Friday, August 12, 2016

Sugin: Rhetoric and Reality in the Tax Law of Charity

Sugin_Linda_Portrait_2127_smLinda Sugin (Fordham) has published Rhetoric and Reality in the Tax Law of Charity, 84 Fordham L. Rev. 2607 (2016). Here is the abstract (from SSRN):

The rhetoric of public purposes in charity law has created the mistaken impression that charity is public and fulfills public goals, when the reality is that charity is private and cannot be expected to solve the problems that governments can solve. The rhetoric arises from a combination of charity-law history and tax expenditure analysis. The reality follows the money and control of charitable organizations. On account of the mismatch of rhetoric and reality, the tax law of charity endorses an entitlement to pre-tax income and (ironically) creates a bias against taxation. This article reorients the project of defining public and private in the tax law by starting from a normative theory of government responsibility. It challenges the conventional economic justifications for the charitable deduction and exemption, arguing for a more philosophical approach that makes affirmative demands on government to distribute the returns to social cooperation. Under this approach, the appropriate role of private organizations is residual; they must achieve what governments cannot. The article concludes by arguing that current law’s tax benefits for charity are easily justified in this new understanding.

Lloyd Mayer

August 12, 2016 in Publications – Articles | Permalink | Comments (0)

Nonprofit Policy Forum Publishes June 2016 Issue

NPFThe Nonprofit Policy Forum has published its June 2016 issue (Volume 7, Issue 2). Here is the table of contents:

Special Issue on International Comparative Nonprofit Public Policy, Guest Editor: Michal Bar

Articles

Book Review

August 12, 2016 in International, Publications – Articles | Permalink | Comments (0)

Nonprofit and Voluntary Sector Quarterly Publishes August 2016 Issue

NVSQ August 2016The Nonprofit and Voluntary Sector Quarterly has published its August 2016 issue. Here is the table of contents:

Editorial

  • From the Editors’ Desk, Femida HandyJeffrey L. Brudneyand Lucas C. P. M. Meijs 

Articles

  • Managing Identity Conflicts in Organizations: A Case Study of One Welfare Nonprofit OrganizationRobert H. ChenhallMatthew Halland David Smith
  • Volunteer Management: Responding to the Uniqueness of VolunteersSibylle Studer

  • Why So Many Measures of Nonprofit Financial Performance? Analyzing and Improving the Use of Financial Measures in Nonprofit Research, Christopher R. Prentice

  • Exploring Gender Differences in Charitable Giving: The Dutch CaseArjen De Wit and René Bekkers 

  • Does Motivation Matter for Employer Choices? A Discrete-Choice Analysis of Medical Students’ Decisions Among Public, Nonprofit, and For-Profit HospitalsVera Winter and Julia Thaler 
  • Donor Reaction to Salient Disclosures of Nonprofit Executive Pay: A Regression-Discontinuity ApproachBrian Galle and David I. Walker 
  • Nascent Nonprofit Entrepreneurship: Exploring the Formative Stage of Emerging Nonprofit OrganizationsFredrik O. Andersson
  • Modern Portfolio Theory and Nonprofit Arts Organizations: Identifying the Efficient FrontierNathan J. GrasseKayla M. Whaleyand Douglas M. Ihrke 
  • Transparency in Reporting on Charities’ Efficiency: A Framework for AnalysisNoel Hyndman and Danielle McConville 

Book Reviews

  • Book Review: Volunteering in Australia by M. Oppenheimer and J. Warburton (Eds.), Richard Lynch
  • Book Review: Governing Cross-Sector Collaboration by J. Forrer, J. Kee, and E. Boyer, Stuart C. Mendel
     
  • Book Review: Mobilizing Communities: Asset Building as a Community Development Strategy by G. P. Green and A. Goetting (Eds.), Anne Namatsi Lutomia
     
