Friday, May 3, 2013
Late last month, the Service issued its Final Report of the Colleges and Universities Compliance Project. The report is based on "the responses to Questionnaires the IRS sent to a sample of 400 colleges and universities and on the results of examinations of 34 colleges and universities. Among the highlights:
- Increases to unrelated business taxable income for 90% of colleges and universities examined totaling about $90 million;
- Over 180 changes to the amounts of UBTI reported by colleges and universities on Form 990-T; and
- Disallowance of more than $170 million in losses and NOL's (i.e., losses reported in one year that are used to offset profits in other years) which could amount to more than $60 million in assessed taxes.
The IRS also determined that nearly 40% of colleges and universities examined had misclassified certain activities as exempt or otherwise not reportable on Form 990-T. Fewer than 20 percent of these activities generated a loss. The examinations resulted in the reclassficiation of nearly $4 million in income as unrelated, subjecting those activities to tax.
Finally, the report notes that about 20% of private colleges and universities implemented procedures that would qualify them for the rebuttable presumption against engaging in an excess benefit transaction with respect to IRS 4958 (Intermediate Sanctions). Those institutions not qualifying for the rebuttable presumption had the following problems:
- Comparability data from institutions that were not similarly situated to the school relying on the data, based on at least one of the following factors: location, endowment size, revenues, total net assets, number of students, and selectivity;
- Compensation studies that neither documented the selection criteria for the schools included nor explained why those schools were deemed comparable to the school relying on the study.
- Compensation surveys that did not specify whether amounts reported included only salary or included total other types of compensation, as required by section 4958.
The Executive Summary suggests that the IRS will focus on UBTI issues more closely, as those issues relate to Colleges and Universities:
The examinations of college and universities identified some significant issues with respect to both UBI and compensation that may well be present elsewhere across the tax-exempt sector. As a result, the IRS plans to look at UBI reporting more broadly, especially at recurring losses and the allocation of expenses, and to ensure, through education and examinations, that tax-exempt organizations are aware of the importance of using appropriate comparability data when setting compensation.
Tuesday, March 5, 2013
From the Council on Foundations Press Release regarding its March 4, 2013, 70 page report entitled, "The IRS and Nonprofit Media: Towards Creating a More Informed Public".
(Washington, D.C.) The Nonprofit Media Working Group, a nonpartisan group of foundation and nonprofit media leaders, today recommended that the IRS modernize its rules to remove obstacles in the way of nonprofit news outlets.The group, created by the Council on Foundations, released a report, “The IRS and Nonprofit Media: Toward Creating a More Informed Public,” which states that the agency’s “antiquated” approach to granting tax-exempt status has undermined the creation of new media models. Although the IRS has a long history of approving the tax-exempt status of media organizations ranging from National Geographic to Pro Publica, in recent years it has become inconsistent and slower in its approvals. “Over the last several decades, accountability reporting, especially at the local level, has contracted dramatically, with potentially grave consequences for communities, government accountability, and democracy,” said Steven Waldman, chair of the Nonprofit Media Working Group. “Nonprofit media provides an innovative solution to help fill this vacuum, but only if the IRS modernizes its approach.”
The Nonprofit Media Working Group was created by the Council on Foundations with a grant from the John S. and James L. Knight Foundation, following the recommendation by the Federal Communications Commission that a group of nonprofit tax and journalism expert convene on the topic. The new report highlights five key problems with the current IRS approach to granting nonprofit status:
1. Applications for tax-exempt status are processed inconsistently and take too long.
2. The IRS approach appears to undervalue journalism by sometimes not viewing it as “educational.”
3. The IRS approach appears to inhibit the long-term sustainability of tax-exempt media organizations.
4. Confusion may be inhibiting nonprofit entrepreneurs trying to address the information needs of communities.
5. The IRS approach does not sufficiently recognize the changing nature of digital media.
Several of these problems stem from the IRS apparently relying on rules developed in the 1960s and 1970s. Under these rules, the IRS may deny tax-exempt status to nonprofits that gather or distribute news in a similar way to commercial outlets. This approach, the group concluded, is no longer a sensible standard. “There must be clear rules distinguishing nonprofit and commercial media but they should be logical rules,” continued Waldman.
