Nonprofit Law Prof Blog

Treasury Office of Tax Policy EO Position (deadline extended to 6/30)

The Office of Tax Legislative Counsel in the Treasury Department's Office of Tax Policy is seeking an Attorney Advisor with exempt organizations experience, as well as in other areas. The just extended deadline for applying is this Thursday, June 30th. Here are the qualifications (emphasis added):

You must meet the following requirements by the closing date of this announcement.

Specialized experience for the GS-15: You must have one year of specialized experience at a level of difficulty and responsibility equivalent to the GS-14 grade level in the federal service. The expectation for selection for grade GS-15 will be at least the following: 12 months of pertinent legal experience at the GS-14 (or equivalent) level. Specialized experience for this position is defined as proven proficiency and experience in the following:

-Experience providing counsel in the area of federal taxation including guidance on: income and transfer tax rules for individuals, trusts, and estates; rules related to charities and other exempt organizations, as well as state, local, or Indian tribal governments; taxation of partnerships, S corporations, or other pass-through business entities and their owners and/or energy tax incentives. AND

- Experience conferring with persons or groups interested in their suggestions for new legislation or on complaints with respect to existing legislation, answering questions relating to tax legislation, conferring with the appropriate interested officials, attorneys, or other technical employees with respect thereto. AND

- Experience with original investigation and research, preparing detailed memoranda and making recommendations on action to be taken.

This experience may have been gained in either the public or private sector. One year of experience refers to full-time work; part-time work is considered on a prorated basis.

Lloyd Mayer

Nonprofits and Dobbs v. Jackson Women's Health Organization

    Today, the Supreme Court overturned Roe v. Wade in Dobbs v. Jackson Women's Health Organization, a historic decision holding there is no longer a federal constitutional right to an abortion.  While the nation reacts in various ways to the decision, it is undeniable that nonprofits played a major role.  Since there are restrictions on the political activity of 501(c)(3) organizations, 501(c)(4) organizations also known as “social welfare organizations” featured heavily.  For a brief summary of advocacy groups and respective restrictions, including 501(c)(3) organizations, 501(c)(4) organizations, and political action committees,  see the website of the non-partisan 501(c)(3) Open Secrets.  

    The anti-abortion group Susan B. Anthony List was created in the 1990s after the formation of Emily’s List, a political action committee (PAC) designed to support abortion rights candidates.  Susan B. Anthony List’s 501(c)(4) is permitted to engage in some lobbying and political activity as long as they do not eclipse its primary purpose.  Susan B. Anthony List’s 501(c)(3) called the Susan B. Anthony Education Fund is subject to lobbying restrictions but can disseminate the group’s anti-abortion message. Here is further reading about Susan B. Anthony's List and today’s decision. 

Should Private Schools Proven to Discriminate Intentionally Receive Government Aid?

    In thinking about the recent Supreme Court decision in Carson v. Makin, No. 20-1088, which deals with private religious schools and state tuition programs, I raised the question of whether government aid should be awarded to private schools at all.  One reason I raised this issue is because private schools are not subject to the same civil rights laws as public schools.  Almost one year ago to the day, I blogged about how historically private schools have not been subject to federal civil rights laws because they did not receive federal funds.  I also noted that perhaps unknowingly, by virtue of receiving P.P.P. loans during the pandemic, private schools became subject to such laws, including Title VI of the Civil Rights Act of 1964 (“Title VI”), which prohibits discrimination on the basis of race, color, or national origin.  In other words, private schools with P.P.P. loans cannot engage in racial discrimination against employees, students, parents, or other participants.  This includes in terms of employment, admissions, enrollment, and other treatment. 

    One must consider the compelling question whether private schools (which in the absence of a P.P.P. loan or other federal funding) are permitted to run afoul of civil rights laws, should be able to receive government aid under a state tuition program, which appears to be the case with the Maine law.  Granted, private schools (non-religious and religious) are subject to nondiscrimination requirements by virtue of their 501(c)(3) status, which they must attest to annually either by filing Form 990 or a statement with the IRS, respectively.  Nevertheless, it is important to consider that Title VI imposes prohibitions against racial discrimination not covered by section 501(c)(3).  One definite difference is that private schools who become subject to federal civil rights laws, e.g., those who receive P.P.P. loans, may have to pay compensatory damages to individuals who prove intentional discrimination in lawsuits against the schools.  In addition, injunctive relief may be awarded to such individuals.  In other words, these private schools are no longer shielded from causes of action from individuals and families who have faced racial discrimination at their hands.

