Friday, July 29, 2011

No, It's Not (American Campaign Academy)

Having just returned from a vacation trip to Seattle, I logged on to the blog site to see Darryll's July 21 post about the IRS using American Campaign Academy to deny 501(c)(4) status to political party training academies.

Though he criticizes this use of the ACA case, Darryll opines that the ACA opinion was "a sound one."

I'm going to spend a few moments taking issue with that statement (and I'm sure Darryll will have a rejoinder!).  A "sound" opinion in my view is one that has a logical doctrinal base, or which breaks new doctrinal ground for sound policy reasons.  A decision that makes up new doctrine to reach a silly result is not "sound" in my world.  And that is precisely what American Campaign Academy did.

Both Darryll and I have written about the private benefit doctrine and its lack of doctrinal clarity.  Both of us have reached similar conclusions about what the doctrine SHOULD be - essentially, it should forbid charities from engaging in deals with non-charitable parties that give the non-charitable parties "special" access to charitable resources without an extremely good reason for doing so.  We've phrased this differently in our writing, and our analysis is not identical, but it's close enough.

And if the American Campaign Academy case were properly documented as one of these cases of a noncharitable organization having special access to charitable benefits denied to others, it might be sound.  But in fact there is no evidence of such special access being part of the "deal" behind ACA.  It is true that most ACA graduates worked for Republican political candidates, although at least some did not.  But there is no evidence whatsoever that the noncharitable parties (the Republican Party and its individual candidates) had any kind of "special" access to ACA graduates; they didn't get "first crack" at the best students (at least, not according to the case record); they didn't have a deal in which students had to buy materials from the Republican Party that resulted in a profit to the Party, or any other "lock-in" arrangement that gave the Party special access to the charitable benefits (a trained workforce) provided by ACA.  Students didn't sign a pledge to work only for Republicans; this wasn't an ROTC-like arrangement where students agree to work for the military in exchange for them paying for one's education.  ACA graduates could work for Democrats; or campaigns in foreign countries (at least one graduate did so).  What the Republican Party got was what every business entity in the world gets from education: a trained workforce.  At the end of the day, this was no different from Microsoft benefitting from the excellent Computer Engineering programs at Stanford, MIT, Cal-Tech or my own university (the University of Illinois); or indeed no different from the NFL or NBA teams benefitting from the excellent athletic training provided by major university athletic programs.  This is what education does.  It trains folks in the skills necessary to operate in a particular labor environment.  Noncharitable interests benefit from this; big surprise.

The notion that this training violates the private benefit rule because a majority of graduates gravitate to one political party over another is preposterous.  This is like saying that Notre Dame should lose its tax exemption because its students gravitate towards jobs compatible with Catholic religious tradition; or that Stanford should lose exemption if we found that its graduates disproportionately worked for Apple Computer.  Or let me give another hypothetical.  Suppose that Intel decided that there was a dearth of individuals trained in the precise engineering skills needed to produce its complex computer microprocessor chips.  So one day it organizes a new "trade school" focused entirely on these skills, gives it $1 billion to start up, appoints a Board of Trustees made up largely of top Intel officers, and that board hires the best engineering faculty away from MIT, U of I, Stanford and others to do this.  Because of the special skills involved, the overwhelming majority of graduates go work for Intel (after all, there aren't many other advanced microprocessor manufacturing companies in the US; AMD would be the other one).  Would the IRS argue that this school should be denied exemption because of the "private benefit" flowing to Intel?   You've got to be kidding me.

ACA is exactly the kind of perversion of doctrine the IRS should not get away with, regardless whether one considers the end result appropriate in specific cases.  The court decision in ACA was not "sound"; it was a decision reached without any doctrinal basis or sound rationale.  And the result has been a doctrine (the Private Benefit Doctrine) that has no doctrinal content, which the IRS routinely uses to deny exemption in cases in which it has a "bad feeling" about things, but no other well-defined doctrinal rationale for taking action.  Police don't get to throw folks in jail because they have a "bad feeling" about them (well, at least the laws say they don't, although minority members of our society may disagree with that statement).  Legal doctrines under which we grant and take away tax exemption should be similarly well-defined.


