Wednesday, June 8, 2016
Eric C. Chaffee, Professor and Associate Dean of Faculty Research & Development at the Univerity of Toledo College of Law, presented his paper entitled "Collaboration Theory: A Theory of the Charitable Tax Exempt Nonprofit Corporation" on June 2 at the most recent Law & Society conference (Program Link here). The current draft of the paper, which is forthcoming 2016 in the U.C. Davis Law Review, is available on SSRN here - the SSRN abstract follows:
Legal scholarship regarding tax exempt nonprofit entities is meager at best. Although some excellent treatises, book chapters, and journal articles have been written, the body of scholarship relating to these entities is not nearly as healthy and robust as the scholarship relating to their for-profit companions. This is especially troubling considering that nonprofit entities help to improve our society in a myriad of different ways.
This Article seeks to fill a void in the existing scholarship by offering an essentialist theory for charitable tax exempt nonprofit corporations that helps to explain the essence of these entities. Beyond the purely academic metaphysical inquiry into what is a corporation, understanding the essential nature of these corporations is important because it helps to determine how they should interact with society, what rights they should have, and how they should be governed by the law. This discussion is especially timely because the recent opinions by the Supreme Court of the United States in Citizens United and Hobby Lobby have reinvigorated the debate over the essence of the corporation.
This Article breaks new ground by offering a new essentialist theory of the corporation, which shall be termed “collaboration theory.” The decades of debate over the essence of for-profit corporations has coalesced into three prevailing theories of the corporation, i.e., the artificial entity theory, the real entity theory, and the aggregate theory. The problem is that none of these prevailing theories fully answers the question of what is a corporation.
Collaboration theory suggests that charitable tax exempt nonprofit corporations are collaborations among the state governments, federal government, and individuals to promote the public good. Unlike the prevailing theories of the corporation, collaboration theory explains both how and why charitable tax exempt nonprofit corporations exist, which provides a fuller and more robust understanding of these corporations. Collaboration theory advances the existing scholarship by finally offering an essentialist theory for nonprofit corporations, and it shows remarkable promise for understanding the essential nature of for-profit corporations as well.
Saturday, November 29, 2014
Last month I had the opportunity to attend the NYU National Center on Philanthropy and the Law's Annual Conference. The conference was titled Regulation or Repression: Government Policing of Cross-Border Charity and provided an eye-opening overview of restritions imposed by many countries on foreign funding of charities and other NGOs. What made the conference particularly timely was the fact that only a month earlier a prominent member of Congress had publicly attacked foreign donations to think tanks - in the United States. This concern led to a bipartisan legislative proposal to require disclosure of foreign funding from scholars who testify on Capital Hill. The timing was particularly ironic, as at almost the same time the Economist ran two articles raising concerns about autocratic and illiberal governments placing limits on such funding: Donors: Keep Out and Uncivil Society. That said, whatever concerns charities and other nonprofits may have in the United States (including members of Congress criticizing them for accepting foreign donations), they pale in comparison to the concerns that the legal restrictions on both funding and activities raise for NGOs in many other parts of the world.
Thursday, October 2, 2014
h/t to our friends over at TaxProf Blog:
Benjamin M. Leff (American), Preventing Private Inurement in Tranched Social Enterprises, 41 Seton Hall L. Rev. ___ (2015):
Thursday, March 20, 2014
Miranda Perry Fleischer recently provided provocative food for thought regarding the efforts to reform the charitable contribution deduction. In this week's Tax Notes (2014 TNT 54-4) she argues that charitable reform should result in something that really adds to the incentives to assist the poor rather than our own favorite projects. She doesn't argue against the worth of a diverse civil society supportive of MOMA, Harvard and other places most often patronized by people of means. But she does argue that assisting the truly needy should be the central focus of the charitable contribution deduction:
A full discussion of the charitable deduction should also take into account who benefits -- not just who receives the tax benefits from claiming the deduction but who the ultimate charitable beneficiaries are. Once we recognize that most charitable giving, especially by the wealthy, does not assist the poor and disadvantaged, what should we do? First, we should stop using the poor as an excuse for not discussing reforms such as turning the deduction into a credit or instituting a rate cap or AGI floor. To truly evaluate these proposals, we need to recognize which institutions (education, arts, and health organizations) might suffer and determine whether any fiscal savings are worth potential drops in donations to those types of charities. They may not be, but that's a different question from talking about harm to the sector in general or harm to the poor from those proposals.