    In the opinion, Chief Justice Roberts himself acknowledged the distinction between public schools and private schools in this regard:  “[T]o start with the most obvious, private schools are different by definition because they do not have to accept all students…”  Given that private schools (who have not received federal funds) largely are shielded from damages or injunctions for intentional discrimination which can be proven, should they be allowed to receive government aid?  This is the larger question that must be answered.

 

Khrista McCarden

Hoffman Fuller Professor of Tax Law

Tulane Law School

Supreme Court Rules Maine Cannot Exclude Religious Private Schools from Aid - The Larger Question

    Today in Carson v. Makin, No. 20-1088, the Supreme Court ruled that Maine cannot exclude religious private schools from a state tuition program.   According to NBC News, under the state tuition program in Maine, taxpayer money is made available to families in remote areas that lack public high schools.  Under the state law, these families could use taxpayer money to send their children to public or private schools in other communities, as long as the schools were not “sectarian,” i.e., did not promote a particular belief or faith system and teach “through the lens of this faith.”  It was a 6 to 3 vote against the Maine law led by a conservative majority.  Chief Justice John G. Roberts Jr. wrote for the majority and stated the ruling does not require states to support religion.  He notes that it requires states that choose to subsidize private schools not to discriminate against religious ones.  In separate dissents, Justice Sonia Sotomayor and Justice Stephen G. Breyer strongly objected on separation of church and state grounds.  A full copy of the decision may be found here. 

    One of the lawyers for the families who challenged the Maine law summed up the decision as “a major step for religious schools to receive the same kind of government aid as other private schools.”  Even if one agrees that religious private schools should not be treated differently than non-religious private schools, an important and long-standing threshold question remains:  Should taxpayer money be made available for private school tuition at all?  

 

Khrista McCarden

Hoffman Fuller Associate Professor of Tax Law

Tulane Law School

NYU School of Law Hosts 2022 Social Entrepreneurship and Impact Investing Conference

    Earlier this month, the Impact Investing Legal Working Group (“IILWG”) and the Grunin Center for Law and Social Entrepreneurship at NYU Law hosted a conference entitled “Legal Issues in Social Entrepreneurship and Impact Investing in the U.S. and Beyond” at NYU.  The IILWG is a group of lawyers and legal/compliance professionals who work or desire to work in the fields of impact investing and social enterprise.  It is comprised of a impact investors, social enterprises, law firms, nonprofit organizations, foundations, and academic institutions.  The Grunin Center for Law and Social Entrepreneurship was formed in May 2017 by two NYU School of Law alumni.  Its mission is to “enhance the community of lawyers and legal institutions engaged in social entrepreneurship and impact investing and to accelerate their effective participation in these fields.” 

    The 2022 conference focused on the following themes: (1) Inclusive Capitalism and Going the Last Mile; (2) Blending Finance to Advance Climate Adaptation and Resilience; (3) Elevating Beneficiaries: Inclusive Design in Impact Instruments; (4) Climate Regulation and the Long and Winding Road; (5) Legal Implications of Minority Wealth Equity Strategies; and (6) Prepare for Impact: Training Lawyers for ESG, Impact Investing, and Social Enterprise Practices.  The complete Program Agenda may be found here.  The themed panel discussion on minority wealth equity seems particularly relevant in light of recent tragedies involving racially charged violence, and it focused on supporting minority-owned businesses in the United States and abroad.  My former Corporations professor, Professor John Coates, delivered a keynote on the proposed SEC climate regulation in confronting a global concern.  The agenda also included, inter alia, an in-progress case study on MicroBuild, a global impact investing fund with a goal of providing adequate housing for the poor.  The topics from the conference lend credence to the notion that impact investing is an effective vehicle for resolving global challenges in a new era of much needed change.

 

Khrista McCarden

Hoffman Fuller Associate Professor of Tax law

Tulane Law School

Can Religious Freedom Protect Right to Abortion?

