Nonprofit Law Prof Blog

College and University Endowments are Shrinking

Yesterday, October 30, Reuters reports that the endowments of Colleges and Universities are dropping, no surprise, during these tough economic times.  The article states that many of the public and smaller, private schools are losing upwards of 20 percent of their endowments' value during these difficult times. 

Unlike the 76 or so, well-endowed elite College and Universities, like Harvard and Yale, the balance of the 400 or so, other institutions are having to dip (or plan to dip) into their endowments just to meet operational needs.  In light of these challenging times, many colleges and universities are considering hikes in tuition.  New hikes in tuition would come at a time when parents and students are finding it harder to get loans in the tighter financial market, the article suggests.

See story excerpt below -

Higher education has been a growth industry in the United States, evidenced by swelling enrollments, expanding campuses and growing endowments. But the global economic crisis has caught colleges and universities in a vice.

With their endowments shrinking along with stock markets, some schools may raise tuition more than usual, even as students complain it is already too expensive and struggle to get loans.

"This will definitely test many schools," said Ronald Watts, the finance chief of Oberlin College, an elite private school in Ohio whose endowment of nearly $750 million has shrunk by about 15 percent in the past four months.

To be sure, schools have proven resilient in past recessions, helped by rising student enrollment as people seek a leg-up in a bleak job market.

"It's not going to be as drastic as what corporations are doing," Watts said. "You don't just eliminate people and lay off faculty and expect not to destroy your academic program."

Nevertheless, a few schools have already announced fresh tuition hikes, and school officials said they were keeping a close eye on their finances. And, with schools under financial pressure, local economies all over the country are likely to suffer.

Tuition increases have outpaced inflation for years. Tuition and fees at public universities have risen 175 percent since 1992, while the consumer price index rose 48 percent.

. . .

Wisconsin, like many schools with substantial endowments -- 400 have endowments over $100 million and 76 above $1 billion -- use a three-year averaging system to smooth out how much they pay out from earnings.

The article further highlights an issue discussed last spring on the Nonprofit Law Prof blog, this blog, that there was mounting pressure on well-endowed, elite institutions to spend more of the endowed funds.  See earlier blog postings from 12/10/07 through 2/25/08.  This article also captures the discussion below:

The wealthiest schools have come to rely on endowments and there has been growing pressure from Congress to boost payouts, threatening to take away their nonprofit, tax-free status if they don't comply.

The article also states that, "[f]or most other schools, small endowments serve as a 'rainy day fund' that can disappear quickly in tough times, said John Griswold of Commonfund, which manages money for nonprofits."  And that,

[o]ften, much of the media's focus is on wealthy private schools with multibillion-dollar endowments like Harvard and Yale, which have promised to cover costs for many of those fortunate enough to gain admission.

But at less well-heeled private schools, which make up most of the United States' unrivaled roster of 4,300 nonprofit institutions of higher learning, significant tuition increases may be unavoidable.

'If history repeats itself, you're going to have falling state support on a per-student basis, rising enrollments, and probably rises in tuition,' said Paul Lingenfelter, president of State Higher Education Executive Officers.

I have yet to see news from the elite institutions in the wake of this financial crisis as to whether the schools will continue with the plans to provide tuition-free, room and board-free, in some cases, to middle class and poor students.  Some of the proposals highlighted last spring would give tuition-free educations to students that come from families making as much as $100,000.

For the full story, please click here - Reuters.

AMT

Churches Aren't the Only Ones Feeling the Heat

Today, the Chronicle of Philanthropy reports that various nonprofit leaders express concerns about the financial health of nonprofits.

See story excerpt below -

Eleven out of 40 senior financial officers at charities around the country said that they expect their organization’s financial prospects to worsen in the next six months, according to a new survey. And eight of the charity officials said they expect the size of their group’s staff to shrink over the next six months.

Grant Thornton, a Chicago consulting and accounting company, conducted the survey, which was mostly geared towards for-profit business leaders, in September. Forty chief financial officers and senior comptrollers at nonprofit organizations participated, though, and Grant Thornton broke out their responses from the roughly 540 others.

For the full story, please click here - The Chronicle of Philanthropy.

AMT

LA Times Reports that Churches are Reporting a Drop in Donations

The Los Angeles Times reported yesterday, October 29, that churches are reporting a fall in donations, and the many churches are feeling the pinch of these challenging fiscal times.  See excerpt of story below:

On a recent Sunday, the Rev. Richard Mahan scrapped a sermon on forgiveness. He felt compelled instead to address the economic turmoil battering the nation.

"Everybody's facing hard times," he told worshippers at St. Timothy Lutheran Church in Charleston. "If you're not, you're going to."

Include churches in that dismal forecast.

With the economy in crisis, congregations around the country are cutting expenses at the very moment many members need help with food, heating bills and gasoline.

Some members of the clergy say their fundraising has remained steady despite the economic downturn, but how long that will last is unclear. Some are postponing building plans and delaying new programs just in case.

Among the congregations faring best are those with a strong tradition of tithing — the biblical mandate to give at least 10 percent of one's income to the church.

.  .  .

A recent report by the Christian research group Empty Tomb Inc. studied six recessions since 1968 and found that donations by church members declined in three and increased in three. Another study, by Giving USA Foundation, found that religion-related charitable giving fell slightly in six of 11 recession years since 1968.

