Tuesday, October 6, 2015

Reiser & Dean publish SE(c)(3): A Catalyst for Social Enterprise Crowdfunding

Dana Brakman Reiser (Brooklyn) and Steven A. Dean (Brooklyn) recently published SE(c)(3): A Catalyst for Social Enterprise Crowdfunding, 90 Ind. L.J. 1090 (2015).  Below is the abstract of their article:

The emerging consensus among scholars rejects the notion of tax breaks for social enterprises, concluding that such prizes will attract strategic claimants, ultimately doing more harm than good. The SE(c)(3) regime proposed by this Article offers entrepreneurs and investors committed to combining financial returns and social good with a means of broadcasting that shared resolve. Combining a measured tax benefit for mission-driven activities with a heightened burden on shareholder financial gains, the revenue-neutral SE(c)(3) regime would provide investors and funding platforms with a low-cost means of screening out “greenwashed” ventures.

Terri Lynn Helge

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

Friday, September 4, 2015

Marshall Posts Paper on Charitable Choice

William P. Marshall, the William Rand Kenan, Jr. Distinguished Professor of Law at the University of North Carolina School of Law, has posted  Remembering the Values of Separatism and State Funding of Religious Organizations (Charitable Choice): To Aid is Not Necessarily to Protect on SSRN.  Here is the abstract:


When we are thinking about whether we have moved beyond separatism, the non-constitutional implications of this observation are worth considering. Does the current turn in constitutional law towards a more deferential approach to aid to religion programs mean that the policy arguments against such programs also should be discounted? Or should we remember the values of separatism in making legislative choices? This essay concludes that the values of separatism should continue to inform legislative judgment. To aid religion is not always to protect it, and the protection of religion and religious freedom fostered by separatism should not be forgotten even as the constitutional barriers to state aid to religion continue to subside.

Part I of this essay introduces this topic by discussing the values of separatism in their relation to current legislative attempts to provide state monies to religious institutions that offer social services -- legislative initiatives that popularly have been entitled “charitable choice.” Part II canvasses the constitutional background surrounding charitable choice and concludes that such programs would likely be found constitutional. Accordingly, the question of whether such programs should be adopted is more a matter of legislative choice than of constitutional mandate. Part III then addresses the legislative calculus. It begins by discussing why support for aid to religious programs is popular in the current political climate. The essay suggests that much of the political impetus behind such programs stems from the belief shared by many of defenders of religion that excluding religious institutions from the class of potential government beneficiaries reflects an anti-religious animus that warrants correction. The section contends, however, that this perception that anti-aid equates to anti-religion is misguided. The separationist objections to charitable choice noted in Part I demonstrate that the anti-aid position may be based on pro-religion values. Aid to religion does not always benefit religion. Remembering the values of separatism means understanding that government support of religion may harm, as well as assist, the religious mission.



September 4, 2015 in Church and State, Publications – Articles | Permalink | Comments (0)

Thursday, September 3, 2015

Cheever and McLaughlin Post Paper on Conservation Easements

Federico Cheever, Professor of Law and Director of the Environmental and Natural Resources Program, University of Denver Sturm College of Law, and Nancy A. McLaughlin, Robert W. Swenson Professor of Law, University of Utah S.J. Quinney College of Law, have posted An Introduction to Conservation Easements in the United States: A Simple Concept and a Complicated Mosaic of Law on SSRN.  Here is the abstract:


The idea of a conservation easement – restrictions on the development and use of land designed to protect the land’s conservation or historic values – can be relatively easily understood. More significant and more challenging is the complex body of state and federal laws that shapes the creation, funding, tax treatment, enforcement, modification, and termination of conservation easements. 

The explosion in the number of conservation easements over the past four decades has made them one of the most popular land protection mechanisms in the United States. The National Conservation Easement Database estimates that the total number of acres encumbered by conservation easements exceeds 40 million.

Because conservation easements are both novel and ubiquitous, understanding how they actual[ly] work is essential for practicing lawyers, policymakers, land trust professionals, and students of conservation. This article provides a “quick tour” through some of the most important aspects of the developing mosaic of conservation easement law. It gives the reader a sense of the complex inter-jurisdictional dynamics that shape conservation transactions and disputes about conservation easements. 

Professors of property law, environmental law, tax law, and environmental studies who wish to cover conservation easements in the context of a more general course can use the article to provide their students with a broad but comprehensive overview of the relevant legal and policy issues.



September 3, 2015 in Publications – Articles | Permalink | Comments (0)

Friday, July 24, 2015

Mayer: Limits on State Regulation of Religious Organizations


Lloyd Hitoshi Mayer (Notre Dame and a fellow blogger) has posted "Limits on State Regulation of Religious Organizations: Where We Are and Where We Are Going" to SSRN.  Here is a brief abstract of the article:

The breadth of activities and organizational forms among religious organizations rivals that of nonprofits generally, and religious organizations are vulnerable to the same types of problems that justify state regulation and oversight of nonprofits.  Such problems include excessive compensation, improper benefits for board members and other insiders, misleading or fraudulent fundraising, employment discrimination, unsafe working conditions, consumer fraud, improper debt collection, and many others.  Religious organizations are different, however, in that under federal and state law they enjoy unique protections from state regulation.