Congregation L’Dor Va-Dor, a progressive synagogue in Palm Beach County not affiliated with a broader denomination filed a lawsuit last week challenging Florida legislation banning most abortions after 15 weeks, under the State Constitution’s right to privacy and freedom of religion. 

The Congregation apparently argues that under the Jewish religion “abortion is required if necessary to protect the health, mental or physical well-being of the woman.”

I have not found the complaint but would gladly post if anyone has found it online. I am wondering whether they are bringing a claim under the Religious Freed Restoration Act (presumably that would be Florida's version of that statute). EDIT: Here is the complaint 

Seems like this should be an interesting case to follow for nonprofits given the potential of the public policy requirement to play a role in how we think about nonprofits engaged in the abortion realm after the Dobbs opinion comes out.

Philip Hackney

 

 

Propublica Piece Examines Nonprofits Pushing Anti-CRT Movement

Propublica has a great but tough story that provides insight into the nonprofits engaged in the Anti-Critical Race Theory movement across the country, including the terrifying impact it has on the lives of many people. It's a reminder of how central a role nonprofits play in our collective American life in the political battles in which we engage and that they can have both great positive effect, but also very dark impact at the same time. 

It's a sprawling story and hard to summarize but the lead does about the best job of describing its focus: "Cecelia Lewis was asked to apply for a Georgia school district’s first-ever administrator job devoted to diversity, equity and inclusion. A group of parents — coached by local and national anti-CRT groups — had other plans."

More from the story: "Lewis, a middle school principal, initially applied for a position that would bring her closer to the classroom as a coach for teachers. But district leaders were so impressed by her interview that they encouraged her to apply instead for a new opening they’d created: their first administrator focused on diversity, equity and inclusion initiatives.

DEI-focused positions were becoming more common in districts across the country, following the 2020 protests over the killings of George Floyd, Breonna Taylor and Ahmaud Arbery. The purpose of such jobs typically is to provide a more direct path for addressing disparities stemming from race, economics, disabilities and other factors."

Examples of the role of nonprofits: "dozens of parents from across the county had assembled on a Sunday afternoon for a lesson in an emerging form of warfare. School board meetings would be their battlefield. Their enemy was CRT.

One of several presenters at the meeting was Rhonda Thomas, a frequent guest on conservative podcasts and the founder of the Atlanta-based Truth in Education, a national nonprofit that aims to educate parents and teachers about “radical ideologies being taught in schools.” “So what is critical race theory?” Thomas asked the crowd. “It teaches kids that whites are inherently racist and oppressive, perhaps unconsciously,” and that “all whites are responsible for all historical actions” and “should feel guilty.”

She added: “I cannot be asked for repentance for something my grandparents did or my ancestors did, right?”

Thomas stressed that parents should form their own nonprofit groups and cut ties with their schools’ Parent Teacher Associations. “The PTA supports everything we’re against,” she told them.

Another presenter, a local paralegal named Noelle Kahaian, leads the nonprofit Protect Student Health Georgia, which aims to “educate on harmful indoctrination” including “comprehensive sexuality education” and “gender ideology.”

Kahaian emphasized how to grab attention during upcoming school board meetings. Identify the best speakers in the group, she told them, adding: “It’s OK to be emotional.” Be sure to capture video of them addressing the board — or even consider hiring a professional videographer.

“It’s good in case Tucker Carlson wants to put you on air,” Kahaian said. “It really helps.”

The story gives great depth of understanding of the impact of this collection of nonprofits that work together to organize to push these narratives. It's well worth a read for those interested in the power of nonprofits and how they are being used today.

Philip Hackney

Equal Protection and Title IX Apply to Charter School Appeals Court Holds

In Peltier v. Charter Day School, the United States Court of Appeals for the 4th Circuit, sitting en banc, held a charter school in North Carolina to be a state actor for purposes of Section 1983 (for an Fourtheenth Amendment Equal Protection claim) and for purposes of Title IX. This meant that the charter could not apply its traditional rules and require girls to wear skirts.

Like most charters, Charter Day School is a nonprofit that is recognized by the IRS as a charitable organization exempt from tax under section 501(a) because described in Section 501(c)(3). Charter Day School and its management company argued that as a private entity it was not a state actor.