More ambitiously, we should grant larger tax benefits to contributions to organizations that provide basic needs to the poor. You want to help education? Let's provide more incentives for donations to a tutoring program in a low-income area than we do for donations to your kid's school (which you would probably do anyway). To that end, I propose that donations to organizations that provide basic services to the poor be treated more generously for tax purposes than other donations. Let's say that you donate $ 100 to a soup kitchen. If the deduction remains a deduction, perhaps you are treated as if you had donated $ 200 (thus triggering a government subsidy of $80 instead of $40). If an AGI floor is implemented, perhaps those contributions are not subject to the floor. If the deduction is changed to a credit of, say, 15 percent, maybe you would receive a 30 percent credit for those types of donations.
By emphasizing donations to organizations helping the neediest, we'd be putting our money where our mouths are when it comes to charitable giving. We routinely use charity for the poor not only as a justification for continuing the tax status quo but also to excuse less government aid to the poor. For example, the bipartisan letter to Baucus argued that if the deduction were reformed, "the government would be required to step in and fund those services now being provided through private generosity. Accordingly, preserving the charitable deduction is also prudent as a matter of broad fiscal policy." There are very valid reasons for wanting charity to do more, and government less, when helping the poor. Quite often, charities can find more efficient, more responsive, and more creative ways of assisting the poor than the government can. So let's structure the tax incentives for charitable giving to reflect these values. Perhaps it's an area in which Republicans and Democrats can find common ground.
I second that. But I bet it won't happen and I just want to comment on and dispense with the most likely counterargument. The big boys -- hospitals and universities -- in civil society would never stand for anything that might result in fewer contributions to their own, even if whatever it is increased the amount of charity to the poor. I don't condemn those who would rather contribute to the Museum of Modern Art any more than would Prof. Fleischer. But the arguments against favoring the poor above all else in IRC 170 [or 501(c)(3)] rely on or at least harken to common misinterpretations of Biblical passages: "Man does not live on bread alone," opponents might say while also adding, "the poor will always be with us." Math. 4:4 and Mark 14:7. Religious scholars pretty much agree that those passages are misused to the extent they are thought to elevate every other good thing to the same level as the relief of poverty. Tax policy makers should conclude likewise.
Friday, February 15, 2013
I was fortunate enough to be invited to present at a conference hosted by Columbia Law School's Charities Law Project last week. Featuring presentations and draft papers (available on the conference website) from a who's who list of charity law experts from the academy, state AG offices and other agencies, and private practice, the conference provided an incredible opportunity to consider and discuss emerging issues in the regulation of charities. Topics covered included:
- Jurisdictional Boundaries: State/Federal, State/State Relationships
- The Fundamental Role Of States In Governance Issues
- Emerging Issue: Political Activity/Advocacy By The Sector & The States' Role
- Transparency, Media And Technology: New Expectations, New Opportunities
- Emerging Issue: Challenges & Interests Of States In Social Mission/Hybrid Organizations
- Mapping The Trajectory: The Changing Role Of The State Regulators
- Emerging Issue: State Jurisdiction Over Religious Organizations
- Emerging Issue: Changing Landscape Of Charitable Solicitation
- Emerging Issue: The Dynamic Role Of States In Nonprofit Healthcare
- Federal Partners
- Envisioning The Future: New Structures
The conference organizers also gathered an extensive set of additional resources that will be helpful to anyone interested in the conference topics.
Monday, November 12, 2012
With h/t to our friends at the TaxProf Blog:
Preservation Easements in an Uncertain Regulatory Future
Jess R. Phelps (Historic New England), Preserving Preservation Easements?: Preservation Easements in an Uncertain Regulatory Future, 91 Neb. L. Rev. 121 (2012):
While federal tax deductions are an important tool for organizations operating easement programs, recent IRS enforcement activity has called the future of this incentive into question--at least as currently constituted. Even if these incentives continue, the presence of continued regulatory uncertainty will make federally subsidized easements less viable unless enforcement activity decreases or easement-holding organizations begin to change how they protect privately-owned homes. However, these challenges provide easement-holding organizations a chance to step back and evaluate their accomplishments of the past thirty years. Many significant structures have been protected, but preservation easements lag far behind in numbers, impact, and public awareness when compared to land conservation efforts. The public has yet to fully “buy in” to the concept of preservation easements and are suspicious of efforts to provide funds to protect private residences.