Among the most significant recommendations:
- The IRS methodology for analyzing whether a media organization qualifies for exemption should not take into account irrelevant operational similarities to for-profits.
- Rather, the IRS should evaluate whether the media organization is engaged primarily in educational activities that provide a community benefit, as opposed to advancing private interests, and whether it is organized and managed as a nonprofit, tax-exempt organization.
- News and journalism do count as “educational” under the tax-exempt rules.
- The IRS should maintain the key structural requirements for being a tax-exempt media organization that properly distinguish it from commercial enterprise, such as: it cannot have shareholders or investors, it must have a governing board that is independent of private interests, and it cannot endorse candidates or lobby lawmakers.
“With the growing lack of accountability and investigative reporting, particularly in local communities, the Council convened a panel of experts to make recommendations on how the IRS can better facilitate the creation of new nonprofit media,” said Vikki Spruill, the Council’s president and CEO. “We strongly encourage the IRS to implement the recommendations made by the Nonprofit Media Working Group, as they will allow nonprofit media to fill the void in today’s reporting.” Eric Newton, vice president of the Knight Foundation, said clearing up the IRS issues is important for efforts to improve local news. “The recession and the digital age combined to slash local news, leading to many new nonprofit media applications,” he said. “But the IRS fell back on industrial age standards and suddenly started delaying or denying requests strikingly similar to ones it had approved just months earlier. Applying 1970s rules to Web media makes about as much sense as telling spaceships they have to use the freeway.”
The Nonprofit Media Working Group includes: Chair Steven Waldman, journalist and former senior adviser to the FCC chairman; Clark Bell, Robert R. McCormick Foundation; Jim Bettinger, Stanford University; Kevin Davis, Investigative News Network; Cecilia Garcia, Benton Foundation; John Hood, John Locke Foundation; James T. Hamilton, Duke University; Joel Kramer, MinnPost; Juan Martinez, John S. and James L. Knight Foundation; Jeanne Pearlman, Pittsburgh Foundation; Calvin Sims, Ford Foundation; and Vince Stehle, Media Impact Funders. Legal Counsel was provided by Marc Owens, former director of the IRS’s Exempt Organizations Division, and Sharon Nokes of Caplin & Drysdale.
Tuesday, February 12, 2013
Monday, February 11, 2013
We previously blogged that while the charitable contribution deduction dodged a bullet (for the most part) in the fiscal cliff agreement, charities remain concerned that the deduction may be vulnerable in future budget and debt ceiling negotiations. What is worth also highlighting, however, is the extent to which charities benefited from the American Taxpayer Relief Act of 2012. While the Act reinstated the overall limitation on itemized deductions, it also extended several charitable giving incentives that had expired, specifically:
- The charitable IRA rollover provision;
- The enhanced charitable deduction for contributions of food inventory; and
- The basis adjustment to stock of S corporations making charitable contributions of property.
For more details about these provisions and the likely effect of other aspects of the Act on charitable giving see the report by the Tax Policy and Charities project of the Urban Institute.
Monday, January 14, 2013
In one way or another, nonprofit organizations are continually required to justify their own existence. That is, as organizations exempt from taxation. The Catch 22 in responding to the mandate is that nonprofits implicitly justify the unstated question: "Are you even worth it?" Nonprofits either justify the question or appear to "protest too much." Better to just address the question head on if you ask me but not through boilerplate That's the question, after all, implicit in local municipalities' continuing efforts to impose PILOTS on nonprofits. Pittsburgh, Pennsylvania, for example, recently appointed another PILOT task force whose ultimate charge is to determine whether nonprofits are "worth it?" "Well . . . are you!?" asks Pittsfied, Massachussetts' Mayor, according to this report. Meanwhile, local nonprofit organizations continually issue those boring and, even worse, less convincing studies designed to show their significant positive impact on local economies. North Dakota, Idaho, Kentucky, Nebraska, New Hampshire and Oregon are just some of the states adhering to the same old tired playbook. Meanwhile, local governments push ahead with their plans, slowly but continually eroding tax exemption on the local level. Deservedly so, if all nonprofits can do is issue reports that don't get to the real question; "what exactly does the tax exempt nonprofit sector provide that cannot be had from the taxable for profit sector?" I think this is the nagging question that follows nonprofits from 2012 and into 2013. Justify thyself.