"CDS, a public charter school in Brunswick County, North Carolina, educates male and female students in kindergarten through the eighth grade. The founder of the school, Baker A. Mitchell, Jr., incorporated defendant Charter Day School, Inc. in 1999. The following year, he obtained a charter from the state of North Carolina, pursuant to the North Carolina Charter Schools Act of 1996, N.C. Gen. Stat. § 115C-218 et seq. CDS’ policies are established by the volunteer members of its Board of Trustees (the Board). Mitchell initially served as the Board’s chairman and now serves as its non-voting secretary."

For those interested in conflict of interest and for profit charter management companies, Charter Day School entered into a charter management contract with Roger A Bacon, Inc. This is a for profit company owned and managed by Mitchell the founder of the Charter Day School who also sits on the board of Charter Day School.

The Court concluded as follows:

"In sum, we hold that CDS, a public school under North Carolina law, is a state actor for purposes of Section 1983 and the Equal Protection Clause. By implementing the skirts requirement based on blatant gender stereotypes about the “proper place” for girls and women in society, CDS has acted in clear violation of the Equal Protection Clause. We further hold that sex-based dress codes like the skirts requirement, when imposed by covered entities, are subject to review under the anti-discrimination provisions of Title IX. We therefore affirm the district court’s award of summary judgment to the plaintiffs on their Equal Protection claim against CDS and affirm the court’s award of summary judgment to RBA on that claim. We vacate the district court’s judgment on the Title IX claim and remand for an evidentiary hearing on that claim asserted against all defendants."

In concluding that Charter Day School is a state actor the Court focused particularly upon the fact that the North Carolina Constitution committed to providing free, universal elementary and secondary schooling to the state’s residents and that charters were ensconced as a part of state law to providing that public education. 

Notably though, the for profit management company was not found to be a state actor. This will continue to be an interesting area to watch given that states allow charters to not have to follow many state laws required of public schools.

Philip Hackney  

AALS Section on Trusts & Estates TWO Calls for Papers: WIP & Pedagogy

The AALS Section on Trusts and Estates Section is seeking papers/presentations for a works in progress panel and a panel on Pedagogy.

Here are the two calls for papers/presentations:

Call 1 WIP: The AALS Section on Trusts and Estates is pleased to announce a Call for Papers: “Works in Progress in Trusts & Estates” 

Selected papers will be presented at the Trusts & Estates Program Session at the 2022 AALS Annual Meeting held in San Diego from January 4-7, 2023. 

Program Description: The Section seeks submissions on a variety of topics and methodological approaches related to Trusts & Estates Law. We are interested in all states of article development.

Eligibility: Full-time faculty of AALS member schools or non-member fee-paid schools as of the submission deadline are eligible to submit papers. For co-authored papers, both authors must satisfy the eligibility criteria. We particularly encourage new voices in the field to submit.

Submissions, due dates and method: Submissions should be of abstracts between 250 and 1,000 words, inclusive of any footnotes. Scholarship may be at any stage of the publication process from work-in-progress to completed article, but if already published, scholarship may not be published any earlier than 2022. We welcome legal scholarship across a wide variety of methodological approaches. Each potential speaker may submit only one abstract for consideration.

There are two submission due dates. The Section seeks detailed abstracts in late summer, with final papers due in late fall.

• The due date for detailed abstractsis August 31, 2022.
• The due date forfinal submission is November 15, 2022.

Abstracts and papers should be submitted electronically in Microsoft Word format to Eric Chaffee at Eric.Chaffee@UToledo.Edu. The subject line should read “AALS Trusts & Estates Section CFP WIP Submission.” By submitting an abstract for consideration, you agree to attend the 2023 AALS Annual Meeting Trusts & Estates Program Session should your paper be selected for presentation.

Submission review, selection, conference attendance: Abstracts and papers will be reviewed by members of the Section’s Executive Committee. Selected presenters will be announced by October 1, 2022. The Call for Paper presenters will be responsible for paying their own AALS registration fee, hotel, and travel expenses.

Inquiries or questions: Any inquiries about the Call for Papers should be directed to Eric Chaffee at the contact information noted above.

 

 

Call 2 Pedagogy: The AALS Section on Trusts and Estates is pleased to announce a Call for Papers: “Post-Pandemic Pedagogy in Trusts & Estates” 

Selected papers will be presented at the Trusts & Estates Program Session at the 2022 AALS Annual Meeting held in San Diego from January 4-7, 2023. 