  • Book Review: Giving to Help, Helping to Give: The Context and Politics of African Philanthropy by T. A. Aina, and B. Moyo (Eds.) and The Handbook of Civil Society in Africa by E. Obadare (Ed.), Mary Kay Gugerty

Lloyd Mayer

August 12, 2016 in Publications – Articles | Permalink | Comments (0)

Monday, August 8, 2016

Breen: Charitable Trust Supervision Practice and Procedure in the Common Law World

Oonagh BreenOonagh B. Breen (University College Dublin) has posted "Guardians of the Charitable Realm: Charitable Trust Supervision Practice and Procedure in the Common Law World" on SSRN (European Review of Private Law, forthcoming). Here is the abstract:

This article examines the control framework for the supervision and oversight of charitable trusts in the common law world. It outlines the fundamental differences between private and public trusts that necessitate a separate enforcement regime for charitable trusts and explores the historical and political powers and duties of the Attorney General as parens patriae of charities. In light of the limitations of the Attorney General’s effective scrutiny, Part II considers the emergence of alternative charity regulators - from tax authorities to independent charity commissions - comparing the relative regulatory achievements of these agencies with that of the AG. Part III turns its attention to the role of the courts and tribunals in the enforcement of the interests of donors, beneficiaries and charitable entities. The article concludes in Part IV with a discussion of the merits and demerits of the charitable trust vis-à-vis the public benefit foundation.

Lloyd Mayer

August 8, 2016 in International, Publications – Articles | Permalink | Comments (0)

Bethke: Charity Law Reform in Hong Kong: Taming the Asian Dragon?

Damian BethkeDamian Bethke has published "Charity Law Reform in Hong Kong: Taming the Asian Dragon?" in the International Journal of Not-for-Profit Law. Here is the abstract:

The number of charitable organizations in Hong Kong has increased significantly despite unclear and lax regulation. A legislator has identified flaws in the present law and recommended changes. The proposed recommendations, however, do not consider the unique characteristics of Hong Kong. If implemented, they would not address the existing problems adequately. In order to tame the Asian Dragon, this article proposes an alternative model: self-regulation, which relies on the work of charity watchdogs.

Lloyd Mayer

August 8, 2016 in International, Publications – Articles | Permalink | Comments (0)

Gary: Values and Value: University Endowments, Fiduciary Duties, and ESG Investing

Gary-SusanBlog contributing editor Susan N. Gary (Oregon) has published "Values and Value: University Endowments, Fiduciary Duties, and ESG Investing" at 42 Journal of College and University Law 247 (2016). While the JCUL published version is not readily available online, here is the SSRN posting of the article. Here also is the abstract:

The trustees managing university endowment funds must comply with fiduciary duties that require the trustees to act in the best interests of the university and to act as prudent investors when managing the funds. This article shows that these fiduciaries may adopt investment policies that consider material environmental, social, and governance (ESG) factors as part of an overall investment strategy. The article explains why older arguments that fiduciaries should avoid “social investing” are no longer relevant and how the prudent investor standard has evolved to include ESG investing. The article discusses the changes in socially responsible investing since the anti-apartheid era and reviews a significant number of empirical studies that show that ESG investing has had a neutral or positive effect on financial return. Based on the empirical work, evidence of the financial industry’s growing use of extra-financial factors in investment analysis, and recent guidance from the Department of Labor, the article concludes that a trustee responsible for a university endowment will not breach the duty of loyalty or the duty to act as a prudent investor by directing the endowment’s use of ESG investing as part of an overall financial investment strategy.

Lloyd Mayer

August 8, 2016 in Publications – Articles | Permalink | Comments (0)

Plerhoples: Nonprofit Displacement and the Pursuit of Charity Through Public Benefit Corporations

Alicia PlerhoplesAlicia Plerhoples (Georgetown) has posted "Nonprofit Displacement and the Pursuit of Charity Through Public Benefit Corporations" on SSRN. Here is the abstract:

Nonprofits dominate the charitable sector. Until recently, this statement was tautological. Charity is increasingly being conducted through for-profit entities, raising concerns about the marketization of the charitable sector. This article examines for-profit charity conducted through the public benefit corporation, a new corporate form that allows its owners to blend mission and profit in a single entity. Proponents of public benefit corporations intended it as an alternative to a for-profit corporation and largely ignored its impact on the charitable sector. While public benefit corporations are ripe for conducting charity because they can pursue dual missions, they lack the transparency and accountability mechanisms of charitable organizations.

