Wednesday, December 4, 2013
The Tampa Bay Times reports that an Ohio jury has found John Donald Cody guilty of 23 counts of fraud, money laundering and theft relating to his role as head of the U.S. Navy Veterans Association. As previously detailed in this space, the Association was a sham charity that Cody ran under the stolen name of Bobby Thompson and used to raise over $100 million before being exposed in 2010 by the newspaper (then named the St. Petersburg Times). Sentencing is scheduled for mid-December. Prosecutors have already obtained a guilty plea from one other person involved in the scam, who is now serving five years in an Ohio prison, and they have stated they plan to indict the lawyer they alleged also helped.
Thursday, October 17, 2013
The Chronicle of Philanthropy reports that New York’s Court of Appeals, the state’s highest court, heard oral arguments yesterday in a case in which the owner of a New York City hotel, the Carlton House Hotel in Queens, seeks damages from the Salvation Army to the tune of $200 million. The claim reportedly is that the building was damaged when the charity used it as a homeless shelter. According to the story, the property owner, a holding company, has already received $10 million as a lease termination fee from the city, which negotiated the lease. The Salvation Army argues that, under the lease, New York City’s Department of Homeless Services was “the exclusive source of funds” for the property’s use as a shelter. For additional coverage, see this entry posted on The Real Deal.
Thursday, September 19, 2013
My thanks to Evelyn Brody for bringing the South Carolina Supreme Court's decision in Wilson v. Dallas to my attention. The case arose out of a dispute involving the Estate of James Brown, his alleged spouse, and several of his adult children. James Brown provided in his will and an irrevocable trust that the bulk of his estate should go into a newly created charitable trust, but the individuals involved sought to set aside those directions and instead have the estate divided pursuant to the applicable laws of intestate succession. The then South Carolina Attorney General become involved and directed negotiations that ultimately led to a settlement under which approximately half of the estate went to a charitable trust to be governed by an AG-appointed trustee, and the other half would go to the challenging individuals. The court-appointed personal representatives of the estate and trustees of the irrevocable trust challenged the settlement (and their removal in the wake of the circuit court's approval of the settlement).
While there are many interesting aspects of the decision, the most significant is the Supreme Court's criticism of the AG's role in shaping the settlement that the court ultimately found was not just and reasonable. I will let the court's speak for itself:
- "In our view, the evidence does not support the finding that the compromise was just and reasonable. The compromise orchestrated by the AG in this case destroys the estate plan Brown had established in favor of an arrangement overseen virtually exclusively by the AG. The result is to take a large portion of Brown's estate that Brown had designated for charity and to turn over these amounts to the family members and purported family members who were, under the plain terms of Brown's will, given either limited devises or excluded."
- "We find the compromise proposed here is fundamentally flawed because the entire proposal is based on an unprecedented misdirection of the AG's authority in estate cases."
- "The AG undoubtedly has the authority to intervene to protect the public interest of a charitable trust. However, the AG has no authority to become completely entrenched in an action that began here as one to set aside a will and for statutory shares, direct the settlement negotiations, and then fashion a settlement that discards Brown's will and his 2000 Irrevocable Trust and replaces them with new trusts, only to give himself sole authority to select the managing trustee. By so doing, the AG has effectively obtained control over the bulk of Brown's assets and has given his office unprecedented authority to oversee the affairs of the parties that has not heretofor been recognized in our jurisprudence."
- "As the enforcer of charitable trusts, we believe the AG's efforts would have been better served in attempting to make a cursory evaluation of the claims rather than directing a compromise which ultimately resulted in the AG obtaining virtual control over Brown's estate. Based on all the circumstances, we do not believe the effect of the compromise is just and reasonable, and we cannot condone its approval."
- "The settlement provisions allowing the AG to select the trustee, and his continued influence over the trust overreaches his statutory authority, as there is no provision allowing an AG to become involved in the day-to-day operations of a trust. Moreover, the AG's primary job is the enforcement of charitable trusts, and in this case, the compromise dismantles the existing charitable trusts, to great ill effect on Brown's estate plan, rather than enforces it."
The Supreme Court concluded by remanding the case to the circuit court to appoint fiduciaries to implement the original directions provided for in the will and irrevocable trust.