For this perception to change, easement-holding organizations need to fundamentally re-evaluate the role they play within the preservation movement and determine whether a larger role is possible. There are a variety of ways that easement-holding organizations can shift their thinking and practices to expand the benefit provided through their programs. Similarly, there are clear alternatives to securing the preservation of significant historic resources via reliance on the federal tax incentives. In the end, the efforts of easement-holding organizations to respond to these challenges and reimagine the possibilities of preservation easements will go a long way toward fulfilling SPNEA's original vision of obtaining control of the most significant historic properties and “let[ting] them to tenants under wise restrictions.” Perhaps more importantly, these efforts can also expand upon this vision to protect the underlying stories and preserve a more meaningful spectrum of our collective architectural heritage.
Monday, June 18, 2012
The Law and Society Association's 2012 International Meeting in Honolulu earlier this month featured the following panel and additional papers relating to nonprofits:
- Charities and Public Policy Panel
- Nina J. Crimm (St John's) & Laurence H. Winer (Arizona State),
- Terri Lynne Helge (Texas Wesleyan), Reforming the Private Benefit Doctrine
- Grace S. Lee (Alabama), Toward a More Dynamic Theory Regarding the Charitable Deduction
- Henry Ordower (Saint Lewis), Charitable Contributions of Services
- Miranda L. Stewart (Melborne), Doing Business to Do Good: Should We Tax the Business Profits of Not for Profits
- Meredith A. Cartwright (York), Tax Subsidies for the Religious Training of Children in Religious Schools in US and Canadian Tax and Constitutional Law: “Public” or “Private” “Personal” (In)Tangible Benefits of a Suspect “Gift”
- Daniel B. Rubin (Michigan), A Population Health-Based Approach to Nonprofit Hospital Tax Exemption
- Richard Schmalbeck (Duke), The Role of Declaratory Judgments in Shaping the Concept of Charity
The Charities Regulation and Oversight Project, which is part of the National State Attorneys General Program at Columbia Law School, has issued a call for papers for its February 2013 conference "The Future of State Charities Regulation". Here are the details:
Tuesday, March 13, 2012
Frede Moreno (Western Midanao State University, Philippines and Alliance for International Education, Germany) has posted a short paper on Governance of Microcredit as a Strategy for Poverty Reduction in the Philippines on SSRN. Here is the abstract:
Microcredit can be an effective tool for tackling the global poverty problem. Making microcredit work better for the poor necessitates a framework that integrates the principles of good governance in the design and implementation of a microcredit program. The integration of good governance principles in microfinance is argued to have positive consequences in improving financial viability and increasing social outreach of microcredit programs as well as in widening the livelihood and economic options of Agrarian Reform Beneficiaries within Third World economic and poverty conditions. Governance principles can be applied as implementation strategies of Official Development Assistance (ODA)-assisted microfinance program as a tool for poverty reduction and development. In view of the Philippine government’s limitations, economic and fiscal challenges, the financial and technical support programs of the international donor community provide a big boost to the effectiveness and impact of microfinance in reducing the incidents of poverty in Third World countries such as the Philippines. As a tool for poverty reduction, microcredit is applicable only to the enterprising poor. The use of microcredit to assist poverty groups is recommended to be based on existing livelihood activities and micro-entrepreneurial skills and capabilities. Furthermore, the program design of the Bangladesh Rural Advancement Committee (BRAC) is found to be appropriate for the agrarian reform beneficiaries in Zamboanga Peninsula (Region IX), Philippines. Joe Remenyi’s (1999) Poverty Pyramid reinforces BRAC’s graduated strategy for helping the poor when they are grouped into: (1) micro-enterprise operators or the less poor, (2) enterprising or moderately poor, (3) laboring or very poor, and (4) poorest of the poor and most vulnerable or the ultra-poor.
