Friday, May 26, 2023

2023 Global Philanthropy Tracker Reports $70 Billion in 2020 Cross-Border Philanthropy

Download (16)The Lilly Family School of Philanthropy at IUPUI has published the 2023 Global Philanthropy Tracker. Its key findings include:

In 2020, 47 countries representing 61 percent of the global population and 85 percent of global gross domestic product contributed USD 70 billion in philanthropic outflows, and USD 841 billion when adding together all four cross-border resource flows—philanthropic outflows as well as official development assistance, individual remittances, and private capital investment (see Figure 1). Philanthropic outflows represent 8 percent of the total cross-border resources.

Philanthropy proved to be resilient during the year 2020, with only a small decline of 0.5 percent from USD 71 billion in 2018. About 60 percent of the 47 countries had updated data that are directly comparable to the amount in 2018. Among this subgroup of countries, philanthropic outflows went up modestly by around 4 percent, though the change varied greatly by country.

Lloyd Mayer

May 26, 2023 in International, Studies and Reports | Permalink | Comments (0)

Hall: The Case for Removing the § 501(c)(3) Tax Exemption for Nonprofits That Discriminate on the Basis of Sex

Stacey Lyn Hall 1620414727058has published a Commentary titled Bad Service: The Case for Removing the § 501(c)(3) Tax Exemption for Nonprofits That Discriminate on the Basis of Sex, 4 Corporate & Business Law Journal 151 (2023). Here is the abstract:

Nonprofit organizations in the United States typically qualify for a significant federal income tax exemption under Internal Revenue Code § 501(c)(3). While this exemption is beneficial in many instances, it also means that nonprofits that discriminate on the basis of sex or gender identity receive the same substantial tax benefits as non-discriminatory nonprofits. To remedy this issue, the United States should implement a system to disqualify nonprofits that discriminate on the basis of sex from receiving the § 501(c)(3) tax exemption. Other scholars have addressed different forms of discrimination in the context of § 501(c)(3) nonprofits, including discrimination on the basis of race and sexual orientation. However, there has to date been little discussion of discrimination on the basis of sex and gender identity in the nonprofit sector.

This article will examine the history, meaning, and dynamics of the § 501(c)(3) tax exemption and illustrate the need for action through the examples of nonprofits engaged in sex discrimination when hiring employees, particularly for leadership positions. It will also propose an amendment to the IRC and the formation of a committee to investigate complaints of sex discrimination. Finally, it will discuss public policy and First Amendment arguments surrounding the issue

Lloyd Mayer

May 26, 2023 | Permalink | Comments (0)

Jung: Does the Lack of Diversity in Nonprofit Museums Make Them Undeserving of Tax-Exempt Status?

Download (7)Yuha Jung (University of Kentucky, Department of Arts Administration) has posted Does the Lack of Diversity in Nonprofit Museums Make Them Undeserving of Tax-Exempt Status?: Perspectives from Critical Race, Commons, and Systems Theories. Here is the abstract:

Currently, visitors to nonprofit art museums are not diverse; rather they represent a small portion of the community — thus the museums are providing benefits to a narrow group. Continuing the practices that result in homogenous visitorship may not be aligned with the congressional intent of 501(c)(3) in terms of failing to provide public benefits and uphold public policy by “denying” access to museums based on socioeconomic and racial backgrounds as well as being seen as providing “private benefits” to a select few. By using legal (critical race theory), economic (theory of the commons), and organizational theories (open systems theory), this article presents a legal argument for greater diversity and inclusivity in museum practices, such as a more concrete and compulsory rationale for museums to strive toward more diversity and inclusivity in their practice in recruiting board members and staff and in serving diverse communities. Critical race theory and the theory of the commons are used to establish the issue of museums’ exclusive practice and the need to provide more public access. A legal analysis of two nonprofit tax law provisions (no substantial private benefit provision and public benefit doctrine) provides compulsory rationale for requiring museums to change and be more inclusive. Open systems theory provides a framework for transformation and a rationale for stronger and enforceable legal standards for nonprofit art museums to merit tax benefits. In comparing 501(c)(3) museum practices to nonprofit hospitals, the paper further proposes community benefit standards for museums as an affirmative action plan which can help move museums toward more inclusive and equitable practices thereby justifying tax benefits that come with being 501(c)(3) nonprofits in the United States.

Lloyd Mayer

May 26, 2023 in Publications – Articles | Permalink | Comments (0)

University of Idaho Will Create Nonprofit to Acquire University of Phoenix in a $550 Million Deal

Download (15)The Washington Post reports that the public University of Idaho will create a nonprofit to acquire a for-profit online college, the University of Phoenix. The University of Idaho will be the sole member of the new nonprofit, and the parent company of the University of Phoenix will have no role in the school if and when the deal is completed. The deal is moving forward in the wake of a board vote rejecting a similar deal with the University of Arkansas System. The deal is subject to approval by relevant accreditors.

Additional coverage: Businesswire; Inside Higher Ed.