Late edit: On re-reading Darryll's post, I see that he actually said "the theory" behind ACA is sound, not the case itself.  Well, OK.  I'll be happy to concede that one could come up with a "sound theory" to support something that one could name "the private benefit doctrine."  In fact, I'd suggest that both Darryll and I have done just that in our writing.  But the theory certainly didn't come from the abominable analysis in ACA!

July 29, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, July 21, 2011

IRS Denies 501(c)(4) Status to Political Party Training Academies

Just when I was suggesting that American Campaign Academy is absurd, the IRS relied heavily on the case to deny 501(c)(4) status to several political party training academies in these private rulings.  In each of the cases, the training schools trained candidates for a specific political party.  In denying exemption, the Service stated:

Educational activities undertaken to provide a partisan benefit are considered to serve private interests, rather than the common good.  In American Campaign Academy, supra, the court denied exemption under section 501(c)(3) to a school organized to train individuals for careers as political campaing professionals because its educational activities were operated with the partisan purpose of benefiting Republican Party entites and candidates.  The private benefit conferred on these persons was more than incidental, and thus demonstrated a substantial non-exempt purpose that precluded exemption.  While you are requesting recognition as an organization described in section 501(c)(4) and not section 501(c)(3) (as was American Campaign Academy), the standard for determining what constitutes private benefit described in American Campaign Academy applies to both sections.  As such, for purposes of both section 501(c)(3) and section 501(c)(4), an organization which conducts its educational activities to benefit a political party and its candidates serves private interests.  And, as discussed above, an organization that primarily serves private interests fails to qualify for exemption under section 501(c)(4). 

Thus, notwithstanding any benefit your educational activities may provide to the community, you fail to qualify for exemption because your trainining program primarily benefits the interests of the Party and its candidates.  According to your Articles and Bylaws, your primary activity is to train and recruit ____________________ who are members of the party to run for political office.  Like the school in American Campaign Academy, your purpose in conducting this activity is to provide education solely to individuals affiliated with a certain political party who want to enter politics.  Indeed, you measure your success in terms of the number of graduates who have run for, or won, elective office representing the Party.

Just to be clear, the theory in American Campaign Academy is a sound one in my opinion, but wrongly applied to cases whether the alleged private benefit is to a political party.  Its like condemning a truck-driving school for benefiting trucking companies.  As one scholar once said, the case is really about an NGO's identifiable ideology rather than private benefit. 


July 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 20, 2011

Nonprofit and charitable contributions at Center of Pakistani "Spy" Allegation

Even if it is a rare occurrence, and even if domestic laws against political activities have never been fully explained, the involvement of NGO's in secret government foreign policy matters puts all NGO's at risk.  For example, an NGO operating in a theatre of war with the explicit or implicit assistance of one or the other warring parties, or both, inevitably causes the warring parties to look upon the NGO as something more than neutral noncombatants trying to mitigate the consequences of human madness.  So I was intrigued when I read the complaint recently filed against two Americans of Pakistani descent and learned that the nonprofit, Kashmir American Center, an organization described as a "not-for-profit dedicated to raising teh level of knowledge in the United States about the struggle of the Kashmiri people for self-determination." In essence, the complaint alleges that the KAC served as a front through which the Pakistani intelligence service, the ISI, attempts to shape domestic political opinion in favor of Pakistan's goals in the disputed Kashmir region.  I am not quite sure whether a tax exempt organization whose goal is to influence American grassroots and political opinion is contrary to 501(c)(3) is necessarily disqualified from tax exemption, but the complaint makes for intriguing reading regarding the seemingly nefarious uses to which nonprofit organizations can be put.  For example, the affidavit in support of the criminal complaint implies that the KAC allowed sympathetic "straw donors" to obtain charitable contribution deductions by funding the domestic operations of a foreign spy agency: 

