarcoidosis, a disease that afflicted Mac. After his death, the BMF’s board at one point reportedly dwindled to three people consisting of two family members and a long-time associate of Mac.  The BMF received several hundred thousand dollars of charitable contributions after Mac’s death, but problems soon surfaced.  According to the story, much of the donated money “ended up going to salaries and contracts that benefited board members, and the foundation fell far short of recognized benchmarks for charitable spending.” 

But all of that now appears to have changed.  The BMF is reported to have increased its board membership to eight people, giving the board “a range of community leaders and professionals.” The Tribune further reports:

[T]he Bernie Mac Foundation's charitable spending is expected to increase this year.


The organization also will stop contracting with two companies controlled by Mac's longtime associate, board Treasurer Edward Williams, according to new board member Manotti L. Jenkins, who is serving as a spokesman for the group. Several experts told the Tribune that the sums paid out to one of Williams' companies seemed large for the financial consulting and investment management services it was listed as providing.

In addition, says the piece, the BMF’s bylaws now prohibit board members from receiving salaries from the charity and from voting on transactions in which they are financially interested. Other reforms include (1) formalizing the BMF’s support of its primary charitable beneficiary, the Bernie Mac Sarcoidosis Translational Advanced Research (STAR) Center, established at the University of Illinois Hospital & Health Sciences System, and (2) requiring modest participation in fundraising by board members.



March 4, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 3, 2015

Issues Abound in For-Profit College Conversions

Readers of this blog are likely familiar with issues surrounding nonprofit hospital conversions.  It appears that we may be witnessing a trend of conversions in the opposite direction (i.e., from for-profit to nonprofit form) in another field – education.  In Some Owners of Private Colleges Turn a Tidy Profit by Going Nonprofit, the New York Times reports that recent governmental regulations and extensive negative publicity have led some for-profit colleges to opt for a solution quite distinct from going out of business.  These schools have chosen to convert to nonprofit corporations.  Apparently to illustrate the risk that for-profit culture may (or at least may be perceived to) carry through to the newly created nonprofit entities, the Times presents the case of Florida’s Keiser University.  Says the Times:

In 2011, the Keiser family, the school’s founder and owner, sold it to a tiny nonprofit called Everglades College, which it had created. As president of Everglades, Arthur Keiser earned a salary of nearly $856,000, more than his counterpart at Harvard, according to the college’s 2012 tax return, the most recent publicly available. He is receiving payments and interest on more than $321 million he lent the tax-­exempt nonprofit so that it could buy his university. And he has an ownership interest in properties that the college pays $14.6 million in rent for, as well as a stake in the charter airplane that the college’s managers fly in and the Holiday Inn where its employees stay, the returns show.  A family member also has an ownership interest in the computer company the college uses. 

The piece quotes fellow blogger Lloyd Mayer of the law school at the University of Notre Dame as observing the concern that newly formed nonprofit schools “may be providing an impermissible private benefit to their former owners.”  

Dr. Arthur Keiser reportedly has dismissed the notion that the conversion of Keiser University raises concerns by stating that transitioning to the nonprofit form was long contemplated and by observing, “We disclosed everything. There’s nothing wrong with it.”  However, not all appear convinced.  According to the Times, former Education Department official Robert Shireman “filed a complaint with the Internal Revenue Service accusing Mr. Keiser and three board members of violating tax regulations and using the nonprofit ‘for personal gain.’”  Keiser is reported to have responded to these allegations by stating that “all the financial arrangements ‘are at fair market value terms and conditions,’ and that the college adheres to ‘generally accepted auditing and accounting principles.’” Further, Dr. Keiser points out that the valuation of the college when sold was supported by “two independent auditors” and that he donated much of the value to the new school. 

The Times reports that the structure of the Keiser University conversion is not atypical.  Others are reported to have financed the purchase of for-­profit colleges through a combination of loans and charitable contributions “to a closely affiliated nonprofit.” According to the story, the newly formed tax­-exempt schools also may lease space from the original owners at hefty rents.  The piece discusses conversions of Stevens-Henager, CollegeAmerica, California College (all owned by Carl B. Barney), Remington College and Herzing University, and a planned conversion of Grand Canyon University.