Lloyd Mayer

May 26, 2023 in In the News | Permalink | Comments (0)

Colorado Enacts Hospital Community Benefit Transparency and Accountability Law

Download (14)Earlier this month Colorado enacted HB23-1243 relating to hospital community benefit. According to the a press release from the Colorado Department of Health Care Policy & Financing, the bill, which takes effect in August 2023, does the following:

  1. It requires hospitals to provide more specific and detailed spending information, so policymakers and communities across the state can tell what activities and initiatives are being funded, and how those initiatives compare with what the community asked for. 
  2. The bill requires the hospital to solicit, consider, and provide the community the opportunity for feedback in creating their community benefit spending plan and any changes to spending priorities, improving on the current annual public engagement process.  
  3. The bill expands requirements for HCPF to undertake stakeholder work to develop community engagement best practices and efficiencies.
  4. The bill includes the calculation of the value of the nonprofit hospitals’ tax exemption. Colorado’s communities need sound estimates of the value of the tax exemption to understand the value of hospitals’ community benefit spending in lieu of paying taxes.
  5. The bill adds reasonable non-compliance measures.

Coverage: Denver Post (subscription required); Greeley Tribune.

Lloyd Mayer

May 26, 2023 in In the News, State – Legislative | Permalink | Comments (0)

Former Governor Sues Middlebury College Over Removal of Donor's Name

Download (6)In one of the latest disputes over attempts to remove the names of past donors, WCAX reports that former Vermont Governor Jim Douglas is suing Middlebury College for the removal of a donor's family name from the school's chapel. The donor, former Governor John Mead, allegedly gave the funds for the chapel in 1914 on the condition that it bear his family's name. But in 2021 the school removed the name because of Governor Mead's "role in advancing eugenics policy." Governor Douglas filed the lawsuit on behalf of the Mead family, seeking to have the name restored and compensation for the litigation costs.

Additional coverage: AP NewsWall Street Journal (subscription requried).

Lloyd Mayer

May 26, 2023 in In the News, State – Judicial | Permalink | Comments (0)

Opinion Page: The NCAA’s position on not paying athletes is worse than tone deaf

From Name, Image and Likeness to Pay for Play, Americans Increasingly  Support Compensation for College Athletes - Morning ConsultFrom Wapo, May 22, 2023

. . . 

But for today’s student-athletes, the definition of a fair deal might change if the National Collegiate Athletic Association (NCAA) loses a case now jogging its way toward the Supreme Court by way of the U.S. Court of Appeals for the 3rd Circuit. Although the appeals court will settle a technical point, the larger issue in Johnson v. NCAA is whether student-athletes should get hourly pay for their labor, just like a work-study student who clerks at the library.

College administrators argue that if even more dollars shift to revenue-generating athletes in football and basketball from revenue-consuming athletes in soccer, track and especially women’s sports, something will have to give to balance the books. “If colleges and universities are forced to pay their student-athletes, it is inevitable that many schools will simply eliminate athletic teams, with nonrevenue sports teams the most likely to be on the chopping block,” warned an amicus brief filed in support of the NCAA by the American Council on Education and a dozen other higher education organizations. Or, as a friend emailed: “There goes another wrestling team.”

The NCAA takes the position that student-athletes shouldn’t be paid minimum wage for the hours they spend on the field because playing sports has long been part of the educational experience, so they aren’t covered by the Fair Labor Standards Act. In the NCAA’s view, sports teams are more like the glee club, the marching band or other student groups. This comes just two years after the Supreme Court pitched a 9-0 shutout against the NCAA in a case regarding compensation for college athletes, ruling that the organization can’t limit education-related benefits.

The NCAA is citing case law, specifically a case called Vanskike v. Peters, as an example of an exempted class of workers. That exemption is contained in the 13th Amendment, the one that outlawed slavery, with the exception of prison labor. The condensed version of the NCAA’s argument is thus: College athletes are like prison laborers.


darryll jones

May 26, 2023 | Permalink | Comments (0)

Opinion Page: East Palestine Disaster Shows How Philanthropy Can Halt Chemical Accidents in Their Tracks

One Month Later, Fallout from Toxic Train Accident Continues

From the Chronicle of Philanthropy, May 16, 2023

. . . 

This is personal for me. I live in Hillsborough, N.C., where my house is just a stone’s throw away from a rail line carrying some of the same toxic chemicals that were spilled in Ohio. I worry every time I hear a train go by that my community may be next.

East Palestine and Hillsborough — and Brunswick, Georgia; West Newbury, Mass.; and Deatsville, Ala., if you count some of the chemical spills in just the last few weeks — sit in a toxic, global web of oil, gas, and petrochemical production that touches everyone in this country. Disasters can and do happen anywhere on this web. On average, toxic-chemical releases, fires, and explosions occur every two days in the United States — most in low-income neighborhoods and communities of color where the majority of fossil-fuel infrastructure is concentrated. Few get the kind of attention the East Palestine disaster received.

Nationwide, members of the Health and Environmental Funders Network, which I lead, are expanding the pool of grassroots organizations defending against the rapid spread of fossil-fuel development and petrochemical disasters. But much more support is needed to protect communities from chemical disasters.

That starts with better data and communications following a disaster. To save lives in the wake of a chemical disaster, residents and emergency responders need to know what substances they have been exposed to and how to protect themselves.