[See Payroll tax would elicit some cash from large Pittsburgh nonprofits (Pittsburgh Post-Gazette)]
Tuesday, October 9, 2012
This post from The Chronicle of Philanthropy about restricted gifts led me to download the report linked in the article that was generated as a result of the Forbes 400 Summit on Philanthropy. Entitled "Next-Generation Philanthropy: Changing the World," the article (available free but email address required) contains the results of a survey of 264 of the world's top philanthropists, all of whom had at least $1.0 million in investable assets.
The Chronicle article focuses on the preference for restricted gifts among higher net worth taxpayers. But there are some other interesting nuggets that only a tax geek like me would focus on:
- 7% of individuals with assets between $1 and 5 million and 18% of individuals with assets over $50 million have utilized a pooled income fund. That seems amazingly high to me, and I'm shocked that it actually goes up with higher income donors, rather than down.
- Two-thirds of respondents said that they had a different philanthropic focus than their predecessors. It stresses the need for succession planning in charitable vehicles, an area that I think is sometimes over looked.
- In response to the question "With whom do philanthropists partner?", 40% responded business while 28% said other nonprofits and 22% said government agencies. And you all thought we were making this social enterprise stuff up.
- 44% of respondents want a time horizon of less than ten years to see a retturn on philanthropic investment. I'm thinking this counts as patient capital in the for profit world, but is it in the nonprofit world?
- Finally 56% of respondents say that taxes impact their philanthropic giving.
It's an interesting read for those of us thinking about how the nonprofit world and the system of private philanthropy will develop over the next generation.
Monday, October 8, 2012
This Reuters piece from Sept. 28th highlights a recent report prepared by the Lincoln Institute of Land Policy, which finds that local PILOT programs do raise some revenue, but not a significant amount. The report (free but registration required) contains a significant amount of statistical information on the distribution of PILOT programs by region and by nonprofit sector, with hospitals and universities in the Northeast bearing the heaviest burden. The authors believe that this may be, at least in part, because the Northeast is “substantially more reliant on the property tax as a revenue source for funding local governments than other parts of the country.” (Page 2)
The report is an interesting read, although it notes its own limitations. There is no good collection point for data from PILOT programs, so the collection was, by necessity, somewhat ad hoc. As a result, the authors can only point to this information as a floor. Moreover, although the data shows an increase in PILOT programs and revenues over time, it is difficult to know whether this increase is due to the increase in the number of programs or simply due to better data collection methodologies. Finally, data collection is hampered by the lack of a consistent definition of a “PILOT” program.
In any event, what is striking is the relatively small amount of money raised if you aren’t in a jurisdiction like the Boston metro area, which has many large organizations making substantial payments. It makes one wonder whether the administrative costs and the poisoning of the relationship with large institutional citizens is worth the effort. Given the status of state and local governmental budgets these days, I’m sure they’d say that every penny is needed.
Friday, September 28, 2012
The Congressional Research Service recently issued a report on 501(c)(3) Organizations: What Qualifies as "Educational"? From the report's Summary section:
The question here is how far can the term “educational” be extended? Can a group espousing a viewpoint (i.e., only one side of an issue) be characterized as educational? If so, does the group have to provide factual information to support its statements? Is there some standard for truthfulness and accuracy?
The answers are rooted in a Treasury regulation, which provides that an organization that advocates a position or viewpoint can qualify as educational if it presents “a sufficiently full and fair exposition of the pertinent facts” so that people can form their own opinions or conclusions. To supplement the regulation’s “full and fair exposition” standard, the Internal Revenue Service (IRS) has developed the “methodology test.” Under it, a method is not “educational” if it fails to provide a “factual foundation” for the position or viewpoint or “a development from the relevant facts that would materially aid a listener or reader in a learning process.”