March 3, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Monday, March 2, 2015

Growing Marijuana as “Agriculture” on Conservation-Easement Protected Land

Mesa LT pot copyA small group of residents of the Town of Palisade, Colorado, recently gathered to protest the Board of Trustees' approval of two zoning ordinances that help pave the way for a couple to lease land in the town to grow medical and possibly retail marijuana. The couple has owned and operated a medical marijuana facility in the town for the past five years and plans to lease the land from a local peach farmer.

The residents objecting to the Board’s decision say it was hastily made without much public discussion or consideration of the ramifications to the town. One noted that Palisades is known for peaches, not pot.

The couple that intends to lease the land is reportedly still in the process of obtaining a conditional-use permit to grow marijuana on the site. State requirements for the growing operation reportedly include an investment in a $35,000 operating system and 24-hour surveillance video that state officials will have access to, storage of all equipment in a structure or an enclosed area, no advertising or identifying signs on the property, and the set-back of the cultivation area at least 50 feet from property lines. The couple reports that the one-acre growing operation will initially be started in greenhouses to help curb residents’ concerns.

The Mesa Land Trust holds a conservation easement on the land at issue. Those opposed to the marijuana growing operation say they do not believe marijuana should be grown on land that is conserved for agricultural uses. Those in favor of the operation say farmers should have the right to do whatever they want on their land.

The Mesa Land Trust has reportedly stated that conservation easements preserve land to be agriculturally productive, “including farming and orchard activities with the choice of crops being in the discretion of the grantor,” and that the land trust does not have the authority to tell landowners which crops they can and cannot grow.

Nancy A. McLaughlin, Robert W. Swenson Professor of Law, University of Utah S.J. Quinney College of Law

March 2, 2015 | Permalink | Comments (2) | TrackBack (0)

Northeastern University Pays Portion of Requested PILOT

According to a recent article in the Boston Globe, “Northeastern University recently retroactively paid the city of Boston $886,000 to help cover the costs of municipal services after the school faced criticism for failing to give anything this past fiscal year.”  The Globe further reports that the city had requested $2.5 million, and that the letter accompanying the lesser payment states that it “should not be construed as support or commitment to the PILOT formula, so much as it reflects our willingness to work with your administration to arrive at a financial number that properly reflects Northeastern’s relationships with the city.”

The story sets forth additional facts that provide context to the Boston PILOT program:


Fifteen of the 19 colleges [owning highly appraised property in Boston], including the city’s wealthiest universities, did not pay the amounts requested by the city during fiscal 2014.


The amounts the city requests are based on the total assessed value of tax-exempt properties owned by the nonprofits. Northeastern has been criticized sharply for failing to pay what the city requests despite its large size. The university owns about $1.3 billion worth of tax-exempt property in Boston, which is the third most of any college in the city.


Boston University owns $2 billion worth of tax-exempt property and last fiscal year paid the city about $6 million, about $500,000 less than the city requested. Harvard, while based in Cambridge, owns about $1.5 billion worth of tax-exempt property in Boston and paid the city $2.2 million, while the city requested about $4.3 million.

Northeastern, reports the Globe, already pays the city more than $2 million annually in property taxes, and has stated that it not only provides annual community benefits exceeding $28 million, but also has committed millions to improve a nearby city park.



March 2, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Proposed Legislation to Expand In-Home Elder Care in Massachusetts

The Boston Globe reports that Massachusetts lawmakers are hearing many proposals for expanding services that the commonwealth provides the elderly who need more help to enable them to live at home.  A coalition of nonprofit entities are reportedly supporting various legislative initiatives that, proponents say, ultimately will save taxpayers money because they will reduce the time that older residents spend at expensive institutions, such as hospitals and nursing homes.  Proposals include providing older people of moderate means assistance with grocery shopping and taking medicine, as well as teaching family members how to perform in-home nursing tasks.  Laws governing the latter, says the story, have already been enacted in Oklahoma and New Jersey.


With the expanding costs of healthcare and the aging population of baby boomers (who must think not only of their current and future medical care needs, but also of their parents’ present health care requirements), a proliferation of similar proposals across the country would not be surprising.



