Thursday, May 14, 2015
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.
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.
Zoë 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.
Linda 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.
John 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.
Fellow 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.
- Matthew L. Sanders,
Being Nonprofit-Like in a Market Economy: Understanding the Mission-Market Tension in Nonprofit Organizing
- 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?
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
Friday, May 1, 2015
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):
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.
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:
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:
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:
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:
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.
Sunday, March 22, 2015
- Pamela Wicker, Neil Longley, and Christoph Breuer, Revenue Volatility in German Nonprofit Sports Clubs
- Wei-Wen Chang, Chun-Mam Huang, and Yung-Cheng Kuo, Design of Employee Training in Taiwanese Nonprofits
- Joseph Lanfranchi and Mathieu Narcy, Female Overrepresentation in Public and Nonprofit Sector Jobs: Evidence From a French National Survey
- Tracey M. Coule, Nonprofit Governance and Accountability: Broadening the Theoretical Perspective
- Daniela Casale and Anna Baumann, Who Gives to International Causes? A Sociodemographic Analysis of U.S. Donors
- Alasdair C. Rutherford, Rising Wages in the Expanding U.K. Nonprofit Sector From 1997 to 2007
- Daniel W. Curtis, Van Evans, and Ram A. Cnaan, Charitable Practices of Latter-day Saints
- Stephan Grohs, Katrin Schneiders, and Rolf G. Heinze, Social Entrepreneurship Versus Intrapreneurship in the German Social Welfare State: A Study of Old-Age Care and Youth Welfare Services
- Steven Reesor Rempel and
- Christopher T. Burris,
- Personal Values as Predictors of Donor- Versus Recipient-Focused Organizational Helping Philosophies
- Patricia Tweet, Book Review: Nonprofit governance: Innovative perspectives and approaches by C. Cornforth and W. A. Brown (Eds.)
- Hans Peter Schmitz,
Book Review: Importing democracy: The role of NGOs in South Africa, Tajikistan, and Argentina by J. Fisher
- Susan M. Chambré, Book Review: Doctors without borders: Humanitarian quests, impossible dreams of Médicins Sans Frontières by R. C. Fox
Mary Crossley (Pittsburgh) has posted Health and Taxes: Hospitals, Community Health and the IRS on SSRN. Here is the abstract:
The Affordable Care Act created new conditions of federal tax exemption for nonprofit hospitals, including a requirement that hospitals conduct a community health needs assessment (CHNA) every three years to identify significant health needs in their communities and then to develop and implement a strategy responding to those needs. As a result, hospitals must now do more than provide charity care to their patients in exchange for the benefits of tax exemption, and the CHNA requirement has the potential both to prompt a radical change in hospitals’ relationship to their communities and to enlist hospitals as meaningful contributors to community health improvement initiatives. Final regulations issued in December 2014 clarify hospitals’ obligations under the CHNA requirement, but could do more to facilitate hospitals’ engagement in collaborative community health projects. The IRS has a rich opportunity, while hospitals are still learning to conduct CHNAs, to develop guidance establishing clear but flexible expectations for how they assess and address community needs. This Article urges the IRS to seize that opportunity by refining its regulatory framework for the CHNA requirement to more robustly promote transparency, accountability, community engagement, and collaboration, while simultaneously leaving hospitals a good degree of flexibility. By promoting alignment between hospitals’ regulatory compliance activities and broader community health improvement initiatives, the IRS could play a meaningful role in efforts to reorient our system towards promoting health and not simply treating illness.