Fai [a principal insider of the nonprofit organization] has received approximately $500,000 to $700,000 per year from the Government of Pakistan, and that the Government of Pakistan has funded Fai's operations through Ahmad. As further discussed below, I believe that the Government of Pakistan money is routed to Fai through Ahmad and a network of other individuals connected to Ahmad. I believe that much of this money is provided to Fai through contacts of Ahmad in the United States because Ahmad lives in Pakistan and is rarely in the United States. The evidence shows that Ahmad arranges for his contacts in the United States to provide money to Fai in return for repayment of those amounts in Pakistan. I believe that these other individuals assist Ahmad in routing money to Fai because doing so ostensibly enables them to take tax deductions deductions for the amounts that they transfer to the KAC as charitable deductions. I estimate that the total amount his funding network to Fai and the KAC since the mid-1990s is at least $4,000,000.

I suppose, though, that an NGO whose goal is simply to advocate for one position or another is nothing new and its views do not necessarily disqualify it from tax exemption or any of the other benefits of charitable nonprofit status, even if the organization is run primarily by a foreign intelligence agency.  That the question is debatable demonstrates the nearly unlimited extent to which "charitable" in 501(c)(3) can be stretched.  But what if the organization itself is an "agent" of a foreign government (under the statute that is the basis of the complaint) and fails to register according to federal law?  If the organization were an agent and had actually registered, could it still qualify for tax exemption?  Theoretically "yes" it seems to me. 








July 20, 2011 in Federal – Judicial | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 19, 2011

Bias in Nonprofit News: Do American Campaign Academy and Big Mama Rag make any sense at all?

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From the "so what?" department, the Pew Research Center for Excellence in Journalism reports in a new study that most nonprofit news organizations have a distinct ideological bent one way or the other, left or right.  Which is really to say that most news people, even those who work for good rather than profit, have an opinion.  Or maybe my own cynical bent is showing.  Anyway, according to the study, almost 60% of the nonprofit news organizations had an identifiable ideological philosophy.  Here is a summary of the major findings:

Among the findings:

  • The most ideological sites were Group Sites, those that belonged to one of two families organized by a sole or primary funder. One was a family of nine liberal sites that all have the word "Independent" in their names, funded chiefly by the American Independent News Network, which itself is funded by a variety of individuals and foundations, including the Open Society Foundations founded and chaired by George Soros. The other was a group of 12 conservative sites that share the name "Watchdog" and are funded chiefly by the Franklin Center for Government & Public Integrity, which was launched in part by a libertarian group called the Sam Adams Alliance.
  • The least ideological in their content were sites that operated entirely on their own and had multiple funding sources and revenue streams, sites such as The Texas Tribune (which lists 12 foundations among its dozens of "founding investors," as well as 64 corporate sponsors and hundreds of individual donors, and generates revenue from events and other revenue devices) and Connecticut Mirror (which lists 10 supporting foundations). These sites also tended to be more transparent and generate a relatively high volume of content.
  • One striking feature across many of the news sites studied was that while they may have been forthcoming about who their funders were, often the funders themselves were much less clear about their own sources of income. This effectively made the first level of transparency incomplete and shielded the actual financing behind the news site. The chief funders listed for nearly two-thirds of the sites studied-28 in all-did not disclose where their money came from.
  • Reporting resources in this emerging category of news operations tended to be quite limited. All the sites in the study had some staff and all produced original content at least weekly. The median was eight stories per week, but some averaged as few as one or two. And, of the 46 sites studied, the median reporting and editorial staff numbered just three people. At 18 sites-more than a third of those studied-just one or two people authored all of the stories analyzed.
  • Whether by design or due to resource limitations, the majority of news stories on these sites presented a narrow range of perspectives on the topics covered. Overall, half of the news stories studied (50%) offered just a single point of view on controversial issues. Just 2% of stories contained more than two points of view.
  • The topics covered on these sites often correlated with the political orientation of the sites and their backers. The more liberal-oriented American Independent News sites, for instance, heavily favored stories about the environment and organized labor, topics that did not appear among the most-covered for other groups of sites. The more conservative sites, on the other hand, often set their focus on the government system itself, drawing attention to stories of inefficiency and waste.