Oregon Tax Court Issues Split Property Tax Exemption Decisions for Substance Abuse Treatment Facilities
On August 30th, the Oregon Tax Court issued two opinions that reached opposite results regarding whether a particular substance abuse treatment facility qualified for exemption from property tax. In each case the key question was whether the facility met the "gift or giving" requirement for exemption under applicable case law.
In Hazelden Foundation v. Yamhill County Assessor, the court concluded the facility did not qualify for exemption. It held that the "gift or giving" requirement incorporated a "doors are open to rich and poor alike" element, and that the Hazelden Foundation failed to satisfy this element. More specifically, the court found that the Foundation limited financial assistance to patients unable to afford the Foundation's normal, relatively high fees and refused to accept payment from Medicare or Medicaid , suggesting "that taxpayer's services are specifically targeted at the more affluent segments of our society."
In contrast, in Serenity Lane Inc. v. Lane County Assessor, the court concluded that the facility did qualify for exemption. While the court found that the record was somewhat mixed on whether Serenity Lane met the gift or giving requirement, the combination of the facility's acceptance of patients on Medicaid, its charging of below market rates for its detox services and certain other services, the offering of scholarships to some financial needy patients, and its internship program led the court to conclude that the facility did satisfy that requirement.
These decisions underline the fact-sensitive nature of such property tax exemption inquiries, and high litigation costs for both sides of litigating these disputes. Given the current pressures on both nonprofit budgets and state and local treasuries, such disputes are unlikely to become any less frequent, however.
Tuesday, August 13, 2013
In a decision handed down last week, the New Jersey Superior Court, Appellate Division, ruled that charities that do not follow donor intent must return the gifts. In Adler v. Save, ___A.3d___, 2013 WL 4017286, a three-judge panel ruled that a Mercer County animal shelter must return a $50,000 gift originally slated for specialized construction.
In delivering the court's opinion, Judge Jose Fuentes wrote:
We hold that a charity that accepts a gift from a donor, knowing that the donor’s expressed purpose for making the gift was to fund a particular aspect of the charity’s eleemosynary mission, is bound to return the gift when the charity unilaterally decides not to honor the donor’s originally expressed purpose.
The case turned on a gift given by a Princeton couple, Bernard and Jeanne Adler, to animal shelter SAVE (now SAVE, A Friend to Homeless Animals). The gift was to finance the building of an area for larger dogs and older cats, whose adoption prospects are limited, as part of a new facility in Princeton.
Before SAVE began construction, it merged with another animal welfare nonprofit, Friends of Homeless Animals. The new organization developed a new plan to build a shelter in nearby Montgomery Township instead. The new shelter will be about half the size of what the new Princeton facility would have been. Although SAVE trustee John Sayer testified that the new shelter would “absolutely” have rooms for large dogs and older cats, the court said that evidence suggested otherwise. Judge Fuentes wrote:
Based on Mr. Sayer’s testimony and the letter announcing the merger between SAVE and Friends of Homeless Animals, we are satisfied that the 15,000 square foot shelter to be constructed in Montgomery Township does not include two rooms specifically designated for the long-term care of large dogs and older cats.
The Adlers filed suit in Mercer County in 2007, seeking the return of their $50,000 donation to SAVE. By order dated August 26, 2010, the court held in the Adlers' favor, finding that they were entitled to the full return of their charitable gift. SAVE appealed, arguing that the judge erred in determining that the Adlers’ gift was restricted. SAVE also argued that even if the gift was restricted, its purpose would have been fulfilled and, barring that, the lower court should have reformed the gift under the cy pres doctrine so that SAVE could spend it on a project as near as possible to the original intent.
The appellate court disagreed, saying SAVE had courted the Adlers, who had been long-time supporters of animal welfare but who had never made a significant gift prior to the $50,000 donation, with a campaign that specifically included the two rooms and a naming opportunity. “To be clear, the record shows that SAVE: (1) decided to construct a substantially smaller facility; (2) outside the Princeton area; (3) without any specifically designated rooms for large dogs and older cats; and (4) without any mention of plaintiffs’ names,” Judge Fuentes wrote. He continued: "By opting to disregard plaintiffs’ conditions, SAVE breached its fiduciary duty to plaintiff. Under these circumstances, requiring SAVE to return the gift appears not only eminently suitable, but a mild sanction.”