Wednesday, March 18, 2015
Mueller: An Argument for Continued Use of Standards to Evaluate the Campaign Activities of 501(c)(4) Organizations
Jennifer Mueller (American) has published "Defending Nuance in an Era of Tea Party Politics: An Argument for the Continued Use of Standards to Evaluate the Campaign Activities of 501(c)(4) Organizations," 22 George Mason Law Review 103 (2014). The following excerpt is from the introduction (citations omitted):
As this Article shows below, many of these premises are true: this is a complex area of law, and under the current system the agency’s final determination is, at the margins, unpredictable. When it comes to both tax and campaign finance, there will always be individuals seeking to circumvent the law. And certainly the public should be concerned for the robustness of the entire system. But all of these considerations counsel for retaining, with some modifications, the IRS’s standards-based approach to policing the campaign intervention line. They certainly do not support the contention that bright-line rules will markedly improve compliance or reduce the level of political participation by newly formed social welfare groups. Moreover, notwithstanding the political appeal of anti-IRS rhetoric, constraining the agency’s discretion in these cases will help no one but private actors looking for loopholes.
This Article reaches this conclusion through two independent lines of analysis. The first is largely theoretical. It examines the characteristics of rules—where the content of a legal command is provided ex ante—and standards—where the exact contours are determined as applied to a concrete set of facts ex post—as set out in legal scholarship over the last several decades. Following the lead of Professor Ellen Aprill, who recently conducted a similar inquiry with regard to 501(c)(3) charitable organizations but reached a different conclusion, this Article relies on the comprehensive framework set out by Professor Louis Kaplow in his article “Rules Versus Standards: An Economic Analysis.”
The second line of analysis is based on the observed effects of brightline rules in the parallel regime of campaign finance law. Campaign finance is an obvious choice for comparison for several reasons. First, many of the concerns and considerations set forth above, including complexity and circumvention, apply with equal force in the campaign finance arena. Second, it is a natural foil: the Federal Election Campaign Act (“FECA”) is increasingly administered through bright-line rules. Finally, many of those calling for reform of Section 501(c)(4) are motivated by concerns about the evasion of existing campaign finance laws, so there is a practical appeal to testing the hypothesis that rules in this area would be more effective.
Thursday, March 5, 2015
Readers interested in a non-inflammatory piece on the Tea Party controversy should take a look at "Citizens United Spurs Social Welfare," published in Tax Notes Today (subscription required) and authored by Jasper L. Cummings, Jr. Jack is legal counsel in the Federal Tax Group of Alston & Bird and has an impressive record of legal service, including academic service as an acting assistant professor of tax at NYU and as a visiting professor of law at my home school, the University of Houston Law Center. In the article, Jack discusses the predictable rise in the use of social welfare organizations following Citizens United, and offers a measured perspective reflecting willingness to consider the best intentions of the Internal Revenue Service in regulating section 501(c)(4) entities in the wake of Citizens United.
In the piece, Jack presents a “short summary” of his article advancing the following points:
(1) To “expect an explosion of independent expenditures on federal elections after Citizens United” was reasonable.
(2) To expect that section 501(c)(4) entities “would receive a significant amount in additional contributions for such spending” was also reasonable.
(3) The new level of funding politically oriented 501(c)(4)s “could be so different in quantity that it would explain and justify a new look at the woefully inadequate published tax guidance for those organizations, and, in the meantime, at the administration of the tax law as it existed.”
(4) “We know now that the IRS did not carry out that new look in the right way,” but because of the “politically charged” nature of the relevant issues, “it is reasonably possible that the new look itself might have been a proper response to changing circumstances, as opposed to evidence of political bias.”
Electronic cite: 2015 TNT 43-10
Tuesday, February 17, 2015
Alexander, "Benefit Corporations-The Latest Development in the Evolution of Social Enterprise: Are They Worthy of Taxpayer Subsidy?"
H/t the mothership at Tax Prof Blog:
Mystica M. Alexander, "Benefit Corporations-The Latest Development in the Evolution of Social Enterprise: Are They Worthy of Taxpayer Subsidy?", 38 Seton Hall Legis J. 219 (2014):
The purpose of this Article is twofold: (1) placing the Benefit Corporation within the historical context of the social enterprise movement in the United States, and (2) considering whether Benefit Corporations should qualify for the preferred tax treatment given to nonprofit organizations. Part II of this Article explores the evolution of the social enterprise movement and the path leading to the hybrid entity’s rise in the United States. Part III provides a closer look at the legal requirements imposed on Benefit Corporations. Part IV outlines the requirements that must be met for a nonprofit organization to qualify for tax benefits and the rationale behind such benefits. Part V addresses whether the tax benefits made available to nonprofit organizations should be extended to Benefit Corporations. This Article concludes that although the Benefit Corporation represents a natural progression in the evolution of social enterprise, its organizational and operational structure does not provide sufficient grounds for extending special tax treatment to these organizations.
