Nonprofit Law Prof Blog

Barnes Foundation - a new movie and lots of comments

The New York Times reviewed "The Art of the Steal," a documentary about the Barnes Foundation.  The movie, which opens today in New York and Philadelphia, describes the controversy surrounding the move of the Barnes collection to a new museum being built in downtown Philadelphia.  As the title of the movie suggests, the former Barnes Foundation student who funded the project and the director have a point of view.

The movie will be of interest to those of us who have followed the Barnes saga for year.  Just as interesting are the posts to the NYT page with the review.  When I checked the page, there were already 56 posts - in favor of the move, against the move, in favor of following a donor's intent no matter what, in favor of allowing public access to a public commodity like art, blaming the neighborhood, blaming Lincoln University, and generally taking positions on all sides of the controversy. 

sng

Brian Galle on Keeping Charity Charitable

Brian Galle's forthcoming article Keeping Charity Charitable will appear in Volume 88 of the Texas Law Review.  Here is the abstract:

This Article responds to recent claims, most prominently by Anup Malani and Eric Posner, that much of the work of the charitable sector should be farmed out to for profit firms. For-profit firms are said to be more efficient because they can offer higher-powered incentives to cut costs. I argue, however, that because of the high costs of monitoring and the presence of externalities, low-powered incentives are preferable for firms that produce public goods. Further, allowing some for-profit firms to receive charitable subsidies would raise the cost of producing those goods in government or other firms, because it would diminish the

“warm glow” workers enjoy from being recognized as self-sacrificing.

 

The "warm-glow"?  Obviously, Prof. Galle has never served in an administrative capacity at a college of university.  Most of us recognize that "warm glow" as plain old heartburn.

dkj

Are Misers more virtuous than Philanthropists?

I ran across an interesting essay recently entitled "In Defense of Charity and Philanthropy".  Interesting because it restates and then challenges the conventional law and economics wisdom that capitalism and its profit seeking "misers" are not only preferable to (what I will call) charitable socialism and its do-gooder philanthropists in an economic sense, but morally superior as well.  Imagine that.  The profit seeker is actually morally superior to the philanthropist.  The idea, espoused by Adam Smith and Ayn Rand in one form or another, is that individual profit seeking is the best way to ensure the most goods and services for the most people.  It is morally good to satisfy as many as possible and anything that sacrifices more than the necessary few for the sake of others is morally lacking.  Capitalism sacrifices the least number of people for the good of all, according to those who believe in it.  Indeed, much political discourse during the last presidential campaign regarding capitalism, socialism, and redistributionism had a moral flavor to it.  Obama, for example, was indignantly and pejoratively derided as a "socialist" by many, even those who believe that a healthy and vibrant charitable sector is to be desired in a capitalist world.  I understand, of course, that the three "isms" can be distinguished from the charitable sector in that the former are types of government while the charitable sector is comprised of the ungoverned, if not the ungovernable.  Still, a blanket condemnation of socialism seems necessarily to cast suspicion on the charitable sector as morally lacking since socialism's more equal distribution of wealth is often an important goal of the charitable sector as well.  Charities, as classically defined, seek the Utopia where nobody wants and everyone receives her subsistence, at least.  The indictment, though, is that in the absence of personal (as opposed to public) profit, more people will receive slightly or greatly less than their subsistence.  A society without a profit motive is morally lacking because it actually prefers and tolerates more poor people than does a society that embraces profit seeking.  Ergo, the miser is morally superior to the philanthropist.

I may very well be mixing my own ideas with those of the essayist.  But much of the law regarding nonprofits, tax and otherwise, is based on the implicit, if not explicit notion that capitalism is morally superior to socialism and, indeed, the charitable sector.  The essayist provides food for thought, at least, to the contrary.

dkj

Indiana University Offers New Bachelor's Degree in Philanthropy

The Center on Philanthropy at Indiana University recently announced a new degree program leading to the Bachelor of Arts Degree in Philanthropic Studies.  Here is the full text of the press release:

INDIANAPOLIS - Students who want to make a difference in the world will be able to earn a bachelor’s degree that prepares them to do so starting this fall, the Center on Philanthropy at Indiana University announced today.