So, what do these findings mean?  Should we turn the holdings of the American Campaign Academy or Big Mama Rag loose on these nonprofits?  Should we be surprised or even concerned?  It seems to me that nonprofits inevitably have an ideological bent, thus exposing the great irony of cases implying that nonprofits should be unbiased; in other words devoid of human influnce.  I don't think a non-ideological organization, profit or nonprofit, exists in nature.  The study, as far as I have read, does not report the reactions of those news organizations perjoratively labeled as "ideological." but I bet most of them would disagree that they are presenting "narrow" perspectives.  They are just as likely to conclude that the study author's have an ideological bent.  Ideology, I think, is in the eye of the beholder.



July 19, 2011 in Studies and Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, July 14, 2011

Is ALEC An Action Organization Disguised as a Charity?

From the Los Angeles Times:

The government watchdog group, Common Cause, has asked the Internal Revenue Service to investigate the tax status of the non-profit American Legislative Exchange Council, or ALEC, an association of conservative state legislators and private sector officials that churns out hundreds of bills and resolutions annually to pare back regulation and promote business.
Over the last few years, Washington-based ALEC has helped legislators around the country to introduce measures, often taken verbatim from the group's website, that would dismantle regional climate change initiatives, rebuke the Environmental Protection Agency, repeal health care reform and curtail labor's power, among other things.

In a letter to the IRS, Common Cause argued that a review would help determine if ALEC's tax-exempt, 501(c)(3) status should be revoked due to "excess lobbying or, alternatively, because ALEC appears to operate primarily to further private business interests and not to advance a charitable purpose."  ALEC has said more than 1000 bills are introduced annually around the country based on the group's templates. Common Cause contends that such activity violates tax code provisions that bar non-profits from "carrying on propaganda, or other attempting, to influence legislation."

According to Common Cause's complaint letter:

According to ALEC’s own tax returns, its largest program area in terms of expenditures is the  operation of its task forces. In turn, the primary function of these task forces is development and dissemination of model bills, with the intent that they be introduced and passed in as many state legislatures as possible.  The organization’s second largest area of expenditures is for meetings held several times a year.  These are opportunities for “private sector” members (corporate representatives) to interact with legislators and advocate for favored policies. The agendas include discussions of specific legislation and specific legislative proposals supported by the organization. Indeed, in many cases the proposals were developed by ALEC itself as its own model bill.  Under the default statutory test, it seems incontrovertible that ALEC is substantially and indeed primarily engaged in attempting to influence legislation. All of its efforts are geared toward developing and promoting favored state legislation. These proposals are generated in a private process where the business interests of its corporate members are highlighted, then shared only with the organization’s legislator members so they can take the proposals back to their states and introduce them as their own ideas.4 Its governing documents state that promotion of introduction of bills at the Federal and state levels and formulation of legislative action programs are two of the seven means by which ALEC pursues its purposes.


There is an informative YouTube Video discussing the issue linked to Common Cause's website.  For its part ALEC has yet to respond to the complaint.


July 14, 2011 | Permalink | Comments (1) | TrackBack (0)

Wednesday, July 13, 2011

More on the Separation Between NGO And State: Donors Buy Influence Using NGO's as Middlepeople

Yesterday, I blogged about the OGE's proposed rule allowing federal employees to serve in leadership positions within nonprofit organizations.  My primary complaint was that NGO's were becoming too cozy with government, risking the loss of their identity as a distinct sector of society.  While there was very little thought given before Congress prohibited tax exempt charities from intervening in political campaigns, nor even in the prohibition against "substantial" lobbying, one reason why the prohibitions are nevertheless good policy is that nonprofit organizations ought to exist as alternatives to top down governance in a democratic society.  Nonprofits allow for spontaneous grassroots initiatives and actually better society by showing top downers a better idea.  To the extent nonprofits get involved in the political process, they run the risk of being "captured" by government.  Or more precisely, captured by incumbents.  Today, the online world is abuzz about an Associate Press article describing the new way to purchase influence from incumbents, candidates or government officials, to wit:  make large donations to charities that are the influential target's favored causes.  That phenomenon, coupled with the imminent rule allowing federal employees to serve as officers and board members of nonprofit organizations, and Citizens United seems a recipe for disaster.