Monday, July 15, 2013
A Maine Superior Court has overruled the decision by the Town of Limington to deny or limit property tax exemption for several parcels of land identified as either "Tree Growth" or "Open Space" properties under the applicable state law. In Francis Small Heritage Trust v. The Town of Limington, the court briefly described the broader context of tax exemptions for charitable institutions under both federal and state law before providing a detailed recitation of the law relating to Maine's property tax exemptions (including a reference to the Elizabethan Charitable Uses Act of 1601!). It both concluded that the Francis Small Heritage Trust "is operated for purely benevolent and charitable purposes in good faith" and rejected the Board of Property Tax Review's argument that permitting logging, farming, and other compatible commercial activities was disqualifying given that so such activities had never in fact taken place and even if they had limited, purely incidental such activities did not undermine exemption. The fact that the properties at issue were indisputedly used to conserve wildlife habitat and were open to the public year-around at no cost also contributed to the court's decision.
The Texas Court of Appeals (Seventh District) recently had occasion to consider the state's law relating to exemption from ad valorum taxes applicable to real and business personal property. While the factual details of the Texas Student Housing Authority v. Brazos Country Appraisal District decision may only be of interest to the parties involved, what is of more general interest is the court's lengthy discussion of both the statutory and constitutional grounds for such exemptions. For both the statutory provision, relating to property "held for educational purposes only" and "devoted exclusively to the use and benefits of the students, faculty, and staff members of an accredited institution of higher education," and the state constitutional provision, relating to "property of counties, cities and towns" (read broadly by the court) and "devoted exclusively to the use and benefit of the public," the court found that exclusively means, well, exclusively. The court therefore concluded under both provisions that while providing housing to participants in state legislatively sanctioned programs associated with the Texas A&M University system fell within these "exclusively" provisions, providing housing for participants in programs sponsored by a private charity unaffiliated with the state government or the Texas A&M system and by an out-of-state for-profit corporation did not, and so providing such housing caused the properties not to be exempt from tax during the years those activities occurred. The Texas Student Housing Authority therefore received a split decision, reacquiring exemption for one year but unable to reverse the lower court's decision denying exemption for three other years.
Friday, June 28, 2013
One had to figure this was coming sooner or later: a lawsuit challenging state property tax exemption for Princeton University, which a state trial judge has refused to dismiss. The arguments in the case appear familiar: the lawyer for the plaintiffs (property owners in Princeton, N.J.) contends that many of Princeton's buildings are used for commercial purposes, and should be put back on the property tax rolls. To quote the story:
“In 2011 Princeton University received $118 million in patent royalties and distributed $30 million from the profits to faculty members,” Afran [the lawyer for the plaintiffs] said. “Under the law they are not even entitled to a tax exemption because they are engaged in commercial patent licensing, and the school give out a percentage of profits to faculty. Under the law in New Jersey, if a nonprofit gives out profits, it is not entitled to an exemption at all.”
The final quote sort of sums it all up:
“In many ways these modern universities have become commercial enterprises.”
Thursday, June 13, 2013
Labelling charitable fundraising scams as "among the lowest of the low," Attorney General Schneiderman praised the decision by New York State Supreme Court Judge Emily Pines. According to Mr. Schneiderman, "This decision proves that New York fundraisers will be held accountable when they defraud the public and line their own pockets." He went on to state that the charity played on people's emotions to get them to donate money in the hopes of fighting breast cancer, but little of the money ever went to research or medical services
Judge Pines' decision said that from 2005 to 2011, the Campaign Center raised $4.9 million on behalf of the charity but kept $3.9 million for itself. During those years, the decision continued, fundraisers, including the Campaign Center, raised $10 million for the Coalition Against Breast Cancer, but the charity only spent 4 percent of that on charitable purposes, according to the judge's decision.
Well, someone is doing something!
Monday, January 28, 2013
From The Chronicle of Philanthropy, citing The Kansas City Star and The New York Times, comes this report on a lawsuit brought by a foundation that received most of the proceeds from the 2003 sale of the nonprofit hospitals previously owned by Health Midwest to Hospital Corporation of America (HCA), the larger operator of for-profit hospitals in the country.
In the sales agreement, Health Midwest required HCA to undertake certain activities, including providing an estimated $500,000,000 in charity care and to spend approximately $450,000,000 to improve existing health care facilities. The Health Care Foundation of Greater Kansas City filed suit against HCA in 2009, allegeing that HCA had not complied with these provisions in the the original sales agreement. The case went to trial in late 2011.