March 2, 2015 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Sunday, March 1, 2015

Conservation Easement Valid Despite Referencing Incorrect Grantor

CO Cattlemens case copyIn Ranch O, LLC v. Colorado Cattlemen’s Agricultural Land Trust, 2015 WL 795050 (Colo. Ct. App. 2015) (unpublished), the Colorado Court of Appeals held that a conservation easement that mistakenly referenced an individual, as opposed to a limited liability company created by the individual, as the easement grantor was nonetheless valid. The Court of Appeals also affirmed the District Court’s reformation of the easement to reflect the limited liability company as grantor.


Mr. Walker conveyed certain ranch property to a limited liability company (LLC) of which he was the sole manager and 99% membership owner. Sometime later, Mr. Walker purported to donate a conservation easement on the ranch to the Colorado Cattlemen’s Agricultural Land Trust (land trust). The conservation easement deed was signed by both parties and recorded, but it incorrectly stated that Mr. Walker, rather than the LLC, was the easement grantor.

Thirteen years later, the LLC sold the real property, expressly subject to the conservation easement, to Ranch O. Ranch O reportedly paid a reduced price for the ranch that reflected the existence of the easement restrictions. Soon thereafter, however, Ranch O filed suit, arguing that the conservation easement was invalid and had no force and effect because the owner of the property (the LLC) had not created the easement.

Mr. Walker and the land trust were unaware of the error in the deed regarding the grantor’s identity until Ranch O brought it to their attention just before filing suit. At the time of the easement’s donation, the land trust had not obtained title insurance.

The District Court held that the conservation easement was valid and reformed the deed to reflect the LLC as the easement grantor. Ranch O appealed, and the Colorado Court of Appeals affirmed the District Court on a number of grounds.

Reformation Based on Mutual Mistake

The Colorado Court of Appeals first noted this general rule:

if a conveyance or encumbrance document fails to reflect that the conveyor is functioning in a fiduciary or representative capacity, and that person does not have a personal or independent interest in the subject property, the document is considered as having been executed in the fiduciary or representative capacity.

Although noting that this general rule “appears to be applicable here,” the Colorado Court of Appeals declined to decide the case on that basis because neither party had raised and the District Court did not address this general rule.

Instead, the Court of Appeals concluded, as did the District Court, that the parties to the conservation easement made a mutual mistake of fact and reformation was the appropriate remedy. The court explained, in part, that

[Mr.] Walker and the Land Trust clearly and unequivocally intended that the grantor of the conservation easement be the owner of the subject property. Accordingly, reformation did not insert a new term that was never in the parties’ minds, nor did it rewrite the parties’ agreement. Rather, the reformed Conservation Deed represented the true agreement of the parties and gave effect to their actual intentions.

The court rejected Ranch O’s argument that the mistake was not mutual because the land trust was ignorant of the LLC’s existence when it acquired the easement while Mr. Walker was not. The court explained that “parties can be mutually mistaken regarding a contracting party’s identity even when their mistakes on that issue are not identical.”

The court also rejected Ranch O’s argument that Colorado’s conservation easement enabling statute, which provides that a conservation easement “may only be created by the record owners of the … land,” precluded reformation because it required the land trust to confirm the property’s ownership before accepting the conservation easement. The court found no authority supporting the assertion that negligent failure of a party to know or discover facts precludes reformation for mutual mistake, and noted that reformation accomplishes the purpose of the enabling statute.

Reformation Did Not Violate Policies and Purposes Behind Race-Notice Statute

The Colorado Court of Appeals also disagreed with Ranch O’s contention that reformation of the conservation easement deed violated the policies and purposes behind Colorado’s race-notice statute. The court explained that the purpose of the race-notice statute is to protect purchasers of real property against the risk of prior secret conveyances and allow them to rely on title as it appears of record. The statute makes an exception, however, for unrecorded documents of which the parties have notice. Ranch O had actual notice of the conservation easement deed before it purchased the subject property—the deed to Ranch O advised, in bold type and all block capital letters, that the subject property was encumbered by the conservation easement and gave the easement deed’s recording date and reception number. Accordingly, the easement deed was valid against Ranch O pursuant to Colorado’s race-notice statute, and thus, reformation of the deed was not contrary to the purposes and policies of that statute.