This paper describes how such federal and state protections limit state regulation of religious organizations under current case law.  It also explores the tension between the general ability of states to apply neutral and generally applicable laws to religiously motivated conduct and the special legal protections provided for some internal actions of religious organizations — particularly employment actions relating to ministers and certain internal disputes.  It concludes by exploring how courts are likely to develop such limits in the future.

Nicholas Mirkay

July 24, 2015 in Publications – Articles | Permalink | Comments (0)

Thursday, June 4, 2015

The Social Justice Role of Nonprofit Organizations in Capitalist Societies

Neoclassic thinkers describe nonprofit organizations in terms of "nondistribution constraint" and "market failure."  I beg to differ; nonprofits are better described in terms of distributive justice.  In various other places, I have tried to develop the idea that profit-seekers are amoral, at best, in the sense that profit seekers indulge the highest bidder without regard to anything else.  Profit cares nothing for social welfare, only exploitation.  Capitalist reject the label and resulting assertion.  They even more vigorously defend against being labeled "immoral" by arguing that "greed is good" essentially; that the search for profit makes life better for everybody who participates.  It is only the lazy -- defined as those who will not get up in the morning and go hunting for profit; in other words those who do not participate -- who get hurt in a capitalist system. 

There is no amorality or immorality in that because the lazy have only themselves to blame. But capitalism necessarily presupposes winners.  There can be no winners without losers.  There is something immoral, or at least amoral, about a system that demands that someone loses.  That's what underlies Rawlsian theory regarding optimal laws, which are laws we would adopt if we knew we would be losers in an ostensibly fair game.  If we economic actors knew ahead of time we were going to lose in a fair game, we would probably insist upon marxism over capitalism even if we also knew that societies would be worse off in the aggregate. 

Americans are taught that the Marxist creed -- "from each according to his ability, to each according to his need"-- embodies the real immorality since communism and socialism invariably stifle the human instinct for the responsible individual pursuit of "mo' better" (more and better) upon which the aggregate is dependent for advancement towards Utopia.  In the Capitalists' moral view, nonprofits' Marxists/Socialists tendencies are indulged only to ameliorate whatever lesser immorality (relative to the immorality in Marxists Socialists societies) exists in the capitalists "winner take all" societies requiring the presence of losers.  Remember, nobody can be rich unless someone is poor.  We create the poor by indulging the rich.  We offer riches to stimulate the individual pursuit of profit upon which the aggregate benefits.  Capitalists admit, in other words, that not only are the lazy hurt in a capitalist society; because of flaws (inherited wealth, fraud, cheating, discrimination, for example) which belie the idea of perfect competition, good faith participants are often wronged just like the lazy in a capitalists system.    Nonprofits exist to ameliorate the lesser moral failures inherent in a capitalists system operated by fallible human beings.  By providing "to each according to his need' but not demanding "from each according to his ability" nonprofits ignore but do not override the profit motive as the dominate driver of our existence.  They serve as recognition that the profit motive is morally superior to the sharing motive only to the extent that flaws in human behavior upon which the capitalist system operate can be eliminated.  Those flaws cannot be eliminated.  They can be punished or regulated by laws, but not eliminated. 

Three German economist are about to publish an article entitled "Nonprofit Organizations, Instutitional Economics, and Systems Thinking" in the journal, Economic Systems.  Here is part of the argument which seems to support the foregoing discussion: 

The relation between the societal effects of corporate power and the role of nonprofit organizations requires more elaboration, and indeed presents the key theme of this paper. The inspiration for this argument stems from both Galbraith's work and Kenneth Boulding's (1984) inquiry into “the ethics of economic organization”. Galbraith (1967) provided a rich and nuanced analysis of the degrading effects of corporate domination of society. In addition to undermining consumer sovereignty, these effects include neglect of the higher dimensions of life, such as social welfare, aesthetics and freedom. Stanfield and Stanfield (2011, p. 141) explain “the social predicament of the new industrial state” as follows: “industrial society embodies core tendencies that chronically undermine the quality of human life and threaten to acutely diminish it in a flash of military or ecological bedlam”. The contribution of Boulding lies in calling attention to a further important effect, namely the tendency of corporations to lower the relative status of certain social groups, most prominently workers and farmers. Boulding noted that the role of some nonprofits, such as labor unions and farmer organizations, is to improve the status of precisely these social groups. Put together, the arguments of Galbraith and Boulding suggest that the role of nonprofits can be more generally seen in compensating for the degrading effects of corporate domination of society. This view of nonprofits clearly differs from the neoclassical market failure approach and is free from the latter's limitations identified by Steinberg (2006, p. 129). The justification of this view will be the main aim of the present paper.


The paper's strategy is to embed the suggested institutional economics perspective on nonprofit organizations into a recent strand of the general systems theory associated with the voluminous work of the German sociologist Niklas Luhmann. Analyzing the regime of functional differentiation as a key attribute of modernity, Luhmann pointed out that the functional systems, such as the economy, law, and politics, tend to develop so much internal complexity that their continued self-reproduction (i.e., autopoiesis) in their respective environment becomes precarious. The present paper will show that Luhmann's ideas about the precarious relation between complexity and sustainability of social systems shed considerable light on the complementary societal effects of profit-seeking corporations and nonprofit organizations. In Luhmannian terms, the degrading effects of corporate domination of society exemplify the tendency of the functional system of the economy to overstrain the carrying capacity of the societal environment; the role of nonprofits is to improve the societal sustainability of this system. The following section summarizes the main thrust of the Luhmannian vision of complexity and sustainability of social systems. The rest of the paper builds on the institutional economics literature, particularly on Galbraith and Boulding, in order to apply the Luhmannian argument to the relation between profit-seeking corporations and nonprofit organizations.