Tuesday, June 7, 2011
A reader alerted me that the links I previously provided for these papers were not working. I have now corrected those postings (first set of papers and second set of papers) with updated information for accessing the abstracts and, where available, drafts of the papers. My apologies for the problematic links.
Monday, June 6, 2011
The following authors presented nonprofit-related papers at the Law and Society Annual Meeting over the weekend. To see the abstracts of these papers, click on the above link, click on "Search the Preliminary Program" of the left side of the page, and then search for the author of the paper. For those papers with publicly available drafts, I have provided a link to those drafts below.
- Ellen Aprill (Loyola-L.A.), Regulating the Political Speech of Noncharitable Exempt Organizations after Citizens United
- Brian D. Galle (Boston College), The Normative Basis for Legal Restrictions on Nonprofit Political Activities
- Jill S. Manny (NYU), Lobbying: Hear the Public Voice of Public Charities
Hat Tip: TaxProf Blog
Friday, June 3, 2011
As part of the Law, Society, and Taxation portion of the Law and Society Association's annual meeting in San Francisco, the following nonprofit-related papers were presented yesterday or are being presented today. To see the abstracts of these papers, click on the above link, click on "Search the Preliminary Program" of the left side of the page, and then search for the author of the paper. For those papers with publicly available drafts, I have provided a link to those drafts below.
- Nicholas A. Mirkay (Widener), International Philanthropy and the Public Policy Doctrine: A Modern Conundrum
- Heather Elliott (Alabama) & Grace Soyon Lee (Alabama), Zoning for Dollars: What Is the True Value of Donated Real Property?
Hat tip: TaxProf Blog
Friday, May 27, 2011
Ellen Aprill (Loyola-Los Angeles) has posted a comment on the Loyola-L.A. faculty blog regarding the emerging dispute over whether the federal gift tax applies to large, individual donations to tax-exempt, section 501(c)(4) nonprofit organizations. Readers interested in more in-depth discussion of this topic would be well advised to take a look at her recent article on the same subject.
Sunday, January 9, 2011
Ellen Aprill (Loyola - L.A.), Roger Colinvaux (Catholic), and I have posted papers examining different ways that the Supreme Court's Citizens United v. FEC decision affects - or does not affect - speech by nonprofit organizations. We initially presented these papers at the National Center on Philanthropy and the Law's Annual Conference last fall, which focused on nonprofit speech in the 21st century. Richard Briffault (Columbia) also presented a paper on this topic at that conference, but that paper is not yet publically available. Here are the abstracts and links for our three papers in the order they were presented:
Roger Colinvaux, Citizens United and the Political Speech of Charities
The Supreme Court’s decision in Citizens United v. Federal Election Commission makes a Supreme Court challenge to the tax law rule that prohibits charities from involvement in political activities likely, and a reexamination of the political speech of charities necessary. Part I of the Article surveys the history of the political activities prohibition in order to emphasize that it was not a reactionary policy but quite considered, and that there are strong State interests supporting it. Part II of the Article analyzes Citizens United in detail and argues that if the Supreme Court considers a challenge to the political activities prohibition, Citizens United is distinguishable: the purpose of the political activities prohibition is not to suppress speech but to define charity; the legal setting is tax and not campaign finance; unlike the campaign finance rule, violation of the political activities prohibition is not criminal; and the political activities prohibition is by nature a rule associated with a tax status rather than a ban on corporate speech. Accordingly, the political activities prohibition, unlike the campaign finance rule, is not a burden on speech and therefore is constitutional. Part III of the Article discusses cautionary notes to the analysis of Part II, and explains that even if there is a constitutional defect to the political activities prohibition, the political activities limitation on the charitable deduction nonetheless would survive. Regardless of the constitutionality of the political activities prohibition, Part IV examines a number of possibilities for a charitable tax status in which political activity is allowed, and concludes that the current rule is the best option. Part V concludes that the prohibition represents the evolution of a century of wrestling with the subject of political activity and charity, and the wisdom that the two are not compatible. Such wisdom should not be contravened.