A new Bachelor of Arts in Philanthropic Studies degree program was approved Friday by the Indiana Commission on Higher Education and courses will be available to undergraduates beginning with the fall 2010 semester.

The new program is designed to equip students with the knowledge and hands-on experience needed to succeed in entry-level positions in philanthropy and the nonprofit sector. It will help them prepare for careers in fields as diverse as foundations, healthcare, human services, community development, education, the arts, and the environment.

“Many of today’s students want an education and a career that lets them use their hearts as well as their heads,” said Patrick M. Rooney, executive director of the Center on Philanthropy. “This new degree will enable them to turn their passion for helping others into their profession.”

“Philanthropy and the nonprofit sector are becoming increasingly complex, and those who plan to work in this field need more sophisticated education than ever before,” Rooney continued. “The undergraduate degree will attract more students to choose a career in philanthropy, and its graduates will be better prepared to help nonprofits serve their constituents and make a meaningful impact in their communities.”

The program will explore the role and impact of philanthropy and nonprofits from a variety of perspectives and subject areas. Courses will examine issues such as the ethics and values of philanthropy, giving and volunteering, philanthropy’s history, fundraising for nonprofits and building civil society.

Students will have opportunities to interact with national nonprofit leaders, complete a capstone learning experience and participate in internships and service learning projects. They will learn firsthand from Center on Philanthropy experts and Indiana University’s Philanthropic Studies faculty members, many of whom are among the nation’s leading experts and researchers in philanthropy.

The program was developed by Dwight Burlingame, associate executive director and director of academic programs at the Center and Richard Turner, professor emeritus of English at IUPUI and former chair of the IU Philanthropic Studies faculty. The degree will be offered through the IU School of Liberal Arts at Indiana University-Purdue University Indianapolis (IUPUI), of which the Center on Philanthropy is a part.

“Philanthropy is such an important aspect of human society that we believe it is well worth studying in a number of ways and from a variety of perspectives. Our graduate programs in Philanthropic Studies began with that idea, and the new bachelor’s degree option extends it to undergraduate students as well,” said Bill Blomquist, dean of the IU School of Liberal Arts at IUPUI. “With this liberal arts foundation, graduates will be prepared to make a difference in nonprofits, public service, business or any career field and will be attractive candidates for graduate school opportunities or jobs in prestigious organizations.”

The Center on Philanthropy pioneered the field of Philanthropic Studies and created the world’s first Master of Arts and Ph.D. degrees in Philanthropic Studies.

“The new program will expand learning opportunities for undergraduates and extend the range of distinctive 21st century degrees offered by IUPUI,” said Charles R. Bantz, chancellor of IUPUI and executive vice president of Indiana University. “Offering a bachelor’s degree in this rapidly growing field will attract many of the best, brightest and most civically engaged students from Indiana, across the nation and around the world, who in turn will make an important impact on the cultural, educational and economic growth of our community and state.”

 

dkj

NYT Reports on the "Church"

And here's the New York Times story on the C Street Center.  

sng

More On Congressional Dorm "Church"

From the eyebrow raising department:  An interesting NPR report today raises the age old question "what is a church?" for purposes of 501(c)(3).  Apparently, the sole purpose of the "C Street Center" is to provide housing for Christian Congressmen who "can pray in the living room and walk to work."  According to the report:

The three-story, brick townhouse at 133 C Street S.E. sits a half-block from the Cannon House Office Building, roughly three blocks from the Capitol — the home-away-from-home for a regular contingent of fundamentalist Christian members of Congress, who can pray in the living room and walk to work.  The C Street Center, which owns the 1880-vintage townhouse, claims status as a church. And as with other religious organizations, the IRS takes the center's word that it is a church. As a result, the center doesn't have to file public tax returns, as most non-profit organizations must do.

