Nonprofit Law Prof Blog

20223 Outstanding Nonprofit Lawyer Awards

The ABA Business Law Section has announced this year's Outstanding Nonprofit Lawyer Awards recipients. They are:

Vanguard Award: Ellen Aprill

Outstanding Lawyer Award: Tracy L. Boak

Outstanding In-House Counsel Award: Angela Tyner

Outstanding Academic Award: Jill Horwitz

Outstanding Young Lawyer Award: Albert H. Pak

You can read more about the awards and the recipients here. Congratulations to all of this year's honorees!

Samuel D. Brunson

Opinion Page: Nonprofits Fueling the Illegal Immigration Crisis

A group of illegal immigrants circa November 11, 1620

 

From Capital Research Center, June 6, 2023:

A nonprofit is granted tax-exempt status because it serves some function beneficial to society. We want to encourage organizations like these to exist, so we reward them by not charging them taxes. What if a nonprofit is functioning in a way that harms society instead? Should it be allowed to keep its nonprofit status?

Such is the case with the cadre of nongovernmental organizations (NGOs) and nonprofits fueling the illegal immigration crisis in America today. Worse yet, not only are they actively harming the country while being exempt from the taxes most Americans pay, they are often tax-payer funded.

Facilitators of the Crisis

The details of this tragicomedy are almost too ridiculous to believe. Nonprofits and NGOs are not only supporting illegal immigrants with food and shelter when they arrive at the border; they are funding and guiding their migrations from far away in Latin America. We’re talking debit cards, maps, legal counsel, pamphlets to guide them on what to say to Border Patrol agents, etc. These organizations are using tax dollars and tax-exempt status to fund the operation. It’s a mass invasion of America, literally funded by our own tax dollars. Stranger than fiction, indeed.

. . . 

darryll jones

 

Opinion Page: Nonprofit hospitals can fill gaps in care of undocumented immigrants

Kaiser Family Foundation

From The Baltimore Banner, June 2, 2023

House Bill 588, which would have allowed immigrants without documentation to gain access to health coverage through the Maryland Health Benefit Exchange, failed to gain approval in the General Assembly this year. This unfortunate result spells trouble for many state residents who are at high risk for delaying essential care. While advocates regroup to try again next session, what are families to do?

Nonprofit hospital systems can put into place a stopgap measure to help people who are ineligible for health insurance, such as people without documentation. These health systems can develop a robust charity care program, modeled on a program called The Access Partnership at Johns Hopkins Medicine. If adopted across the state, these programs can form a bridge to a true policy fix that would help thousands gain coverage.

At Hopkins, we routinely encounter patients and families in situations such as that of Verónica del Cid Gaitán. The Baltimore Banner reported that she delayed going to the hospital out of her fear of the costs. Recently, an Eastern European woman came to our hospital suffering from heart failure. Fluid filled her lungs and legs. She had run out of her diuretic (i.e., water pill) a month prior but waited until she could barely breathe to seek medical attention in the emergency room.

. . . 

darryll jones

Opinion Page: Charity or generosity, that is the question

From the Greenfield Recorder, April 28, 2023

Have you ever considered the difference between charity and generosity? Does giving to others make you feel good? When you drop a few coins in The Salvation Army bucket at Christmas, or donate a little to Saint Jude’s Children’s Hospital, do you take notice of your giving and pat yourself on the back just a bit? Or when you volunteer a few hours at your local food pantry, do you feel you have done your part?

All giving is good, and meeting the needs of others as we can is commendable, but there is a marked difference between charitable acts and generosity. Let’s read from the great Sufi poet, Hafiz, to see how he addresses the subject of giving:

The Sun Never Says

Even after all this time

The sun never says to the Earth,

“You owe me.”

Look what happens with a love like that,

It lights up the whole sky!

“Look what happens with a love like that …” Hafiz’s poem speaks to far more than half-hearted or “tit for tat” giving, and it reminds us of how transformative selfless giving can be for all of us.

. . . 

darryll jones

Stanford Social Innovation Review: "The Movement for Nonprofit Social Responsibility"

 

From an interesting essay in the Stanford Social Innovation Review:  

Nonprofits worldwide have come under a sweeping movement for social responsibility. They are now engaging in all manner of prosocial activities that go well beyond their primary missions. Diversifying their boards by gender and race, paying their suppliers a fair wage, reducing their environmental footprint, and lending their voice to social causes from #MeToo to Black Lives Matter are just a few trappings of this surprising development.

As the movement has taken off, some nonprofits have formally broadened their missions to incorporate new concerns for social responsibility. In 2022, the American Hospital Association, which represents nearly 5,000 organizations in the health-care sector, revised its vision statement to insert language about justice and equity. Likewise, the Sierra Club is no longer focused narrowly on environmentalism; its “2030 Strategic Framework” also touches on antiracism, sexism, economic justice, and achieving work-life balance for its employees. Similarly, Goodwill Industries, which has a heritage statement from its founder, Rev. Dr. Edgar J. Helms, that acknowledges its history of creating employment opportunities for those who are disabled, now stresses in its core values the broader objective of being “socially, financially, and environmentally responsible.”