The article is a fascinating read, I think.  It argues that profit-seekers simultaneously depend upon and destroy the dignity of [wo]man for the exact successes that lead to a better aggregate society.   Nonprofits help redeem that dignity and by doing so support the tracks upon which rats race to the betterment of society -- if one believes that profit may not be entirely "good" but is at least better than wholesale sharing; that is if one believes that capitalism is morally superior to Marxism. 


June 4, 2015 in Publications – Articles | Permalink | Comments (0)

Monday, June 1, 2015

The Wall Street Takeover of Nonprofit Boards

Garry Jenkins has an interesting piece in the Stanford Social Innovation Review regarding the growing presence of capitalist minded people, particularly those from the Wall Street Finance sector, on Nonprofit Boards.  I have, in the past, argued that the Service should allow exempt organizations greater flexibility to use profit-seeking approaches in the pursuit of the charitable goal.  The danger has been that the more an exempt organization looks and acts like a for-profit, the more vulnerable it is to the argument that it ought to lose its tax exemption, perhaps under the commerciality doctrine.  But lately, I have had to rethink my belief that for profit and non-profit motives can actually live as happy neighbors in the same charitable neighborhood.  That rethinking was prompted mostly by the absolute mess at the Charleston School of Law, (I want to use that for context in a later post about the interplay between for profit and nonprofit motives in a social enterprise) where apparent profit-seeking influences have all but destroyed what originated from altruistic motives.  Jenkins explores the longstanding pressures on nonprofits to "get that money" by adoption of for-profit processes.  Here are the first few interesting paragraphs:

Over the past twenty-five years the composition of the boards at some of America’s most important nonprofit organizations has dramatically changed. Without much notice, a legion of Wall Street executives (investment bankers, hedge fund managers, and others) has taken a growing number of seats in nonprofit boardrooms. Not only that, they hold a disproportionate share of the leadership positions on these boards.


One of the obvious reasons for this shift is undoubtedly the pressure that nonprofit organizations are under to raise more private funds. After all, given the significant growth in personal wealth generated by those working in high finance, it shouldn’t be too surprising to find more of them on nonprofit boards. A more subtle reason for the growth of financiers on nonprofit boards is likely the growing popularity of using business approaches (and talent) to run nonprofit organizations.


Since 2008, when Matthew Bishop and Michael Green popularized the term “philanthrocapitalism” to describe a new trend of donors seeking to conflate business aims with charitable endeavors, the nonprofit sector has engaged in active interrogation and discussion about the trend and its effect on public charities. Scholars and practitioners have documented various pressures placed on nonprofit organizations by donors and private foundations to adopt business approaches.


Although some of the pressure to adopt business approaches has come from external forces, it may also be true that the concepts and norms of philanthrocapitalism are also now carried into nonprofit organizations by the directors of public charities themselves. Perhaps a new fault line to consider is the very makeup of the governing boards of nonprofit institutions.


To understand the ways in which the composition of nonprofit boards has evolved in recent years, my research team and I examined the biographies of governing directors in 1989 and 2014 of three sets of nonprofit organizations: major private research universities, elite small liberal arts colleges, and prominent New York City cultural and health institutions. The most striking finding was the sizable presence and growth on charitable boards of those whose primary professional background and skill set were drawn from the financial services industry. The tally indicates that the percentage of people from finance on the boards virtually doubled at all three types of nonprofits between 1989 and 2014.


More striking, the data reveal that finance professionals hold an even greater percentage of nonprofit board leadership positions (i.e., board chair, vice chair, or their equivalent). In the case of liberal arts colleges and New York City nonprofits, financiers make up 44 percent of board leadership positions, and in the case of private universities they hold 56 percent of leadership slots.


Of course the social sector, especially the largest and most powerful nonprofit organizations such as those represented by the three types of institutions studied, has long populated its boards with men and women of wealth and professional backgrounds tied to the corporate world. Indeed, it is not unusual for many (although not all) of such members to have the capacity to contribute substantial resources, especially those from business and industry. What’s new is the increased concentration of directors drawn from one narrow sector of business and industry: finance.


This quiet yet dramatic self-transformation of the nonprofit boardroom has come about with little notice and discussion. To understand fully these trends and the impact, the nonprofit sector should ask itself some tough questions: What is sparking these changes in board composition? What values are being represented and promoted? What are the consequences for organizations and the people they serve? How might they affect the quality of board governance? How might the sector respond?


This article begins to shed light on the increasing influence of the finance industry on nonprofit boards. In addition to examining the data, it explores some of the explanations and consequences of these prevailing governance composition choices—and they are choices—that deserve attention and reflection from nonprofit leaders, trustees, and constituents.