One of the many aftershocks of the Supreme Court’s landmark decision in Citizens United v. FEC is that the decision may raise constitutional questions for the long-standing limits on speech by charities. There has been much scholarly attention both before and after that decision on the limit for election-related speech by charities, but much less attention has been paid to the relating lobbying speech limit. This article seeks to close that gap by exploring that latter limit and its continued viability in the wake of Citizens United. I conclude that while Citizens United by itself does not undermine the limit on lobbying by charities, the decision does reinforce the constitutional requirement that the government allow charities to easily form a non-tax favored alternative for engaging in unlimited lobbying. Some post-Citizens United proposals for regulating speech-related activity may in fact run afoul of this requirement. More importantly, the intersection of Citizens United and this tax-based limit on charity speech may be a catalyst for renewed consideration of whether the unconstitutional conditions doctrine could be successfully refined in the subsidy context through an approach that considers the purpose of the subsidy and how important the speech-related limit is to the accomplishment of that purpose.
The role of noncharitable exempt organizations was perhaps the key feature of this year’s election. Senator Baucus as Chairman of the Senate Finance Committee, for example, sent a letter calling upon the IRS to survey major noncharitable 501(c) organizations to ensure that they are obeying the rules regarding political activity, including limits on politicking. In Citizens United, however, the Supreme Court decreed that “[n]o sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.” Nowhere does Citizens United acknowledge the tax limits on political speech or address their constitutionality. Supreme Court cases predating Citizens United have justified these tax limits on the grounds that government has no duty to subsidize political speech. To the extent that “no duty to subsidize” is and remains the justification, nothing in Citizens United explicitly threatens the current tax regime. Nonetheless, we must ask whether the reasoning of Citizens United has undermined Regan v. Taxation with Representation of Washington (“TWR”), the key ”no duty to subsidize” case. In addition, the rules regarding politicking by tax exempt entities have changed significantly since TWR. As a result, the standards as announced in the case and interpreted by its progeny may call for a different conclusion today.
Furthermore, this piece will explore both the tax rules that are, and some that might be, applicable to the political speech of noncharitable tax exempt organizations. Part I will review TWR, its ancestors and its progeny as well as Citizens United. Part II will describe the current tax rules regarding lobbying and politicking applicable to exempt organizations that can engage in unlimited lobbying and politicking as part, but not the primary purpose, of their activities: section 501(c)(4) social welfare organization, section 501(c)(5) labor organizations, and section 501(c)(6) trade associations. The discussion will include consideration of treatment of contributions to such organizations for gift tax purposes and the special tax that may be applicable to membership dues because of lobbying and politicking by such organizations. Part II will also review the history of section 527, the section governing political organizations, with particular attention to the 2000 amendments that added registration and disclosure requirements. Part III examines the possible impact of Citizens United on the tax law’s current approach to political speech. It highlights the difference between the definitions of lobbying provided in the Internal Revenue Code and Treasury regulations and the uncertain “facts and circumstances” approach employed by the Internal Revenue Service (“IRS” or “Service”) in identifying politicking. It offers a reconciliation of seemingly contradictory language in Taxpayers With Representation and Citizens United regarding use of affiliates to conclude that Citizens United has not sub silentio overturned TWR’s “no duty to subsidize” holding. It defends, albeit unenthusiastically, the 2000 amendments to section 527. Part IV proposes a number of possible additional disclosure requirements for noncharitable exempt organizations engaged in lobbying and politicking. They include requiring applications for exemption, establishing a new category of exempt organizations for organizations primarily engaged in lobbying and expanding disclosure of contributors for all or for some noncharitable exempt organizations. It also explores the possibility of taxing the politicking expenditures of noncharitable tax exempt organizations not conducted through a separate segregated fund, whether or not the organization has investment income. The piece concludes by reminding us that the tax law regulation cannot substitute for campaign finance regulation.
Discussion of Hammack & Anheier's American Foundations: Roles and Contributions Hosted by Hudston Institute
On Tuesday, January 25th in Washington, DC, the Hudson Institute will be hosting a book discussion of American Foundations: Roles and Contributions, edited by David Hammack (Case Western Reserve) and Helmut Anheier (UCLA). According to the announcement, the panelists will include co-editor David Hammack, as well as Leslie Lenkowsky of Indiana University, Steven Rathgeb Smith of Georgetown University, and Susan Ostrander of Tufts University. Bradley Center Director William Schambra will moderate the discussion.