This development is surprising, not only because of its reach and depth but also because nonprofits are already supposed to be good actors. Advocates of corporate social responsibility typically justify it as a corrective to the social ills created by the pursuit of profit. But nonprofits’ very purpose is to contribute to the public good. In the United States, this is a legal matter: The Internal Revenue Service grants tax-exempt status only to organizations that provide public benefit. The goodness of nonprofits is also implicit to the main theory of their existence: They provide services (feeding the poor, caring for the sick) that society needs but that are undersupplied by governments and not lucrative enough for traditional investors.

In this article, we address the causes, contemporary characteristics, and consequences of this puzzling movement for nonprofit social responsibility. The phenomenon has profound implications for our understanding of nonprofit mission and for the demands that are placed on nonprofit leadership. Nonprofits that incorporate a broader view of responsibility into their work may gain legitimacy, and the expansion of purpose could spark innovation. However, leaders will also be challenged as the mission becomes less singular and will need greater skill in navigating multiple, sometimes competing goals.

. . . 

Dimensions of the Contemporary Movement

As the movement for nonprofit social responsibility has evolved, its character has also changed. It emerged against a backdrop of high-profile scandals and rapid growth in the number, size, and reach of nonprofits and, perhaps as a result, initially operated by a logic of social control. The initial movement was animated by the push for external oversight and standardization, in the form of certifications, accreditations, watchdogs, and codes of conduct.

By contrast, the contemporary movement is driven by nonprofits taking proactive steps to incorporate an expanding array of social issues into their core values. It goes beyond a narrow conception of the nonprofit mission and beyond the baseline responsibilities of being lawful and ethical to stress responsibility to a wide array of stakeholders, including the sector as a whole, and practicing leadership on emergent social issues.

 

darryll jones

First Bill Introduced to Strip PGA of 501(c)(6) Status

PGA continues to take a public relations beating for its perceived capitulation to LIV Golf and its backer, the Saudi Public Investment Fund.  Yesterday, only one day after the PGA and LIV Golf announced its plans to partner up, a California democrat introduced the "No Corporate Tax Exemption for Professional Sports Act."  Here is the press release:

Today, Congressman John Garamendi (D-CA08) introduced the “No Corporate Tax Exemption for Professional Sports Act” following the Saudi Sovereign Wealth Fund’s surprise takeover of the Professional Golfers’ Association of America (PGA) Tour.

The legislation would end the tax loophole that the PGA Tour and other professional sports leagues exploit to avoid paying any federal corporate income tax. These professional sports leagues each generate more than $100 million annually in corporate income, which would be taxable under the Garamendi bill. In 2015, the National Football League voluntarily stopped claiming exemption from the federal corporate income tax under an exemption originally intended only for amateur sports.

“Saudi Arabia cannot be allowed to sports wash its government’s horrific human rights abuses and the 2018 murder of American-based journalist Jamal Khashoggi by taking over the PGA,” Garamendi said. “PGA Tour Commissioner Jay Monahan should be ashamed of the blatant hypocrisy and about-face he and the rest of PGA’s leadership demonstrated by allowing the sovereign wealth fund of a foreign government with an unconscionable human rights record to take over an iconic American sports league and avoid paying a penny in federal corporate income tax. This merger flies in the face of the PGA players who turned down hundred-million-dollar paydays from the Saudi-backed LIV to align themselves with the right side of history and human decency.

“The notion that the Saudi Sovereign Wealth Fund would pay zero dollars in taxes on their blood money and potentially billions of dollars in profits while countless American families pay their fair share while struggling to make ends meet is ludicrous. My commonsense legislation would right this wrong and bring some much-needed accountability to this matter,” Garamendi concluded.

The bill is likely a harbinger of things to come for PGA, especially in light of past efforts to revoke tax exemptions for professional sports associations, and the characterization of the joint venture as Saudi Arabian sportswashing, a process whereby a pariah sponsors a beloved event or team to cleanse itself of its pariah status.  Already 9/11 families and even PGA golfers who were loyal to PGA -- foregoing millions just to show up and hit a few balls -- as it engaged in anti-competitive behavior (proving it does not deserve tax exemption as a business league) are condemning the PGA.  We can expect co-sponsors from both sides of the isle when the bill is really introduced.  

 

 

darryll jones

The Changing Role of Museum Directors

The New York Times recently published an article on how running a museum is changing. Once the domain of the slightly-aloof art history Ph.D. who could also raise money, today's museums face labor unrest, the realization that some portion of their collections are looted, activist pressure, and internal pressure. They need to diversify their collections, their workforces, and their managers. 

How will this shift from aesthetic managers to manager-managers play out? It's probably too early to know, but it will be an interesting progression to follow over the next months and years.

Samuel D. Brunson

Photo by Diogo Fagundes on Unsplash

UK Supreme Court on Charity, Public Benefit, Health Care, and Serving Poor People

A few days ago, I asked with righteous indignation who was behind Revenue Ruling 69-545’s decision to make poor people optional in tax exempt health care.  Whose idea was it to allow a tax-exempt hospital to ignore, if not actively shun or hound poor patients?  My indignation signaled that I knew with certainty (and the benefit of hindsight) that Revenue Ruling 69-545 was a bad decision.  Well, I’ve been severely and immediately rebuked by a group of jurists composing the Supreme Court of the United Kingdom. 