This article chronicles the supply and demand for public benefit corporations that conduct charity (i.e., “charitable public benefit corporations”) and hypothesizes the micro and macro level harms caused by them. At the micro level, the harm is fraud or “greenwashing”, i.e., deceiving unwitting stockholders, customers, or other stakeholders into investing or spending their time and money in the negligent or fraudulent enterprise. At the macro level, the more pernicious harm is that “market-based charity” injects individualistic and autocratic business values and methods into charitable work. To mitigate these harms, this article proposes that charitable public benefit corporations be required to grant or sell shares to a group of stakeholders sufficient to give such stakeholder-stockholders standing to bring a derivative suit against the public benefit corporation should it fail to pursue its charitable public benefit. These stakeholder-stockholders are akin to impact investors, or investors who value charitable returns above, or concomitantly with, financial returns. The derivative suit offers the rare stick to guard against greenwashing. More importantly, stakeholder-stockholders can (i) guide the founders and boards of a charitable public benefit corporation in pursuing charity as an ordinary business decision, and (ii) import the participatory and democratic values of the charitable sector to public benefit corporations.

Lloyd Mayer

August 8, 2016 in Publications – Articles | Permalink | Comments (0)

Wednesday, June 8, 2016

Chaffee, "Collaboration Theory: A Theory of the Charitable Tax Exempt Nonprofit Corporation"

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.

 

E.W.W.

 

 

June 8, 2016 in Conferences, Paper Presentations and Seminars, Publications – Articles | Permalink | Comments (1)

Tuesday, May 24, 2016

Cyber-Attacks and Risk Allocation

A compelling article from the ABA’s Business Law Today on the risk of loss to client bank accounts from cyber-theft highlights the dangers faced by all bank account holders across the United States, including non-profits. In a technology driven economy, while efficiency is promoted through instantaneous transfers, a door has opened for a new type of cyber-crime.

This article explores some of the inconsistent and unpredictable case law that has developed over who should bear the risk of loss from a cyber-attack, the bank or the customer. Loose standards of “commercial reasonableness” lead to a wide range of possible interpretations. For example, the same banking practice was “reasonable” for one bank, but “unreasonable” for another.

This issue is particularly important for non-profits, who would likely be forced to close their doors if they were to bear the consequences of a large cyber-attack, leaving them without the necessary funds to continue operation.  

The article concludes with some practical advice on how an organization should assess their banking needs and what type of protection is best for their own needs.

David Brennen

May 24, 2016 in Current Affairs, Publications – Articles, Web/Tech | Permalink | Comments (0)

Friday, May 6, 2016

Property Tax Exemption Skirmishes Spread in New Jersey and Elsewhere

Img-location-morristown-detailAs has been covered in this space repeatedly (for example, with respect to Illinois and Maine), the combination of wealthy nonprofits, valuable real estate, and government budget pressures continues to lead to battles between those nonprofits and governments over property tax exemptions. New Jersey has become perhaps the most active battleground - NorthJersey.com reported last month that 26 of the state's 62 nonprofit hospitals are now embroiled in tax-court cases, building on a 2015 Tax Court of New Jersey ruling against Morristown Medical Center.  While earlier this year New Jersey Governor Chris Christie announced an agreement to freeze property tax assessments for nonprofit hospitals for two years in order to give a to-be-formed Property Tax Exemption Study Commission time to review the issue, the legislature has yet to act on the legislation needed to implement this proposal. Additional coverage: NJ.com. The hospital battles join the ongoing lawsuit by individual residents of Princeton, N.J. against Princeton University that a state trial judge has refused to dismiss (a decision now upheld earlier this year by a state appellate court). For recent coverage of that suit, see Bloomberg and Fortune