June 1, 2015 in Publications – Articles | Permalink | Comments (0)

Tuesday, May 26, 2015

Waterhouse-Wilson on LLC's and the Excess Business Holdings Tax

Elaine Waterhouse-Wilson's recent article deals with the excess business holdings tax (IRC 4943) as it relates to ownerships in LLC's.  Here is the abstract:

How much should charity and business intersect? Recent trends point toward a growing entanglement between the for-profit and nonprofit sectors, as evidenced by the growth of the social enterprise movement. The issue of the entanglement of business and charity is, however, not new; it was one of the primary concerns behind the enactment of the private foundation excise taxes in 1969, including the excess business holding excise tax of Code Section 4943. While Code Section 4943 has changed little since its original enactment, the business and investment world has changed substantially, specifically including the introduction and growth of the LLC as a business entity. This Article looks at the current treatment of LLCs under Code Section 4943 and considers various options for incorporating LLCs into the statutory framework. It then evaluates these options in light of the original concerns about the interaction between business and charity voiced in the debate over the 1969 excise taxes and echoed today in the evaluation of social enterprise as a viable means of accomplishing charitable goals. The article concludes with a recommendation for change to Code Section 4943 that would incorporate LLCs specifically, provides administrative clarity, minimize the possibility of abuse, and allowing for modern investment practices and innovation.


May 26, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Thursday, May 14, 2015

Fei et al.: Are PILOTS Property Taxes for Nonprofits?

Fan Fei (Michigan Economics), James Hines Jr. (Michigan), and Jill Horwitz (UCLA) have posted Are PILOTs Property Taxes for Nonprofits?.  Here is the abstract:

Nonprofit charitable organizations are exempt from most taxes, including local property taxes, but U.S. cities and towns increasingly request that nonprofits make payments in lieu of taxes (known as PILOTs). Strictly speaking, PILOTs are voluntary, though nonprofits may feel pressure to make them, particularly in high-tax communities. Evidence from Massachusetts indicates that PILOT rates, measured as ratios of PILOTs to the value of local tax-exempt property, are higher in towns with higher property tax rates: a one percent higher property tax rate is associated with a 0.2 percent higher PILOT rate. PILOTs appear to discourage nonprofit activity: a one percent higher PILOT rate is associated with 0.8 percent reduced real property ownership by local nonprofits, 0.2 percent reduced total assets, and 0.2 percent lower revenues of local nonprofits. These patterns are consistent with voluntary PILOTs acting in a manner similar to low-rate, compulsory real estate taxes.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (1) | TrackBack (0)

Foohey: Secured Credit in Religious Institutions' Reorganizations

Pamela FooheyPamela Foohey (Indiana University Maurer School of Law) has published Secured Credit in Religious Institutions' Reorganizations, 2015 University of Illinois Law Review Slip Opinions 51.  Here is the abstract from the SSRN posting:

Scholars increasingly assume that most businesses enter Chapter 11 with a high percentage of secured debt, which leads to a high percentage of cases ending in the sale of the debtor’s assets under section 363 of the Bankruptcy Code rather than with confirmation of a reorganization plan. However, evidence and discussions about “the end of bankruptcy” center on secured creditors’ role in the reorganizations of very large corporations. The few analyses of cross-sections of Chapter 11 proceedings suggest that secured creditor control is not nearly as omnipresent as asserted and that 363 sales are not as dominant as assumed.

This Essay adds original empirical evidence to the debate by highlighting how one subset of debtors — religious organizations — whose main creditors typically are secured lenders have used the reorganization process. By focusing on 363 sales and other indices of creditor control, plan proposal and confirmation rates, recoveries to creditors, and post-bankruptcy survival rates, this Essay establishes that the traditional negotiated Chapter 11 case is alive and thriving among these debtors. The data suggest that these cases preserved significant value for secured creditors, while distributing value to unsecured creditors. The results show that further empirical examinations of secured creditors’ role in Chapter 11 cases may yield insights that diverge from current understandings of how creditor control impacts modern reorganization, and what that control means for reforms of Chapter 11.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Frye: Social Technology & the Origins of Popular Philanthropy

Brian FryeBrian Frye (Kentucky) has posted Social Technology & the Origins of Popular Philanthropy.  Here is the abstract:

The prevailing theory of charity law holds that the charitable contribution deduction is justified because it solves market and government failures in charitable goods by compensating for free riding on charitable contributions. This article argues that many market and government failures in charitable goods are actually caused by transaction costs, and that social technology can solve those market and government failures by reducing transaction costs. Specifically, it shows that in the early 20th century, the social technology of charity chain letters solved market and government failures in charitable contributions and facilitated the emergence of popular philanthropy.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Galle: Law and the Problem of Restricted-Spending Philanthropy

Brian GalleBrian Galle (Georgetown) has posted Pay It Forward? Law and the Problem of Restricted-Spending Philanthropy, 2016 Washington University Law Review (forthcoming).  Here is the abstract:

American foundations and other philanthropic giving entities hold about $1 trillion in investment assets, and that figure continues to grow every year. Even as urgent contemporary needs go unmet, philanthropic organizations spend only a tiny fraction of their wealth each year, mostly due to restrictive terms in contracts between donors and firms limiting the rate at which donations can be distributed. Law has played a critical role in underwriting and encouraging this build-up of philanthropic wealth. For instance, contributors can typically take a full tax deduction for the value of their contribution today, no matter when the foundation spends their money, and pay no tax on the investment earnings the organization reaps in the meantime. 