In London Borough of Merton Council v. Nuffield Health, released today, the UK Supremes said "[shut up Darryll]," the failure to serve the poor does not preclude charitable status or necessitate a finding against public benefit.  Long story short, an exempt hospital system with about 30 clinics or hospitals and 115 gyms was charitable even with regard to the gyms at which paid membership is required and there are no subsidies or discounts for poor people. The ease with which the conclusion is articulated belies what seems a fairly important decision in the UK, and a highly persuasive one in the US.  It’s a must read.  It will take three or four reads, though, before I can regain my confident, righteous indignation.

Below, you can watch and hear the 7 minute announcement of the opinion, all by a Justice who looks kinda like Anthony Bourdain and sounds like the patriarch on Downtown Abbey (but without the charm of either fellow).

The UK Supremes render a concise, in depth academic read not unlike opinions from the US Supremes.   The opinion waxes eloquent on the history and meaning of charity as a legislative matter, the meaning of private benefit as it relates to serving the poor, the history of property tax, and the charitable exemption from property taxes.  One interesting note is that charitable exemption from property taxes first occurred only on an ad hoc basis, as local assessors felt moved to provide discounts to churches, hospitals and schools.  The ad hoc nature proved inefficient and unfair, obviously, so the law evolved into official recognition of charitable property tax exemption.  But the opinion has relevance to the definition of charity under both an income and a property tax.  Here is a snippet containing some of what the Court said about public benefit and serving the poor:

25. The public benefit requirement is set out in section 4. By section 4(3) any reference in the relevant chapter of the 2011 Act to the public benefit is a reference to the public benefit as that term is understood for the purposes of English charity law. As explained by Nugee LJ in the Court of Appeal in the present case at para 141, the public benefit requirement in English charity law has two aspects to it (see also ISC, para 44). The first is the nature of the purpose. Again, it is common ground that the purpose for which Nuffield Health is established, namely (in short) the advancement of health, satisfies the first aspect of the public benefit requirement. The second is a matter of scope. It requires that the specified benefit is available to a sufficient section of the public, so that the provision of that benefit is for a public rather than private purpose. That section of the public may be defined by a variety of contours, such as residents of a particular locality, or even by age. Thus the inhabitants of a small village or large town will be a sufficient section of the public, but the entirety of the current and former employees of a large corporation will not, however numerous: see Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297, 305-307. The old and the young may each be a sufficient section of the public: see Joseph Rowntree Memorial Trust Housing Association Ltd v Attorney General [1983] Ch 159 for the old and In re Sahal’s Will Trusts [1958] 1 WLR 1243 for the young. But however broadly defined, the purpose will not be for the benefit of a sufficient section of the public if it excludes the poor (meaning, in modern parlance, not the destitute but those of modest means): see In re Resch’s Will Trusts [1969] 1 AC 514, 543-544 (“Re Resch”), and ISC, paras 178-179.

26. It by no means follows that a purpose (other than of course the relief of poverty) which serves both the rich and the poor only satisfies the public benefit requirement so as to be charitable in the benefit which it provides to the poor members of its beneficial class. On the contrary, the “scope” element of the public benefit requirement is satisfied by reference to the whole of the section of the public thereby benefitted, rich and poor alike. Even if this may perhaps not accord with the perception of every modern-thinking person untrained in charity law, this is true both as a matter of logic and authority. Logically if a body, established for the purpose of promoting the health of all comers paying a membership fee which did not exclude the poor or the rich, was only charitable in the service which it provided to the poor, then having a (non-charitable) purpose also to serve the rich would mean that it was not established for charitable purposes only. Such a body would not be a charity. If this were so it is hard to imagine how any fee-paying independent school could be charitable; but, as reviewed in ISC, many fee-paying schools are charitable.

darryll jones

The PGA-LIV Golf Joint Venture

So it looks like the Professional Golf Association, about which we blogged last week, is going to enter a joint venture with LIV Golf and the European PGA, with the Saudi Private Investment Fund (PIF) serving as principal investor.  PGA is a 501(c)(6) entity subject to the prohibition against private inurement.  Curiously, though, IRC 4958 (regarding excess benefit transactions) does not apply.  Still nonprofit/for-profit joint ventures invariably raise private inurement issues.  If these were hospitals, we would refer to the transaction as a "whole hospital joint venture," presumably governed by Revenue Ruling 98-15.  Here are snippets from the PGA announcement:

In addition, PIF will make a capital investment into the new entity to facilitate its growth and success. The new entity (name TBD) will implement a plan to grow these combined commercial businesses, drive greater fan engagement and accelerate growth initiatives already underway. With LIV Golf in the midst of its second, groundbreaking season, the PGA TOUR, DP World Tour and PIF will work together to best feature and grow team golf going forward.

Under the terms of the agreement, the Board of Directors of the new entity will oversee and direct all the new entity’s golf-related commercial operations, businesses and investments. The new entity will work to ensure a cohesive schedule of events that will be exciting for fans, sponsors and all stakeholders. PIF will initially be the exclusive investor in the new entity, alongside the PGA TOUR, LIV Golf and the DP World Tour. Going forward, PIF will have the exclusive right to further invest in the new entity, including a right of first refusal on any capital that may be invested in the new entity, including into the PGA TOUR, LIV Golf and DP World Tour. The PGA TOUR will appoint a majority of the Board and hold a majority voting interest in the combined entity. 