For the full story, please click here - Los Angeles Times.

AMT

Inquiring Minds Want To Know - The Chronicle of Philanthropy Asks For Your Advice For the Next President

Today, October 30, The Chronicle of Philanthropy is soliciting the advice of its readers for about what nonprofit issues the next president should make a top priority.  Click Here.

See story below -

Government and Politics Watch: Seeking Advice for the Next President

With the Presidential election less than one week away, the Chronicle wants to know what nonprofit issues readers think the next occupant of the White House should make a top priority. Share your thoughts in Government and Politics Watch, The Chronicle’s online column.

This request comes on the heels of a survey completed by the Nonprofit Listening Post, a research effort that conducts regular surveys on issues facing nonprofit groups, under the auspices of the John Hopkins University Center for Civil Society Studies in Baltimore, Maryland.  For more information about this project, click here - The Chronicle of Philanthropy October 22.  The article reported on October 22 states that, the survey "was based on responses from executives at more than 1,000 nonprofit organizations that focus on four causes: children and family services, housing and services for older people, neighborhood and economic development, and the arts."

AMT

59 Constitutional and Family Law Professors from 14 California Law Schools Analyze and Reject Prop. 8 Claims

Today, the San Diego Union-Tribune published a story regarding the California November 4 ballot measure known as Proposition 8 (or "Prop 8"), that if successful would result in a ban on same-sex unions.  The proposition is a response to the California Supreme Court's decision legalizing same-sex unions in the State of California. 

Both sides of the issue have organized and are actively attempting to sway voters to one side or the other.  According to the article, a group of 59 Constitutional and Family Law professors, on October 29, issued a press release, containing a position paper of their own.  The position paper rejects and/or refutes some of the claims made by those in favor of the ban, "Yes on Prop 8."  Of particular interest to this blog, the Nonprofit Law Prof Blog, is the claim that failure to reject the ban would mean that churches, in particular, and by inference, other tax-exempt nonprofits, would lose the status of being tax-exempt if "forced" to discriminate against gay men and lesbians who want to use the church to perform same-sex unions or who just want to rent out commercial spaces owned or operated by the churches or other tax-exempt nonprofits, and the church declines to let them do it.

The Nonprofit Law Prof Blog's very own, Professor David Brennen was interviewed for the article, and his comments are reflected therein.  Among the claims being made by Pro-Prop 8 supporters is the claim that the tax-exempt status of churches could be revoked if Prop 8 is not passed, and the only law in California standing is the California Supreme Court case making same-sex unions legal.  Those favoring Prop 8 use this claim, the threatened loss of tax-exempt status of the church, as a way to sway voters to support the ban on same-sex unions represented in Prop 8.  The law professors dismiss this claim as basically an unsupported scare tactic to prompt voters to vote yes on Prop 8, i.e., supporting the ban.  With the ban in place, no one could force the issue with a church or tax-exempt organization, and allege that the church or other tax-exempt organization is discriminating against gay men and lesbians.

Michael Gardner, who reported the story, wrote that:

A potentially landmark guide is a case that focused on racial discrimination allegations at Bob Jones University, which had denied admission to interracial couples. In 1983, the U.S. Supreme Court held 8-1 that charities and nonprofits cannot maintain an IRS tax exemption if their practices run contrary to “established public policy.”

California's marital-status and sexual-orientation protections could be construed as established public policy, according to some legal experts.

When asked about this claim and the relevance of the Bob Jones University case to Prop 8 and the surrounding issues, Professor Brennen said,

“Although the high court did not go beyond race in the text of its opinion, the ruling could be interpreted as barring charities from discriminating based on sexual orientation – at least in an environment in which such discrimination violates established public policy,” said David Brennen of the University of Georgia School of Law, who specializes in nonprofit tax law.

Professor Brennen's interpretation of the Bob Jones University case leaves open the possibility that those supporting Prop 8, who also claim that a church's tax-exempt status could be at risk, is potentially a correct position.

For the full story, please click here - San Diego Union-Tribune.

AMT

Some Minnesota Charites Fail Duty of Care

The Minneapolis Star Tribune reported on Monday, October 27, that several Minnesota charities were bilked out of money .  The article further suggests that the nonprofits failed to exercise the charities' duty to be prudent with donated money when investing with Tom Petters, a businessman with major holdings in Sun Country Airline and who is now jailed on federal fraud and money laundering charges.

See the excerpt below:

Minnesota charities scrambling to recover millions of dollars invested with businessman Tom Petters violated a basic duty to be prudent with donated money, according to experts in nonprofit finance.

For at least five years, religious nonprofits, led by Fidelis Foundation, based in Plymouth, made large, unconventional loans to businessman Tom Petters' company -- supposedly secured by merchandise -- in return for interest payouts of 19 to 22 percent.

Six charities had more than $27 million invested with Petters when federal authorities alleged last month that he and others had run a massive Ponzi scheme that bilked investors out of more than $3 billion.

Petters, an entrepreneur with major holdings in Sun Country Airlines, Polaroid and other companies, is now jailed on federal fraud and money-laundering charges. He maintains he is innocent, though four others implicated in the alleged scheme have pleaded guilty to related charges.

As the criminal case developed, several of Petters' companies were put into receivership and 10 filed for Chapter 11 bankruptcy protection.

Private investors lent far more to Petters' companies than did charities. But experts in nonprofit management say that charity boards of directors have special responsibilities to be financially prudent with donated, tax-exempt money.