In its Final Order (warning: 142 pages!) issued on January 24, 1013, the trial court found that HCA failed to comply with the requirement to spend the allotted funds on existing health care facilities. In addition, the court was concerned about HCA's compliance with its charity care requirements, but found that the level of detail provided by HCA was insufficient to make a final determination on the matter.
From my brief review of the Order (I emphasize brief - did I mention 142 pages?), it appears that the capital improvements issue hinged primarily on the language of the sales agreement, which required the capital improvement spending to occur in "existing" facilities, and not in new or replacement facilities. (My personal highlight of the Order in this regard - paragraphs 140 and 141, wherein the Court states that the then Chair and CEO of HCA admitted to not reading the full agreement before signing it and to understanding the operative language to be "legalese".) The court found a minimal short fall in capital improvements of approximately $162,000,000, to be paid immediately to the Foundation, with more possibly to follow based on a court-supervised accounting.
With regard to the issue of charity care, the sales agreement specifically divided the world between charity care and care for indigents (based on gross charges foregone), and uncompensated care (based on bad debt). See Paragraph 208. A separate part of the agreement required HCA to continue to participate in Medicare and Medicaid for ten years. See Paragraph 210. Apparently, the Attorneys General of both Kansas and Missouri had requested information breaking down HCA's expenditures between charity care and uncompensated care, to no avail. See Paragraph 456, et. seq. Some of the compliance reports issued by HCA with regard to charity care compliance appeared incomplete and inconsistent. As a result, the order requires the court-supervised accounting to look specifically at the provision of charity and uncompensated care as mandated by the sales agreement.
According to The Kansas City Star article, "HCA representatives have consistently said the company met or surpassed its obligations, and ... said the company would appeal the decision."
Tuesday, January 22, 2013
A modestly-improving economy does not seem to have halted the trend of local property tax exemption fights. Here's a roundup of recent ones, to give a flavor of the scope of what's going on.
Vanderbilt University is seeking full property tax exemption for 11 fraternity/sorority houses. According to Vanderbilt, an agreement with the Greek organizations transferred full control over the property to Vanderbilt, and therefore the houses should be exempt like any other student housing. The move would save Vanderbilt (whose 2013 operating budget was $3.7 billion) $74,000 in annual property taxes. To paraphrase the late Senator Everett Dirksen, "$74,000 here and $74,000 there, and pretty soon you're talking about real money."
Meanwhile, the town of Hebron, Indiana, is fighting property tax exemption granted by the state to a set of apartment buildings. "Town Clerk-Treasurer Terri Waywood said the exemption was granted because the complex provides its tenants with classes in managing money and other services they can't get anywhere else in town." Sounds like a tax-exemption blueprint for all the apartment complexes in Indiana; heck, who doesn't need help managing their money? Even the folks on Downton Abbey could use some instruction on this front . . .
In Knoxville, Tennessee, a pair of golf courses are fighting to re-establish exempt status, and Texas State University's exempt status apparently is causing some budgetary headaches (heartache?) in San Marcos, Texas.
Some days I wonder whether the solution is just to get rid of all tax exemptions . . .
Friday, December 14, 2012
As reported by the Nonprofit Quarterly, a Maine court is set hear a case where the town of Hebron is arguing that the nonprofit boarding school, Hebron Academy, owes property taxes on income-generating uses of its facilities (i.e., rentals to outside groups for events). The argument ultimately comes down to an extent issue, with the town arguing that there is too much non-school use of the Academy's ice rink and other facilities, resulting in them becoming "taxable venues." Interestingly, Maine's incoming Attorney General has filed a brief supporting the Academy.
The case could provide a persuasive bright-line threshold for when commercial use of nonprofit property rises to a level exceeding "incidental," and thus becomes taxable.
[See a more extensive article in the Portland Press Herald]
Monday, October 15, 2012
The dispute between the town of Vestal, NY and United Health Services over a property tax exemption for a new clinic owned by UHS offers a good lesson in the requirements for state property tax exemption. UHS built the clinic on land leased from a for-profit corporation. There is no dispute that the building is tax-exempt; the dispute regards an exemption on the underlying land.