In East Palestine, residents were told it was safe to go back home just five days after the derailment and two days after hazmat teams burned off five train cars’ worth of spilled vinyl chloride — a known carcinogen. Chemical fires were still burning when the evacuation order was lifted, but the Environmental Protection Agency declared no air-quality concerns of note. East Palestine’s drinking water was also deemed safe after only a week’s worth of EPA testing conducted privately on behalf of Norfolk Southern, which operated the derailed train.

This type of rushed and industry-funded disaster response doesn’t exactly inspire trust in the institutions charged with protecting public health.

So when it became clear official testing might not be capturing the full extent of the contamination, the nonprofit Environmental Health Project and other local groups sprang into action. This included conducting independent soil, water, and air-quality testing and providing real-time public-health information to help residents manage their exposure.

. . . 

darryll jones

May 26, 2023 | Permalink | Comments (0)

Opinion Page: Environmental NGOs In The Global South: Saviors Of Humanity Or Predatory Special Interests?

Environment vs. development: It's all about land

From Forbes, May 23, 2023

On Friday, the Moscow Times announced the closure of Greenpeace Russia following the government authorities’ decision to label it “undesirable,” a designation that renders all its activities illegal.  It is no surprise that the green chattering classes of the West will cast this event as yet another example of Putin’s autocratic government riding roughshod over an organization that speaks on behalf of ordinary people in Russia. Alas were it that simple.

Western-Funded Environmental NGOs in the Third World

Greenpeace is headquartered in Amsterdam, has a large budget with contributions from rich foundations such as the Rockefeller Family Fund. It controls huge lobbying and litigation resources, often exceeding government finances available to many small developing countries. Well-funded NGOs such as Greenpeace represent large bureaucracies with interests in creating environmental scares to maximize income, salaries and perks of its staff and key executives. The classic example of Greenpeace raising cash via bogus alarmist reports relates to polar bears that are allegedly facing extinction.

Are Western-funded environmental NGOs such as Greenpeace operating in the Global South the moral arbiters of environmental issues affecting the poor and the marginalized? Are they the “global salvationists” giving succour to the “wretched of the earth”, promoting “sustainable development” in the face of predatory capitalists and their governmental supporters? As the late classical economist Deepak Lal asked in an opinion piece on the foreign-funded NGO ban, “what are we to make of their local representatives who seek to influence their countries’ public policy to the agenda of their foreign sponsors”?

“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth.”

The Western-funded environmental NGOs, the moral busybodies, may yet be the worst enemies of the poor and the marginal of the third world.

darryll jones

May 26, 2023 | Permalink | Comments (0)

Thursday, May 25, 2023

How to Not (and Maybe How To) Make Money Off of Tax-Exempt Political Organizations

Download (13)Late last month, the U.S. Department of Justice announced the sentencing of three individuals "for soliciting millions of dollars in contributions to scam PACs." The press release further states:

According to court documents, from 2016 through at least April 2017, Tunstall, Reyes, and Davies operated two PACs – Liberty Action Group PAC and Progressive Priorities PAC – that solicited contributions from the public via robocalls and radio and internet advertisements. The two PACs represented that the contributions would be used to support the presidential nominees of the two major political parties, respectively.  Instead, the co-conspirators used the funds to enrich themselves and to fund additional fraudulent solicitations. Specifically, the two PACs raised approximately $4 million in contributions during the 2016 election cycle and subsequent months.

The penalties for this deception? A sentence of 10 years in prison, a sentence of 7 years in prison, and a sentence of 5 years of probation. Additional coverage: CNN.

As previously discussed in this space, the N.Y. Times recently had a lengthy story about five other tax-exempt political organizations that reportedly raised almost $90 million while only spending $800,000 on actual political activity. Yet that story indicates the four of those organizations still in existence have so far survived IRS scrutiny of their operations in the form of examinations that began a year or so ago. It remains to be seen whether this high profile coverage will lead to more critical IRS, and perhaps DOJ, attention.

I have not done a deep dive into the documents detailing the finances of either set of groups, but the key difference may be that the money flowing out of the tax-exempt section 527 organizations has to at least arguably go to outside vendors for actual services rendered, even if those services are mostly generating additional fundraising appeals.  Of course the fact that those vendors have financial connections to the individuals who also run the tax-exempt organizations sets off alarm bells, but that fact by itself does not make the payments illegal. And the organizations also have to be careful what is actually said in the irappeals for donations, as making specific promises to potential donors that are not kept is also problematic.

This last point is demonstrated by the recent sentencing of two individuals involved in the tax-exempt section 501(c)(4) organization "We Build The Wall" fundraising effort to 51 and 37 months in prison, respectively. The court also ordered that those individuals pay millions in restitution. In that case, one individual promised that he would  “not take a penny in salary or compensation” and that “100% of the funds raised…will be used in the execution of our mission and purpose.” In fact, the individuals involved directed for their personal benefit and use hundreds of thousands of dollars out of the more than $25 million raised.

Lloyd Mayer

May 25, 2023 in Federal – Executive, Federal – Judicial, In the News | Permalink | Comments (0)

Strategic Planning in Dutch Charity Organizations

Who Needs Strategic More: For-Profits or Not-For-Profits?