All of can recall reading a case or two concerning a family that claims its homestead as a church, its members comprised of mom, dad, sisters and brothers.  But I have never seen a case involving [mostly Republican] Congressman claiming what is essentially their residence away from home as a church.  A group of ministers, relying on the infamous 15 factor test, has filed a complaint with the IRS asserting that just because you pray in your living room doesn't make your venue a house of worship.  You can listen to or read the report on NPR's website.

dkj

Columbus Ohio Pastors Petition IRS re: C Street Center in DC

A group of Columbus, Ohio pastors have requested that the IRS investigate whether the C Street Center in DC should be entitled to tax exempt status as a church.  The Columbus Dispatch reports that the pastors will file a complaint with the IRS today, asking for the investigation.  The pastors are concerned that the Center is not a church and that by "masquerading" as a church, the Center "poses a threat to the integrity and legitimacy of all religious organizations in the United States."  

The C Street Center operates as a residential facility and a spiritual retreat for some members of Congress. The Center offers private Bible sessions and weekly dinners to members of Congress, and provides cheap rooms for a few Senators and Representatives.  News reports have said that the Center is run by the Fellowship Foundation, an evangelical Christian network also known as the Family, but the president of the Fellowship Foundation, Richard Carver, says that his organization does not own or run the C Street Center. Because the C Street Center is tax exempt as a church, the Center is not required to file the documents non-church exempt organizations file.  This lack of transparency is part of what concerns the pastors, who are concerned about the separation of church and state - and the fact that activities in the C Street Center may be attempts to influence public officials.  If the C Street Center is not a church, it will have to file tax returns that reveal its sources of income.  It will then be possible to determine whether private money is being used in attempts to influence members of Congress.

Last fall the District of Columbia revoked 66% of the property tax exemption the C Street Center had received as a church, because 66% of the Center was used as a residence and not as a church.

Marcus Owens, former director of the IRS tax-exempt division, is representing the pastors.

sng

Will Expiration of Estate Tax Mean Less $ for Charity?

Uncertainty about the estate tax has caused all sorts of problems for estate planners and their wealthy clients. The estate tax expired at the end of 2010, but if Congress does nothing, the tax in 2011 will affect more people than it did in 2009.  And Congress may do something - but no one knows what Congress will do and whether it will be retroactive.  In addition to all the other planning problems this causes, charities are beginning to worry about a possible effect on charitable giving.  An article in the Pittsburgh Tribune discusses the problems caused by the uncertainly surrounding the estate tax, including possible losses of charitable gifts.  Some people commenting in the article suggest that because many people are in a holding pattern, gifts already written into wills will stay there but someone planning an estate may be reluctant to include a charitable gift until the impact of the estate tax on the person's family becomes clear.  

Thanks to Cassie Peters for bringing this article to my attention.

sng

MLB Can No Longer Require Ramirez Provisions in non-Free Agency Contracts

After Manny Ramirez pledged to donate $1 million of his $45 million contract to the Dodgers' charitable foundation, the Dodgers owner thought it would be a good idea to include "Ramirez provisions" in all contracts, in amounts of the players' choosing.  Other Major League ball clubs followed suit, and some 109 contracts now contain the provision. One problem seems to be that the provisions require donations to the club's own foundation and limit the players' ability to pick their own charities for donations, but the coercive nature of the provisions in general concerned the players' union.  The LA Times has reported that a union grievance about these provisions has been settled.  The settlement has not been officially announced, but a management official said that the settlement permits the provision in contracts signed by players signing as free agents or buying out a year or years of free agency when signing a long-term contract.  A spokesperson for the Dodgers says that the club will continue to encourage charitable giving by its players, even without the provisions.

Thanks to Tori Klein for bringing this to my attention.

sng

New York City Charities Aid Haitians Through a Special Fund

It will be years before the impact of Haiti’s earthquake on Haitians in New York can be fully measured.  But as the local population rushes to respond — increasing remittances to relatives in Haiti, welcoming others who are fleeing the destruction, or mourning the dead — The New York Times reports that two of the city’s major charities are pitching in to help.  

On Thursday, the Brooklyn Community Foundation and the United Way of New York City will announce the start of the NYC Haitian Community Hope and Healing Fund.  The fund will issue grants to local nonprofit groups that help Haitians with a variety of services, including immigration assistance, literacy and other educational programs, employment training, and grief counseling.

The initiative, which its organizers say is unique among the Haitian diaspora in the United States, is driven in part by the expectation that the number of Haitians in New York will surge as people flee the quake’s destruction.  The Obama administration’s offer of temporary legal status to many illegal Haitian immigrants could also bring thousands of people out of the shadows to seek formal educations and legal work.