Friday, February 6, 2015
Fran Quigley (Indiana University Robert H. McKinney School of Law) has posted For Goodness’ Sake: A Two-Part Proposal for Remedying the U.S. Charity/Justice Imbalance on SSRN. Here is the abstract:
The U.S. approach to addressing economic and social needs strongly favors individual and corporate charity over the establishment and enforcement of economic and social rights. This charity/justice imbalance has a severely negative impact on the nation’s poor, who despite the overall U.S. wealth struggle with inadequate access to healthcare, housing, and nutrition. This article suggests a two-part approach for remedying the charity/justice imbalance in the U.S.: First, the U.S. should eliminate the charitable tax deduction, a policy creation that does not effectively address economic and social needs, forces an inequitable poverty relief and tax burden on the middle class, and lulls the nation into a false sense of complacency about its poverty crisis. Second, the U.S. should replace the deduction with ratification of the International Covenant on Economic, Social and Cultural Rights. This two-part process would reverse the U.S. legacy of avoiding enforceable commitments to economic and social rights. Charity would take a step back; justice a step forward.
Richard Schmalbeck (Duke University School of Law) has posted Ending the Sweetheart Deal between Big-Time College Sports and the Tax System on SSRN. Here is the abstract:
This paper was prepared for the annual conference of the National Center for Philanthropy and Law, held at the NYU Law School, held October 24-25, 2013. The overall topic was “Tax Issues Affecting Colleges and Universities,” and I was asked to address specifically those issues relating to athletics. This paper considers two specific issues that have in common only that they involve college sports, and are plagued by egregiously bad, (in this case, egregiously generous), tax treatment: the failure of the IRS to regard any part of the revenue from college sports as unrelated business income, and the choice by Congress to allow taxpayers to deduct 80% of contributions that they make to colleges or their “booster clubs,” even when those contributions entitle the donors to special privileges in purchasing tickets to college athletic events.
Most readers are probably familiar with the general rules regarding charitable contributions deductions, but a word about the unrelated business income tax may be helpful. An organization may qualify (or continue to qualify) as a tax-exempt organization, eligible to receive tax-deductible contributions, if its activities are primarily charitable. However, if the organization regularly carries on trade or business activities that are unrelated to its exempt purpose, the income from those activities is subject to federal income taxation at the same rates applicable to for-profit corporations. Although those rates are low for small businesses (those earning less than $75,000 per year), corporate earnings in excess of that amount are taxed at a rate of 34% on up to ten million dollars of income, and 35% beyond that amount. The unrelated business income tax raises very little revenue, but is thought to have an in terrorem effect, discouraging nonprofit organizations from engaging in unrelated business activities. While the unrelated business tax exists primarily because of Congressional concerns about unfair competition with for-profit businesses, a better description of its actual effect is that it discourages nonprofit organizations from pursuit of business activities that do not further any exempt purpose.
Lionel Smith (McGill University - Faculty of Law - Paul-André Crépeau Centre for Private and Comparative Law; King's College London – The Dickson Poon School of Law) has posted Fiduciary Relationships: Ensuring the Loyal Exercise of Judgement on Behalf of Another on SSRN. Here is the abstract:
In this article, I present a theory of fiduciary relationships that seeks to address both the justification and the content of fiduciary duties. It will also address the question of remedies, which sheds important and neglected light on the question why this part of the law has the shape that it does. All three aspects — the reasons we impose these duties, what these duties require, and the remedies associated with them — are linked to one another in a conceptual unity that reveals the interlocking aspects of private law’s concern with relationships in which one person is empowered to exercise decision-making authority on behalf of another.