From SSRN, a paper analyzing strategic planning in Dutch charities:

In this study, we explore how charities adopt and apply practices of social impact measurement --- analysing a dataset of over 450 Dutch charity organisations. Although the concept of social impact is ambiguous and the field undertheorized, there are universally recognized factors that are regarded as vital for the strategic use of impact measurement. We identify three types: Type 1 organizations are characterized by an incoherent logic model, indicating a more symbolic use of impact measurement. Type 2 organizations are characterized by the adoption of a coherent logic model, but a lack of organisational learning. This indicates that the organisation has a strategy in place to reach long-term objectives, but this strategy might not be supported by evidence. Type 3 organisations are those with proper logic model and a system for evaluation and learning. In our sample, this group is by far the smallest: only 10.8% of the organisations fall into this type. Almost half of the charity organisations are Type 2 organisations. They have a strategy to achieve long-term objectives with logical chain of expected events between their activities and the intended impact, but they do not test their assumptions, measure their impact and/or adjust their projects according to the conclusions of the evaluation. The size of the Type 1 category charities is remarkable: 4 out of 10 charities that claim to measure their impact do not have a coherent logic model. In other words, their projects do no logically align with their intended long-term objectives.

darryll jones

May 25, 2023 | Permalink | Comments (0)

Brunson with More Thoughts on Ensign Peak

Ensign Peak Advisors, Inc - Portfolio Value

Sam still doesn't believe church's can do whatever they want with their tax exemption. Not too many people do but trust me, Church's can do whatever they want.  Cite that as Jones, on Church Tax Exemption.  Churches can smoke Amazonian weed and they can even sit on a mountain of dead presidents through a separately incorporated entity.  If we admit, as Sam does, that a church can invest and horde earnings in-house, we necessarily concede it may do so through an integral part entity.  But, well, I could be wrong.  Sam is out with some interesting thoughts on Ensign Peak's tax exempt status.  Recall that we recently posted on the topic.  

So right here, EPA runs into a theoretical wall. The church itself clearly qualifies as exempt—religion is one of the explicitly-listed charitable purposes. But investment management? Nope.

Prior to about 1997, that didn’t matter. The church had an internal investment management team. And an exempt organization can manage its assets. But once EPA was separately incorporated, if the church wanted it to be exempt, it had to figure out how that would work.

And look, EPA probably an “integrated auxiliary.” An integrated auxiliary has to qualify as exempt, has to be affiliated with a church, and has to essentially support itself or receive its support largely from the church.[fn2]

But the thing is, if an investment advisor just sits on the money, it doesn’t look like it’s doing anything charitable. Decades ago, the IRS issued a ruling creating the commensurate-in-scope rule, which basically says that to qualify as exempt, an organization has to spend a commensurate part of its assets on charity. I’ve argued that this rule doesn’t apply to integrated auxiliaries, and the New York State Bar Association says its scope and application are generally unenforced and also unduly vague, especially in light of the fact that Congress is capable of imposing distribution requirements if it wants to.

It’s also worth noting that it turns out that EPA does distribute money back to the church on a pretty regular basis, which undercuts the idea that it’s not doing anything charitable with its money.

All of that said, it still strikes me as weird and uncomfortable that we have an exempt organization, the whole role of which is to manage a multi-tens-or-hundreds-of-billions-of-dollar portfolio.

So what should be done? Honestly, I think EPA should give up its tax-exempt status. I mean, it’s not the only exempt money manager out there—Harvard Management Company is also a 501(c)(3) organization. But unlike EPA, HMC files public disclosures of its finances and doesn’t appear to actually hold Harvard’s endowment; it just manages it.

darryll jones

May 25, 2023 | Permalink | Comments (0)

Charity is a "major cause" of Immigration Crisis, According to House Judiciary Chair

AP PHOTOS: Migrants attempt to cross into the U.S. before Title 42 ends -  The San Diego Union-Tribune

The Italian right wing government continues to blame migrant deaths in the Mediterranean Sea on  charities trying to rescue drowning migrants.  And stateside, Representative Jim Jordan, Chairperson of the House judiciary Committee blames charities along the southern border for the immigration crisis.  No kidding, because everybody knows that migrants would not risk death on the open seas -- even at the hands of government officials, sometimes --  if it weren't for the less than 1% chance of being rescued by a charity boat.  And migrants wouldn't make a 1,799 mile journey from Guatemala by foot and sometimes on the top of the "train of death" were it not for less than 1% chance they will survive murder, robbery, disease and starvation, to get a dry baloney sandwich and a bottle of water, maybe some baby formula, from a resource starved charity just north of the border.   

I swear I try to be unbiased on this blog but when I can't the next best thing is just to admit my bias.  So let's just say that if Jim Jordan and I were bank robbers together, I would not trust that guy with the loot while I visited the men's room, I'll tell you that much.  Here's what he said in a letter to Homeland Security requesting information on behalf of the Committee:

A major cause of this crisis is the incentive created by non-governmental organizations (NGOs) using DHS grant funding through the Federal Emergency Management Agency (FEMA). While Americans suffer the consequences of chaos at the southwest border caused by the Biden Administration, NGOs receive hundreds of millions of taxpayer dollars through federal grants to provide free food, lodging, and transportation for illegal aliens to be released anywhere they want in the United States. NGOs simply tell DHS how many illegal aliens they encounter, and funding can be awarded without any documentation or receipts. Federal funding for migration-related NGOs at the border has increased dramatically at a time when federal resources for border security and immigration enforcement and local resources for emergency response and medical care have been strained to the breaking point. Amid this crisis, there is also an increased risk of fraud, misuse, and abuse of funds because, due to current policies, FEMA is unable to ensure that humanitarian relief funds are not being wasted.