Separately, PGA TOUR Inc. will remain in place as a 501(c)(6) tax exempt organization and retains administrative oversight of events for those assets contributed by the PGA TOUR, including the sanctioning of events, the administration of the competition and rules, as well as all other “inside the ropes” responsibilities, with Jay Monahan as Commissioner and Ed Herlihy as PGA TOUR Policy Board Chairman. PIF’s Governor Yasir Al-Rumayyan will join the PGA TOUR Policy Board. The DP World Tour and LIV Golf will retain similar administrative oversight of events on their respective Tours.

If profits are derived by the Saudi Private Investment Fund, will that constitute private inurement?  It looks as though PIF might be treated as an insider (or disqualified person using IRC 4958 language), but does the payment of the joint venture's excess revenue to a government agency constitute the distribution of profit to a "private shareholder or individual?"  If PIF were a U.S. government agency, I doubt that distributing an exempt org's profit to PIF would or should constitute private inurement.  But does the sharing of U.S tax-subsidized wealth with a foreign government investor make it private inurement, per se?  By the way, the only reason why I can think the PGA wants to retain its 501(c)(6) is to ensure that the huge amounts of anticipated advertising revenue remains tax free under the seriously unjustifiable exclusion of "corporate sponsorships" from the unrelated business income tax.  It will be interesting to see the details and how the Service blesses (or not) the transaction.

Here is a little more detail from the New York Times:

The PGA Tour, which is a nonprofit organization, will remain that way and retain oversight over the “sanctioning of events and administration of the competition and rules” for the tour, according to the release announcing the merger. Basically, the PGA Tour will still have full control over how its tournaments are played.

But all of the PGA Tour’s commercial businesses and rights — such as the rights to televise its tournaments, which garner hundreds of millions of dollars annually — will be owned by a new, as-of-yet unnamed for-profit entity. That entity will also own LIV Golf as well as the commercial and business rights of the PGA European Tour, known as the DP World Tour.

The board of directors for the new for-profit entity will be chaired by Yasir al-Rumayyan, the governor of the Saudi sovereign wealth fund, the Public Investment Fund, who also oversees LIV. Three other members of the board’s executive committee will be current members of the PGA Tour’s board, and the tour will appoint the majority of the board and hold a majority voting interest. 

With the PGA Tour controlling the for-profit holding company and remaining in charge of administering its own tournaments, it may seem as though the PGA Tour will forever remain the dominant voice in men’s professional golf. But that could change.

darryll jones

 

 

 

Nonprofit Bail Funds

The ACLU characterizes the cash bail system in the United States as wealth-based incarceration industry:

After an arrest — wrongful or not — a person’s ability to leave jail and return home to fight the charges typically  depends on access to money. That's because, in virtually all jurisdictions, people are required to pay cash bail in order to secure their freedom. Originally, bail was designed to ensure  people return to court to face charges against them. Now we know that simple solutions like court reminders often can achieve that purpose. And, the money bail system has morphed into one that perpetuates widespread wealth-based incarceration. The pretrial incarceration caused by unaffordable bail is the single greatest driver of convictions, and is responsible for the ballooning of our nation’s jail and prison populations.  Poorer Americans and people of color often can't afford to come up with money for bail, leaving them incarcerated in jail awaiting trial, sometimes for months or even years. Meanwhile, wealthy people accused of the same crime can buy their freedom and return home.

And now, according to the Chronicle of Philanthropy, nonprofit bail funds are under attack, legislatively and actually, by death and bomb threats, for allegedly facilitating the release of dangerous criminals awaiting trial.  Problem is, the dangerous criminals are awaiting trial and have not been found dangerous or criminal yet.  They languish in jail -- innocent until proven guilty but severely punished already -- sometimes for years.  Meanwhile, there is no telling what Jeffrey Epstein was doing when he was out on bail he paid from a few pennies lying around.    

The rather phenomenal success of nonprofit organizations operated to pay low income arrestee's cash bonds has unleased the boogey-man caricature -- the usually poor, usually black predatory criminal out on bond victimizing more victims perpetually. So states are beginning to push back by prohibiting nonprofits from paying those bonds. 

Ok, first (as my daughter would say, hand on hip), I don't understand and in fact I seriously doubt that a legislature can constitutionally enact such a prohibition.  My head is exploding with the word, "unconstitutional," though it could take me months to understand why.  Second, I just think its somehow unfair for a legislature to outlaw a nonprofit's legal activity solely because the activity might be counter-majoritarian.  Nonprofits, to a more than modest extent, exist to be counter majoritarian. 

But I guess that's sort of what happened in Bob Jones, an instance where a supermajority declared discrimination absolutely beyond charity, even if charity is imbued with counter-majoritarian grass roots conceptions (like maintaining the separation of races).  I can settle for a supermajority determining that something is beyond charity.  But a mere majority should not be entitled to define charity by government fiat.  That cuts against the whole purpose of civil society. 

Here are a few snippets from a very interesting read:  

The act of organizing to post other peoples’ bonds dates back to at least the 1920s, according to Jocelyn Simonson, a professor at Brooklyn Law School. But over the past eight years, she says, the number of nonprofit bail funds has exploded. That growth was fueled by the Black Lives Matter movement’s rise after the murder of Michael Brown in 2014 and greater awareness of injustices in the criminal-justice system.