There are constitutional implications in how the term “educational” is defined. In particular, the denial of tax-exempt status on the basis of an organization’s speech could raise issues under the First Amendment. While there is no constitutional requirement that the term “educational” encompass every communication protected by the First Amendment, courts will examine the IRS’s denial of a tax exemption or other benefit when it is based on the content of the taxpayer’s speech in order to ensure the denial was not done for an impermissible reason. Groups that promote controversial positions may be particularly vulnerable to an interpretation of “educational” that permits a subjective determination by the IRS as to whether a group’s methods of presenting its views are educational.
Concern over these issues has led to questions about whether the “educational” standard is unconstitutionally vague. While the IRS’s methodology test was held to be unconstitutionally vague by a federal appellate court, subsequent court decisions have suggested that the test passes constitutional muster
Tuesday, September 11, 2012
The International Herald Tribune (IHT) is reporting that the compilers of a leading league table of the world's top universities on Tuesday reported an “unstoppable rise” in the numbers of students choosing to travel abroad to study.
“Global student mobility is on a seemingly unstoppable rise, with those seeking an overseas education targeting the leading universities,” wrote John O'Leary, an academic adviser to the London-based Quacquarelli Symonds, which produces the annual QS World Universities Rankings. O'Leary continued: “Even after considerable growth in recent years, the latest rankings show an extraordinary rise of almost 10 percent in international student numbers at the top 100 universities.”
According to the IHT,
This year’s listings saw Massachusetts Institute of Technology (MIT) overtaking Britain’s Cambridge University as the top place in the influential league table, which is based on a range of factors that include the opinions of academics and prospective employers.
American and British institutions continued to dominate the QS rankings, which were launched in 2004, occupying all 10 top places.
QS factors foreign student and faculty numbers into the rankings. This practice is reflected in this year’s listing. According to O'Leary, “Cambridge, for example, has seen a significant increase in international students, but has dropped five places in this measure, contributing to its fall from first to second place in the overall ranking.”
Similarly, a drop in the ranking of the University of California at Berkeley — down to 22nd place from 2nd in 2004 — reflected not only a comparatively poor faculty-to-student ratio, but also “low attractiveness for international faculty and students,” said QS adviser, Martin Ince.
The IHT continues:
QS noted that the most successful universities competed to attract the world’s best students and faculty. “Simple evaluations of the proportion of international students and international faculty serve as indicators of an institution’s diversity and international attractiveness,” it said.
Traveling abroad to study has obvious attractions for students who want the very best education available globally. There is also an economic incentive for the institutions themselves, and the countries that host them, in terms of fees and foreign earnings.
However, the IHT notes, mobility depends on the readiness of governments to allow access to foreign students.
Thursday, August 2, 2012
New Hampshire Attorney General, Michael A. Delaney, announced today that the New Hampshire Center for Public Policy Studies (NHCPPS) has issued its report on executive compensation at New Hampshire's nonprofit hospitals. The Attorney General commissioned the NHCPPS to conduct the study in 2011. The review was to determine whether the trustees of New Hampshire's nonprofit hospitals are meeting their fiduciary responsibilities in setting executive compensation, and to examine the types and variations in executive compensation among the hospitals.
According to a press release from the New Hampshire Department of Justice,
The report finds that most hospitals follow the process established by the Internal Revenue Service (IRS) for determining executive salaries. However, these hospitals do not necessarily follow the same process in determining other forms of executive compensation including hiring and retention agreements, bonuses, and perquisites. These additional forms of compensation can, in some circumstances, constitute a significant portion of an executive's pay package. The Report also finds that for most hospitals there is a correlation between hospital size and levels of compensation paid to the chief executive officer (CEO). The data does not however show a significant correlation between CEO compensation and hospital performance measures such as quality of care, cost of care, or charitable care provided. Given these hospitals exist to provide quality health care and are required to provide community benefit and charitable care in light of their non-profit status, the lack of such a correlation is a significant concern.
The Report found that in using IRS guidelines to set compensation, there is a potential "log-rolling" effect created. As long as other hospitals are "moving the log forward" with similar levels of compensation, the industry remains in compliance with the IRS guidelines. Hospitals are supposed to use a range of salaries when setting their CEO compensation. In actual practice hospitals tend to target the 75 percentile, and often higher, in setting their CEO's compensation. This creates an upward spiral and executive compensation can grow at a rate disproportionate to relevant measures of achievement, or to increases experienced by other sectors of the population. This appears to have been the case even during the significant economic downturn experienced since 2008.