Who knew?  If we just got rid of the stupid charities we could solve all our problems.  I always learn something by listening to a well reasoning conservative, especially one with the ability to expose my ignorance. Hey, it happens every now and again. But these Maggotts make me spit.

darryll jones

May 25, 2023 | Permalink | Comments (0)

Taliban Finalizing Women in NGO Rules

The Taliban Will Govern Afghanistan. What Does the Future Hold for China  and the Central Asian Region? - Silk Road Briefing

I am not a journalist, though I sometimes play one on the internet.  I have no obligation to be neutral or cleanse my soul of ethnocentrism.  But I should admit my biases. So let me just say, the Taliban are really stupid.  Call me Archie Bunker for disrespecting the culture but this whole "subservient women" Handmaids Tale thing makes the Taliban look like post-apocalyptic cavemen.  There, I said it.  I have four daughters, all college educated at considerable personal sacrifice.  I'm not finna indulge anybody's right to tell them what to do or how to go.  So yeah, the rule prohibiting women (women, literally the mother of all charity!) from work, charitable or otherwise, is stupid.  And if your religion says so, well . . . your religion is . . . not smart, lets just say.  Sorry, not sorry.

Anyway, various media report that the Taliban are close to finalizing rules allowing grown women to reenter the volunteer sector, though apparently not the schools or businesses, at least not without a 13 year old male "chaperon." Stupid. I told myself I would editorialize only in the first paragraph so I'll just cut to the chase. 

So here is what you thought you were gonna read, and thanks for the therapy:

KABUL, Afghanistan (AP) — The head of a major international aid agency said Tuesday that key Taliban officials told him in meetings that they are close to finalizing guidelines that will allow Afghan women to resume working for nongovernmental organizations. But they were unable to give a timeline or details when pressed.

The Taliban last December barred Afghan women from working at NGOs, allegedly because they were not wearing the hijab — the Islamic headscarf — correctly and were not observing gender segregation rules. In April, they said this ban extended to U.N. offices and agencies in Afghanistan. There are exemptions in some sectors like health care and education.

. . . 

Jan Egeland, the secretary-general of the Norwegian Refugee Council, is visiting Afghanistan for the second time in five months to persuade the country’s Taliban rulers to reverse the ban on the organization’s female staff.

He was told the Taliban couldn’t guarantee anything as everything needed to be put to the supreme leadership. They also told him they had been working on the NGO matter for months and that most issues have been resolved. The guidelines are likely to cover dress codes, gender segregation in the workplace, and a chaperone for travel.

Egeland warned that it would not be a lifting of the ban if the guidelines went beyond that.  The Norwegian Refugee Council stands to lose 40% of its funding for Afghanistan because of the bans on female employment and education, he said. Egeland said he pressed the Taliban officials for a timeline and clarity on the word “soon” but they didn’t elaborate.

But these guys aren't on the verge of an enlightenment.  They are only doing it for the money.  

darryll jones


May 25, 2023 | Permalink | Comments (0)

Wednesday, May 24, 2023

IRS EO Data Shows More of the Same: 86% Application Approval, 0.1% Examination Rate

DownloadThe 2022 IRS Data Book, covering the fiscal year that ended on September 30, 2022, contains its usual treasury trove of information about exempt organizations. Notable facts include:

  • There are 1,971,532 tax-exempt organizations, nonexempt charitable trusts, and split-interest trusts (Table 14), a  slight decline from the previous year, of which 1,817,332 are recognized under IRC section 501(c) (1,480,565 under section 501(c)(3)) and 45,325 under IRS section 527 (political organizations).
  • The IRS closed 136,708 applications for recognition of exemption (Table 12), approving 81,583 (86.4%), an increase of about 40,000 from the previous year, disapproving 86 (0.06%), and resolving 16,694 (12.2%) in other ways (including withdrawal, lacking required information, or incomplete). The vast majority (131,669 or 96.3%) of the applications were under IRC section 501(c)(3), with the next closest categories being a little over a thousand applications each under section 501(c)(4) and section 501(c)(6).
  • The IRS also received 3,407 notices of intent to operate under Section 501(c)(4) (Table 13), of which it rejected 474 for a variety of reasons, including that notice was not required because of a previously filed annual information return or application for recognition of exemption, or the organization was exempt under a section other than 501(c)(4).
  • The IRS examined only 1,343 Forms 990, 990-EZ, and 990-N, an additional 170 Forms 990-PF, 1041-A, 1120-POL, and 5227, 748 Forms 990-T, and 301 Forms 4720 (Table 21) . This compares to 1,360,719 exempt organization returns filed in 2020, 1,757,064 filed in 2021, and 1,751,682 filed in 2022, which figures include all of the above forms except for Forms 1041-A and 1120-POL This means even taking into account examination lag the examination rate was only about 0.1%.

The IRS Statistics of Income office has also released exempt organizations statistical tables for Tax Year 2019, available here, based on Form 990 filings.