The Colorado Court of Appeals acknowledged that, in certain circumstances, a bona fide purchaser of real property can defeat a claim for reformation—i.e., the equitable claim for reformation based on mutual mistake “is subject to the rights of good faith purchasers for value and other third parties who have similarly relied on the finality of a consensual transaction in which they have acquired an interest in property.” In this case, however, Ranch O acquired the property with actual knowledge of the easement, even though the instrument was defective, and it could not ignore an instrument of which it had actual notice. To hold otherwise, said the court, would run counter to the notion that reformation is an equitable remedy that should be available when fairness demands such relief. Reforming the deed, explained the court, effectuates the intent of the parties and does not prejudice Ranch O in any way, given Ranch O’s actual knowledge of the existence of the conservation easement.

Nancy A. McLaughlin, Robert W. Swenson Professor of Law, University of Utah S.J. Quinney College of Law

March 1, 2015 | Permalink | Comments (0) | TrackBack (0)

Friday, February 27, 2015

SSRN Update: Articles on Public Interest Law, Church Bankruptcy, and Conservation

(1) Kathryn Sabbeth (UNC) has posted: "What's Money Got to Do With It?: Public Interest Lawyering and Profit." Here is the abstract: 

Definitions of public interest lawyering influence financial support, regulation of lawyers, and professional identity. This Article examines three contexts in which legal institutions have operationalized the concept of public interest lawyering: tax exemptions, exceptions to solicitation prohibitions, and fee-shifting statutes. The Article critiques the common conception of public interest lawyering as work provided by non-profit organizations or through volunteer activities outside the mainstream market for legal services. It argues that interpreting public interest lawyering as a market exception not only is incomplete but also threatens the viability of important work.

(2) Pamela Foohey (Indiana) has posted "When Faith Falls Short: Bankruptcy Decisions of Churches." Here is the abstract:

What does a church do when it is about to go bust? Religious organizations, like any business, can experience financial distress. Leaders could try to solve their churches’ financial problems on their own. Perhaps leaders do not view the problems as addressable with law. Or perhaps they do not think, as a moral or spiritual matter, that they should resort to the legal system, such as bankruptcy, to deal with their churches’ inability to pay its debts. Yet about ninety religious organizations seek to reorganize under the Bankruptcy Code every year. This Article relies on interviews with forty-five of these organizations’ leaders and attorneys to examine how the leaders conceptualized their churches’ financial distress as legal problems and decided to address those legal problems with bankruptcy.

Through these inquiries, the Article sheds light on longstanding questions about how people and organizations decide to use the legal system versus doing nothing or solving problems through self-help. The Article thus provides one of the first assessments of how small organizations view their problems as legal problems, and the first assessment of how leaders of small organizations decide to file for bankruptcy.

Church leaders’ journeys began with struggling to solve their congregations’ financial problems themselves and proclaiming that “bankruptcy from a spiritual standpoint is a no-no.” Most often, creditors’ foreclosure threats brought law to leaders’ attention. Leaders then turned to social networks for help understanding their legal options. Drawing from these results, the Article also scrutinizes how leaders’ reliance on social networks and feelings of stigma and shame because of their decisions to file influence debates about restricting access to bankruptcy.

(3) Jesse Phelps (USDA) has posted "'A Tinge of Melancholy Lay Upon the Countryside': Agricultural Historic Resources Within Contemporary Agricultural and Historic Preservation Law." Here is the abstract:

Preservation of working lands and resources has become the focus of many interested in the protection of rural areas. Despite public support for such initiatives and quantifiable successes, preservation advocates have struggled to utilize the current tools available to safeguard historic resources. To address this gap, this Article first considers the unique nature of agricultural historic resources and the challenges they present from a preservation perspective. It then assesses the current framework of historic preservation laws, developed largely for urban neighborhoods, and the issues preservationists face in applying these tools to the rural context. Last, this Article proposes a series of policy solutions that would provide meaningful assistance to rural preservationists in achieving their objectives. Ultimately, historic preservation has the potential to play a strong role in preserving the character of rural areas, but only if this profound policy disconnect can begin to be bridged.