"By giving millions to nonprofits and charities that lawmakers have a connection to, lobbyists and special interests have a very discreet way of currying favor with the members of Congress they're trying to influence, one that the public is rarely aware of," said Bill Allison, editorial director of the foundation. "How much more money is contributed to these nonprofits by clients of lobbyists or others with an interest in federal policy is unclear, since only lobbyists have to disclose these contributions."

The AP report comes after the Sunlight Foundation blog reported that:

Last year, four of the country’s biggest military contractors paid $100,000 or more to become top sponsors of a black tie charity gala that honored the influential former chair of the House Armed Services Committee, Rep. Ike Skelton, D-Mo.  In exchange for that gift, some of the company's top executives were placed at Skelton's table and all were given the chance to address the V.I.P. crowd that included many top military officials. The event benefited a charity for families of fallen soldiers.  This kind of lavish corporate spending on galas bestowing awards on executive or legislative officials is common practice in Washington, D.C., and unlike other forms of giving—such as donations from companies’ political action committees—it is unlimited.

The gist of the problem, it seems, is that individuals or corporations seeking to curry favor with incumbents or candidates are subject to limits on the amount they can donate and cannot get an explicit endorsement from a charity because of the prohibition stated in 501(c)(3).  Instead, they can make significant  unlimited charitable contributions to that same charity which then turns around and "honors" the incumbent, candidate, or government officer (the latter of which is not necessarily in violation of 501(c)(3).

Of the over $50 million in these reports, firms employing lobbyists spent $36.3 million honoring members of Congress and $11 million honoring executive branch officials in 2009 and 2010, according to Sunlight’s analysis. In addition, nearly $645,000 went to legislative branch employees—mostly congressional staffers—the reports showed.

The entire Sunlight Foundation report is available online here.



July 13, 2011 in In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 12, 2011

Separation of NGO and State: A Comment on The Office of Government Ethics' Proposed Rule Allowing Government Employees to Serve on Nonprofit Boards

According to the Preamble to Proposed Rule 5 CFR 2640.203(M) (May 3, 2011)(relating to ethics in government),

a number of [federal] agencies had a practice of assigning employees to participate on the boards of directors of certain outside nonprofit organizations, where such service was deemed to further the statutory mission and/or personnel development interests of the agency . . .   However, in 1996, the Office of Legal Counsel (OLC) at the Department of Justice issued an opinion concluding that section 208 generally prohibits an employee from serving, in an official capacity, as an officer, director or trustee of a private nonprofit organization . . . This conclusion was premised in large part on the fact that officers, directors and trustees of an outside organization owe certain fiduciary duties to the organization under state law, which may conflict with the primary duty of loyalty that all Federal employees owe to the United States.

The Preamble continues by articulating a list of negative consequences arising from what I will call the "separation between NGO and State," including the following:

Since the 1996 OLC opinion, some agencies have continued to assign employees to serve on  such outside boards by granting the employees individual waivers under 18 U.S.C. 208(b)(1). Other agencies have declined to issue individual waivers (or have done so rarely), often because of discomfort about waiving the application of a criminal statute. OGE has fielded numerous inquiries and has held many meetings with agencies and nonprofit organizations, mostly professional and scientific societies, concerning the application of section 208 to prevent official participation on outside boards.  Several of the agencies and nonprofit organizations have argued that the application of section 208 has created unfortunate barriers to professional development and meaningful exchange between Federal and non-Federal experts in certain professions and areas of expertise.  Moreover, some of the organizations have pointed out that there is a lack of uniformity within the Executive Branch, owing to the willingness of some agencies to grant waivers and the unwillingness of other agencies to do so, often with respect to participation in the same organization.  Additionally, the Office of Government Ethics has noted the potential for confusion in some instances when employees are permitted to serve only in a private, rather than official, capacity.  Especially where the agency has policy interests that overlap with those of the nonprofit organization, it can be very difficult for the employee to avoid the mistaken impression that he or she is acting in an official capacity when participating in the organization. Employees may be uncertain about the extent to which they are permitted to make reference to their official position or to use official time or agency resources.