Lloyd Mayer

May 24, 2023 in Federal – Executive | Permalink | Comments (0)

DOJ Takes Stand Against Nonprofit NIMBY-ism

U.S. Department of Justice shows support for Micah's Way in lawsuit against  Santa Ana – Orange County Register


Charity is nice, but sometimes not in my back yard.  Let's not be fake about how we really feel.  Out in Santa Ana, Micah's Way is just trying to be true to its charitable mission, but people are feeling uncomfortable and want them to do it somewhere else.  Just not here.  Here is Micha's Way's mission statement:  

Orange County is one of the wealthiest places on Earth. Its economy is the size of Israel or Malaysia. Yet there are over 35,000 homeless people in OC. 7,000 are children, 2,000 are veterans, and 4,000 are of retirement age. (OC Register 2005) And nearly half a million people, according to FEMA, are one check away from being homeless. We get in contact with the people we serve in various ways. Check out our Outreach page to read about MiCafé our most popular outreach project.  Micah's Way is an all-volunteer, non-profit, tax-exempt public benefit corporation. Tax ID 54-2166918. All donated money goes directly into programs to help poor people.

Micah's Way distributes food and other life items (toothpaste, socks, old clothes, etc.) and naturally the homeless gather and hang around.  All smelly and unwashed, I guess.  But that is who Jesus used to hang out with.  There is no indication that Micah's Way proselytizes.  It just helps the needy and it doesn't claim to be a church.  The only indication of religious motivation is its name, taken from Micah 6:8.  Well, problem is, Micah's Way is getting in the way.  The Center is located downtown near the professional district, according to the LA Times, and "well, we just don't want them kinda folks hanging around.  Its not that we don't like them, its just well . . . can't they go somewhere else where we don't have to see them?"  I am paraphrasing here.  Ok, really I just made that quote up and attributed it to the suits downtown sipping latte grande mochas.  But we all think it, sometimes.  People are selfish, we were born that way.  Anyway, Micah's Way sued when the city denied them permission to do what they were doing, and now DOJ is involved.    

From the DOJ Press Release:  

SANTA ANA, California – The Justice Department has filed a statement of interest in a federal lawsuit explaining that the act of distributing food and drinks to people who are homeless by Micah’s Way, a faith-based organization in Santa Ana that helps people in need, could be religious exercise under the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA).

The statement of interest was filed Tuesday afternoon in Micah’s Way v. the City of Santa Ana, a lawsuit alleging that the City of Santa Ana imposed a substantial burden on Micah’s Way’s religious exercise. At issue is the city’s denial of an occupancy certificate to Micah’s Way on the grounds that it was providing food and drinks to people who are homeless in violation of the city’s zoning ordinance.

According to its complaint, Micah’s Way has a religious duty to help people in need, including by providing food and drink to someone who is hungry. After denying the occupancy certificate, the city informed Micah’s Way that it could not feed people who are homeless at its resource center under any circumstances and that if it continued to do so, Micah’s Way would be subject to fines and potential criminal prosecution.

The city filed a motion to dismiss the complaint, arguing, in part, that providing food and drinks to people who are homeless is not religious exercise and that its denial of an occupancy certificate did not substantially burden Micah’s Way’s religious exercise. The Justice Department’s statement of interest argues that feeding people who are homeless may be religious exercise protected by RLUIPA, and that the city’s denial of an occupancy certificate and complete prohibition on feeding people who are homeless may have imposed a substantial burden on Micah’s Way’s religious exercise, in violation of RLUIPA.

“The free exercise of religion is a bedrock principle of our nation,” said United States Attorney Martin Estrada. “Religious groups should be entitled to exercise their religion by providing charitable services based in their religious beliefs. Our office firmly opposes actions that block religious groups from carrying out their spiritual mission to help others in need.”

The city should stop being stupid and ugly in way that only Americans are good at, that's my layperson's take.  But legally, if the organization looks like any secular SRO or foodbank, what makes it "religious" and therefore subject to heightened protections?  What's to stop any foodbank from naming itself after a religious writing and then claiming religious exemption from zoning laws?  I'm just asking.

darryll jones

May 24, 2023 | Permalink | Comments (1)

International and Comparative Perspectives on Nonprofit Governance and Regulation


The international dimensions of charity law – and the insights that can be gained from the experience and perspective of other jurisdictions – cannot be underestimated. This introduction to a new innovative collection identifies key challenges and tensions in charity governance and regulation in multiple jurisdictions, as presented by authors in the collection. Key themes include the nature of charity accountability, the refocusing of governance duties in the charities sphere, evaluation of charity law frameworks and regulatory approaches, and appraisal of charity law reforms. Given that charities in multiple common law and civil law jurisdictions are grappling with these issues, the multijurisdictional comparative analysis of these themes is timely.

Top 15 Non-profit Board Governance Mistakes - Charity Lawyer ...

darryll jones

May 24, 2023 | Permalink | Comments (0)

Kansas Passes Law Clarifying Enforcement of Donor Restrictions

Donor Trust is Key Component in Fundraising and Philanthropy

Kansas has adopted a statute, effective 1 July 2023, that purports to make it easier for donors to enforce gift restrictions.  According to Philanthropy Today, which suggests the act is the first of its kind (but I would be surprised if that is true) the act was motivated by a few instances where charities violated donor restrictions, only to have those restrictions enforced, if at all, after complicated litigation:  

Why the need for such laws? There have been unfortunate instances where donor intent has been violated, resulting in complicated legal battles.  