One of the most influential has been the Bronx Freedom Fund, co-founded in 2007 by Robin Steinberg, who drew on her experience as a public defender in the South Bronx. Steinberg has said her clients often pled guilty for crimes they did not commit because they did not have money for bail and wanted to go home.

In 2017, Steinberg founded a larger effort called the Bail Project to pay bail for low-income people and “disrupt the money bail system — one person at a time.” It soon became the largest bail fund working on a national level, thanks to a $30 million grant in 2018 from the Audacious Project, which is housed under TED and aims to bolster “jaw-dropping ideas with the potential to spark change.” The grant enabled the Bail Project to expand to more than 20 sites.

Backlash Against Bail Funds

While legislation to end cash bail did pass in Illinois, efforts to limit use of cash bail in several other states have floundered amid concerns about rising violent crime.

New York State rolled back its bail laws for a third time in April, after passing a law in 2019 that eliminated bail for most misdemeanors and nonviolent felonies. Hawaii Gov. David Ige vetoed a bill that would remove bail for nonviolent misdemeanors for certain felonies last year. Ohio voters also approved a constitutional amendment giving judges more power to consider public safety when setting bail, a measure opposed by groups like the Bail Project.

Public safety concerns have also led several states, including Kentucky, Minnesota, and Pennsylvania, to introduce bills that would limit nonprofit bail funds’ ability to post bond. Indiana adopted a law last year that stopped charitable bail funds from bailing out people accused of violent crimes and banned them from receiving local and state government funds. The Bail Project has sued the state over the law, while pausing operations there.

 

darryll jones

Dean, Charity and Abuse: Fundraising and Symbolic Power in the Case of Jimmy Savile

Yesterday I wrote about some of the benefits that tax-exempt organizations can uniquely provide. But there are downsides, too. One is that the warm glow of charity can disguise or cover bad actions. As an American, I'm only vaguely familiar with Jimmy Savile (and mostly only because of the revelations that came out after his death. But Jon Dean's Charity and Abuse: Fundraising and Symbolic Power in the Case of Jimmy Savile demonstrates that Jimmy Savile's predation on underage girls was enabled, in part, by this charitable fundraising prowess. You can read the abstract here:

In life, Jimmy Savile was revered as Britain’s greatest charity fundraiser. In death, he is remembered as Britain’s most notorious pedophile. Raising over £40 million for good causes throughout his media career, a year after his death several investigations revealed a history of abuse of hundreds of children, mostly young girls, across the institutions he worked or volunteered at. Using the framework of the symbolic power of charity, this article documents how these crimes were either missed or covered up. Savile used his fundraising prowess and the “good glow” of his reputation to enable his abuse and shield him from discovery. Institutions prioritized their reputation or fundraising income over bad publicity and proper safeguarding. Drawing on a growing critical literature, this is the first article to explore the role of Savile’s charity in his crimes and highlights the increased concern over charity’s role as a tool of reputation laundering for elites.

Samuel D. Brunson

U.S. Attorney Investigates 527s

I am not sure Lloyd understands the concept behind the phrase "snitches get stitches."  Because only  days after he obliquely suggested that a couple of former college Republicans were treading dangerously close to criminal violations, the U.S. Attorney issued subpoenas for the records of certain 527s that raised nearly $90 million using AI generated robocall appeals to patriotism and gratitude for first responders.  The problem is, most of the $90 million went to the fiduciary's web of private entities, ala United Cancer Council.  Here is a summary from the  New York Times:

Federal prosecutors are scrutinizing at least 10 political nonprofit groups — including five recently profiled in The New York Times — seeking to determine if the groups defrauded donors, according to two recent subpoenas.

. . .

One of the two recent subpoenas was signed May 15, according to a copy obtained by The Times. It sought recordings of fund-raising calls from five nonprofits that The Times had profiled a day earlier: the American Police Officers Alliance, the National Police Support Fund, the American Veterans Honor Fund, the Firefighters and EMS Fund and the Veterans Action Network.

The subpoena said that prosecutors in the Southern District of New York were investigating allegations of wire fraud and conspiracy to commit fraud.  These groups are “527s,” named for a section of the tax code and overseen by the Internal Revenue Service. They are supposed to focus primarily on helping candidates for office.  

Together, these five groups have raised $89 million since 2014, mostly from small-dollar donors who answered fund-raising robocalls. The largest of the five groups, the American Police Officers Alliance, promised in its calls to “support legislators whose goals are to keep our communities safer,” and to help the families of first responders killed in the line of duty.

But about 90 percent of the money raised was used to pay for more robocalls. Another 3 percent was paid to three political operatives from Wisconsin, who appeared to be the driving force behind all five groups.

Of course, it could have been the Times article I posted about.  But my post only mentioned that there are no rules revoking exemption for private inurement or even private benefit, though those prohibitions should be implicit in the word "nonprofit."  That word is not often used, if at all, in IRC 501 and certainly not in 527.  Just as the general concept of "charity" underlies all exempt organizations -- meaning they all must be "charitable" in the common law sense going all the way back to the Statute of Charitable Uses and even further -- all exempt organizations should also have to meet a common law conception of "nonprofit" even if the statute never mentions that phrase.  It ought to be implicit and enforceable.  I'm just talking tax, though, I ain't dropping no dimes on nobody.  

darryll jones

Tax-Exempts Stepping In for Government

There has long been some discomfort for the federal and state subsidies tax-exempt organizations (and their donors) receive. A big criticism is that by allowing donors to deduct their donations, the wealthy can direct some amount of government spending without democratic oversight, perhaps overfunding universities and cultural organizations at the expense of the humanitarian or other organizations that a democratic society would prefer to fund.