All of New Hampshire's 23 nonprofit hospitals were included in the review.
Friday, June 1, 2012
The Institute for Nonprofit Mangement at Portland State University and the Nonprofit Association of Oregon have published a detailed report on the nonprofit sector in Oregon. Here is a description of the report from the Institute's website:
The Oregon Nonprofit Sector Report (ONSR) is a comprehensive report that examines the sector as a whole—including a description of its size and scope, the current condition of nonprofits and clues about their economic and social relevance, and social impact of the nonprofit sector in Oregon.
The report aims to inform decision makers in the public, nonprofit, and private sectors, and will be an important tool for raising public awareness about the overall importance and contributions of Oregon’s nonprofits to the state.
Friday, January 27, 2012
Nonprofits engaging in public policy advocacy has often been a controversial topic, and a recent mix of reports and articles indicate that there are still widely divergent perspectives on the wisdom, benefits, and costs of such advocacy. Here are some notable examples:
- ARNOVA's Finances of Nonprofits and Public Policy: Focused on the financial challenges now facing nonprofits and related emerging public policy issues, this report is from a June 2011 symposium and describes "the challenges now facing nonprofits in the realm of public policy, especially as they pertain to the financing of nonprofits presently and in the future. The report outlines an agenda for research needed to develop a better understanding of these challenges and issues."
- NCRP Report on Foundation Funding of Advocacy: Titled "Leveraging Limited Dollars: How Grantmakers Achieve Tangible Benefits by Funding Policy and Community Engagement," this report asserts that even modest financial support for nonprofit advocacy can lead to large benefits for marginalized groups. Based on a study of 110 organizations, it concludes that for every $1 invested in such advocacy a $115 in benefits flowed to such groups or over $26 billion in total.
- "Pandering for Profit: The Transformation of Health Charities to Lobbyists": For a more critical perspective on at least one aspect of nonprofit advocacy, there is this article by James T. Bennett (George Mason University - Department of Economics). Here is the abstract:
This study explores the metamorphosis of three major voluntary health agencies — American Cancer Society, American Heart Association, and American Lung Association — from charities supported primary by donations into lobbying organizations seeking taxpayers’ funds and grants from commercial enterprises in exchange for supporting private or political initiatives only peripherally related to their charitable missions. Prior to the 1980s, lobbying was all but nonexistent, limited to seeking increased funding for disease research. Fearing loss of tax-exempt status, health charities largely avoided political advocacy. The AIDS movement revealed that vast sums could be acquired from government by intense lobbying, and this advocacy evidently did not threaten tax-exempt status. All three of these charities copied the AIDS movement and targeted tobacco tax revenues at the state level. The American Lung Association, in particular, has acted as a public relations flack for both government agencies and corporations — selling its charitable reputation as a selfless entity concerned only with public health for self-interested purposes. The implications of this transition for both the charities themselves and the public interest are analyzed and discussed.
Friday, December 9, 2011
The NY Times reports that presidents of private colleges and universities continue to see their compensation increase at a rate above inflation, with 36 presidents earning more than $1 million in 2009 as compared to 33 in the previous year. The data are from a Chronicle of Higher Education study that relied on information reported in the schools' IRS filings (Form 990). One interesting aspect of the study is an interactive chart that compares presidential salaries to professorial salaries, with most schools bunching in the two to five times range but a few in the eight times or more range.
Wednesday, November 23, 2011
In doing some trolling on the web, I came across a fairly new web site that addresses the pros, cons and history of tax exemptions for Churches. The site is well-done, and with the exception of a few minor nitpicks (the exemption for churches goes back farther in history than Constantine; there are references to exemptions for churches in the Old Testament of the Bible and in ancient Egypt), gives a good overview of the issues involved in this continuing debate (about which I am sure we will hear more during the upcoming election cycle).