Hans Rawhouser (UNLV College of Business), Michael E. Cummings (UNLV College of Business), and Andrew Crane (York University - Schulich School of Business) have posted Benefit Corporation Legislation and the Emergence of a Social Hybrid Category on SSRN. Here is the abstract:
Previous research highlights the tensions that social hybrids face by spanning categories. This paper explores the emergence of legislation to support a new category for social hybrids, focusing on Benefit Corporation legislation in the United States. We present quantitative analysis of the state-level factors that make a state suitable for a social hybrid category (attractiveness for for-profit business and non-profits, existing social hybrid organizations, legislative intensity, political leanings) followed by qualitative analysis of the arguments marshaled for the creation of the Benefit Corporation legal form. Our findings raise important insights for research on social hybrids and suggest a range of practical implications.
Friday, January 30, 2015
Patrick Walker (Lindenwood University) has posted Whistleblower Protection for Missouri Nonprofit Organizations. Here is the abstract:
Nonprofit organizations exist primarily to further the interests of individuals, businesses, and communities who believe and trust in the organization’s mission. At the heart of every nonprofit’s mission is governance: creating systems, structure, and solutions to guide expectations and decision-making that promotes and protects good citizenship in business. Whistleblower policies represent “good governance” for public employees who report illegal or fraudulent activity by an employer, government, or organization, with a set of duties defined by law for employees and employers. While most states have whistleblower laws and policies protecting government and/or private sector employees, Missouri whistleblower protection only extends to public employees. This article will critique the notion of whistleblower protection in general and for Missouri nonprofit organizations, discuss implications of a recent Eighth Circuit Court of Appeals decision in
Chavez-Lavagnino v. Motivation Education Training, Inc., and outline a governance conceptual framework for developing whistleblower protection policies in nonprofit organizations.
Saturday, January 24, 2015
Elizabeth A.M. Searing (School of Policy Studies, Georgia State University) has published Charitable (Anti)Trust: The Role of Antitrust Regulation in the Nonprofit Sector, 5 Nonprofit Policy Forum 261 (2014). Here is the abstract:
The purpose of this study is to address the ambiguities in the application of anti-trust regulations to the nonprofit sector. We first survey policy tools and their diverse historical usage in nonprofit and mixed markets, specifically in professional associations, hospitals, and education. This analysis informs the development of a typology of anti-competitive nonprofit markets which is used to classify the three historical examples into eight traits. Finally, this typology is applied to three new markets – animal shelters, thrift stores, and soup kitchens – which have less in common with purely for-profit markets and have little or no discussion in antitrust literature. We find that the nonprofit form per se does not indicate an absence of anticompetitive practices or antitrust concerns; however, certain combinations of attributes – such as purely donative revenues and an absence of pricing ability – make the threat of anticompetitive practice less oppressive.
Hemphill & Cullari: The Benefit Corporation: Corporate Governance and the For-profit Social Entrepreneur
Thomas A. Hemphill and Francine Cullari (both School of Management, Michigan-Flint) have published The Benefit Corporation: Corporate Governance and the For-profit Social Entrepreneur, 119 Business and Society Review 519 (2014). Here is the abstract:
The adoption by 19 states and the District of Columbia of a new variant of the business corporation form—known as the benefit corporation—presents several issues for legislatures, for entrepreneurs electing to organize as benefit corporations, for existing corporations that are converting to the new form, and for the stakeholders (other than shareholders) who are intended to be considered in benefit corporation governance. The article presents the history and structure of the new business form and a discussion of what has become its predecessor—the constituency statute. The model benefit corporation statute provisions are reviewed, which many states have adopted in toto. The authors address the obstacles that should be overcome by legislatures, businesses, and stakeholders before further legislative adoptions occur, as well as considerations for effective implementation by government, corporations, and stakeholders under existing and proposed variations of the statute.