Program Description: We invite papers and/or presentations that provide insights into educating law students in trusts & estates. These insights might take a variety of forms. For example, papers/presentations might describe classroom techniques and innovations, innovations in course design or structure, or novel courses. They might discuss proposals that show how we might incorporate issues of race, gender, class, sexual orientation, immigration status, and/or disability into our classrooms. They might also explore the lessons learned during the time we have all now spent teaching during the pandemic. Or contributions might be completely forward looking and propose novel ideas or experiments in teaching that you have not yet implemented.

Eligibility: Full-time faculty of AALS member schools or non-member fee-paid schools as of the submission deadline are eligible to submit papers. For co-authored papers/presentations, both authors must satisfy the eligibility criteria.

Submissions, due dates and method: Submissions should be of abstracts between 250 and 1,000 words, inclusive of any footnotes. The submissions for this panel can either describe an intended paper or a presentation that you will provide. Scholarship may be at any stage of the publication process from work-in-progress to completed article, but if already published, scholarship may not be published any earlier than 2022. We welcome legal scholarship across a wide variety of methodological approaches. Each potential speaker may submit only one abstract for consideration.

There are two submission due dates. The Section seeks detailed abstracts in late summer, with final papers due in late fall.

• The due date for detailed abstractsis August 31, 2022.
• The due date forfinal papers/and or presentation materials is November 15, 2022.

Abstracts and papers should be submitted electronically in Microsoft Word format to Philip Hackney at phackney@pitt.edu. The subject line should read “AALS Trusts & Estates Section CFP Pedagogy Submission.” By submitting an abstract for consideration, you agree to attend the 2023 AALS Annual Meeting Trusts & Estates Program Session should your paper be selected for presentation.

Submission review, selection, conference attendance: Abstracts and papers will be reviewed by members of the Section’s Executive Committee. Selected presenters will be announced by October 1, 2022. The Call for Paper presenters will be responsible for paying their own AALS registration fee, hotel, and travel expenses.

Inquiries or questions: Any inquiries about the Call for Papers should be directed to Philip Hackney at the contact information noted above.

 

Philip Hackney

06/13/22

Philanthropy in the Age of Covid

Last week, Candid and the Center for Disaster Philanthropy released Philanthropy and Covid-19: Examining Two Years of Giving. There's a lot of interesting information there, but the topline conclusion is this: Covid-related giving declined significantly between 2020 and 2021, on several metrics.

Survey respondents reported $2.119 billion of Covid support in 2020. The number declined 31% to $1.462 billion in 2021. In that same period, overall grantmaking went up 11%. (Candid does say that, since there is no precise definition of Covid support, respondents used their own judgment to determine whether their giving represented Covid support.)

Anyway, it's an interesting survey and an interesting report, and probably worth taking some time with.

Samuel D. Brunson

Happy June! (And Call for Papers)

Happy June everybody! You know what that means--it's time to submit for the AALS meeting! I've copied the call for papers below. Let's hear all of the hard nonprofit work everybody has been doing!

Call for Papers
AALS Section on Nonprofit and Philanthropy Law
2023 Annual Meeting
January 4-7
San Diego, CA

Nonprofits & Philanthropy

The AALS Section on Nonprofit and Philanthropy Law announces a call for papers to be presented as works-in-progress in our committee session at the 2023 AALS Annual Meeting in San Diego, CA from January 4-7, 2023.

The Section seeks submissions on a variety of topics and methodological approaches related to Nonprofit and Philanthropy Law. Given the recent importance and novelty of state nonprofit law, we are especially interested in scholarship that illuminates, elucidates, and otherwise engages with the work states are doing in the nonprofit world, but are happy to consider any scholarship in the field. We are interested in all states of article development.

Eligibility: Scholars teaching at AALS member or nonmember fee-paid schools. We particularly encourage new voices in the field to submit.

Due Date: June 15, 2022

Form and Content of Submission: Submissions may range from early drafts to articles that have been submitted for publication, but not articles that will have already been published by January 7, 2023.

Submission Method: please submit papers electronically to sbrunson@luc.edu with “AALS Nonprofit and Philanthropy Law Submission” in the email subject line.

Submission Review: Papers will be selected for inclusion in the program after review by members of the AALS Section on Nonprofit and Philanthropy Law.