Later, the Preamble makes the point that the current prohibition discourages scientist and other professionals from accepting federal employment.  The Preamble suggests that federal employees become isolated from the "exchange of ideas" amongst their peers as a result of the prohibition and then concludes that the conflicting duties to the nonprofit and the government are more "theoretical than real."  The isolation argument actually seems more theoretical than real since scientists and professionals need not be in a leadership position to participate in a nonprofit organization's discussion of ideas.  Anyway, for these reasons, the Office of Government Ethics proposes to allow federal employees to participate in leadership positions on behalf of nonprofit organizations:

§ 2640.203 Miscellaneous exemptions.

* * * * *

(m) Official participation in nonprofitorganizations. An employee may participate in any  particular matter where the disqualifying financial interest is that of a nonprofit organization in which the employee serves, solely in an official capacity, as an officer, director or trustee.

All the reasons given for the proposed rule seem sensible but I have one or two concerns.  As a general matter, I am in favor of a clear clean delineation between the independent sector and government.  Yes, I know that as a tax policy matter the independent sector is justified in part because it relieves the government of some of its burdens and therefore it might be inevitable that there be some coordination.  But it is deeper than that, it seems to me.  The independent sector also exists to offer alternative means and ideas to government.  I worry when government and the independent sector get too cozy, as, for example, when the independent sector becomes too dependent on government for financial capital.  Under the proposed rule we might very well have government officials also directing nonprofit organizations active in the same area of social betterment.  This might be a small issue but I am not so sure.  The other issue conspicuously absent from the Preamble discussion involves political activity.  It seems to me that there is an emerging consensus, particularly after Citizens United that tax exempt nonprofit organizations have a right to participate in the political process.  It seems certain that if the matter were decided today or in the next two years, the High Court might even say so clearly if it hasn't already.  The proposal was made only last May so the Office of Government Ethics should have been aware of Citizens United and should have addressed it.  Suppose a high ranking federal employee in EPA, for example, also serves on the board of an organization actively concerned with global warming; or an FCC official serves on the board of an organization concerned with some media regulatory issue that happens to be supported or opposed by the current administration?  I haven't thought it through enough to have a firm opinion but I wonder if the issue is being discussed as the rule moves to final stages -- the comment period closed, by the way, on July 5, 2011.


July 12, 2011 in Federal – Executive | Permalink | Comments (0) | TrackBack (0)

Monday, July 11, 2011

Adam Chodorow Proposes "Charitable Flexible Spending Accounts"

In a forthcoming article, Professor Adam Chodorow proposes allowing taxpayers to donate unsed FSA amounts to charity:

This article considers two unrelated tax provisions – healthcare Flexible Spending Accounts (FSAs) and the charitable deduction. FSAs permit eligible taxpayers to set income aside tax-free to use for medical expenses. However, these accounts have a “use-it-or-lose-it” feature that discourages participation and creates incentives for unnecessary spending at year-end. The charitable deduction is available only to those who itemize their deductions, thus negating the incentive to give for the 65% of taxpayers who take the standard deduction. Prior attempts to fix these provisions separately – by allowing taxpayers to rollover unused FSA amounts to the next year and moving some or all of the charitable deduction “above the line” – have failed.

I propose combining the two provisions by allowing taxpayers to donate unused FSA amounts to charity. Doing so would lower a key impediment to participation in FSAs while giving a functional above the line deduction (and relief from payroll taxes) to those who donate through this mechanism. Not only would this reform increase the efficacy of both provisions, but it should also avoid many of the pitfalls of prior stand-alone reform efforts.