Check it out: http://churchesandtaxes.procon.org/
Thursday, October 13, 2011
The IRS has released its 2008 unrelated business income statistics. Based on a quick review, the data appears to relatively consistent with previous years, including slightly over 40,000 unrelated business income returns (Form 990-T), approximately $10 billion in gross unrelated business income reported, and $1 billion in net taxable income yielding approximately a third of a billion dollars in taxes. Section 501(c)(3) organizations reported approximately half of the taxable income, with the rest spread among a variety of other types of tax-exempt organizations.
Tuesday, July 19, 2011
From the "so what?" department, the Pew Research Center for Excellence in Journalism reports in a new study that most nonprofit news organizations have a distinct ideological bent one way or the other, left or right. Which is really to say that most news people, even those who work for good rather than profit, have an opinion. Or maybe my own cynical bent is showing. Anyway, according to the study, almost 60% of the nonprofit news organizations had an identifiable ideological philosophy. Here is a summary of the major findings:
Among the findings:
- The most ideological sites were Group Sites, those that belonged to one of two families organized by a sole or primary funder. One was a family of nine liberal sites that all have the word "Independent" in their names, funded chiefly by the American Independent News Network, which itself is funded by a variety of individuals and foundations, including the Open Society Foundations founded and chaired by George Soros. The other was a group of 12 conservative sites that share the name "Watchdog" and are funded chiefly by the Franklin Center for Government & Public Integrity, which was launched in part by a libertarian group called the Sam Adams Alliance.
- The least ideological in their content were sites that operated entirely on their own and had multiple funding sources and revenue streams, sites such as The Texas Tribune (which lists 12 foundations among its dozens of "founding investors," as well as 64 corporate sponsors and hundreds of individual donors, and generates revenue from events and other revenue devices) and Connecticut Mirror (which lists 10 supporting foundations). These sites also tended to be more transparent and generate a relatively high volume of content.
- One striking feature across many of the news sites studied was that while they may have been forthcoming about who their funders were, often the funders themselves were much less clear about their own sources of income. This effectively made the first level of transparency incomplete and shielded the actual financing behind the news site. The chief funders listed for nearly two-thirds of the sites studied-28 in all-did not disclose where their money came from.
- Reporting resources in this emerging category of news operations tended to be quite limited. All the sites in the study had some staff and all produced original content at least weekly. The median was eight stories per week, but some averaged as few as one or two. And, of the 46 sites studied, the median reporting and editorial staff numbered just three people. At 18 sites-more than a third of those studied-just one or two people authored all of the stories analyzed.
- Whether by design or due to resource limitations, the majority of news stories on these sites presented a narrow range of perspectives on the topics covered. Overall, half of the news stories studied (50%) offered just a single point of view on controversial issues. Just 2% of stories contained more than two points of view.
- The topics covered on these sites often correlated with the political orientation of the sites and their backers. The more liberal-oriented American Independent News sites, for instance, heavily favored stories about the environment and organized labor, topics that did not appear among the most-covered for other groups of sites. The more conservative Watchdog.org sites, on the other hand, often set their focus on the government system itself, drawing attention to stories of inefficiency and waste.
So, what do these findings mean? Should we turn the holdings of the American Campaign Academy or Big Mama Rag loose on these nonprofits? Should we be surprised or even concerned? It seems to me that nonprofits inevitably have an ideological bent, thus exposing the great irony of cases implying that nonprofits should be unbiased; in other words devoid of human influnce. I don't think a non-ideological organization, profit or nonprofit, exists in nature. The study, as far as I have read, does not report the reactions of those news organizations perjoratively labeled as "ideological." but I bet most of them would disagree that they are presenting "narrow" perspectives. They are just as likely to conclude that the study author's have an ideological bent. Ideology, I think, is in the eye of the beholder.