I was think about this with respect to the influx of refugees Chicago (and other cities) is experiencing. The city has provided some housing in hotels and other locations, but many migrants are sleeping in, for example, police stations for lack of other places to sleep.

Part of the problem, of course, is logistics. But part is political; there is often a political cost to helping people who won't be voting, especially where the surrounding community feels like aid to newcomers will come at the expense of things that they need.

Continue reading

No Health Care for the Poor

Anybody know the back story of Revenue Ruling 69-545?  Revenue Rulings go through several layers of review, debate, discussion and reconsideration at Treasury.  I'd like to hear the war stories of IRS attorneys sitting around a conference table discussing whether to make relief of poverty optional for tax exempt purposes.  It was Treasury not Congress or the judiciary in Eastern Kentucky Welfare Rights Organization that decided that the largest tax exempt sector in the nation need not serve the poor.   Why? What made the executive branch do it? No congressional committee ever even thought about making charity for poor people optional before then, far as I can tell.  I understand theoretically -- by that I mean way back to the Statute of Charitable Uses -- that there has been debate about whether charity can exist without relief of poverty, but whose idea was it in this country to explicitly  excuse nonprofit hospitals from treating the poor? Did somebody just wake up one day and decide to make poor people optional?  

The Times is running another one of its exposes on voracious nonprofit hospitals.  This one about Allina Health System which, according to the report, not only disdains poor people but will actually cut any patient off, forever, if the patient hits a debt ceiling at any of its more than 90 clinics:

Allina has an explicit policy for cutting off patients who owe money for services they received at the health system’s 90 clinics. A 12-page document reviewed by The Times instructs Allina’s staff on how to cancel appointments for patients with at least $4,500 of unpaid debt. The policy walks through how to lock their electronic health records so that staff cannot schedule future appointments.

“These are the poorest patients who have the most severe medical problems,” said Matt Hoffman, an Allina primary care doctor in Vadnais Heights, Minn. “These are the patients that need our care the most.”

Allina Health said it has a robust financial assistance program that in an average year helps over 12,000 of its 1.9 million patients with medical bills. The hospital system cuts off patients only if they have racked up at least $1,500 of unpaid debt three separate times. It contacts them by phone and with repeated letters that include information about applying for financial help, said Conny Bergerson, a hospital spokeswoman.

Health care is complicated machinery in the United States so its hard to generalize about cause and effect.  I wonder how a rule requiring nonprofit hospitals to only accept all patients at their emergency rooms -- if they even have one -- can be justified as efficient.  Seems to me, shunning poor into an ad hoc emergency room health care system would cost a whole lot more to everybody.  Not only that, it pretty much guarantees that poor people will just not get treated until the last minute or the pain is unbearable.  I am fully insured and I will go the emergency room only with one foot on a banana peel.  Its cold, its dark, and I know I'm gonna be sitting there for hours.  We oughta at least get a theoretical promise of minimal charity care,  even from the boutique nonprofit hospitals.

darryll jones

The Impact of Section 4960 Excise Tax on Nonprofit Compensation

From SSRN

We examine the effect of Internal Revenue Service code (IRC) section 4960 of the Tax Cuts and Jobs Act of 2017 (TCJA) which imposed a 21% excise tax on nonprofit employee compensation over $1 million per covered individual. Using a difference-in-differences analysis on IRS Form 990 data for almost 40 thousand nonprofit employee-year observations from 2015 to 2020, we find a lower growth rate for treated employee compensation post section 4960. Our results are robust to the use of alternative treatment specifications as well as control samples, e.g., employees earning more than $1 million but not covered under section 4960; medical professionals specifically exempt from section 4960. We also find that CEO turnover is higher for treated CEOs post section 4960. Our findings contrast those of prior research on Section 162, the parallel provision which applies to executive compensation in for-profit publicly listed firms, which found no decrease in compensation.

 

darryll jones

Opinion Page: The Sisters of Perpetual Indulgence do great work. Some readers say they still cross a line

From the Los Angeles Times, May 27, 2023

Even in 2023, LGBTQ+ Pride celebrations manage to offend segments of the population. That fact cannot be denied after the Dodgers included the Sisters of Perpetual Indulgence in the team’s upcoming Pride Night, then disinvited them after a campaign by a handful of conservative Catholic groups — only to reinvite the Sisters when the team’s attempt to placate detractors sparked a much larger backlash. Perhaps the Dodgers could use a journalist’s eye for distinguishing between a genuine grassroots uprising and an internet-generated outrage campaign.

This isn’t to say plenty of Catholics weren’t sincerely troubled by the Sisters’ inclusion. In letters, some wrote that satirizing sacred figures in their church crossed a line — although notably, one actual nun wrote a letter praising the Sisters.

From the Dodgers’ standpoint, the matter is settled: There will be a Pride Night, and the Sisters will be included. Among our readers, the discussion continues.

. . . 

How can it be right to defend one group of people by mocking and ridiculing another? If love is love, then hatred is hatred. Period.  

. . . 