February 27, 2015 | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 25, 2015

Hospital Boards and Quality of Care

The New York Times reported on the relationship between a sound hospital board of directors and the quality of care provided by the hospital. Here is the beginning of the article:

"If you or a loved one is having a heart attack, your most pressing concerns probably include how quickly you can get to the hospital and the quality of care you’ll receive. You’re probably not thinking about the hospital’s board room, even though quality of care for heart attacks and many other conditions may be determined in large part by decisions made there. Several studies show that hospital boards can improve quality and can make decisions associated with reduced mortality rates. But not all boards do so." Another interesting installment on the relationship between good governance and charitable outputs.


February 25, 2015 | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 24, 2015

Senate Hearing on Colleges and Universities

The U.S. Senate Committee on Health, Education, Labor & Pensions held a hearing today (Feb. 24) titled: Recalibrating Regulation of Colleges and Universities: Report of the Task Force on Federal Regulation of Higher Education. The Report is available here. Coverage of the hearing was provided by the Washington Post in an article titled "Are Colleges Over Regulated?" The Post describes the hearing as an initial step in “efforts to simplify federal regulations of colleges and universities, seeking to lay the groundwork for a rewrite of the nation’s higher education law.” 


February 24, 2015 | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 18, 2015

The new phone book's here! The new phone book's here!

Steve Martin
One of the best resources out there for keeping track of state adoption of hybrid entities is and specifically, the fantastic multi-colored map that keeps track of who has what where.   

So it is with a great excitement that would do Navin Johnson proud that we can share that Cass Brewer has updated his map.   Check it out!

EWW (dating herself....)

February 18, 2015 in Other, Weblogs | Permalink | Comments (1) | TrackBack (0)

Tuesday, February 17, 2015

Alexander, "Benefit Corporations-The Latest Development in the Evolution of Social Enterprise: Are They Worthy of Taxpayer Subsidy?"

H/t the mothership at Tax Prof Blog:

Mystica M. Alexander, "Benefit Corporations-The Latest Development in the Evolution of Social Enterprise: Are They Worthy of Taxpayer Subsidy?", 38 Seton Hall Legis J. 219 (2014):  

The purpose of this Article is twofold: (1) placing the Benefit Corporation within the historical context of the social enterprise movement in the United States, and (2) considering whether Benefit Corporations should qualify for the preferred tax treatment given to nonprofit organizations. Part II of this Article explores the evolution of the social enterprise movement and the path leading to the hybrid entity’s rise in the United States. Part III provides a closer look at the legal requirements imposed on Benefit Corporations. Part IV outlines the requirements that must be met for a nonprofit organization to qualify for tax benefits and the rationale behind such benefits. Part V addresses whether the tax benefits made available to nonprofit organizations should be extended to Benefit Corporations. This Article concludes that although the Benefit Corporation represents a natural progression in the evolution of social enterprise, its organizational and operational structure does not provide sufficient grounds for extending special tax treatment to these organizations.


February 17, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Monday, February 16, 2015

Third Circuit: Religious Nonprofits Must Comply With The ACA

On February 11, 2015, the Third Circuit handed down Geneva College v. Sec'y United States HHS. The case was brought by a group of nonprofit organizations that objected to purchasing healthcare plans that cover contraceptives in accordance with the Affordable Care Act. While Geneva College was exempt from providing such healthcare plans, the College argued that the ACA ultimately required it to sanction the use of contraceptives through an “opt out” provision. The Third Circuit, however, ruled the College’s religious beliefs were not substantially burdened by the ACA’s opt out provision.

At first blush this case seems similar to Burwell v. Hobby Lobby Stores, Inc. However, in Burwell the Supreme Court held that Hobby Lobby, a closely held corporation with a religious identity, had to choose between complying with the ACA in violation of its religious beliefs, or refuse to comply and face large fines. The Court held that the law violated the test set forth in RFRA. In relevant part, RFRA states that the “[g]overnment may substantially burden a person's exercise of religion only if it demonstrates that application of the burden to the person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest."