Monday, June 20, 2011
A new report prepared by Giving USA Foundation and the Center on Philanthropy at Indiana University found that Americans gave $291 billion to charity in 2010, 4 percent more than they gave in 2009 but more than 6 percent below the all time record set in 2007. After adjusting for inflation, though, giving increased by only 2.1 percent. Click here for the report's executive summary, also available for free online: Download GivingUSA_2011_ExecSummary_Print; the entire report is available for $75.00. A Reuters report states:
Revised estimates by the study, which started in 1956, showed that during the financial crisis giving fell more than $10 billion in 2008 to $299.8 billion and then dropped more than 6 percent in 2009 to $280.3 billion. Patrick Rooney, executive director of the Center on Philanthropy at Indiana University, said that giving in 2010 grew by 2.1 percent after adjusting for inflation. "But the sobering reality is that many nonprofits are still hurting, and if giving continues to grow at that rate, it will take five to six more years just to return to the level of giving we saw before the Great Recession," he said. The study estimates the giving by about 75 million households, up to 1.5 million corporations, an estimated 120,000 estates and about 77,000 foundations. That money goes to more than 1.2 million registered charities and some 350,000 American religious congregations. Individual giving rose by 2.7 percent in 2010 to $211.7 billion, charitable bequests soared nearly 19 percent to $22.8 billion, foundation giving remained unchanged at $41 billion and corporate giving rose more than 10 percent to $15 billion. Edith Falk, chairwoman of the Giving USA Foundation, a philanthropic research group, said that while giving had started to rebound, the gains "suggest philanthropy is likely in for slow growth over the next several years" and changes in donor behavior during the recession are likely here to stay.
Thursday, May 26, 2011
Bloomberg reports that the U.S. Department of Education's annual The Condition of Education 2011 study for Congress finds that full-time, dependent students at for-profit colleges paid an average of $30,900 annually in the 2007-2008 academic year, as compared to $15,600 at public colleges and $26,600 at private nonprofit schools (see Figure CL-4 on page 11 of the study). These costs include living expenses such as housing and food and are after taking scholarships into account, which scholarships are significantly higher at at private nonprofit colleges than at for-profit schools. The study also found less spending on instruction per student in 2008-2009 by for-profit schools, with four-year, for-profit colleges spending $2,659 per student, public institutions spending $9,418, and private, four-year, nonprofit colleges spending $15,289 (Figures CL-3 on page 10). All these figures are in constant 2009-2010 dollars. Finally, for-profit schools also had the highest average loan amounts in 2008-2009 for students with loans and the highest percentage of students with loans, with $9,754 and 81 percent for 4-year, for-profit institutions as compared to $7,712 and 61 percent for 4-year, private, not-for-profit schools and $6,029 and 47 percent for 4-year, public schools (Figure CL-5 on page 12).
Wednesday, May 25, 2011
The Congressional Budget Office released a report yesterday entitled Options for Changing the Tax Treatment of Charitable Giving. The report reviews 11 options grouped into four categories:
- Retaining the current deduction for itemizers but adding a floor.
- Allowing all taxpayers to claim the deduction, with or without a floor.
- Replacing the deduction with a nonrefundable credit for all taxpayers, equal to 25 percent of a taxpayer's charitable donations, with or without a floor.
- Replacing the deduction with a nonrefundable credit for all taxpayers, equal to 15 percent of a taxpayer's charitable donations, with or without a floor.
The CBO evaluated the options with respect to their cost to the federal government (the "federal tax subsidy"), their effect on the total amount donated to charity, and the extent to which different income groups would benefit or be hurt by the proposed change.
Wednesday, February 2, 2011
JAMA Study Finds For-Profit Hospice Organizations "Cherry-Pick" Lower Cost Patients, Leaving Higher Cost Patients to Nonprofit Hospice; Medicare Payment Structure Incentivizes The Strategy
Capitalist systems are amoral (some might argue immoral) so the results of a recent JAMA study (described and linked to below) should not be surprising. The study results helps us think about what should be the proper role of nonprofits in society. Capitalism presupposes the necessity that in order for some to be rich, others must be poor. Capitalism requires the poor and the poor will always be with us. Nonprofits ought to militate against this particular amoral or immoral aspect of capitalism. This is not to condemn capitalism in toto. If, indeed, it provides more utility for more people than any other economic model than, of course, it is not entirely immoral. But to determine beforehand that some people must, of necessity, be poor so most people have what they need is the quandry of capitalism. Nonprofits help solve the quandry and, as I argued yesterday, should be tax exempt and supported in other ways only to the extent they do so.