A faith-based uproar over the Sisters of Perpetual Indulgence’s scheduled appearance at the Dodgers’ Pride Night?  Utterly diabolical! Time for a constitutional amendment to establish the separation of church and ballpark.

darryll jones

 

Opinion Page: For-Profit or Nonprofit, Hospice Is Not a ‘Hustle’

 

From Hospice News, December 2, 2022

. . . 

The profit conundrum

Ensuring the permanent sustainability of nonprofit hospices is crucial. These providers pioneered the care model, blazed the trail that led to the Medicare Hospice Benefit, and remain vital to the communities they serve. To paraphrase a quote from Isaac Newton, nonprofit hospices have giants standing on their shoulders.

But for-profit providers also have a part to play, and their tax status does not automatically impugn their integrity. Providing quality care and turning a profit are not mutually exclusive.

Many stakeholders have voiced concerns about the growing incursion of private equity into hospice and the larger health care space.

While any significant changes in an environment that affects the lives of millions of people should be closely examined, I am uncomfortable with statements that praise or castigate an entire population or sector in generalized terms.

Reality is rarely so cut and dry, and almost every action has both positive and negative effects. The ideal for any system is to develop a set of practices and oversight that encourages the positive and holds bad actors accountable (which is admittedly easier said than done).

Some investors may have indeed made or encouraged decisions that prioritized profits over patients, but one can’t assume that such allegations are universally applicable or that the influence of PE has been entirely negative.

PE capitalization has allowed a contingent of providers to build scale and expand to new markets, including some inroads to underserved communities. This has given many patients access to care that they otherwise may not have been able to receive.

Investor dollars have also allowed hospices to obtain tools and technology that can improve efficiency and in some instances have a positive impact on quality.

“This is a complex issue, and it can’t be solved just by someone saying that equity funds shouldn’t be in health care, or that we’re going to regulate equity funds more. At the end of the day, equity funds are an economic driver,” Randal Schultz, a certified public accountant and health care lawyer with Lathrop GPM, told Hospice News earlier this year. “The clients of mine that get involved with equity funds for the most part are doing it because they’re getting some money out of it, but also because they’re getting new technologies that they need. By getting new technologies, they’re able to provide a broader base of care and better and faster care for their patients.”

darryll jones

Opinion Page: Profit-Obsessed Private Equity Is Now Dominating the US Hospice System

From Jacobin, May 25, 2023

. . . . 

Though the majority of Americans spend the final weeks of their lives in hospice care, the United States only got its first hospice, the Connecticut Hospice, in 1974. Today, just under a half century later, over 5,500 hospices provide services for the dying; in 2020, 1.72 million Americans received care through hospice services, whether in brick-and-mortar inpatient facilities or in the comfort of their homes. (Most people on hospice do pass away at home.)

The United States’ heavily for-profit hospice system would be unrecognizable to Florence Wald and the group of patient-minded nurses, doctors, and clergy who founded the Connecticut Hospice. As of 2020, over 72 percent of hospices are for-profit and approximately 24 percent are nonprofit. Less than 3 percent are publicly owned.

In a new report by the Center for Economic and Policy Research (CEPR), Preying on the Dying: Private Equity Gets Rich in Hospice Care, researchers examined the outsize role that private corporations, and specifically a small but growing group of private equity firms (PEFs), play in the administration of US hospice care. They found that in recent years, private equity has exploited both fragmentation in the sector and gaping holes in oversight left by federal agencies, including the Centers for Medicare & Medicaid Services (CMS) and the Federal Trade Commission (FTC). And though groundbreaking investigations from the Los Angeles Times, the New Yorker, and ProPublica have sounded the alarm on hospice fraud in recent months, too little attention has been paid to issues inherent to the system — in particular, how private equity can so exploit regulatory holes.

. . . 

darryll jones

Opinion Page: Israel is experiencing NGO tax bill deja vu - analysis

THE ROLE OF HUMAN RIGHTS NGO’S: HUMAN RIGHTS DEFENDERS OR STATE SOVEREIGNTY DESTROYERS?

From the Jerusalem Post, May 28, 2023

If 2016 is any indication, though, there’s a good chance the latest NGO bill will make a comeback, even if some of its sharpest edges are filed down.  And the reason for that is that governments, mostly in Europe, and the NGOs they fund have not substantially changed their behavior since the transparency requirements were put in place.

No country likes other countries intervening in their affairs. Still, there might be more understanding in Israel if the donations were going to what one might typically define as “civil society” organizations – groups that focus on Israeli society, such as “human rights defenders, human rights NGOs, bar associations, student clubs, trade unions, university institutes, bloggers, environmental rights activists or charities working with discriminated groups,” to name some of the examples in a UN Office of the High Commissioner for Human Rights definition of the concept.  

The other examples the OHCHR gave are “human rights defenders and human rights NGOs,” but as a recent report by the research institute NGO Monitor said, there is a “deep politicization of the universal human rights discourse… demonstrations of bias and the absence of credible and consistent criteria.”  

The behavior that sparks these NGO laws is, generally, when foreign-funded NGOs try to intervene in the Israeli-Palestinian conflict by making extreme anti-Israel statements around the world, advocating for Israel to be put on trial for alleged war crimes and similar actions.  