In related news, Gerard F. Anderson (John Hopkins) and Ge Bai (Washington & Lee) just published a study reporting that seven of the ten most profitable hospitals in the United States in 2013 were nonprofits. At the same time, they found more than half of the hospitals they studied (which included for-profit and public hospitals as well as nonprofits) incurred losses from patient care services and only 2.5 percent earned more than $2,475 per adjusted discharge. Here is the abstract for the study, which appears in HealthAffairs:

To identify the characteristics of the most profitable US hospitals, we examined the profitability of acute care hospitals in fiscal year 2013, measured as net income from patient care services per adjusted discharge. Based on Medicare Cost Reports and Final Rule Data, the median hospital lost $82 for each such discharge. Forty-five percent of hospitals were profitable, with 2.5 percent earning more than $2,475 per adjusted discharge. The ten most profitable hospitals, seven of which were nonprofit, each earned more than $163 million in total profits from patient care services. Hospitals with for-profit status, higher markups, system affiliation, or regional power, as well as those located in states with price regulation, tended to be more profitable than other hospitals. Hospitals that treated a higher proportion of Medicare patients, had higher expenditures per adjusted discharge, were located in counties with a high proportion of uninsured patients, or were located in states with a dominant insurer or greater health maintenance organization (HMO) penetration had lower profitability than hospitals that did not have these characteristics. These findings can inform policy reforms, while providing a baseline against which to measure the impact of any subsequent reforms.

Coverage: St. Louis Post-Dispatch/AP; Washington Post.

Lloyd Mayer

May 6, 2016 in In the News, Publications – Articles, State – Executive, State – Legislative | Permalink | Comments (0)

Tuesday, April 26, 2016

Call for Papers: 2017 AALS Annual Meeting

We received the following call for papers, which may be of interest to many of you.    EWW

***

Nonprofit and Philanthropy Law

LLCS, NEW CHARITABLE FORMS, AND THE RISE OF PHILANTHROCAPITALISM

2017 AALS Annual Meeting

January 3-7, 2017

San Francisco, CA

In December 2015, Facebook founder Mark Zuckerberg and his wife, Dr. Priscilla Chan, pledged their personal fortune—then valued at $45 billion—to the Chan-Zuckerberg Initiative (CZI), a philanthropic effort aimed at “advancing human potential and promoting equality.” But instead of organizing CZI using a traditional charitable structure, the couple organized CZI as a for-profit Delaware LLC. CZI is perhaps the most notable example, but not the only example, of Silicon Valley billionaires exploiting the LLC form to advance philanthropic efforts. But are LLCs and other for-profit business structures compatible with philanthropy? What are the tax, governance, and other policy implications of this new tool of philanthrocapitalism? What happens when LLCs, rather than traditional charitable forms, are used for “philanthropic” purposes?

From the heart of Silicon Valley, the AALS Section on Agency, Partnerships LLCs, and Unincorporated Associations and Section on Nonprofit and Philanthropy Law will host a joint program tackling these timely issues. In addition to featuring invited speakers, we seek speakers (and papers) selected from this call.

Any full-time faculty of an AALS member or fee-paid school who has written an unpublished paper, is working on a paper, or who is interested in writing a paper in this area is invited to submit a 1- or 2-page proposal by June 1, 2016. The Executive Committees of the Sections will review all submissions and select two papers by July 1, 2016. If selected, a very polished draft must be submitted by November 30, 2016. All submissions and inquiries should be directed to the Chairs of the Sections at the email addresses below:

 

Mohsen Manesh

Associate Professor

University of Oregon School of Law

mohsen@uoregon.edu

 