While property tax exemption laws vary considerably from state to state, in most states property tax exemption requires that the exempt property meet two requirements: (1) it must be owned by an exempt charity and (2) it must actually be used "exclusively" (which usually really means "primarily") for exempt purposes. In New York, the relevant statutory language comes from Section 420-a of the New York Real Property Tax Law, which states:
Real property owned by a corporation or association organized or conducted exclusively for religious, charitable, hospital, educational, or moral or mental improvement of men, women or children purposes, or for two or more such purposes, and used exclusively for carrying out thereupon one or more of such purposes either by the owning corporation or association or by another such corporation or association as hereinafter provided shall be exempt from taxation as provided in this section.
The New York law seems pretty clear in requiring "ownership" by an exempt entity, which is pretty clearly not the case in the Vestal-UHS dispute. It may be, however, that UHS is claiming that the terms of its lease are the equivalent of "ownership" for New York property tax rules. The IRS sometimes treats very long-term leasing arrangements as the equivalent of fee ownership. In its regulations regarding tax-deferred exchanges under Code Section 1031, for example, the IRS treats a leasehold of 30 years or more as "like kind" to a fee interest. Treas. Reg. 1.1031(a)-1(c).
Since UHS has declined to reveal the specific provisions of its lease, I don't know what it's argument is on the ownership question (there is a suggestion in the cited story that UHS is claiming that it is responsible for paying the property taxes, which is enough to meet NY law). I'm also not sure whether New York would recognize certain leasehold interests (or obligations to pay the taxes) as the equivalent of "ownership" for property tax purposes - perhaps some reader from New York could enlighten us on that point.
But the story is a good illustration of how state property tax exemption differs from federal (or even state) income tax exemption. Federal income tax exemption is focused solely on the "charitable-ness" of the entity seeking exemption. Property tax exemption, on the other hand, generally requires meeting a two-pronged "ownership and use" test. The latter can produce different results - for example, property that is owned by a charity but not used for charitable purposes (e.g., leased to for-profit entities, or not used at all - that is, fallow property) generally will not qualify for exemption, just as property used for exempt purposes but owned by a for-profit entity and leased to a charity will not qualify.
Monday, July 16, 2012
The NonProfit Times reports that another restricted gift case is winding its way through the courts - now, a trial date has been set in a dispute over land transferred to Johns Hopkins University in a part sale/part gift transaction by Elizabeth Beall Banks (John Timothy Newell, et. al v. Johns Hopkins University). Miss Banks, who died in 2005, was a land advocate who was concerned about the potential development of her property, known as the Belwar Farm, a 108 acre tract along Interstate 270. In 1989, she sold the property at a deeply discounted price to Johns Hopkins, subject to the condition that only 30 acres of the land could be developed for “. . . agricultural, academic, research and development, delivery of health and medical care and services or related purposes only.” According to The Washington Post, this language was contained in the two page deed that conveyed the property - it does not appear that there was another gift instrument. The family contends that the planned science center development is much denser and more commercial than what Miss Banks intended, and is suing have these wishes enforced.
Is it just me, or are there more of these cases around these days, where a donor's full wishes are not incorporated into the gift instrument but are later asserted as conditions to be respected? (Garth Brooks, I'm looking at you!) It would certainly have been possible to draft something that incorporated a current development plan for Belwar Farm or something similar into the terms of the gift instrument - it would seem to me that donors would want the certainty, and that charities would like to stay out of court. Is it just that UPMIFA's definition of a record - which doesn't include oral representations but does include ancillary marketing material and correspondence - hasn't caught up with these cases or otherwise doesn't apply? Do we think UPMIFA will help or is this trend (if indeed it is a trend) a side effect of institutions and people scrambling for dollars wherever then can find them in a down economy? Or is it just bad drafting coupled with charities wanting to maintain as much vagueness as possible?
Thursday, July 12, 2012
A while ago I posted about a recent Pennsylvania Supreme Court decision on tax exemption that I speculated might reopen the door to property exemption challenges. The President of the Pittsburgh City Council might have kicked that door open a bit recently. A story posted on Pittsburgh's public radio station web site notes that city council president Darlene Harris is "investigating whether the city could legally challenge the tax-exempt status of large nonprofits in Pittsburgh." Harris apparently specifically referred to the recent Pennsylvania Supreme Court decision as grounds for her investigation.
“What some call ‘nonprofit’ is not necessarily all nonprofit,” said Harris. “If you can pay for having commercials during Super Bowls, if you can pay for your name to be on the top of the highest buildings in the City of Pittsburgh… There are doctors that will not see poor people.”