 

kws

IJCSL and IJCSL-N Published by ICCSL

The January issue of IJCSL and the February issue of IJCSL-N have been published on the ICCSLwebsite at www.iccsl.org.  Subscription inormation is available for both.

kws

Swiss Court Orders Charities Cannot Receive Haitian Dictator’s Money

According to Philanthropy Today and the Washington Post, the Swiss high court published an opinion on Wednesday requiring that $4.6 million previously committed to charities by the Swiss government, be returned to the family of former Haitian dictator Jean-Claude "Baby Doc" Duvalier.  The former dictator is thought to have stolen millions in public funds before fleeing in exile in 1986.  The $4.6 million is a portion of the millions that Haiti alleges Duvalier stole during his time in power.  

The Haitian government first requested the return of the money to Haiti in 1986; however, Swiss law only permits the return of funds when asked for by a national government that is pursuing its own criminal investigation (Haiti was not pursuing such an investigation against Duvalier at that time).  The funds have been frozen since 1986 and the Swiss government had proposed giving them to aid groups working in Haiti.

The high court’s decision overturned a recent lower court ruling permitting the release of the funds to aid organizations working in Haiti, in accordance with the Swiss government’s proposal.  The high court stated that while it was not happy about the decision, its hands were legally tied because the lower court’s ruling was barred by the statute of limitations, which had expired on Duvalier’s crimes.

The high court reached its decision on January 12, prior to the devastating earthquake, but the opinion was not reported until this week.  The Swiss government is deeply concerned about the court’s decision and has issued an emergency decree freezing the return of any funds to Duvalier pending passage of a law to undo the high court’s ruling.

SS

Haiti – Leader of Baptist Group Has History of Ignoring the Law

Laura Silsby is currently in jail in Haiti awaiting trial for leading a group of 10 Baptists trying to take 33 children to the Dominican Republic.  According to the Sydney Morning Herald, Ms. Silsby has had trouble following the law prior to this incident.  Ms. Silsby was sued 14 times between March and July of 2008 for failure to pay wages as chief executive of PersonalShopper.com.  These lawsuits resulted in 9 liens against PersonalShopper.com; the other 5 lawsuits are on appeal or have been dismissed.  Ms. Silsby’s trial in Haiti is scheduled for February 22.

SS

UK – Centre for Policy Studies Suggests Two Key Changes Aimed to Increase Charitable Giving

The Centre for Policy Studies published a paper by Paul Palmer advocating two key changes that Palmer argues could increase annual giving in the UK by up to £74bn or more.  The paper, A Step Change in UK Philanthropy, argues for the creation of remainder trusts and personal charitable trusts.  The remainder trusts would be similar to charitable trusts but could be controlled and accessed directly by donors.  The personal charitable trusts are a new type of charitable trust based on US and Canadian models that permit donor anonymity.  The goal of both suggestions is to increase charitable giving among the middle class.

SS

Intelligent Giving Comes Back Online

Intelligent Giving (IG) is set to come back online this April.  IG is a charity whose primary purpose is maintaining a website with information for donors about charitable organizations.  The website’s purpose is to increase transparency through dissemination of data and to train and encourage other charities to become more transparent.  To that end, IG maintains profiles on a number of charities.

Third Sector reports that IG closed and deregistered as a charity in August 2009.  The charity think tank New Philanthropy Capital (NPC) has acquired IG and is scheduled to have it working again in the spring.  NPC intends to give IG a tronger focus on how well, and to what extent, charities are keeping the general public informed about meeting targets and effectiveness.

The new site isexpected to launch inApril 2010.

SS

Zimbabwe – NGO Agreements

According to NGO News Africa, the Zimbabwean government is calling for NGOs operating in Zimbabwe to regularize operations and follow Zimbabwe's laws.  Specifically, the government wants more formal signed agreements between NGOs and the government.  The government stated that "[t]he signing of the agreements is an important step towards the attainment of a comprehensive and sustainable regulatory framework for NGOs operating in Zimbabwe.”  This comment came during the signing of agreements between Zimbabwe and two NGOs, World Vision and Terre Des Hommes Italia.  Representatives from both NGOs responded positively to the move because it adds structure and credibility to the work already being performed.