What, if anything, justifies public support for “restricted spending” charity? This Article offers the first comprehensive assessment of that question, and supplies original empirical evidence on several key aspects of it. I argue that restricted spending sacrifices crucial information, introduces unnecessary agency costs, and on average transfers funds to times when they are less useful. While there is a place for large and long-lived philanthropic organizations in American society, that role does not require public support for restricted spending. As long as foundations can demonstrate their value to new donors, they will continue to thrive. I therefore set out a series of policy recommendations aimed at better reconciling nonprofit law and the principles that justify it. 

I support my claims with new evidence drawn from a data set of over 200,000 firm-year observations of private foundations. For example, I find that foundations earn about twice as much money per year as in earlier studies funded by foundation-industry lobbyists, and that they are growing three times faster than those earlier studies suggest. This finding implies that law could require a much higher annual “payout” from foundations. I also find that new laws introduced in about a dozen states since 2006 have significantly slowed foundation spending in the enacting states. And I offer simulations of several policy proposals for making foundations more effective at fighting recessions.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Murray & Martin: The Blossoming of Public Benefit Institutions (Australia)

Ian murray
F MartinIan Murray (University of Western Australia) and Fiona Martin (UNSW Australia Business School) have published The Blossoming of Public Benefit Institutions - From 'Direct' Provides to Global Networks, 40(1) Alternative Law Journal (2015).  Here is the abstract:

Public benevolent institutions (‘PBIs’) form a class of not-for-profit (‘NFP’) entities that is entitled to various taxation concessions. The PBI concept was originally adopted in order to deliver selected tax benefits to a narrower group of NFPs than charities, given the wide legal meaning of ‘charitable’. As well as being eligible for income tax exemption like charities, PBIs can be deductible gift recipients (‘DGR’), which means that donors may be able to claim a tax deduction, and are entitled to fringe benefits tax (‘FBT’) exemptions, enabling more attractive employee remuneration packages. For decades, the Australian Taxation Office (‘ATO’) has insisted that PBIs must not only have purposes focused, narrowly, on the relief of poverty, sickness, destitution or helplessness, but that they must also directly provide relief to those suffering from such poverty, sickness, destitution or helplessness. The recent Full Federal Court decision of Commissioner of Taxation v Hunger Project Australia (‘Hunger Project’) clearly states that there is no such ‘direct’ requirement. The development is relevant for a range of state and federal taxes and is expected to have a large impact on federal revenue. This is due to the fact that the primary tax concessions relating to PBIs, the FBT exemption and DGR status, are currently in excess of $2 billion. The ‘cost’ of those concessions will likely increase with the broadening of the classes of entities that fall into the PBI category.

Lloyd Mayer

May 14, 2015 in International, Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Newman: Contributions to College Athletic Booster Clubs

Joel NewmanJoel Newman (Wake Forest) has posted Contributions to College Athletic Booster Clubs, LEXIS Federal Tax Journal Quarterly (March 2015).  Here is the abstract:

Not all transfers of value to qualified charitable organizations are deductible. When you buy a book from the college bookstore, your payment is not a contribution; you got what you paid for. If you give $300 to your local public radio station, and they give you a tote bag, you’ve made a charitable contribution, but you have to subtract the value of the tote bag from your deductible amount.

What if you make a substantial payment — say $2,000 — to a major college’s athletic booster club, knowing that, by virtue of that payment, you gain the right to purchase otherwise unavailable tickets to that school’s football games? Surely, the entire $2,000 should not be deductible. The deduction should be $2,000 minus the fair market value of the rights obtained. Congress says that the deduction should be 80 percent of the contributed amount, or $1,600, no matter which booster club it is. Is that fair? This essay will describe how we got to that 80 percent, and what we might do about it. Specifically, the essay describes how the secondary ticket market brokers, such as StubHub and Ticketmaster, could be used to value the rights obtained.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Pessôa &Trezza: Main Problems with Taxation of Civil Society Organizations in Brazil

Leonel Cesarino Pessôa and Valeria Maria Trezza (both Getulio Vargas Foundation) have posted Main Problems with the Taxation of Civil Society Organizations in Brazil: Certifications and Impact on Payroll.  Here is the abstract:

The objective of this paper is to identify and analyze the main problems in the taxation — regarding both taxes themselves and compliance costs of taxation — of civil society organizations in Brazil. This study is qualitative descriptive research. A multiple case study with 26 organizations was performed. The results show that the problems mainly affect organizations with lower revenue and that do not work in the areas of education, health or social care. The main problems involve the taxation of the payroll and the difficulties related to obtaining and maintaining certifications. The study concludes with suggestions for the improvement of the regulatory framework.

Lloyd Mayer

May 14, 2015 in International, Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Robinson: Religious Interest Groups in the Legislative Process

Zoe RobinsonZoë Robinson (DePaul) has published Lobbying in the Shadows: Religious Interest Groups in the Legislative Process, 64 Emory Law Journal 1041 (2015).  Here is the abstract:

The advent of the new religious institutionalism has brought the relationship between religion and the state to the fore once again. Yet, for all the talk of the appropriateness of religion–state interactions, scholars have yet to examine how it functions. This Article analyzes the critical, yet usually invisible, role of “religious interest groups”—lobby groups representing religious institutions or individuals—in shaping federal legislation. In recent years, religious interest groups have come to dominate political discourse. Groups such as Priests for Life, Friends Committee on National Legislation, Women’s Christian Temperance Union, and American Jewish Congress have entered the political fray to lobby for legislative change that is reflective of specific religious values. These religious interest groups collectively spend over $350 million every year attempting to entrench religious values into the law. These groups have become the primary mechanism for religious involvement in federal politics, but, surprisingly, the place and role of these groups has yet to be examined by legal scholars.