And they say the charities dropped the ball for years by making the Petters' investments.

For the full story, please click here -Tribune.

AMT

Canadian Nonprofits Exploring Social Finance

     In a recent article, at Charityvillage.ca, a news archive for Canadian charities, discusses the increasing awareness of, and preference for, social finance strategies as a funding tool by Canadian charities.  The need for an interest in such strategies was highlighted in a survey.  The survey canvassed over 200 nonprofit professionals in Canada.  The survey was published as a report entitled, Strengthening Organizational Capacity. Among the issues brought to light by the survey and report was the lack of awareness on the part of Canadian charities of "social finance."

     The article's reporter, Elisa Birnbaum, describes "social finance as 'a sustainable approach to managing money that delivers social, environmental and economic benefits.'  More than just a financial bottom line, it promotes double or triple bottom lines. It comprises that 'space on the financial continuum between traditional financial investment with no social returns, and no economic value but high social returns,' she further explains. Products range from insured and uninsured deposits, real estate mortgages and loan guarantees to fixed income securities, stock purchases, and private equity. And the arena covers areas like community investing, social enterprise finance, micro-lending, sustainable business, and philanthropic program-related investments."

     In growing uncertain economic times, many nonprofits, Canadian and others, are looking for more creative ways to sustain themselves.  The article suggests that UK-based charities, followed by US-based charities are a few steps ahead of Canada in this area.  Below is a brief excerpt of the article:

While the approach[, social finance,] is becoming popular in Europe and is beginning to stake its ground in the Unites States, Canada seems to be lagging behind, says van Bentum. The reasons are complex but some of it comes down to legislative efforts on the part of the UK and US governments, efforts lacking in Canada. In the US, for example, the Community Reinvestment Act led to the evolution of a number of organizations that provide easy vehicles for people to invest in social finance. Meanwhile, in the UK, the focus on social finance stems from varied initiatives to create a level playing field for social entrepreneurs in their competition for dollars.

But Canada hasn’t yet taken such proactive steps. Some blame Canada Revenue Agency (CRA) rules and the fact that tax breaks are limited to entities defined strictly as charitable organizations. van Bentum and others are hopeful tax incentives similar to those enjoyed by the movie industry will soon be implemented. In fact, her survey found that 78% of respondents agreed or strongly agreed that the government will enable social finance through tax incentives or will remain completely marginal if it doesn’t. Others place responsibility for the lag on public policy, legislation or a conventional nonprofit mindset. “We haven’t created an enabling environment for this to happen,” says Draimin.

The undeveloped social entrepreneurial framework doesn’t help. 'The focus on entrepreneurship hasn’t been a really prominent plank in the nonprofit communities’ self-identified value set,' he adds. Though it’s become more prominent recently, social entrepreneurship still barely compares to other places where the mindset has much deeper roots. But with the continued pressures on government and evolving societal needs, this may have to change. 'The nonprofit looking forward will have to realize that the pattern of financing will continue to evolve and that exploring what social finance might mean to them will be important,' Draimin asserts.

See article for full story, please click here - Charityvillage.ca.

AMT

Georgia State University's Andrew Young School of Policy Studies Holds a Brown Bag Series in Nonprofit Research

The Nonprofit Program of the Andrew Young School of Policy Studies at Georgia State University presents its Brown Bag Seminar Series in Nonprofit Research.

WHEN: Wednesday, November 5, 2008

WHERE: Room #749 AYSPS BUILDING from 11:30 PM - 1:00 PM

WHO: Kristina Jaskyte, from the University of Georgia presents:

          "Creativity and Innovation In Nonprofit Organizations"

WHY: The purpose of these seminars is to discuss research-in-progress by faculty associated with the nonprofit program.

INVITED: We invite students, faculty and interested members of the community to join us!

AMT

Google, Inc., Going Green

The New York Times reported, yesterday, Monday, October 27, that Google, Inc. was considering investing in Green Energy, taking the lead from its nonprofit, philanthropic arm, [Google.org].  Its nonprofit arm has been investing in Green energy for a period of time, and Google, Inc. now sees the potential in making a profit.  Below is an excerpt of the story:

Google, the Internet search and advertising giant, is increasingly looking to the energy sector as a potential business opportunity.

From its beginning, the company has invested millions of dollars in making its own power-hungry data centers more efficient. Its philanthropic arm has made small investments in clean energy technologies.

But in recent weeks, Eric E. Schmidt, Google’s chief executive, has hinted at the company’s broad interest in the energy business. He also joined Jeffrey R. Immelt, General Electric’s chief executive, to announce that they would collaborate on policies and technologies aimed at improving the electricity grid. The effort could include offering tools for consumers.

Meanwhile, engineers at Google are hoping to unveil soon tools that could help consumers make better decisions about their energy use.

And while the company’s philanthropic unit, Google.org, has invested in clean energy start-ups like one that uses kites to harness wind power, Google is now considering large investments in projects that generate electricity from renewable sources.

“We want to make money, and we want to have impact,” said Dan W. Reicher, director for climate change and energy initiatives at Google.org.

The timing could be off. With a recession looming and oil prices dropping, investors might pressure Google to curtail its clean energy ambitions.

For the full story, click here - The New York Times.