 Here, under the ACA, religious nonprofits may “opt out” of providing health insurance that covers contraceptives. Under the ACA, nonprofits may submit a form to the government evidencing their religious objection. Once submitted, the nonprofit is exempt from providing the coverage, and the insured is able to obtain coverage for contraceptives elsewhere at no additional cost to the insured. The Geneva College claimed that submitting the exemption form to the government, it is “triggering, facilitating, or making [the appellees] complicit” in providing coverage for contraceptives despite not having to do so directly.

The Third Circuit disagreed, holding that the College’s religious exercise is substantially burdened by the opt out requirement. The Court of Appeals stated that the “[opt out provision] does not necessitate any action that interferes with the appellees' religious activities… [t]he appellees' real objection is to what happens after the form is provided—that is, to the actions of the insurance issuers and the third-party administrators, required by law, once the appellees give notice of their objection.” The Court of appeals went on to say “RFRA does not give the appellee a religious veto against plan providers’ compliance with [ACA regulations].”

Similar challenges to the ACA have been heard by the Fifth, Sixth and District of Columbia circuits, all of which ruling in favor of the government. Some say that this issue will almost certainly be heard by the Supreme Court next term. It should be interesting to see how the Court will decide this case and what it will mean for religious nonprofits.


February 16, 2015 | Permalink | Comments (0) | TrackBack (0)

Sunday, February 15, 2015

Nonprofits Find Much to Like in Obama's Tax Proposal

An interesting article from the Chronicle of Philanthropy explains that there may be something in the president’s budget proposal that nonprofits may appreciate. According to the article, the budget would ultimately “raise the capital-gains tax, paid on inheritances of money and property, from its current rate of 23.8 percent to 28 percent for high-income taxpayers. In addition, the tax plan would close what some tax experts call the ‘trust-fund loophole.’”  According to some, these provisions would incentivize wealthy taxpayers to bequeath a greater portion of their assets to nonprofits to avoid paying the hefty capital gains tax. However, this assumes that the President or Congress won’t put limits on the charitable tax deduction.

It is important to note that the President’s budget has already garnered a great deal of criticism from GOP law makers. One of the greatest points of contention comes from the increase in capital-gains tax. It will be interesting to see the final budget and how it may affect donor behavior.     


February 15, 2015 | Permalink | Comments (0) | TrackBack (0)

Saturday, February 14, 2015

Pennsylvania Lawmakers Seek To Enact Constitutional Amendment Limiting Judicial Interpretation of Nonprofits

The Pennsylvania General Assembly is considering a constitutional amendment that would give the General Assembly the sole authority to set the standard for “purely public charities.” According to a memo from Senators Ryan P. Aument (R) and Joseph B. Scarnati (R), the Amendment is apparently in response to the Pennsylvania Supreme Court case Mesivtah v. Pike County Board of Assessment Appeals. The court held that that Camp Mesivtah was not a purely public charity even though it qualified under the Pennsylvania Institutions of Purely Public Charity Act. The proposed constitutional amendment is purported to overrule the Mesivtah decision and obviate the need for the judiciary to interpret or set standards regarding the requirements for tax exempt status.

The Pennsylvania Institutions of Purely Public Charity Act may reflect the will of the General Assembly, but is a constitutional amendment going to keep the courts out of the business of interpreting the Act? Read more here.


February 14, 2015 | Permalink | Comments (0) | TrackBack (0)

Friday, February 13, 2015

Maine’s Governor Proposes Budget That Would Include Property Tax for Large Nonprofits

Maine’s legislature is in the process of considering the governor’s biennial budget proposal. In relevant part, the budget includes a tax on “large” nonprofit organizations operating within the state. The provision would require municipalities to tax nonprofit organizations at 50% of assessed property value over $500,000 as well give municipalities the authority to impose other fees. This has prompted many to say that the budget, if adopted as is by the legislature, would ultimately be an overhaul of the state’s tax code.

Rhetoric about taxing nonprofits and exempt organizations is nothing new. However, the notion is gaining traction in many states, particularly in the northeast. And while some states have attempted to impose similar taxes, this is the first time such a proposal has been made part of a governor’s budget proposal. Proponents of the measure claim that the tax would help broaden the base and allow the state to cut taxes for citizens in need of tax relief. Read more here.