Additional Information: Presenters are responsible for their own expenses associated with the conference. If you have any questions, please contact the chair, Sam Brunson, at sbrunson@luc.edu.

On Twitter and Charitable Exemption

On Friday, David Herzig (EY) proposed a thought experiment about what Elon Musk could do in his acquisition of Twitter:

So, how could one solve for this problem? Well, what if the take private proposed by Mr. Musk is done through a newly formed true Public Charity. And if one know the charitable rules like I do, then one would know that in the first year, Mr. Musk could do all the funding. 3/

— David Herzig (@professortax) May 27, 2022

His proposal led to some interesting discussion--could Twitter qualify as a 501(c)(3)? After all, newspapers and other journalistic organizations have been doing it for the last couple decades. Most recently, the Chicago Sun-Times converted from a for-profit newspaper into a nonprofit, tax-exempt one.

As I've thought about it, I see two major impediments to the idea of Twitter itself become a tax-exempt organization.

Continue reading

Abely, The Uncertain Role of Reliance in the Enforcement of Charitable Subscriptions

Christine Abely (New England Law) has posted The Uncertain Role of Reliance in the Enforcement of Charitable Subscriptions, 26 Lewis & Clark L. Rev. (2022) to SSRN. Its abstract reads:

In cases where charitable promises are made and later retracted, the Restatement (Second) of Contracts provides conflicting guidance as to how a court should factor in reliance by the charity when considering whether to enforce the promised donation by way of promissory estoppel. Specifically, the text of § 90(2) within the Second Restatement provides that a charitable subscription is binding “without proof that the promise induced action or forbearance.” The adoption of this provision represented a departure from the requirement of reliance historically necessary for the enforcement of most types of promises by promissory estoppel. According to the Second Restatement, however, reliance remains relevant to the determination of whether enforcement of a promise is necessary to avoid injustice, which is a required element to enforce a charitable subscription pursuant to § 90(2). Namely, Comment b to § 90, discussing the character of reliance protected, notes that enforcement of the promise must be necessary to prevent injustice, one factor of which is the nature and extent of reliance; such reliance “need not be of substantial character in charitable subscription cases.” Comment f states that for charitable subscriptions where recovery is rested on reliance, “a probability of reliance is enough,” although American courts “have found consideration in many cases where the element of the exchange was doubtful or nonexistent.” Moreover, Illustration 17 to Comment f describes a situation where reliance does in fact support enforcement of a charitable subscription.

Continue reading

Global Study Shows Impact Investing Interest Is Growing

Earlier this week, IFA Magazine published an article entitled “Interest in Impact Investing at All-Time High Worldwide” in which it referenced a global study.  In the United States, the percentage of individuals who find impact investing appealing has jumped from 51% to 61% since 2020.  Perhaps most interestingly, millennials have registered the largest interest in impact investing across numerous countries: 67% in the UK, 66% in the U.S., and 68% in Australia.  What makes this relevant is that many commentators have noted there will be a large scale shift of wealth to millennials by baby boomers in the coming years.  This begs the question whether millennials will choose to invest in benefit corporations and forego traditional charitable giving avenues.

The study also noted that the environment was the largest concern internationally.  For example, 34% of those in the UK, 30% in Australia, and 34% in Germany were concerned primarily about climate change.  Americans were chiefly concerned with health care.  The top concern for 25% of U.S. individuals surveyed were health, including disease prevention and cures.   Finally, the study also noted the growing concern about greenwashing in the U.K.  Greenwashing is the practice of using marketing spin to deceive the public about how environmentally friendly a company’s products, aims, and policies are. It will be interesting to see what U.K. policies are put into place to stop this practice.