Virginia NAACP Sues Govenor of State

The Washington Post reports that the Virginia NAACP, a nonprofit organization, sued the Governor of Virginia and key election officials over the anticipated under-preparedness for the large numbers of voters expected to vote in the state on November 4.  The NAACP was assisted by another nonprofit, The Advancement Project.  The lawsuit was filed in Richmond, Virginia on Monday, October 27.

The story is excerpted below:

The lawsuit claims that the state is violating the U.S. and Virginia constitutions by not allocating enough voting machines, poll workers and polling places -- particularly in precincts with high minority populations -- which could result in long lines and lost votes.

The Advancement Project, a national voter protection group, filed the lawsuit late Monday in U.S. District Court in Richmond on the NAACP's behalf. It asks the state to move voting machines to precincts most likely to have long waiting lines; keep polls open for an extra two hours; and use paper ballots in some cases.

. . .

The group ([NAACP]) has conducted studies on election preparation in states across the country, including Virginia, and has sued in at least one other state, Colorado. [(Click Here for More Information on Colorado)]

In Virginia, the group reviewed public records and other public information that described how many voting machines, voting booths and poll workers would be used in various areas of the state, including Alexandria. The report predicts too few machines and workers will be available per voter in high-minority precincts and that voters in those precincts will have to travel farther to vote.

"Virginians are going to turn out in large numbers, and election officials must act quickly to make sure their failure to prepare doesn't become a barrier to voting," said King Salim Khalfani, executive director of the Virginia State Conference NAACP. "If the court does not intervene, thousands, if not hundreds of thousands, of the Commonwealth's voters may be disenfranchised, particularly African American voters."

The group's report says problems are predicted to be particularly severe in Richmond, Norfolk and Virginia Beach.

For more information, click here - The Washington Post.

AMT

Seven Myths About Public Investment in Private Education

The October 31, 2008, issue of the Chronicle of Higher Education has a very interesting commentary that identifies seven myths that people generally have about the lack of willingness (or ability) of government to invest in private education.  The commentator suggests that understanding these myths may be the first step in overcoming them.  The seven myths are listed below.  But first, here is an excerpt from the commentary:

Why is public education the poor pupil of public investment? Part of the explanation is political: A quarter-century of culture wars has undermined the egalitarian values and tax-based public infrastructure that made America a mass middle-class society after World War II. Since 1980, stratification by income has steadily worsened, and higher education has been caught in an ideological crossfire between traditional supporters and conservative elites who want to set that broad middle-class majority back. It is easy to blame the sponsors of the culture wars in particular, and the country's political leadership in general, for turning the public away from an inclusive social vision and the public institutions that make such visions real.

But after spending nearly a decade serving on and leading faculty committees for planning and budgets, participating in countless budget discussions, and working on two large-scale budget reports, I've concluded that the fault lies not only with the usual suspects but also with ourselves. Many public-university administrators are incapable of convincing political and business leaders of the need for financial support because they are no longer fully convinced themselves. They have systematically, if unintentionally, deprived themselves of their best arguments and have adopted a series of myths about public investment.

The seven myths, many of which involve the willingness of the populous to accept a higher tax bill in exchange for better and more accessible higher education,  are:

Myth 1: The public hates taxes now more than in the past.

Myth 2: The public rejects tax-based support for higher education.

Myth 3: Privatization of public higher education has been happening for years and is an established practice.

Myth 4: State cuts have no effect on educational quality or student outcomes.

Myth 5: Revenues from industry can replace lost public money.

Myth 6: Privatization won't hurt public universities because revenues from philanthropy can replace public support.

Myth 7: Cutting higher-education support is a national trend that cannot be stopped.

For the entire commentary, see "Public Universities at Risk: 7 Damaging Myths" in the October 31, 2008, issue of the Chronicle of Higher Education.

DAB

IRS Offers Online Courses in Tax Exempt Issues

New Online Courses at StayExempt.org
StayExempt.org, the web-based version of the popular Exempt Organization workshops, has added new mini-courses on the redesigned IRS Form 990 to the online materials already available. The site now has the original five virtual workshop sessions, five mini-courses that cover topics important to tax-exempt organizations, and five mini-courses discussing aspects of the redesigned annual return (Form 990) for exempt organizations.  The site is hosted by the IRS. The new mini-courses about the redesigned annual return (Form 990) include: Preparing to File the New Form 990:  An overview of the changes to the form, and tips on getting ready to file it. The Redesignied Form 990 - Part I:  General instructions for completing the form and walk through of the heading and financial sections. The Redesigned Form 990 - Part II:  Walk through of the accomplishments, compliance, and compensation sections. The Redesigned Form 990 - Part III:  Walk through of the governance, management, disclosure, and summary sections; the checklist of required schedules; and Schedule A. The Redesigned Form 990 - Part IV:  Walk through of Schedules C, F, G, I, M, and R. The mini-courses on StayExempt.org are: Navigating IRS EO Resources - How to use IRS.gov and find workshops, outreach events and publications. Political Campaigns and Charities - Explains the ban on intervening in political campaign activities by tax-exempt and charitable organizations. Can I Deduct My Charitable Contributions? – What’s deductible and what’s not? The Wonderful World of Foundation Classification (Part I) - Covers two common types of classifications for 501(c)(3) organizations. Applying for Tax-Exempt Status – How to make the application process easier and quicker for new organizations. The five interactive virtual workshop sessions are: Tax-Exempt Status – How can you keep your 501(c)(3) exempt? Unrelated Business Income – Does your organization generate taxable income? Employment Issues – How should you treat your workers for tax purposes? Form 990 – What records should your organization keep to prepare to file an accurate Form 990? Required Disclosures – What items are open to public inspection and what disclosures are exempt organizations required to make? Users can complete the modules in any order and repeat them as many times as they like. StayExempt.org does not require registration and visitors will remain anonymous. IRS Exempt Organizations created and maintains StayExempt.org. AMT

IRS Host Free Webcasts on Tax Exempt Issues

The Internal Revenue Service hosts free webcasts on a variety of issues.  On November 4, 2008, the IRS will sponsor a free webcast for tax professionals on completing the new 990.  Click link for more information - IRS Webcasts.