A study in the current Journal of American Medical Association helps demonstrate the broader point, while also demonstrating the need to make changes to the medicare payment structure. The study concludes that for-profit hospice organizations typically select lower cost patients, leaving higher cost patients to the nonprofit sector. Nevertheless, both for-profits and nonprofits are reimbursed using identical per diem rates. Here is the study abstract:
Context: Medicare's per diem payment structure may create financial incentives to select patients who require less resource-intensive care and have longer hospice stays. For-profit and nonprofit hospices may respond differently to financial incentives.
Objective: To compare patient diagnosis and location of care between for-profit and nonprofit hospices and examine whether number of visits per day and length of stay vary by diagnosis and profit status.
Design, Setting, and Patients: Cross-sectional study using data from the 2007 National Home and Hospice Care Survey. Nationally representative sample of 4705 patients discharged from hospice.
Main Outcome Measures: Diagnosis and location of care (home, nursing home, hospital, residential hospice, or other) by hospice profit status. Hospice length of stay and number of visits per day by various hospice personnel.
Results: For-profit hospices (1087 discharges from 145 agencies), compared with nonprofit hospices (3618 discharges from 524 agencies), had a lower proportion of patients with cancer (34.1%; 95% CI, 29.9%-38.6%, vs 48.4%; 95% CI, 45.0%-51.8%) and a higher proportion of patients with dementia (17.2%; 95% CI, 14.1%-20.8%, vs 8.4%; 95% CI, 6.6%-10.6%) and other noncancer diagnoses (48.7%; 95% CI, 43.2%-54.1%, vs 43.2%; 95% CI, 40.0%-46.5%; adjusted P < .001). After adjustment for demographic, clinical, and agency characteristics, there was no significant difference in location of care by profit status. For-profit hospices compared with nonprofit hospices had a significantly longer length of stay (median, 20 days; interquartile range [IQR], 6-88, vs 16 days; IQR, 5-52 days; adjusted P = .01) and were more likely to have patients with stays longer than 365 days (6.9%; 95% CI, 5.0%-9.4%, vs 2.8%; 95% CI, 2.0%-4.0%) and less likely to have patients with stays of less than 7 days (28.1%; 95% CI, 23.9%-32.7%, vs 34.3%; 95% CI, 31.3%-37.3%; P = .005). Compared with cancer patients, those with dementia or other diagnoses had fewer visits per day from nurses (0.50 visits; IQR, 0.32-0.87, vs 0.37 visits; IQR, 0.20-0.78, and 0.41 visits; IQR, 0.26-0.79, respectively; adjusted P = .002) and social workers (0.15 visits; IQR, 0.07-0.31, vs 0.11 visits; IQR, 0.04-0.27, and 0.14 visits; IQR, 0.07-0.31, respectively; adjusted P < .001).
Conclusion: Compared with nonprofit hospice agencies, for-profit hospice agencies had a higher percentage of patients with diagnoses associated with lower-skilled needs and longer lengths of stay.
A Los Angeles Times article had this to say of the study:
They found that for-profit services had a lower proportion of patients with cancer than nonprofit providers, and a higher proportion of patients with dementia (which are, generally, less expensive to treat). For-profits had more patients living in nursing homes (also less expensive to treat.)
The team also found that the average length of stay for patients in for-profit hospice was 20 days, while the average length of stay in a nonprofit hospice was 16 days. Because costs are highest at the onset of enrollment and near death, longer stays in hospice are more profitable for providers.
Between 2000 and 2007 the number of for-profit hospice agencies more than doubled, from 725 to 1,660, while the number of nonprofit operators stayed about the same. For-profits have "significantly higher" profit margins than nonprofits, reported the researchers. Indeed, nonprofits, true to their name, operate at a loss.
The team did not assess the relationship between profit status and quality of care, but did suggest that policy makers should consider the study's results when planning how Medicare hospice reimbursements will work in the future.
"Patient selection of this nature leaves nonprofit hospice agencies disproportionately caring for the most costly patients," the team wrote. "As a result, those hospices serving the neediest patients may face difficult financial obstacles to providing appropriate care in this fixed per-diem payment system."