 

Khrista McCarden

Hoffman Fuller Associate Professor of Tax Law

Tulane Law School

 

Giving to Ukraine & the Importance of Nonprofit Efficiency and Transparency (Top-Ranked Charities)

Last month, an article in Fortune noted that Ukraine so far has received more than 600 grants totaling almost $900 million. The article’s source for this information is Candid, an information services company specializing in nonprofits.  In fact, Candid provides updates on a Philanthropic response to the war in Ukraine page as donations are made.  The article stated that charities, such as Bloomberg Philanthropies, the IKEA Foundation, and the American Red Cross have donated $25 million, $22 million, and $12 million, respectively. Celebrities and others have also made large donations to Ukraine.  Ryan Reynolds and Blake Lively donated $1 million to Ukrainian refugees through the United Nations refugee agency in late February. Netflix co-founder Reed Hastings donated $1 million to Razom, a 501(c)(3) aiding Ukraine. Other celebrity donors have raised significant sums for Ukraine, including Ashton Kutcher and Mila Kunis who raised over $30 million and Bethenny Frankel —a former Real Housewives of New York star who raised $85 million for Ukraine.

The article also references Congress’ approval of The Ukraine Supplemental Appropriations Act, 2022 in March, which provides $13.6 billion in emergency funding, which includes $3.5 billion for military supplies alone.

The author notes that these figures raise the question of how much the war is costing Ukraine.  According to Ukrainian Prime Minister Denys Shmyhal, Ukraine is spending approximately $4 billion each day on war.  Russia’s war expenses are believed to be over $20 billion per day according to Consultancy.org.

Clearly, Ukraine needs any funds that are donated to end up in the hands of those charities that will put them to their best possible use.  I have written about the need for efficiency in terms of charitable giving (an "efficient charitable market"), and this issue is brought into sharp focus in considering the current plight of Ukraine.  The need for transparency is brought into sharp focus as well.  Organizations such as Charity Navigator, CharityWatch, and BBB Wise Giving Alliance are helping donors find appropriate relief efforts.  Charity Navigator has compiled a list of top nonprofits seeking to advance relief and recovery efforts in Ukraine.  CNBC recently published a list of over 30 organizations that are highly-rated in terms of financial efficiency and transparency by category.  

 

Khrista McCarden

Hoffman Fuller Associate Profesor of Tax Law

Tulane Law School

NY Attorney General Sues Diocese to Recover Pensions for St. Clare's Hospital Workers

Yesterday, New York Attorney General Letitia James filed a lawsuit against the Roman Catholic Diocese of Albany, its leadership, and others, for their alleged negligent and intentional actions that resulted in depriving over 1,100 former employees of St. Clare’s Hospital of their pensions.  The press release describes the lawsuit and history.

The complaint alleges that New York Not-for-Profit Corporations Law and New York Estates, Powers & Trusts Law were violated when the Diocese (1) decided to remove the pension plan from federal protections; (2) failed to adequately fund, monitor, or insure the pension; and (3) ultimately failed to administer the pension.

Attorney General James seeks to hold the Diocese accountable for these failures and to recover the pensions that the former hospital workers lost.

As a result of the alleged breaches of fiduciary duties, over 1,100 former employees lost their retirement benefits.  These former employees include St. Clare’s Hospital nurses, lab technicians, social workers, EMTs, orderlies, housekeepers, and other essential workers.

The lawsuit resulted from a 2019 investigation by Attorney General James after the Diocese terminated the pension that had been in place since 1959.  That investigation unearthed numerous and systemic violations of the Diocese’s fiduciary duties of care, loyalty, obedience, and disclosure to St. Clare’s Corporation, which ultimately resulted in depriving former employees and vested pensioners their promised retirement benefits. 

The Future of Impact Investing

Last week, I had the great honor of serving as the keynote speaker for the Pennsylvania Bar Institute’s Nonprofit Conference.  My presentation addressed the rise of impact investing or what is commonly referred to as the third-sector.  In 2015, I published an article on impact investing in the University of Pennsylvania Journal of Business Law, and I have remained deeply interested in the area, largely because of its potential to address many of the world’s global problems, such as economic inequality and extreme poverty, racial injustice, human trafficking, and other crises.

A recent article in the Stanford  Social Innovation Review addresses the likely trajectory of impact investing over the next 30 years.  Interestingly, the authors note that a little over 10 years ago, JPMorgan, the Rockefeller Foundation, and the Global Impact Investing Network (GIIN) released a report estimating that impact investing would “reach between $400 billion and $1 trillion in assets under management by 2020,” which was viewed as doubtful.  However, in 2020, the impact investing market reached $715 billion.  With such an unexpected rise in only ten years, the authors decided to address how far the market might climb from 2020 to 2030.  I was pleased to see they focused on the UN Sustainable Development Goals (SDGs) in their analysis.  In my own work, I have emphasized the need to ensure philanthropic funds are directed towards those charities that are making the best measurable strides in terms of SDGs.  The authors point out that there is a $2.5 trillion annual gap in funds necessary to achieve the SDGs by 2030.  Clearly, traditional avenues and methods of charitable giving are unlikely to work.  The authors go on to discuss how the COVID-19 pandemic has made it even more difficult to achieve the SDGs because governments were forced to shift resources and accumulate new debt in order to confront attendant challenges, including greater inequalities. 