Below is information excerpted from the IRS website:

Program Content
It's been 30 years since the IRS made major changes to Form 990 and when many tax-exempt organizations file their 2008 tax year returns, they will confront a radically redesigned form. Because the revised Form 990 is so different from previous years', IRS and tax-exempt sector experts will discuss the redesigned 990; make sure you know what parts of the forms to complete and answer your questions to help you become familiar with and prepare for the changes now.

Learning Objectives
The primary learning objective is to maintain or increase competency of tax practitioners through expert discussion, explanation and interactive questioning. The programs are designed for learners (tax professionals) to exercise a practical understanding of new and current tax policies, as well as the latest changes, in a complex and continually changing industry.

Moderator

Les Witmer, APR
Communications Consultant

Les Witmer is currently a Communications Consultant in Atlanta. He has served as the moderator for Tax Talk Today since March 2000. He retired after a distinguished career of 34 years with the Federal Government serving the last 23 years with the Internal Revenue Service. His last year with the IRS he worked on the design of the Wage and Investment Division and retired as the Acting Director of Communications for that Division. He was responsible for the communications programs that included employee communications, media relations, practitioner and external stakeholder relations, congressional affairs, public and government liaison and other public relations and information programs.

He previously held responsible IRS communications positions including first Director of Internal Communications for the IRS in Washington, D.C., Assistant to the Southeast Regional Commissioner for Public Affairs and district Public Affairs positions serving as the chief local spokesperson on Federal tax matters.

During his last five years with the IRS, Les was periodically assigned by U.S. Treasury Department to the Office of Economic Cooperation and Development (OECD) to be a member of an international team that advised and conducted seminars on Public Relations and Customer Service programs to tax and ministry of finance officials from Russia and former Soviet Bloc Countries. Preceding IRS, he served with the U.S. Army as an infantry officer in Vietnam, public affairs officer at Ft. Meade, MD, instructor at Department of Defense Information School (DINFOS) and other active duty and reserve assignments.

He retired as a Colonel, U.S. Army Reserves. He's an accredited member and past committee chairman, board member and officer of the Atlanta Chapter of Public Relations Society of America. Les is active in the community and has served in various other capacities including board member for the Georgia Council on Economic Education and worked with the 1996 Olympic Organizational Committee. He holds a B.S. in Journalism from the University of Southern Mississippi and M.S. in Public Administration from the American University.

Host

Phyllis Grimes
Chief, Stakeholder Liaison
Small Business/Self-Employed Division
Internal Revenue Service

Ms. Grimes is the Chief, Stakeholder Liaison for Industry Outreach. In this role, she is responsible for partnering with the small business community to provide education and outreach related to tax administration. Her office serves as a liaison between various industry groups/associations and the IRS to share information, elevate and resolve issues, and further overall tax compliance.

Grimes began her IRS career in 2000 in the Executive Development Program in Washington, DC. Since then, she has held other positions to include Acting Deputy Director for the Office of Tax Administration Coordination, working very closely with the IRS Commissioner's Office and Director of Business Marketing Services, where she was responsible for marketing related to IRS' electronic products and programs.

Prior to joining the IRS, Ms. Grimes enjoyed a long management and executive career in the financial services industry with Bank of America. Ms. Grimes earned both an M.B.A. and B.S. in Finance from the University of Maryland in College Park, Maryland.

Panelists

Eve Rose Borenstein
Exempt Organizations Tax Attorney
Borenstein and McVeigh Law Offices (BAM!)

Eve Rose Borenstein is an exempt organizations tax attorney who practices nationally from offices in Minneapolis. She received her Juris Doctor from the University of Minnesota in 1985, and then joined the tax department of a Big 8 accounting firm, primarily working on filings of exempt organizations. Ms. Borenstein initiated a solo law practice in 1988, serving tax-exempt nonprofit organizations on their federal tax and State administrative law compliance needs. In 2004 that practice merged into Borenstein and McVeigh Law Offices (BAM!), a firm providing tax law representation as well as general corporate counsel and employment law assistance to nonprofit organizations. To date, Ms. Borenstein has represented more than 800 organizations before the IRS on status, audit, and rulings.

Ms. Borenstein has taught tax exempt compliance mandates (including Form 990 preparation) for almost two decades to both CPAs and attorneys (for CPE/CLE credit). She is a frequent instructor and presenter to and for the nonprofit community, addressing Boards and staff, as well as the foundation community (her speaking and professional education course teaching is provided through Eve Rose Borenstein, LLC). In addition to her law practice and speaking and teaching efforts, Ms. Borenstein also participates in multiple professional committees. She co-chairs the American Bar Association's Section of Taxation's Exempt Organizations Committee Task Force on the Form 990 and over the past two years has participated extensively through the ABA, other professional committees (including efforts of the American Institute of Certified Public Accountant), and on her own, in providing comments and assistance to the IRS' Exempt Organization Division in their work on the Redesign of the Form 990.