It appears that the City Council is not exactly happy with the PILOT deal struck with a consortium of Pittsburgh nonprofits that we blogged about last week. The story quotes council budget director Bill Urbanic, who stated “If these were ‘taxable organizations,’ the amount of payroll tax we would receive would be somewhere around $22 million… Also, the real estate, with the new assessment, is probably somewhere between $35 to $50 million. So, you’re looking at somewhere around $60 to $70 million that we’re forgoing, and what we’re getting instead is $2.6 million annually.”
Has the rumble over property tax exemption started in Pennsylvania?
Saturday, May 19, 2012
This makes me sad. It's really hard to imagine more of an heroine than Rosa Parks, so it is upsetting that the footnote to her legacy is this ridiculousness. This conspiracy suit was apparently filed by the attorney that represented the Parks Foundation and one of its executives in prior probate proceedings, although it is never quite clear from the article as to whether he is filing on their behalf or on his own (I'm assuming this is just technically incorrect writing on legal matters but I could be wrong).
The petition alleges that the Court and the estate's appointed attorneys conspired to drain the estate of funds through attorney's fees and through the failure to enforce certain orders of the Michigan Supreme Court - a fairly serious (and difficult if not impossible to prove) charge. This article contains more background on the fight between the Parks heirs and the Parks Foundation and its co-founder.
I have to say that my first reaction was that I was stunned that the Foundation (if the Foundation is in fact the filer of the motion) would allege such a thing and whether that would serve to tarnish its repution. I suppose some of it will depend on the outcome.
Can anyone help me with access to the original petition? I'm not finding it right off, but will post a link if I can. Update: Here's a link to the petition.
Friday, May 4, 2012
In a "deja vu all over again" case, the Pennsylvania Supreme Court just decided Mesivtah Eitz Chaim of Bobov, Inc v. Pike County Board of Assessment Appeals, that may open (or more appropriately, reopen) challenges by local taxing authorities to property tax exemptions for Pennsylvania charities.
There is a long history here that will provide some context. Back in 1985, the Pennsylvania Supreme Court's Hospital Untilization Project case (507 Pa. 1, 487 A.2d 1306) opened the door to a massive number of challenges to property tax exemption for nonprofit hospitals by holding that an exempt organization must meet a five-factor test, one of which was that the organization "must donate or render gratuitously a substantial portion of its services." Some commentators indicated that as a result of the HUP case, by 1996, local taxing authorities had challenged exemption for 175 of Pennsylvania's then-existing 220 nonprofit hospitals. See Alice A. Noble, Andrew L. Hymans and Nancy M. Kane, Charitable Hospital Accountability: A Review and Analysis of Legal and Policy Initiatives, 26 J. L. Med. & Ethics 116, 121 (1998) (this article is an excellent overall discussion of the HUP case and its impact on nonprofit hospitals in Pennsylvania).
As a result, the Pennsylvania legislature stepped in in 1997 and passed the Institutions of Purely Public Charity Act to "clarify" Pennsylvania state law with respect to tax exemptions, particularly in the case of nonprofit hospitals. Act 55, as it is officially known, essentially overturned the interpretation that substantial charity care was necessary for hospitals to be an "institution of purely public charity" eligible for property tax exemption.
And there things stood until the Pike County case noted above. In this case, the Pennsylvania Supreme Court said that Act 55 could not alter the underlying constitutional principles of tax exemption as set forth in the 1985 HUP case. Organizations claiming exemption must meet the baseline constitutional standards of HUP, regardless what Act 55 might say (this is not much different that the law in Illinois, where the Illinois Supreme Court has similarly held that the legislature cannot override constitutional doctrine regarding property tax exemptions).
Now the question will be whether this decision reopens the door to tax exemption challenges to nonprofit hospitals (and universities? I note that unlike many state constitutions, Pennsylvania's does not automatically grant exemption to "educational" institutions). I suspect there are a lot of very nervous hospital CEO's and university presidents in Pennsylvania these days . . .