 

Khrista McCarden

Hoffman Fuller Associate Professor of Tax Law

Tulane Law School

Ukraine Update: Crowdfunding's Key Role; IRS Notice on Employee-Leave Donations

Two recent news stories underline the importance of crowdfunding for supporting Ukraine and Ukrainians. The N.Y. Times reports that Ukrainian appeals to private individuals and companies have led to contributions of numerous items that have military applications, including drones, night vision scopes, body armor, rifles, and ammunition. The Chronicle of Philanthropy reports that the Ukrainian government is enhancing its crowdfunding efforts to keep support flowing even as the Russian invasion of Ukraine passes the three-month mark.

And even the incredibly busy IRS has taken the time to ease ways of supporting Ukraine. Notice 2022-28 provides guidance on how employers can adopt leave-based donation programs to aid citizens and residents or Ukraine, individuals presently in Ukraine, or refugees from Ukraine. Importantly it states:

Employer leave-based donation payments made by an employer before January 1, 2023, to section 170(c) organizations to aid victims of the further Russian invasion of Ukraine (qualified employer leave-based donation payments) will not be treated as gross income or wages (or compensation, as applicable) of the employees of the employer. Similarly, employees electing or with an opportunity to elect to forgo leave that funds the qualified employer leave-based donation payments will not be treated as having constructively received gross income or wages (or compensation, as applicable). 

Lloyd Mayer

10th Circuit Upholds Denial of Exemption Under 501(c)(15) for Small Captive Insurance Company

In Reserve Mechanical Corp. v. Commissioner, the U.S. Court of Appeals for the Tenth Circuit upheld the Tax Court's decision affirming the IRS' decision that the company did not qualify as tax-exempt status under section 501(c)(15). Here is the court's summary of the decision:

Reserve Mechanical Corp. appeals the decision of the Tax Court affirming the decision of the Commissioner of Internal Revenue that it did not qualify for an exemption from income tax as a small insurance company and that the purported insurance premiums it received must therefore be taxed at a 30% rate under I.R.C. § 881(a). We hold that the record supports the Tax Court’s decision that the company was not engaged in the business of insurance. The court had two grounds for deciding that Reserve was not an insurance company. First, it determined that Reserve had not adequately distributed risk among a large number of independent insureds—a hallmark of any true insurance company. Virtually all the insured risk was that of one insured, a company that had the same ownership as Reserve itself. To appear to distribute risk, Reserve entered into an insurance pool with other purported insurance companies, each owned by an affiliate of its insured, but the arrangement lacked substance and the pool itself did not distribute risk. Second, the Tax Court determined that the policies issued by Reserve were not insurance in the commonly accepted sense. For example, the premiums were not the result of arm’s-length transactions and were not reasonable, and Reserve was not operated in the way legitimate insurance companies operate. In addition, Reserve argues that if it was not an insurance company, the premiums it received must be treated as nontaxable capital contributions. We also reject that argument.

The decision is significant in part because there are number of other, similar cases, on appeal involving other companies, and the possibility of more IRS action in this area with this victory for the government to support them. For a detailed analysis, see this Forbes article.

Lloyd Mayer

Bremer Trust Decision: One Trustee Removed, Two Retained; Trust Allowed to Consider Sale of Bank

The Minnesota Star Tribune reports that a state court judge has order the removal of one of the trustees for the Otto Bremer Trust, but has also refused the Minnesota Attorney General's request to remove two other trustees. The judge also held the trustees acted properly by considering whether sell the bank Bremer Financial (commonly known as Bremer Bank). The story provides a copy of the 103-page opinion. 

I have not had a chance to review the opinion - busy grading exams this week - but here is a helpful analysis from the law firm of Nilan Johnson Lewis.

Lloyd Mayer