This Article shows that the key features of religious interest groups reflect significant tensions within the emerging project of religious institutionalism. In developing this claim, this Article identifies two benefits claimed to result from religious involvement in politics—protecting religious liberty and enhancing democratic participation—and demonstrates that in fact these benefits are unlikely to result from religious interest group politicking. Instead, the pursuit of religiously bound interests as a legislative end results in the religious interest being pursued as an end in and of itself, consequently imposing significant costs on the values of religious liberty and democracy. Ultimately, this Article claims that when considering the place of religion in the political process, it is incumbent on scholars to consider both the institutional design question of how religious participation in politics is operationalized, as well as take into account both the costs and benefits of that involvement.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Sugin: Replacing Media Oversight with Advance Rulings for Nonprofit Fiduciaries

Linda suginLinda Sugin (Fordham) has published Strengthening Charity Law: Replacing Media Oversight with Advance Rulings for Nonprofit Fiduciaries, 89 Tulane Law Review 869 (2015).  Here is the abstract:

This Article considers three urgent challenges facing the charitable community and its state regulators: too little fiduciary duty law for nonprofits, the rise of media enforcement of wrongdoing in charities, and an inherent tension in the state’s dual role as enforcer and protector of the nonprofit sector. It analyzes whether the scarcity of law is really a problem by comparing nonprofit organizations with business organizations and concludes that charities lack the selfenforcement mechanisms of businesses and therefore need more government guidance. It evaluates whether the media has made governmental supervision obsolete and expresses skepticism about the press displacing state oversight. The solution presented, an advance-ruling procedure for fiduciary duty questions, proposes that states shift their focus from better enforcement against wrongdoers ex post to better charity governance ex ante by devoting more attention and resources to assisting well-meaning charity directors in carrying out their fiduciary obligations.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Tyler et al.: Advancing the Design and Usefulness of Hybrid Vehicles for Social Business Ventures

John_tylerAnthony LuppinoJohn Tyler (Ewing Marion Kauffman Foundation), Evan Absher, Kathleen Garman, and Anthony Luppino (University of Missouri-Kansas City School of Law), have published Producing Better Mileage: Advance the Design and Usefulness of Hybrid Vehicles for Social Business Ventures, 33 Quinnipiac Law Review 235 (2015).  Here is the abstract from the SSRN posting of the article:

Since 2008 approximately half of the states in the U.S. have enacted statutes permitting “hybrid” business forms that blend aspects of traditional for-profit ventures with characteristics normally associated with traditional non-profit entities. This article analyzes theoretical, academic, practical, legal, and regulatory questions regarding the extent to which the existing hybrids are suited to achieving social purposes objectives, including in comparison to modified traditional forms of business organization. Finding the current fleet of hybrids an innovative, useful start, but with need to evolve, this article proposes statutory language (set forth in a detailed appendix, and summarized in the article text), and regulatory policies, including in the areas of general oversight, tax, and securities regulation, for a next iteration of hybrid — a “Social Primacy Company” designed to provide more clarity in the marketplace for socially-conscious investors.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Wilson: Incorporating LLCs into Section 4943

Elaine Waterhouse WilsonFellow blogger Elaine Waterhouse Wilson (West Virginia) has posted Better Late than Never: Incorporating LLCs into Section 4943, Akron Law Review (forthcoming).  Here is the abstract:

How much should charity and business intersect? Recent trends point toward a growing entanglement between the for-profit and nonprofit sectors, as evidenced by the growth of the social enterprise movement. The issue of the entanglement of business and charity is, however, not new; it was one of the primary concerns behind the enactment of the private foundation excise taxes in 1969, including the excess business holding excise tax of Code Section 4943. 

While Code Section 4943 has changed little since its original enactment, the business and investment world has changed substantially, specifically including the introduction and growth of the LLC as a business entity. This Article looks at the current treatment of LLCs under Code Section 4943 and considers various options for incorporating LLCs into the statutory framework. It then evaluates these options in light of the original concerns about the interaction between business and charity voiced in the debate over the 1969 excise taxes and echoed today in the evaluation of social enterprise as a viable means of accomplishing charitable goals. The article concludes with a recommendation for change to Code Section 4943 that would incorporate LLCs specifically, provides administrative clarity, minimize the possibility of abuse, and allowing for modern investment practices and innovation.