Garry W. Jenkins

Associate Dean for Academic Affairs

John C. Elam/Vorys Sater Professor of Law

Moritz College of Law, Ohio State University

jenkins.434@osu.edu

April 26, 2016 in Conferences, Publications – Articles | Permalink | Comments (0)

Monday, April 4, 2016

Study on The Impact of Charity and Tax Law and Regulation on Non-for-Profit News Organizations

Robert G. Picard (University of Oxford-Reuters Institute for the Study of Journalism), Valerie Belair-Gagnon (Yale Law School-Information Society Project), Sofia Ranchordas (Yale Law School-Information Society Project; Tilburg Law School-Department of Public Law), Adam Aptowitzer (Drache Aptowitzer, LLP), Roderick Flynn (Dublin City University), Franco Papandrea (University of Canberra-Communications and Media Policy Institute), and Judith Townend (Institute of Advanced Legal Studies) recently posted their joint research study, "The Impact of Charity and Tax Law and Regulation on Not-for-Profit News Organizations" to SSRN.  Below is an abstract of their report:

Since the advent of the Internet, numerous media organizations have been forced to adopt new business models and convert into not-for-profit start-ups or hybrid entities. However, not-for-profit news organizations have faced an important challenge: outdated legal frameworks that were not designed to facilitate the development of digital journalism. This report inquires whether the legal systems in which they operate provide a conducive environment for charitable media and whether it can help explain their development. The legal qualification of news organizations as charities and the conferral of tax-exempt status are necessary to gather the necessary public support for their activities. However, in a number of jurisdictions, not-for-profit media outlets are often confronted with long-established legal frameworks that do not include journalistic activities within the concept of ‘charitable status’. These news organizations thus face significant delays and uncertainties during the process of obtaining tax-exempt status.

This report contributes to the evolving debate on not-for-profit news start-ups by examining legal systems that determine whether charitable and tax exempt status and a variety of benefits associated with them can be granted. This report compares and contrasts legislative frameworks and policies, and assesses how they affect both the development of startups and existing news organizations that would like to become charities and gain tax-exempt status. It also provides an overview of best regulation practices in an attempt to tackle legal and societal challenges that need to be addressed.

The study draws on the regulatory systems in five countries: Australia, Canada, Ireland, the United Kingdom (England and Wales), and the United States.

TLH

April 4, 2016 in Publications – Articles | Permalink | Comments (0)

Saturday, April 2, 2016

Brooks on The Missing Tax Benefit of Donor Advised Funds

BrooksJohn R. Brooks (Georgetown University Law Center) recently published "The Missing Tax Benefit of Donor-Advised Funds," 150 Tax Notes 1013-1024 (2016).  Below is an abstract of Professor Brooks' article:

Donor-advised funds are often billed, by both their critics and advocates, as providing a preferred from of charitable donation relative to typical giving. This is because the tax law allows for a full deduction of the money or property contributed to the fund in the year of the contribution, even if the money does not go to operating charities until a future year.

In this report, I show that this feature of donor-advised funds does not actually provide an additional benefit over typical gifts of property to charities, and in many cases creates a tax cost. Furthermore, in some situations that do provide a modest tax benefit, most or all of that benefit is soaked up in fees by the donor-advised fund sponsoring organizations, such as Fidelity, Schwab, and Vanguard. Thus, donors need to better understand the potential costs and benefits of donor-advised funds.

TLH

April 2, 2016 in Publications – Articles | Permalink | Comments (0)

Myer on Pursuit of Religious Freedom

Briton Jacob Myer (JD Candidate, Southern University Law Center) recently posted "In Pursuit of Religious Freedom: The RFRA and How It Applies to Non-Profit Organizations and Their Objections to the Accommodation of the Affordable Care Act Contraception Mandate" to SSRN:

The Hobby Lobby case decided by the Supreme Court back in 2014 determined the rights of for-profit corporations to refuse to provide certain contraceptives guaranteed by the Affordable Care Act in their employee’s health insurance plans. Hobby Lobby had argued their case under the three-part test of the Religious Freedom Restoration Act, claiming that the government-mandated provision of certain contraceptives substantially burdened its free exercise of religion. The Supreme Court with a narrow majority agreed with Hobby Lobby, finding a substantial burden existed due to Hobby Lobby’s limited options. In dicta, the Court noted the accommodation to the contraceptive mandate as a viable option to relieve Hobby Lobby of its substantial burden. This dicta gave birth to a new wave of contraceptive-mandate cases.