Wednesday, January 4, 2012
In a decision certain to intrigue nonprofit practitioners and scholars alike, the Montana Supreme Court upheld its century-old ban on corporate political expenditures (the state's 1912 Corrupt Practices Act), applying, yet ultimately ruling contrary to, the United States Supreme Court's decision in Citizens United v. F.E.C. (see prior blog postings on this seminal case here and here). Plaintiffs sought to overturn the ban. One of the plaintiffs, Western Tradition Partnership, now named American Tradition Partnership, is a "501(c)(4) grassroots lobbying organization dedicated to fighting environmental extremism and promoting responsible development and management of land, water, and natural resources in the Rocky Mountain West and across the United States." In its decision, the Montana Supreme Court, via a 5-justice majority opinion, concluded that the State has always had and continues to have a compelling interest in regulating corporate spending on political campaigns because of the state's history of past political corruption (the famed "Copper Kings"). In the conclusion of its opinion, the majority stated:
Citizens United does not compel a conclusion that Montana's law prohibiting independent political expenditures by a corporation related to a candidate is unconstitutional. Rather, applying the principles enunicated in Citizens United, it is clear that Montana has a compelling interest to impose the challenged rationally-tailored statutory restrictions.
The majority clearly stated that corporations can speak through their own political action committees, which are both easy to form and to whom contributions are easy to make under Montana law, unlike the federal law PACs at issue in Citizens United.
The two dissenting justices both wrote that Montana's outright ban on corporate political expenditures violates the First Amendment, as enunciated in Citizens United.
(Hat Tip: The Nonprofit Quarterly)
Saturday, December 31, 2011
When civil rights icon Rosa Parks died in 2005, she left most of her estate to the Rosa and Raymond Parks Institute for Self-Development, a nonprofit she had founded in 1987 with her friend, Elaine Steele. The nonprofit's purpose is to teach young people leadership and character development. Her heirs, nieces and nephews, challenged her will and trust and in 2007 entered into a Settlement Agreement with the institute. Last April the Michigan Appeals Court held that statements by counsel regarding fees in the appellate case had breached a confidentiality provision of the Settlement Agreement between the institute and Rosa Parks' heirs. The Appeals Court had ordered the institute to transfer property to the heirs in compensation for the breach. The Supreme Court reversed that decision and remanded the case to the Probate Court with instructions to implement the Settlement Agreement. The decision "will allow the institute the financial solvency and ability to carry on Rosa Parks' legacy," said institute lawyer Steven G. Cohen. Parks' estate included memorabilia that may be worth millions. A New York auction house, Guernsey's Auctioneers, will try to find buyers for some of the memorabilia. See stories in the Detroit Free Press and the Detroit News.
Saturday, December 10, 2011
The Wall Street Journal reports that a state appeals court has affirmed a lower state court's decision to permit the partial sale by Fisk University of the art colleciton donated to it by Georgia O'Keefe and also concluded that the lower court lacked authority to require Fisk to set aside two-thirds of the sales proceeds, or $20 million, as an endowment to maintain the collection. As we previously blogged, the planned sale is of a 50 percent interest in the collection to Crystal Bridges Museum in Bentonville, Arkansas. The Tennessee Attorney General challenged the sale in an attempt to keep the collection in Nashville. The appeals court's decision, with one judge dissenting, does not fully resolve the terms of the sale, however, as the court left the door open for the lower court to require some type of dedicated source of support for the collection and also requires Fisk to explain how it will use the sale proceeds. Fisk received the collection subject to the condition it not be sold or broken up, but Fisk is now asserting that its financial situation is so dire it cannot afford to display or maintain the collection without some type of sale. A summary of the trial court's decision and its conclusion are reproduced below.
Summary of Previous Proceedings
After finding that cy pres relief was available to modify conditions imposed by donor of artwork which had been gifted to Fisk University, the trial court approved agreements whereby the Crystal Bridges Museum would purchase a fifty percent interest in the art for $30 million and would thereafter share in the display and maintenance of the artwork. The court conditioned approval of the agreements on the requirement that Fisk establish an endowment of $20 million from the proceeds of sale in furtherance of the donor’s intent to make the art available for the citizens of Nashville. The Attorney General of Tennessee appeals, contending that the trial court exceeded the scope of remand and that the court erred in determining that the agreement with the Crystal Bridges Museum most closely reflects the donor’s intent. Fisk seeks review of trial court’s requirement that it establish the endowment.
State Appeals Court Conclusion
For the foregoing reasons, we affirm the trial court’s approval of the Revised Sharing Agreement. We reverse the order requiring Fisk to establish an endowment of $20 million from the proceeds of sale and limiting the funds available to Fisk from the proceeds to $10 million. The case is remanded for further proceedings in accordance with this opinion.