Lloyd Mayer

May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Nonprofit and Voluntary Sector Quarterly April 2015 Issue

NVSQ April 2015Here is the Table of Contents for the April 2015 issue of the Nonprofit and Voluntary Sector Quarterly:


  • Matthew L. Sanders, 

    Being Nonprofit-Like in a Market Economy: Understanding the Mission-Market Tension in Nonprofit Organizing


    Thomas Adam and Gabriele Lingelbach, The Place of Foundations and Endowments in German History: A Historical-Statistical Approach
  • Robert J. Chaskin and David Micah Greenberg, 

    Between Public and Private Action: Neighborhood Organizations and Local Governance

  • Kellie C. Liket and Karen Maas, 

    Nonprofit Organizational Effectiveness: Analysis of Best Practices

  • Michaela Neumayr, Ulrike Schneider, and Michael Meyer, 

    Public Funding and Its Impact on Nonprofit Advocacy

  • Gordon Liu, Chris Chapleo, Wai Wai Ko, and Isaac K. Ngugi, 

    The Role of Internal Branding in Nonprofit Brand Management: An Empirical Investigation

  • Avner Ben-Ner and Ting Ren, 

    Comparing Workplace Organization Design Based on Form of Ownership:Nonprofit, For-Profit, and Local Government

  • Sheila M. Cannon and Gemma Donnelly-Cox, 

    Surviving the Peace: Organizational Responses to Deinstitutionalization of Irish Peacebuilding

  • María José Sanzo, Luis I. Álvarez, Marta Rey, and Nuria García, 

    Business–Nonprofit Partnerships: Do Their Effects Extend Beyond the Charitable Donor-Recipient Model?


Book Reviews

  • Shilpa C. Damle, 

    Book Review: Foundations of the American century: The Ford, Carnegie and Rockefeller Foundations in the rise of American power by I. Parmar

  • Susan M. Chambré, 

    Book Review: Nonprofits & advocacy: Engaging community and government in an era of retrenchment by R. J. Pekkanen, S. R. Smith, and Y. Tsujinaka (Eds.)

  • Theresa Anasti, 

    Book Review: Sex work politics: From protest to service provision by S. Majic

Lloyd Mayer


May 14, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Friday, May 1, 2015

Recent Articles on Nonprofits Law and Policy

The season for introducing recent scholarship to the world is upon us, and scholars of nonprofits law have been busily posting their work to SSRN.  This blog entry features abstracts of SSRN postings to the Nonprofit & Philanthropy Law eJournal over the past ten days.


Eric A. Lustig of New England Law on Boston PILOTs (two postings):

The Boston PILOT Task Force One Year Later: Proposed Change and its Aftermath 

This article will address two specific developments in the PILOT program. First, the PILOT Task Force issued its final report in December, 2010. Second, the Lincoln Institute of Land Policy published a comprehensive report in the fall of 2010.


A Continuing Look at Boston's Revised Payment in Lieu of Taxes (PILOT) Program: Update Version 2.0 

This article examines the first three years of results under the revised Boston Payment-in-Lieu of Taxes (PILOT) Program. The article updates two previous articles on the proposals and roll-out of the program. The revised Boston program and these results continue to be significant for several reasons. First, the Boston program is a long-standing one which is acknowledged as a national leader. Second, the creation of the task force and its resulting recommendations reflected a collaborative and transparent process. Finally, PILOT programs, particularly in the northeast, are an increasingly popular and controversial revenue producing source for local governments. The article concludes that the revised Boston program has led to a broader base of contributions from the Boston nonprofit community. The overall effectiveness of the changes may be limited by the voluntary basis of the program and the non-monolithic nature of the Boston nonprofit community.


Miranda Perry Fleischer of University of San Diego School of Law on Charity Tax Subsidies:

Libertarianism and the Charitable Tax Subsidies

Tax scholarship is largely silent about the interaction between libertarian principles and the structure of our tax system. If all taxation is indeed slavery, as Nozick suggested, why bother analyzing libertarianism for insights into our tax system? This dismissal, however, ignores the diversity of libertarian thought. To that end, this Article mines the nuances of libertarian theory for insights into one feature of our tax system: the charitable tax subsidies. 

One strand of libertarianism suggests that the charitable tax subsidies are in and of themselves illegitimate. Yet several other understandings of libertarianism see a role for the state to engage in a varying amount of redistribution or to provide varying amounts of public goods. One reading of minimal state libertarianism, for example, suggests that only charities that help the very poor should be subsidized, while another implies that only organizations assisting individuals who have been harmed by past injustices should be subsidized. A strict reading of classical liberalism suggests that groups providing public goods should be subsidized regardless of whether they assist the poor, but would likely narrow the definition of what counts as a public good suffering from market failure. Only a more lenient interpretation of classical liberalism that conceives of a vibrant nonprofit sector as a public good in and of itself and an expansive reading of left-libertarianism support something akin to our current structure, in which elite cultural institutions such as the opera are subsidized even if they provide no free or discounted services to the poor.


Jacqueline R. Moss on the Charitable Contributions Deduction:

A Mismatch in Function and Form: Equity, Efficiency, and the Charitable Tax Deduction

Ostensibly, the purpose of the tax code is to raise revenue. But the tax code, like most laws, the United States tax code is a tool for social engineering, for better or for worse. Laws function not just to create stability, establish rules, or enshrine moral values; laws provide incentives for obeying the rules and disincentives for breaking them. The tax code, perhaps more than other body law, explicitly encourages and rewards behavior deemed valuable by society with tax credits and tax deductions while discouraging undesirable behavior through tax rates and the withholding of credits and deductions. 