Stephen Clarke
Tax Law Specialist
Rulings and Agreements, Exempt Organizations
Internal Revenue Service

Stephen Clarke has been a tax law specialist with the IRS since 2005. He currently serves as the Project Manager for the IRS Form 990 redesign. He specializes in health care, hospitals, churches and religious organizations, and other tax-exempt organizations and issues. Prior to joining the IRS, he served as an attorney at Gammon & Grange, P.C., a law firm in northern Virginia, where he specialized in tax-exempt organization law, communications law, and trusts and estates. He has a BA degree from Wheaton College (IL), a JD degree from the College of William and Mary School of Law, and is a member of the Virginia Bar.

Julie L. Floch, CPA
Director of Not-For-Profit Services
Eisner

Julie Floch is Eisner's Director of Not-For-Profit Services and is the partner responsible for coordinating the planning and administration of engagements in the firm's not-for-profit practice. She is experienced with the application of federal and state tax laws, as they relate to not-for-profit entities, as well as with the requirements of federal regulations relating to clients who receive government funding.

A gradute of the State University of New York at Binghamton, with graduate studies at Baruch College/CUNY, Julie is a current member of the American Institute of CPAs' committee on not-for-profit organizations (which she formerly chaired) and its committee on tax-exempt entities. In addition, she is the technical reviewer for the AICPA's annual not-for-profit accounting videocourse update, and a frequent moderator and panelist for a variety of its courses.

Julie recently completed her three-year appointment by the Internal Revenue Service to its Advisory Committee on Tax Exempt and Goverment Entities, and she has served the Independent Sector on one of its panels designed to respond to the Senate Finance Committee. She is on the board of the Council of Community Services of New York State, is an advisor to the Frances L. and Edwin L. Cummings Memorial Fund, was a founding member of the Alliance for Nonprofit Governance, and has served on (and previously chaired) the finance and audit committees of the Crohn's and Colitis Foundation of America.

Julie is an adjunct professor of auditing at Baruch College/CUNY, and she has previously taught not-for-profit management at the New School University and has served on its Faculty Senate. In addition, she frequently addresses groups on business topics, most recenlty participating in conferences for the Independent Sector, the Urban Institute, the Council on Foundations, the New York State Charities Bureau, Baruch College's School of Public Affairs, the New York Regional Association of Grantmakers, the National Association of State Charity Officials, the Council of Community Services of New York State, the Association of the Bar of the City of New York, the New York City Administration for Children's Services, the Better Business Bureau, the Lawyers Alliance, the AICPA, the NYSSCPA, Columbia University, the Arts and Business Council, and various law firms. She also contributes to the profession's literature, co-authoring articles for The New England Quarterly, The NonProfit Times, The CPA Journal, BACTalk, and The Journal for Nonprofit Management.

Ronald J. Schultz
Senior Technical Advisor to the Commissioner
Tax Exempt and Government Entities Division
Internal Revenue Service

Ronald J. Schultz is Senior Technical Advisor to the Commissioner of the IRS's Tax Exempt and Government Entities division. He joined the IRS in that capacity in October 2006.

The TE/GE Senior Technical Advisor provides legal advice to the TE/GE Commissioner and other top executives on programs serving TE/GE customers. He provides technical advice on a wide variety of issues including legislation, regulations and other guidance, litigation matters, and trends and needs relating to tax-exempt and government entities. He also coordinates tax administration issues with other IRS functions, as well as with outside stakeholders. While at the IRS, he has worked extensively on the IRS Form 990 redesign project, hospital issues, political activity issues, and various compliance initiatives involving exempt organizations.

He has had extensive practice in the private sector in the areas of health, nonprofit and exempt organizations, and other areas of tax law. Until his appointment, he was a member of the law firm of Leonard, Street and Deinard, in Minneapolis. In addition, he served from May 2002 to January 2005 as legislation counsel on the staff of the Joint Committee on Taxation of the U.S. Congress. While there, he advised Congress, including the Senate Committee on Finance and the House Committee on Ways and Means, regarding hearings, investigations, legislation and tax policy pertaining to various areas of federal income tax law, concentrating on charitable and other exempt organizations, as well as charitable contribution deductions.

Click link for more information - IRS Webcasts.

AMT

IRS to Hold One Day Conferences Around the Country for Small and Medium-Sized Nonprofits

The Tax Exempt and Government Entities Division of the Internal Revenue Service will hold one-day workshops around the country for small and mid-sized 501(c)(3) organizations.

Each workshop, presented by experienced IRS Exempt Organizations specialists, will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations. The IRS states that this introductory workshop is designed for administrators or volunteers who are responsible for an organization's tax compliance.

Each one day workshop covers the following topics:

Tax-Exempt Status  -  Benefits and responsibilities of tax-exempt status under 501(c)(3). Actions that may jeopardize tax-exempt status of an organization.

Unrelated Business Income  -  The definition of unrelated business income, common examples, common exceptions and filing requirements. Includes a discussion of charitable gaming.

Employment Issues  -  Classification of workers and filing requirements for employees and independent contractors.