If adopted by the legislature, how might this affect the nonprofit sector nationally? Are other states likely to follow suit? 


February 13, 2015 | Permalink | Comments (0) | TrackBack (0)

Friday, February 6, 2015

Article on the Charitable Contributions Deduction and Social Justice

Fran Quigley (Indiana University Robert H. McKinney School of Law) has posted For Goodness’ Sake: A Two-Part Proposal for Remedying the U.S. Charity/Justice Imbalance on SSRN.  Here is the abstract:


The U.S. approach to addressing economic and social needs strongly favors individual and corporate charity over the establishment and enforcement of economic and social rights. This charity/justice imbalance has a severely negative impact on the nation’s poor, who despite the overall U.S. wealth struggle with inadequate access to healthcare, housing, and nutrition. This article suggests a two-part approach for remedying the charity/justice imbalance in the U.S.: First, the U.S. should eliminate the charitable tax deduction, a policy creation that does not effectively address economic and social needs, forces an inequitable poverty relief and tax burden on the middle class, and lulls the nation into a false sense of complacency about its poverty crisis. Second, the U.S. should replace the deduction with ratification of the International Covenant on Economic, Social and Cultural Rights. This two-part process would reverse the U.S. legacy of avoiding enforceable commitments to economic and social rights. Charity would take a step back; justice a step forward.



February 6, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Article on College Athletics and Taxation

Richard Schmalbeck (Duke University School of Law) has posted Ending the Sweetheart Deal between Big-Time College Sports and the Tax System on SSRN.  Here is the abstract:


This paper was prepared for the annual conference of the National Center for Philanthropy and Law, held at the NYU Law School, held October 24-25, 2013. The overall topic was “Tax Issues Affecting Colleges and Universities,” and I was asked to address specifically those issues relating to athletics. This paper considers two specific issues that have in common only that they involve college sports, and are plagued by egregiously bad, (in this case, egregiously generous), tax treatment: the failure of the IRS to regard any part of the revenue from college sports as unrelated business income, and the choice by Congress to allow taxpayers to deduct 80% of contributions that they make to colleges or their “booster clubs,” even when those contributions entitle the donors to special privileges in purchasing tickets to college athletic events.

Most readers are probably familiar with the general rules regarding charitable contributions deductions, but a word about the unrelated business income tax may be helpful. An organization may qualify (or continue to qualify) as a tax-exempt organization, eligible to receive tax-deductible contributions, if its activities are primarily charitable. However, if the organization regularly carries on trade or business activities that are unrelated to its exempt purpose, the income from those activities is subject to federal income taxation at the same rates applicable to for-profit corporations. Although those rates are low for small businesses (those earning less than $75,000 per year), corporate earnings in excess of that amount are taxed at a rate of 34% on up to ten million dollars of income, and 35% beyond that amount. The unrelated business income tax raises very little revenue, but is thought to have an in terrorem effect, discouraging nonprofit organizations from engaging in unrelated business activities. While the unrelated business tax exists primarily because of Congressional concerns about unfair competition with for-profit businesses, a better description of its actual effect is that it discourages nonprofit organizations from pursuit of business activities that do not further any exempt purpose.



February 6, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Article on Fiduciary Duties

Lionel Smith (McGill University - Faculty of Law - Paul-André Crépeau Centre for Private and Comparative Law; King's College London – The Dickson Poon School of Law) has posted Fiduciary Relationships: Ensuring the Loyal Exercise of Judgement on Behalf of Another on SSRN.  Here is the abstract:

In this article, I present a theory of fiduciary relationships that seeks to address both the justification and the content of fiduciary duties. It will also address the question of remedies, which sheds important and neglected light on the question why this part of the law has the shape that it does. All three aspects — the reasons we impose these duties, what these duties require, and the remedies associated with them — are linked to one another in a conceptual unity that reveals the interlocking aspects of private law’s concern with relationships in which one person is empowered to exercise decision-making authority on behalf of another.



February 6, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)