In 2016, Westminster College in Fulton, Missouri, violated donors’ wishes for grants when it tried to get $12.6 million from an endowment to fund its general operating budget. In fact, the college president had already withdrawn funds and was asking for more money to repay what was already spent without authorization. In the end, Westminster was subjected to annual independent audit statements to the state attorney general’s office through the end of the 2019 fiscal year.  

Another recent example is the case of Michael Moritz and The Ohio State University (OSU). Moritz donated $30.3 million to OSU in 2001 to establish a permanent endowment supporting law school scholarships. However, years later, it was discovered that the endowment held less than the agreed-upon amount, and the number of scholarships provided was significantly less than what was originally intended. This resulted in law graduates having to pay full price for their education, which should have been covered by the Moritz Merit Scholarship.  

These two examples show how a breakdown of trust between donors and charities can have far-reaching impacts. These bad actors can undermine the foundation of philanthropy, generosity, and a thriving civil society. Donors need to have confidence their gifts will be used the way they intended. 

Here are the operative sections of the Act:

Sec. 3.  (a) Except where specifically required or authorized by federal or state law, including, but not limited to, K.S.A. 58-3616, and amendments thereto, no charitable organization that accepts a contribution of property of an endowment fund or to an endowment fund pursuant to an endowment agreement that imposes a written donor-imposed restriction shall violate the terms of that restriction.

(b) If a charitable organization violates a donor-imposed restriction contained in an endowment agreement, the donor, or the donor's legal representative, may file a complaint within two years after discovery of the violation for breach of such agreement but not more than 40 years after the date of the endowment agreement that established the endowment fund. The complaint may be filed in a court of general jurisdiction in the county of this state where a charitable organization named as a party has its principal office or principal place of carrying out its charitable purpose or in the county of residence of the donor. The complaint may be filed whether or not the endowment agreement expressly reserves a right to sue or a right of enforcement. A complaint filed pursuant to sections 1 through 4, and amendments thereto, shall not seek, or result in, a judgment awarding damages to the plaintiff.

(c) (1) If the court determines that a charitable organization violated a donor-imposed restriction, the court may order any remedy in law or equity that is consistent with and restores, to the extent possible, the donor's intent as expressed by the donor-imposed restrictions and conditions in the endowment agreement, including, but not limited to:

(A) Future compliance with or performance of donor-imposed restrictions or conditions on the use or expenditure of the gifted endowment property;

(B) restitution or restoration by the charitable organization of property to an endowment fund that has been expended or used by the charitable organization in contravention of donor-imposed restrictions;

(C) an accounting or the imposition of accounting requirements;

(D) restoration or a change to a name required by the donor imposed

(E) measures to preserve the property and value of the endowment fund;

(F) modification or release of a donor-imposed restriction or reformation or dissolution of the endowment agreement as permitted by Kansas law; or 

(G) transfer of property from the endowment fund to another charitable organization as directed by the donor, but only if the transfer would not jeopardize or be inconsistent with the tax-exempt status of the original charitable organization.

Nothing in this section shall conflict with or affect section 3(b), and amendments thereto.

(2) The court shall not order the return of donated funds to the donor or the donor's legal representative or estate.

Sec. 4. A charitable organization may obtain a judicial declaration of rights and duties expressed in an endowment agreement containing donor-imposed restrictions as to all of the actions that such agreement contemplates, including, but not limited to, the interpretation, performance and enforcement of the agreement and determination of its validity as provided in K.S.A. 58-3616, and amendments thereto. The charitable organization may also seek such declaration in any suit brought under this section.

. . . . 

Nothing in this act affects the authority of the attorney general to enforce any restriction in an endowment agreement, limits the application of the judicial power of cy pres or alters the right of an institution to modify a restriction on the management, investment, purpose or use of an
endowment fund in a manner permitted by the endowment agreement.

darryll jones

May 24, 2023 | Permalink | Comments (0)

Some Random Thoughts on Levelling Up

Levelling-up white paper: 9 things schools need to know

The British are a funny lot.  And the food is terrible.  I mean, "black pudding" and "offal," with a side helping of beans and toads?  Yeeesh, and that's just for breakfast.  If I want to eat the very innards of an animal, I can just eat a big ol bowl of chitlins for breakfast.  My mother loved them but I never ate those either.  Nope, no thanks.  I'll just have the fish and chips.  They talk funny too.  They don't speak American.  Once you get the gist of what they are talking about, though, you suddenly realize that maybe these people know better the precise meaning of words and phrases than we do.  

So a UK think tank recently issued a fairly detailed report concluding that UK civil society is strongest where it is needed least, and weakest where it is needed most.  One has to take into account cultural differences but sometimes comparative law holds a mirror by which to judge ourselves.  The report highlights what might be a common problem across borders  -- the inefficient allocation of charitable resources.  Waste, in other words.  In our heart of hearts we all acknowledge, or at least suspect, that donors donate to the things that make life -- art, museums, symphonies -- but often to things that cannot sustain life -- like art, museums, symphonies -- all with our encouragement and subsidy.  Besides, there is plenty of commercial incentive for art museums and symphonies-- the Supreme Court just recently acted to protect that incentive, narrowing the fair use exception according to some IP folks.  Why subsidize those things?  But that is all debatable and I haven't resolved it in my own mind.  I have a starving artist daughter living in NY.  She might think her art is more important than food sometimes.  