Form 990  -  An explanation of the Form 990, tips on record-keeping and completing the Form 990. Includes a discussion on the new "e-Postcard" filing requirement.

Required Disclosures  -  Overview of disclosures tax-exempt organizations are required to make, including new disclosure requirements imposed by the Pension Protection Act of 2006.

This workshop does not cover how to apply for tax-exempt status or compliance requirements for non 501(c)(3) organizations.

The dates and locations of these workshops are posted on the IRS website.  Please click here for more information.  Pre-registration is required.

AMT

IRS and GWU Host 21st Annual International Tax Conference

IRS Announcement 2008-94

The Internal Revenue Service announces the Twenty-First Annual Institute on Current Issues in International Taxation, jointly sponsored by the Internal Revenue Service and The George Washington University Law School, to be held on December 8 and 9, 2008, at the J.W. Marriott Hotel in Washington, DC.  Registration is currently underway for the Institute, which is intended for international tax professionals.

[According to the IRS,] [t]he program will present a unique opportunity for top IRS and Treasury officials and tax experts, an OECD representative, foreign government tax authorities, and leading private sector specialists, to address breaking issues and present key perspectives on new developments. The first day will feature a discussion by U.S. and foreign tax authorities of competent authority current trends and new frontiers.

The first day will also feature sessions on the following:

Foreign Audits and the Competent Authority Process

Transfer Pricing Update—Regulatory and Administrative Developments

The Modernization of Subpart F—Accommodating Business Structures While

Preventing Avoidance Transactions

Foreign Tax Credit Update

Cross-Border M&A

The second day will focus on the following topics:

When Does And Mean Or?: Current Issues in Treaty Interpretation

Full Disclosure: How Taxpayers and Tax Administrators Are Coping with the

New Transparency

Inbound/Outbound Developments

[Senior law professors from The George Washington University Law School will join with officials from the Treasury Department, the IRS, a representative from the OECD and representatives of the tax authorities of foreign governments to discuss significant tax compliance and treaty issues at the 21st Annual Institute on Current Issues in International Taxation.]

AMT

Upcoming - Western Conference on Tax Exempt Organizations

Western Conference on Tax Exempt Organizations

Dates: November 20 & 21, 2008
Millennium Biltmore Hotel
Co-sponsored by Loyola Law School & Internal Revenue Service

Who should attend

• Attorneys
• Accountants
• CEO's& CFO's of Tax-Exempt Organizations
• Directors and Trustees of Tax-Exempt Organizations

Information

Ph: (213) 736-8154
Fx: (213) 487-6736
Em: eotax@lls.edu

For more information, please go directly to the Conference website.

AMT

Will the Proposed Tax Changes Hurt Charities?

Recently, The Wall Street Journal published in its opinion section, the views of Mr. Howard Husock, vice president of Policy Research at the Manhattan Institute and Director of the Manhattan Institute's Social Entrepreneurship Initiative.  The Manhattan Institute is a New York based 501(c)(3) charity.  Mr. Husock expresses his views that the proposed changes to the charitable tax deduction being proposed by some in Congress will hurt charities in the long-run.  Below is an excerpt of the story,

The essence of the looming discussion: Should the charitable tax deduction be reserved only for those organizations that can show they are directly serving, in the phrase of Rep. Xavier Becerra (D., Calif.), "the poor and disadvantaged"? The congressman, a member of the tax-code-writing House Ways and Means Committee, has also expressed "intense concern" about what he views as the low level of racial and ethnic diversity within organizations supported by charitable contributions.

As he told Nonprofit Quarterly: "You will see a correlation between those that are diverse and those that are doing a good job of reaching those in need." Then he explained his economic logic: "I start off with the proposition that if you're getting a tax subsidy, another taxpayer must make up for what you're not paying. That subsidy should serve a good purpose. . . . Statistics I've seen suggest that only one in every 10 dollars are serving poor people or disadvantaged people. I have to wonder where the other nine are going."

Clearly, Rep. Becerra -- and he is not the only politician voicing such sentiments -- would like to attach strings to the charitable deduction, requiring organizations to conform to racial or economic quotas. But such a policy could well undermine the efforts of those offering direct help to people in need.

The St. Bernard Project is a case in point. On paper it might well fail a number of Rep. Becerra's implied tests. Its clientele -- truck drivers, fishermen, sugar-refinery workers -- are neither unemployed nor technically poor. All, by definition, own a significant asset -- a home that needs repair. Both clients and staff, moreover, are predominantly white -- St. Bernard's is a big step up the economic ladder from the adjoining Lower Ninth Ward of New Orleans, a place much poorer and blacker and more closely associated with the suffering from Katrina. But there is a preventive aspect to a lot of charity. As Mr. Rosenburg notes of the St. Bernard Project: "If we didn't address the needs we see here, our people would quickly become the poorest of the poor."

If the IRS begins micromanaging the charitable tax deduction, it is hard to know where it will stop. How long would it take for the IRS to deny the incorporation of a new nonprofit on the grounds that a similar one is already serving a given area? The St. Bernard Project was far from the first home-rebuilding effort in greater New Orleans. Yet it has found its way clear to helping many who couldn't qualify for government assistance -- because it can operate with a discretion that the government inevitably lacks. "We understand some people had to get out without thinking about grabbing their gas bill," says Mr. Rosenburg, referring to a famous FEMA prerequisite for aid. Reporting details of day-to-day operations to the IRS would make him, in effect, a government subcontractor, not the role for which he and other social entrepreneurs sign up. Even a program doing the sort of work that Rep. Becerra favors might, in other words, have no easy time proving it.