The Supreme Court will soon decide the new contraceptive-mandate issue in Zubik V. Burwell. As a consolidation of several cases, plaintiffs in this round of contraceptive controversy are all non-profit organizations who object on religious grounds not just to the contraceptive mandate but also to the accommodation process created for religious non-profit organizations by the government. This process requires the objecting non-profit to either notify by form the department of Health and Human Services (HHS) or, by form, notify its health-insurance provider.

These non-profit plaintiffs have the same argument as Hobby Lobby with a twist. They argue that the notification requirements make them complicit in the provision of the contraceptives that they find to be religiously abhorrent. In turn, the non-profits claim that once they notify either HHS or their insurance provider, they have essentially become facilitators of the provision of these contraceptives. Because they can either provide the coverage they find objectionable, give notification they find objectionable, or drop coverage and be subject to fines, the plaintiffs claim the government has placed a substantial burden on their exercise of religion. Thus, the question for the Court is whether a substantial burden is being imposed on the plaintiffs and if so has the government employed the least restrictive means of achieving its compelling interest in protecting the health of women. To answer the first question, this Article examines the historical interpretation by the Supreme Court of what constitutes a substantial burden since the RFRA’s enactment in 1993. This is critical in determining whether the plaintiffs will pass the first prong of the RFRA action and place the burden on the government to show its compelling interest and that it employed the least restrictive means. In answering the second question, this Article looks to the Hobby Lobby case discussion of least-restrictive means to determine if the government’s accommodation scheme will pass the least-restrictive-means test. With the recent death of Justice Scalia, these questions could go either way. The author believes this article gives insight into how the Court should and will decide to usher in this new era of RFRA litigation.

TLH

April 2, 2016 in Publications – Articles | Permalink | Comments (0)

Lederman: IRS Reform: Politics as Unsual

Lederman
Leandra Lederman (Indiana University Maurer School of Law) recently posted "IRS Reform: Politics as Usual," 7 Columbia Tax Journal (forthcoming 2016) to SSRN.  Below is an abstract of Professor Lederman's article:

The IRS is still reeling from accusations that it “targeted” Tea Party and other non-profit organizations for delays of their applications for tax-exempt status. Although multiple government investigations found no politically motivated behavior — only mismanagement — Congressional hearings were quite inflammatory. Congress recently followed up those hearings with a set of IRS reforms. Congress’s approach is reminiscent of the late 1990s, when highly publicized Congressional hearings regarding alleged abuses by the IRS resulted in a major IRS reform and restructuring, although the allegations subsequently were largely debunked. This Article argues that the recent allegations against the IRS also were overblown. It looks to the aftermath of the 1998 IRS reform, which included a major downturn in enforcement, for lessons for the present day. The Article concludes that Congress as a whole can do a better job of keeping politics from undermining tax administration.

TLH

April 2, 2016 in Publications – Articles | Permalink | Comments (0)

Friday, March 4, 2016

Backer, Note, Religious Nonprofit Political Activity

BackerJonathan Backer (Michigan '15) has published Thou Shalt Not Electioneer: Religious Nonprofit Political Activity and the Threat "God PACs" Pose to Democracy and Religion, 114 Mich. L. Rev. 619 (2016). Here is the abstract:

The Supreme Court’s 2010 decision in Citizens United v. FEC invalidated a longstanding restriction on corporate and union campaign spending in federal elections, freeing entities with diverse political goals to spend unlimited amounts supporting candidates for federal office. Houses of worship and other religious nonprofits, however, remain strictly prohibited from engaging in partisan political activity as a condition of tax-exempt status under Internal Revenue Code § 501(c)(3). Absent this “electioneering prohibition,” religious nonprofits would be very attractive vehicles for political activity. These 501(c)(3) organizations can attract donors with the incentive of tax deductions for contributions. Moreover, houses of worship need not file with a government agency to begin operating and deriving tax benefits, and the IRS has shown reluctance to aggressively audit their activities. Two circuits have previously upheld the electioneering prohibition against legal challenges, but recent jurisprudential shifts expose the tax code provision to challenge under the Religious Freedom Restoration Act (RFRA), which directs courts to apply strict scrutiny to facially neutral laws that substantially burden the free exercise of religion. First, Burwell v. Hobby Lobby Stores, Inc. greatly reduced the barriers to successful RFRA claims. Second, by lifting restrictions on political speech for many other types of organizations, Citizens United magnified the burden the electioneering prohibition imposes on religious organizations. The decision also rejected compelling state interests that might have previously shielded the law from invalidation. This Note is the first analysis of the electioneering prohibition’s vulnerability in this new legal climate. Despite these significant developments, this Note ultimately concludes that the electioneering prohibition can survive RFRA challenges because the prospect for widespread use of religious organizations as conduits for political activity undermines the values reflected in Establishment Clause jurisprudence.

Lloyd Mayer

March 4, 2016 in Publications – Articles | Permalink | Comments (0)

Aprill, The Section 527 Obstacle to Meaningful Section 501(c)(4) Regulation

AprillEllen Aprill (Loyola L.A.) has published The Section 527 Obstacle to Meaningful Section 501(c)(4) Regulation, 13 Pitt. Tax Rev. 43 (2015). Here is the abstract:

As is well known, on May 10, 2013, at a session of the American Bar Association Tax Section meeting in Washington, DC, Lois Lerner, at the time the director of the Exempt Organization Division of the Internal Revenue Service, apologized for IRS mishandling of applications by Tea Party groups for exemption as social welfare groups under § 501(c)(4) of the Code. A few days later, the Department of the Treasury Inspector General released a report (TIGTA Report) concluding that the “IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention

 

Lloyd Mayer

March 4, 2016 in Publications – Articles | Permalink | Comments (0)

Fici, Recognition and Legal Forms of Social Enterprise in Europe

FiciAntonio Fici (European Research Institute on Cooperative & Social Enterprise) has posted on SSRN Recognition and Legal Forms of Social Enterprise in Europe: A Critical Analysis from a Comparative Law Perspective. Here is the abstract:

Social enterprise lawmaking is a growth industry. In the United States alone, over the last few years, there has been a proliferation of state laws establishing specific legal forms for social enterprises. The situation is not different in Europe, where the process began much earlier than in the United States and today at least fifteen European Union member states have specific laws for social enterprise. This article will describe the current state of the legislation on social enterprise in Europe, inquiring into its fundamental role in the development of the social economy and its particular logics as distinct from those of the for-profit capitalistic economy. It will explore the models of social enterprise regulation that seem more consistent with the economic growth inspired by the paradigms of the social economy. It will finally explain why, in regulating and shaping social enterprise, the model of the social enterprise in the cooperative form is to be preferred to that of the social enterprise in the company form.

Lloyd Mayer

March 4, 2016 in Publications – Articles | Permalink | Comments (0)

Fishman, Who Can Regulate Fraudulent Charitable Solicitation?