July 11, 2011 | Permalink | Comments (0) | TrackBack (0)

Massachusettes Bill Regulating Nonprofit Officer and Board Member Compensation Dies

We reported last week that the Massachusettes Senate passed a bill requiring state approval of compensation paid to nonprofit officers and board members.  According to the Chronicle of Philanthropy, the bill was "rejected" last week, though the Massachusettes AG indicates she will seek to have the bill reintroduced this fall.


July 11, 2011 in State – Legislative | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 6, 2011

Are Foundations a Threat to Democracy? Detroit vs. Kresge Foundation

Comtemporary conventional wisdom is that the incredibly detailed private foundation regulations came about because Congress bought into the then prevailing conventional wisdom that private foundations -- with their mountains of untaxed, closely held wealth -- represented a threat to government.  The notion provokes deep thoughts about the role of the "independent sector" and the nature of democracy.  An interesting article in the weekend Wall Street Journal provides nice context for discussion.  The article described the tensions between the Detroit City government and the $3.1 billion Kresge Foundation.  The Foundation has poured hundreds of millions into the revitalization of one of America's once great cities.  As it has done so, according to the article, the Foundation has explicitly or implicitly demanded more influence over city policies.  The Mayor's office has begun to push back, implicitly asserting that the private foundation has exceeded its proper boundaries.  The article made me wonder what exactly are the boundaries of charities.  Without quoting DT  (de Tocqueville) all over again, what is the role of nonprofit collective action in American society and when, if ever, do charities become "too much"?  Anyway, here is an excerpt from the article (available from the free portion of the WSJonline):

Under Mr. Rapson's watch, Kresge has invested more than $100 million in Detroit's transformation, funding a riverfront promenade, building greenways and backing incentives for entrepreneurs. And he's just getting started. "Philanthropy has emerged as the sector best able to provide the long-term vision and shorter-term investment of capital the city needs to right itself," Mr. Rapson said at a private gathering of urban experts in Detroit this spring. That foundation-knows-best attitude exasperates Mayor Dave Bing and City Hall officials, who have sought to reassure Detroiters that their voices, not outsiders, will guide efforts to rebuild the city. "Everyone talks about Kresge, Kresge, Kresge," the mayor said in an interview. "We're pleased with the support we're getting from them, but... Kresge is not doing this in a vacuum by themselves." Mr. Rapson dived head-first into city politics last year when Kresge agreed to fund Detroit Works, Mr. Bing's signature campaign to consolidate the city's shrinking population into healthy neighborhoods and re-purpose vast tracts of vacant land. Kresge also put up $35 million to spark development of "M1," a light-rail transit line down Woodward Avenue, the spine of the city.  Both initiatives are now in limbo. Kresge stopped funding Detroit Works at the start of the year after disagreements with City Hall over the role of outside consultants. The foundation also is rethinking its support for the rail line amid a separate spat with city officials.  The tug of war between Kresge and the Bing administration raises serious questions for Detroit about whether City Hall and foundations can work as partners in saving the shrinking city from collapse. Caught in the struggle are tens of thousands of Detroiters waiting to find out whether their neighborhoods will come alive with new investments, or be left to fade away.

The emerging consensus, at least more recently, is that private foundations are entirely overregulated and, in fact, that Congress overreacted to unfounded horror stories regarding private foundations when it enacted IRC 4940 - 4946.  I still tend to agree.  As for Detroit vs. Kresge, well, they just need to set aside egos and work it out.  Ironically, the most beautiful thing in Detroit is the International Airport, which serves primarly as a temporary way-station for people simply passing through.  It would be great if the city and the charity could celebrate the final revitalization of Motown.  Too many good cars and too much good music has come from Detroit.  As for the Lions and Tigers, well, that's going to take a lot more than government and charity.



July 6, 2011 | Permalink | Comments (0) | TrackBack (0)