Tuesday, November 9, 2010
Stephen Schwarz (UC Hastings) presented Navigating the Charity/Business Border: Structures, Strategies and Solutions at the University of San Diego School of Law's Tax Law Speaker Series yesterday. The paper builds on the draft he presented in 2008 at the National Center on Philanthropy and the Law's annual conference that year, The Architecture of Charities: Commercial Activities, Structural Reactions: Basic Structures. For more information, see this TaxProf Blog entry.
Sunday, June 13, 2010
For the last two days I helped Notre Dame Law School host the fifth annual Junior Tax Scholars Workshop. Among the papers presented by the attending, pre-tenure law school faculty were the following on exempt organizations topics. Since these papers are works in progress, public copies are not yet available, but we can expect to see most if not all of them eventually in law reviews.
Perry Fleischer (
Leff (American), The Case Against
For-Profit Charity: An Agency Cost Analysis
Mayer (Notre Dame), Charities and
Lobbying: Institutional Rights in the Wake of Citizens United
Samuel Brunson (Loyola-Chicago), Rethinking Public Charities and Political Speech
Wednesday, May 26, 2010
A list of "Law, Society, and Taxation" papers relating to taxation that will be presented at the Law and Society Conference in Chicago this weekend includes the following relating to nonprofit organizations:
David Louk (Yale/Berkeley) "Unrelated Operations of Universities and Religious Organizations and Their Favorable Tax Treatment"
Shannon McCormack (UC Davis) "Deconstructing the Charitable Deduction: Devising a Workable Framework to Analyze Charitable Transfers"
Brian Galle (Florida State/GW (and soon Boston College)) "Keep Charity Charitable"
Todd Henderson (Chicago) "Corporate Philanthropy and the Market for Altruism"
Benjamin Leff (American) "Tax Benefits for For-Profit Do-Gooders"
Shruti Rana (Maryland) "Micro-Innovation"
Roger Colinvaux (Catholic) "The Pension Protection Act of 2006: The Beginning or the End of Reform of the Tax Status of Charitable Organizations"
James Fishman (Pace) "Stealth Preemption: The IRS’s Corporate Governance Initiative"
Terri Helge (Texas Western) "The Limitless Private Benefit Doctrine"
Richard Schmalbeck (Duke) "Differential Subsidies among Charities and Their Relation to Worthiness"
Friday, April 16, 2010
Georgia State Hosts Forum on "Social Enterprise and Social Change: Should Nonprofits Embrace Business"
The Nonprofit Studies Program at Georgia State University is hosting a forum on social enterprise on April 22, 2010. The forum will feature Michael Edwards, author of Small Change: Why Business Won't Save the World, and a panel including corporate citizenship and philanthropy officers from IBM, the ING Foundation, and Newell Rubbermaid Corporation.
Wednesday, April 14, 2010
The Chronicle of Philanthropy reports that Catholic University in Washington, DC is hosting a symposium today, April 14, entitled "Philanthropy in the 21st Century: Should All Charities Be Equal?" The primary focus of the symposium is consideration of whether tax law should distinguish between different types of charities. This issue raises questions of line drawing and what to emphasize in distinguishing charities from other companies and from each other. Many charities engage in activities that closely resemble for-profit companies but enjoy more favorable tax treatment.
One of the most recent and high profile examples of the issues in this area is the Provena case recently decided by the Illinois Supreme Court. That case upheld denial of a charitable hospital's property tax exemption because the hospital had failed to provide sufficient charitable services. Another question regarding the charitable exemption is whether charities directly aiding the poor deserve greater tax benefits.
include Diana Aviv, head of Independent Sector; Richard L. Schmalbeck, a
professor of law at Duke University; Eugene Steuerle, a fellow at the
Urban Institute, a Washington think tank; and Russ Sullivan, chief of staff of
the Senate Finance Committee and an aide to its chairman, Sen. Max Baucus, Democrat
of Montana. The moderator is Professor
Roger Colinvaux, professor of?,