SS

Conference of INGOs 2009 Activity Report

The Conference of International Nongovernmental Organizations (part of the Council of Europe) recently published its 2009 Activity Report at its Winter Session in Strasbourg.  The 18-page report reviews the Conference of INGOs’ work on the three main aspects of its activities: 1) promoting the Council of Europe’s fundamental values, 2) fostering civil society in Europe and 3) strengthening the political and institutional presence of the Conference of INGOs.  It details the work of five committees dedicated to specific themes: 1) The Civil Society and Democracy Committee, 2) The Culture, Science and Education Committee, 3) The Human Rights Committee, 4) The Social Cohesion and Eradication of Poverty Committee and 5) The Sustainable Territorial Development Committee.  One of the committee highlights was the Civil Society and Democracy Committee’s ongoing work to develop and revise a Code of Good Practice for Civil Participation in the Decision-making Process.

Finally, the report briefly discusses the work of two transversal Groups: 1) The Europe and Global Challenges Transversal Group and 2) The Gender Equality Transversal Group.  The Europe and Global Challenges Transversal Group was partially responsible for the Draft Co-operation Agreement between the Conference of INGOs and the North-South Centre that we blogged about on November 27^th.

SS

New Publication on Nonprofit Finance

A timely new book entitled Nonprofit Finance for Hard Times: Leadership Strategies When Economies Falter by Susan Raymond, has recently been publishedThe book is meant to be a tool for nonprofit organizations seeking to reassess strategies for managing their financial health.  It provides information and guidance on a variety of subjects including responding to the economic crisis, change in stability interests, financial support strategies, and a systems approach to revenue strategy. 

SS

IRAQ—NEW NGO LEGISLATION PASSES PARLIAMENT

ICNL announced the passage of a new Law on Non-Governmental Organizations for the Republic of Iraq.  The new law, which awaits the final signature of Iraqi President Jalal Talabani, will replace Coalition Provisional Authority Order Number 45.  According to ICNL’s analysis the new Law on Non-Governmental Organizations is a significant improvement upon both CPA Order 45 as well as the draft law first introduced in the Iraqi parliament in March 2009.  ICNL has produced a table that summarizes several of the most important provisions.  This is available at http://www.icnl.org/knowledge/news/2010/01-25.htm

 

kws

 

ECNL Response to the Public Consultation on the Review of the Financial Regulation

The European Center for Not-For-Profit Law (ECNL) has published a 39 page response to proposed new EU financial regulations that would apply to nonprofit organizations (NPOs).  ECNL raises concerns about our key issues: (i) a cap on indirect expenses; (ii) treatment of in-kind contributions; (iii) treatment of exchange rate changes; and (iv) information about upcoming and awarded grants and paperwork for applicants.  ECNL’s report indicates that the proposed regulations on these issues  may  deter NPOs from engaging with the EC on important matters.

First, ECNL’s report states that the EC’s 7% cap on indirect (administrative) expenses is in direct conflict with the EC’s goal of increased transparency and accountability because it constrains the resources that NPOs can devote to professional financial management, accounting and reporting.  The report suggests that the EC raise the flat rate and introduce new methods of calculating NPO direct costs to allow for full reimbursement of legitimate direct costs.

Second, the report suggests that the EC provide appropriate guidance and criteria on how NPOs should record and report in-kind contributions.

Third, the report lays out several difficulties regarding exchange rate changes.  ECNL suggests that the regulations classify exchange rate losses as project expenses and exchange rate gains as project income.  Such classification would permit recovery of losses and offsetting of gains (either through reduced EC funding or payments to the EC).

Finally, the report identifies major inefficiencies in the dissemination of information regarding available grant funding.  The inefficiency is caused by late reporting by the various EC Directorates-General and a failure to categorize and organize grant data.  The ECNL proposes aggregating all of the grant award information in one well-structured portal with information from all Directorates-General and financial instruments.  Specifically, ECNL suggests that the portal should contain information on (1) annual work programs of departments and financial mechanisms; (2) calls for proposals and tender opportunities; and (3) awarded grants and contracts.

SS