For example, Breaking the Silence, whose representatives travel the world, claiming Israel committed war crimes, received 55.6% of its funding from foreign governments in 2017-2019, according to NGO Monitor. They include Switzerland, France, Norway, Spain, Ireland, Denmark, Belgium and more. B’Tselem received 49.7% of its funding from foreign governments in the same period of time, with international donors including the EU, Norway, the Netherlands, France, the UK and more, and is active in promoting the claim that Israel is an apartheid state.

darryll jones

Can Nonprofit News Endorse Political Candidates?

 

The short answer to the question posed in the headline, of course, is "no."  The question occurred to me because the Institute for Nonprofit News has a new report out describing the state of the nonprofit Fourth Estate.  Here is a snippet from the Executive Summary.  

Growth of the nonprofit news sector can be measured across a variety of indicators, including the numbers of INN members, total revenue, philanthropic revenue, staffing size and audience reach. Collectively, these measures indicate the field is robust, increasing in capacity and influence. 

In the past, some observers have wondered whether capital support would increase to match the needs of a growing nonprofit news sector. This year’s revenue estimates suggest that as the nonprofit journalism field expands, the resources to sustain this field are expanding, too. 

INN membership saw 17% growth in the number of digital-first news outlets between 2021 and 2022. That growth did not translate into more competition over a static or shrinking pool of resources. We estimate that fieldwide revenue for INN members grew about 19% in the same period, now totaling to just under $500 million. 

Should there be an exception allowing nonprofit newspapers to endorse candidates, like real newspapers?  Print media, thoroughly on the outs these days, is probably the last bastion of objective information.  Its all relative, of course, but print media doesn't so thoroughly indoctrinate by even the selection and ordering of stories.  By print media, I mean the daily general circulation newspapers.  The Washington Examiner as well as the Washington Post.  Even papers with an identifiable political philosophy, like the WSJ or the Times, have news staff  who are content to tell readers what happened.  I am not suggesting that news reporters, as opposed to editors, are without bias.  But that sort of bias is inevitable and tolerable.  By the way, here is an excerpt from "A Brief History of Newspaper Endorsements."    

While [endorsements] were once ubiquitous, they've faded in recent decades; a survey by Editor & Publisher showed that by 1996, almost 70% of newspapers weren't endorsing presidential candidates as opposed to just 13.4% during the 1940 election cycle. Part of this is probably a reluctance to engage in partisan politics, but it also probably speaks to the decline of the newspaper as a central aspect of Americans' lives. With so many avenues available for voters to get to know the candidates, it seems rather quaint to think of anyone voting how an editor tells them to. Nevertheless, endorsement of candidates persists.

Print media endorsements made a rebound around 2016 when the OrangeFuhrer ran for president and called all of media "fake news."   Newspapers and magazines that had rarely, if ever, endorsed a candidate, issued loud warnings against a candidate who challenged the Fourth Estate's very legitimacy.  "Don't believe a word they say!"  was his successful rally cry. Were they protecting their own, or were they employing their superior fact gathering skills to provide editorial analysis useful to the public good? Whatever the case, that most endorsed Hillary only proves their scant influence.  Even so, the endorsement are useful not just today but years from now when historians are wondering how we lost our damn minds.  

So should we provide a legislative or regulatory exception to the prohibition against campaign intervention for nonprofit news? The way we do for churches -- trust me, churches can get deep into political campaigns, we are only fooling ourselves to think otherwise.  An exception for nonprofit news, though, would best be be permitted by legislative fiat not the Constitution or a judge interpreting same.  Something like, "For purposes of subsection (c)(3), an endorsement by a news gathering organization shall not be treated as prohibited campaign intervention."  We probably would need a good amount of other regulations designed to prevent any old rag from calling itself a "news gathering" organizations.  I don't know.  It may not even be worth the trouble.  

The Californians Gene, Erin and Michele, over at Nonprofit Law Blog -- catchy name for a blog but not to be confused with this, the Nonprofit Law Prof Blog -- have a concise and helpful primer on current law:  

Lobbying and Political Intervention Activities

Unlike their for-profit counterparts, nonprofit news organizations are limited in the amount of their lobbying activities and prohibited from intervening in political campaigns. The lobbying limitation, however, allows for generous amounts of lobbying, particularly if the organization has made the 501(h) election, and does not restrict other forms of advocacy. On the other hand, the political campaign intervention prohibition strictly prohibits activities such as endorsing candidates for public office, making campaign contributions in support of such candidates, and otherwise using organizational assets to preferentially support certain candidates and/or political parties over others.

It’s very common for news organizations to support specific bills and to publish opinion pieces with a view on such proposed legislation. While a nonprofit news organization need not avoid such activities, they will need to track such activities for reporting purposes and ensure that they have not exceeded the permissible threshold.

News organizations also commonly endorse political candidates and otherwise express views that may influence elections. Nonprofit news organization may not make such endorsements and must be careful in avoiding partisan political activities that may be considered electioneering. Such problematic activities include publishing pieces on certain wedge issues in a partisan manner, particularly immediately before an election, even if such pieces do not explicitly endorse or even name a particular candidate.

See:

The Electioneering Prohibition: A Closer Look
501(c)(3) Electioneering Rules: Employee Endorsements & Election Activities
501(c)(3) Electioneering Rules: Candidate Appearances & Debates
501(c)(3) Electioneering Rules: Voter Guides & Candidate Questionnaires

darryll jones