For the full story, please click here - The Wall Street Journal.

Professor David Brennen, one of a lead editors this blog, wrote an article in 2006 on using alternative rationales for the grant of charitable tax exemption under the Internal Revenue Code, and by way of extension, I would add, for the grant of a charitable tax deduction, too.  He offers what he calls the Contextual Diversity Theory as an alternative and equally compelling reason for granting charity status to nonprofits on the basis of diversity and creativity.  The traditional rationales revolve around economic efficiency.  As Professor Brennen explains, the "contextual diversity theory posits that the charitable tax exemption is a means of diversifying the market and, thus, allowing for more creative and wealth producing opportunities."  Further, he explains "that the exemption is subject to contextual constraints that act to limit the scope of charitable activity."  I believe that Professor Brennen's theory would embrace the views of rep. Becerra and others in Congress looking to link the grant of tax relief to considerations beyond economics, such as race and relief of the poor.  While Professor Brennen's theory would encompass those reasons, he does not advocate or suggest that those are the only basis upon which for granting charity status.  Click here to learn more about Professor Brennen's work.

In an earlier blog, June 25, 2008, I also mentioned that there was a growing concern among some charities and other observers that in recent times, fewer and fewer charities are tackling the difficult needs of race and poverty so perhaps Rep. Becerra is on to something.

AMT 

British Charities Seek Bailout From Government

On Friday, October 24, 2008, The Chronicle of Philanthropy reported that British Charities, particularly hard hit by the failure of Icelandic Banks, are asking the British Government to bail them out.  The Charities have asked the Government to set up a $788 million emergency fund.

Below is a brief excerpt of the story:

As American charities suffer from the sour economy, nonprofit groups in Britain are arguably in worse shape, with charity leaders calling for the government to set up a roughly $788-million emergency fund to help struggling organizations.

Like others in Britain, a large number of charities were hit hard by the near collapse of the Icelandic banking system. Potential nonprofit losses due to the Icelandic problems are estimated at $189-million, reports The Guardian, a British newspaper.

However, so far the newspaper reports that the government minister who oversees nonprofit groups has rejected throwing them a lifeline.

Indeed, Patrick Butler, an editor for The Guardian, writes that charities need to be more forthcoming about financial losses if they want public support.

On the newspaper’s Joe Public Blog, he writes that only 13 charities have stepped forward to discuss their problems related to the Iceland banks, with many others preferring to stay quiet.

I find the final comments about the need for the charities to be "more forthcoming" interesting in light of the increased calls in the United States for greater transparency and fiscal accountability by U.S. Charities.  See earlier blog postings.

Please see the Chronicle of Philanthropy and The GuardianThe Guardian for the full story.

AMT

Academics Overwhelmingly Favor Obama Over McCain

The Chronicle of Higher Education reprted on October 24, 2008, that academics overwhelmingly favor Barack Obama over John McCain for U.S. President.  Here is an excerpt from the article:

Professors, college administrators, and other educators have donated eight times as much to Barack Obama as they have to John McCain, the widest gulf in giving to presidential candidates by academics in the past five presidential elections, according to data from the Center for Responsive Politics.

Through the end of last month, donors from academe had contributed just over $12.2-million to Mr. Obama, compared with just over $1.5-million to Mr. McCain, according to the center, a nonprofit research group whose data on giving to presidential candidates date to the 1992 election.

It is no surprise that the Democratic candidate for the White House has received more cash from people in higher education than the Republican, given that studies and polls have shown that faculty members and college presidents are more likely to be registered Democrats.

For the entire article, see "Donors from Academe Favor Obama by a Wide Margin" in the October 24, 2008, issue of the Chronicle of Higher Education.

DAB

Corporate Charitable Giving to Educational Institutions Expected to Decline

The October 24, 2008, issue of the Chronicle of Higher Education reports that corporate giving to colleges and universities will likely fall in the near future, especially for matching fund programs and corporations that file for bankruptcy.  Here is an excerpt from the article:

Kettering University isn't the only institution seeing changes  — including some declines  — in corporate giving. As the economy enters a recession, those who follow philanthropic trends expect such giving to drop, especially among companies that are filing for bankruptcy or are being acquired.

The question is, By how much will donations fall? Data gathered by GivingUSA Foundation data for the past 40 years show an average 1.6-percent decline in donations by corporations to all charities during years with recessions that last eight months or more (and an average 1.9-percent drop in total giving for education during these years). One expert expects worse, predicting this economic decline will cause corporate giving to all nonprofit groups to go down at least 10 percent.

At the same time, philanthropy experts say, companies weathering the turmoil will most likely continue their philanthropic giving, including the donation-match programs, which are seen as an employee benefit that raises workplace morale. Although General Motors, which gave $657,000 to degree-granting institutions and libraries through matching gifts last year, discontinued its matching program on October 1, two dozen companies contacted by The Chronicle said they were continuing to match employee donations. General Motors says it will continue giving to education through its foundation.

For the entire article, see "Colleges Brace for Drop in Corporate Giving" in the October 24, 2008, issue of the Chronicle of Higher Education.

DAB