A second random thought that occurred to me is weather the absence of charitable effort in our poorest and most neediest areas contributes to or results from poverty.  Does its absence cause poverty, or is the absence the result of poverty.  Because if the latter is true, it seems government must eliminate abject poverty before even self help charity can germinate.  And maybe that initial charitable impulse, of the sort the Pilgrims necessarily practiced and were assisted in by Native Americans, is a necessary precondition to capitalism -- think micro-loans, which begin as charity but only to spur capitalism.  In its absence or eradication from the most abject areas, maybe capitalism can't even get a foothold because there is no charitable precursor.   Just a random thought, I am not even sure I'm asking the right question.  Maybe the answer would help better allocate charitable finance or subsidy.  Anyway, take a look at how the think tank described the results:     

Civil society is weakest in Levelling Up priority areas – with a third less local charitable activity than in the lowest priority areas. Worse, our data suggests the gap has grown – with local charitable activity falling between 5% and 6% since 2018 (compared to less than 1% drop in wealthier places). This matters because the evidence shows civil society can make people and places healthier and improve their education and skills – key building blocks of the local economic growth at the heart of the Levelling Up agenda.

Civil society brings three unique advantages to tackling inequalities:

    • Preventing issues
    • Connecting communities
    • Targeting services to where they’re most needed

But civil society remains weakest in the poorest parts of Britain – and our new data suggests it’s getting weaker still. A key asset for growing local economies is therefore struggling precisely where it’s most needed.  We need greater support for civil society as an engine of growth if we are to truly tackle regional inequalities across the UK – such as through new targeted social investment zones, a social investment fund and better evaluation of what programmes work

The British don't even spell right, doggonit.  Turns out "Levelling Up" is the King's English way of acknowledging systemic injustices in British society and socio-economic initiatives designed to eliminate those injustices.  Here is how Wiki describes it:

"Levelling up" is a political policy first articulated in the 2019 Conservative Party manifesto that aims to reduce the imbalances, primarily economic, between areas and social groups across the United Kingdom. It seeks to do so without acting to the detriment of prosperous areas, such as much of South East England. A white paper for the policy was published by Boris Johnson's government on 2 February 2022, and has been continued by Rishi Sunak's government. The policy is overseen by the Department for Levelling Up, Housing and Communities, and the incumbent Secretary of State is Michael Gove.

No kidding.  The British have a whole cabinet level Department of Social Justice.  Here is its self-declared raison d'etre:

The United Kingdom is an unparalleled success story – a multi-cultural, multi-national, multi-ethnic state with the world’s best broadcaster; a vibrantly creative arts sector; a National Health Service which guarantees care for every citizen; charities and voluntary groups which perform a million acts of kindness daily; globally renowned scientists extending the boundaries of knowledge every year; entrepreneurs developing the products and services which bring joy and jobs to so many; and millions of citizens whose kindness and compassion has been so powerfully displayed during the COVID-19 pandemic.

But not everyone shares equally in the UK’s success. While talent is spread equally across our country, opportunity is not. Levelling up is a mission to challenge, and change, that unfairness. Levelling up means giving everyone the opportunity to flourish. It means people everywhere living longer and more fulfilling lives, and benefitting from sustained rises in living standards and well-being.

This requires us to end the geographical inequality which is such a striking feature of the UK. It needs to begin by improving economic dynamism and innovation to drive growth across the whole country, unleashing the power of the private sector to unlock jobs and opportunity for all. While there are world-leading and enterprising businesses and innovators right across the UK, economic growth and the higher productivity which drives it has been over-concentrated in specific areas, particularly the south east of England. A long tail of low-productivity businesses and places explain why UK productivity growth is too low compared to competitors.

It is vital that we preserve and enhance the economic, academic and cultural success stories of the UK’s most productive counties, towns and cities. But it is equally critical that we improve productivity, boost economic growth, encourage innovation, create good jobs, enhance educational attainment and renovate the social and cultural fabric of those parts of the UK that have stalled and not – so far – shared equally in our nation’s success.

darryll jones

May 24, 2023 | Permalink | Comments (0)

Tuesday, May 23, 2023

A Further Examination of Entry and Exit in the Nonprofit Sector

A new article posted to SSRN:

We examine whether the patterns of entry and exit established in prior work continue to persist, despite recessions in 2001 and 2008, the introduction of the new Form 990 in 2008, and claims of increased IRS enforcement. We find that charity net entry rates remain positive and consistent over time and sector, are similar to previous findings, and are driven by extremely low exit rates. In analyzing the sector based on Form 990 filing thresholds, we find that charities enter and exit the sector at smaller sizes and that the median charity size is decreasing after the introduction of the Form 990-N. We find 78.23% of all NPs fail to file for at least one year across our entire sample and 35.35% fail to file for at least one interval of three years or longer. The paper emphasizes how this creates an upward bias on exit rates and provides guidance on accounting for this bias when examining entry and exit. We discuss the importance of including the 990-N filers and the implications for policy and future research.

darryll jones

May 23, 2023 | Permalink | Comments (1)