FishmanJames Fishman (Pace) has published Who Can Regulate Fraudulent Charitable Solicitation?, 13 Pitt. Tax Rev. 1 (2015). Here is the abstract:

The scenario is common: a charity, typically with a name including an emotional word like “cancer,” “children,” “veterans,” “police,” or “firefighters,” signs a contract with a professional fundraiser to organize and run a campaign to solicit charitable contributions. The charity may be legitimate or a sham. The directors of the charity may be allied or coconspirators with the fundraiser, or as likely, well-meaning but naïve individuals. The fundraiser raises millions of dollars through telemarketing, Internet, or direct mail solicitation. The charity receives but a small percentage of the amount. In some cases, at the close of the campaign, the organization owes the solicitor more than the amount raised for the charity. Thereafter, the state attorney general investigates the charity and finds fraud in the solicitation or an improper use of the funds raised. As part of the settlement, the professional solicitor agrees to be barred from operating in that particular state. Thereafter, the fundraiser moves to a neighboring jurisdiction, opens business (perhaps under a different name), and commences the same cycle of fraudulent fundraising using another charity

Deception in solicitation and misuse of monies raised for charitable purposes is not only a fraud on the donor; it also can be a diversion of tax dollars from state or federal treasuries. This article examines several approaches for regulating unscrupulous professional fundraisers and preventing carpetbagging, moving from jurisdiction to jurisdiction, committing fraud, or willfully violating regulatory requirements. It examines limitations in the existing regulatory framework to prevent charity fraud and offers possible solutions to the problem. As a first solution, the Internal Revenue Service should revitalize and extend the “private benefit doctrine” as a tool of enforcement. Second, Congress and the Service should amend § 4958 to address excess benefit transactions to more clearly include unscrupulous solicitors. A third possible resolution to the problem outlined would be the expansion of the Federal Trade Commission’s enforcement authority to cover charitable solicitation generally. Currently, the FTC has authority over telemarketing by for-profit fundraisers.3 The legislation proposed would enable the creation of a self-regulatory organization under Federal Trade Commission aegis that fundraisers would be required to join. This new organization would enforce norms and rules for professional fundraisers, have the authority to discipline and, if necessary, to bar dishonest fundraisers from the fundraising industry. A final recommendation is the creation of an online, readily accessible database containing records of violations of professional fundraising companies and the individuals who own and work for them, the contracts between professional solicitors and the charities they work for, the results of fundraising campaigns listing the percentage of dollars raised that goes to the charity, and the texts of settlement agreements between state charity officials and fundraisers and the charities involved. An important issue not addressed in detail is the fiduciary responsibility of charity boards to carefully select the firms that manage their solicitation campaigns.

Lloyd Mayer

March 4, 2016 in Publications – Articles | Permalink | Comments (0)

Fleischer, How is the Opera Like a Soup Kitchen?

FleischerMiranda Perry Fleischer (San Diego) has published on SSRN How is the Opera Like a Soup Kitchen, The Philosophical Foundations of Tax Law (Oxford University Press, forthcoming 2016). Here is the abstract:

The charitable tax subsidies are, at heart, redistributive. Some individuals (the recipients of charitable goods and services, such as students, museum-goers, and soup kitchen patrons) receive benefits. Other individuals pay for these benefits, both voluntarily (through donations) and involuntarily (in the form of higher taxes or reduced benefits). At first glance, it appears that the redistribution effectuated by the subsidies violates commonly-held notions of distributive justice. After all, the subsidies treat charities that serve the wealthy (like the opera) the same as charities that aid the poor (such as the soup kitchen). How can spending public funds on the wealthy in this manner be considered just? As this Chapter shows, so doing is just under expansive interpretations of resource egalitarianism and left-libertarianism that account for expensive tastes and talent-pooling. These understandings argue that individuals with expensive tastes deserve compensation to put them on equal footing with individuals with ordinary tastes when pursuing their visions of the good life – just as individuals who lack financial resources deserve compensation to put them on equal footing with the financially-advantaged when pursuing their life plans. Subsidizing not only the soup kitchen but also the opera thus helps a variety of individuals who are disadvantaged in their ability to pursue their visions of a good life to achieve those visions.

Lloyd Mayer

March 4, 2016 in Publications – Articles | Permalink | Comments (0)