The tax code is the instrument through which government drives investment in economic activities deemed valuable, like research and development, education, small-business, and the nonprofit sector. The merit of using the tax code as a method for social engineering is not the subject of this article, but it is necessary to understand that whether one agrees or not with this use of the code, it is how it functions. Because the tax code functions to raise revenue and a policy tool, tax credits, deductions, and subsidies are frequently evaluated to determine if they are efficient – that is, do they work? Because if these tax incentives don’t work, they end up costing the government – and tax payers – a great deal of money with little to no benefit.

The creation of the individual charitable tax deduction exemplifies the debate over efficiency and the social engineering function of the tax code. The charitable deduction was created and lives on because we, through our representatives in Congress who author the tax code, have deemed charitable donations as socially and morally valuable, and thus as behavior that should be encouraged and rewarded. However, the deduction was created not only to reward and encourage charitable giving, but also to provide tax relief to wealthy Americans. The charitable tax deduction, quite intentionally, doesn’t recognize the charitable donations of all those who donate. Indeed, the charitable deduction – by design – tends to recognize and reward the charitable donations of high income individuals. In fact, as ones’ income rises, so does the value of the charitable deduction. Rewarding the wealthy but not lower-income individuals’ for their charitable contributions raises serious questions about the efficiency and equity of the charitable deduction. Surely, if the vast majority of Americans give to charity, and we, as a society, value and wish to encourage, reward, and maximize charitable giving, shouldn’t the tax code recognize the contributions of all taxpayers? 

This article seeks to answer some of the questions raised by the purpose and function of the charitable tax deduction. In part one I will summarize the impact and role of the nonprofit sector and the impact of the charitable deduction upon that sector on the United States economy. Part two will examine the history and purpose of the charitable deduction and how the provision evolved since its creation in 1917. Part three will review how the charitable currently deduction functions. Part four will examine the inequity of the deduction in its treatment of similarly-situated taxpayers. Part five will explore the motivation – economic and otherwise – for donating to charity as well as the benefit of subsidizing nonprofits. Part six will examine various proposals for reform, the predicted effect of such reforms, and options to potentially maximize charitable giving among all income levels and increase equity.


Joseph Mead of Cleveland State University and Michael Pollack on Fiduciary Duties:

Courts, Constituencies, and Nonprofit Corporations: Enforcement of Fiduciary Duties in the Nonprofit Sector

Directors of nonprofit organizations owe fiduciary duties to their organization, but the content of these duties -- and how and when courts should enforce these duties -- has long been debated among scholars and courts. This debate emerges in several areas, including the level of deference to be shown by courts to nonprofit directors (the business judgment rule), who should be allowed to sue to enforce duties (standing), and the type of relief available to prevailing plaintiffs (remedies). Existing literature debates these legal rules in isolation and in abstraction, generally failing to consider how the rules interact with each other and ignoring the empirical reality of the nonprofit sector.

Because for-profit and nonprofit corporations evolved from a common ancestor, courts generally apply the corporation law principles developed in the context of for-profit corporations to nonprofit corporations as well. But for-profit and nonprofit corporations often differ in key ways, including sources of income, constituencies, and other institutional characteristics. These differences make rote application of corporation law principles to nonprofit corporations a conceptually questionable endeavor. Rather than setting nonprofit rules through strained analogies to for-profit concepts of ownership and profit-maximization, we propose an employing an analysis of institutional features that can operate in a whole range of governance contexts, including the nonprofit sector. This approach rigorously considers opportunities for voice and exit, impact range, homogeneity, and comparative competence between boards and courts, and it does so among different types of nonprofit actors, like directors, members, employees, donors, customers, and beneficiaries. 

Using this institutional analysis with for-profit corporation law as the baseline, we compare emerging legal rules in the nonprofit sector against existing empirical literature. We find that, with one exception, institutional characteristics vis-à-vis nonprofit actors are reasonably comparable to their for-profit counterparts, and we therefore place the applicable legal regime with respect to those actors on a more conceptually sound footing. In contrast, beneficiaries of a nonprofit organization tend to lack opportunities for exit or voice, face risk of considerable deprivation, and often differ considerably in relevant aspects from the individuals who manage the organization. We argue that the law should take into account the limited power of beneficiaries in nonprofit governance structures, and we analyze options for reform.


Fiona Martin of the Australian School of Business, UNSW on the Charities Act 2013:

Has the Charities Act of 2013 Changed the Common Law Concept of Charitable "Public Benefit" and, if so, How?

In 2013, the Charities Act 2013 (Cth) was enacted and it came into effect on 1 January 2014. This is the first time that there has been an enactment of a statutory definition of the legal concept of “charity” in Australia. The definition is important for many areas of personal and commercial life, however one of the most significant, at least from a legal point of view, is how this definition operates in the context of Australian taxation law. This is particularly relevant in view of the fact that charities are exempt from income tax and subject to many other tax concessions at federal, state and local government level. Under Australian common law, a charitable entity was required to have a charitable purpose and be of benefit to the public. This article introduces the statutory definition and how it confirms the common law definition of charity and charitable purpose in certain instances, but also amends and expands these concepts. This discussion is provided as a context for the analysis of how the issue of public benefit has been dealt with under the statute. The article concludes with an analysis of how the Act has amended the application of the public benefit test to recipients of payments in respect of native title and traditional Indigenous lands.



May 1, 2015 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)