Saturday, December 30, 2017
The end of 2017 brought significant new tax legislation. Although the Johnson Amendment remained intact, the increase in the standard deduction means that fewer people will itemize deductions, which, in turn, effectively eliminates the value of the charitable deduction for many US taxpayers. The Washington Post article "Charities fear tax bill could turn philanthropy into a pursuit only for the rich" catalogs worries by major nonprofits' leaders that donations will drop and the shift will be towards wealthier donors. On his blog, Alan Cantor warns that "An earthquake just hit the nation," and the tax changes will reduce the funds to the sector and increase the power of the wealthiest at the very time when nonprofits will face greater demands. The Wall Street Journal editorial board, however, was unimpressed, publishing a sharp critique entitled "Uncharitable Charities:"
These nonprofits want to keep millions of Americans filing more complicated tax forms and paying higher tax rates. They also sell Americans short by assuming that most donate mainly because of the tax break, rather than because they believe in a cause or want to share their blessings with others. How little they respect their donors.
How will the nonprofit sector fare in 2018?
Saturday, December 23, 2017
William A. Drennan (Southern Illinois University School of Law) has written Conspicuous Philanthropy: Reconciling Contract and Tax Laws, 66 Am. U. L. Rev. 1323 (2017). Below is Professor Drennan's abstract:
It sold for $15 million, and the IRS treated it as worthless. Avery Fisher, a titan of industry and a lover of classical music, made a generous contribution to renovate a charity’s building, and in exchange the charity agreed to name the building after Fisher in perpetuity. Forty years later, the Fisher family sold the naming rights back to the charity for $15 million in cash. The IRS treats these publicity rights as worthless when charities grant them, and this generates substantial tax benefits for the donor and the donor’s family. In contrast, the common law can treat these publicity rights as valuable consideration supporting an enforceable contract, and a charity may be liable for damages if it renames a building. Why the contradiction? What are the consequences? Should we reconcile these positions? How? This Article asserts that the common law contract approach is well-suited for today’s mega-million dollar charitable building naming rights deals, but the tax approach is outdated and inconsistent with U.S. Supreme Court precedents.
At a 1996 conference on the “Law of Cyberspace,” Judge Frank Easterbrook famously criticized “cyberlaw” as the equivalent of “The Law of the Horse”: superficial and unilluminating. He argued that we should study general legal principles and apply them to cyberspace and horses alike. Easterbrook’s genial jeremiad provoked a litany of responses defending the worthiness of cyberlaw, typically arguing that cyberspace regulation is sui generis and studying it illuminates general legal principles.
“Art law” is arguably analogous to “cyberlaw.” Or at least the “law of the horse.” While precious little law is specific to art, a rich and complex body of social norms and customs effectively governs artworld transactions and informs the resolution of artworld disputes. In any case, a smattering of scholars study art law and a similar number of lawyers practice it. In this essay, I will provide a brief overview of art law from three different perspectives: the artist, the art market, and the art museum.
Brian D. Galle (Georgetown University Law Center) has written The Dark Money Subsidy? Tax Policy and Donations to 501(c)(4) Organizations. Below is Professor Galle's abstract:
This Article presents the first empirical examination of giving to § 501(c)(4) organizations, which have recently become central players in U.S. politics. Although donations to a 501(c)(4) are not legally deductible, the elasticity of c(4) giving to the top-bracket tax-price of charitable giving is - 1.24, very close to the elasticity for charities. 501c(4) donations also correlate with changes in the tax savings from in-kind gifts. These responses could be driven either by donor-side behavior, such as misunderstandings or intentional over-claiming, or by firm-side fundraising.
I find evidence consistent with both explanations. 501(c)(4) fundraising is also highly responsive to the value of the deduction, with an elasticity of -2.9, and is more effective when the value of the deduction rises. These results imply that the U.S. is currently granting much larger subsidies to c(4) firms than is generally understood, and that subsidies for charity cause previously unobserved pressures on competing c(4)s.
Ellen P. Aprill (Loyola Law School - Los Angeles) has written Amending the Johnson Amendment in the Age of Cheap Speech, University of Illinois Law Review On-Line (Forthcoming). Below is Professor Aprill's abstract:
On November 2, 2017, the House Ways and Means Committee released its proposed tax reform legislation. It includes a provision amending the provision of the Internal Revenue Code, sometimes called the Johnson Amendment, that prohibits charities, including churches, from intervening in campaigns for elected office, at risk of loss of their exemption under section 501(c)(3). Under the Ways and Means proposal, as later revised and passed by the House, organizations exempt as charities under section 501(c)(3) would be permitted to engage in campaign intervention if “the preparation and presentation of such content . . . is in the ordinary course of the organization’s regular and customary activities in carrying out its exempt purpose and . . . results in the organization incurring not more than de minimis incremental expenses.”
If such legislation becomes law, the IRS and the Department will be faced with the difficult task of giving guidance as to the meaning of “regular and customary,” “de minimis,” and “incidental.” It would likely have to address whether donations could be earmarked for campaign intervention so long as they were within the organization’s de minimis limit and involved regular and customary activities. Whatever rules are announced are sure to be controversial and complicate enforcement of the prohibition for campaign intervention that is more than de minimis. Given the lack of IRS resources and controversy regarding its attempts to regulate political activities of exempt organizations, the IRS may well hesitate to take action against possible violations.
However these terms are defined and enforced, a de minimis exception raises significant issues that demand attention in an era of what Professors Eugene Volokh and Richard Hasen have called “cheap speech.” These are issues that require consideration whether or not a de minimis exception is adopted in the current tax reform legislation.
After giving background on the Johnson Amendment, this essay discusses the impact of any de minimis exception regarding campaign intervention in the age of cheap speech. It concludes that the availability of cheap speech may have undermined the most common constitutional justification for the prohibition – that the government has no duty to subsidize speech – such that a new approach to limiting the political speech of charities is needed.
Wednesday, December 20, 2017
Goodrich & Busick: Sex, Drugs, and Eagle Feathers: An Empirical Study of Federal Religious Freedom Cases
Luke W. Goodrich (The Becket Fund for Religious Liberty; University of Utah - S.J. Quinney College of Law) and Rachel N. Busick (The Becket Fund for Religious Liberty Fellow) have written Sex, Drugs, and Eagle Feathers: An Empirical Study of Federal Religious Freedom Cases, Seton Hall Law Review (forthcoming). Below is their abstract:
This Article presents one of the first empirical studies of federal religious freedom cases since the Supreme Court’s landmark decision in Hobby Lobby. Critics of Hobby Lobby predicted that it would open the floodgates to a host of novel claims, transforming “religious freedom” from a shield for protecting religious minorities into a sword for imposing Christian values in the areas of abortion, contraception, and gay rights.
Our study finds that this prediction is unsupported. Instead, we find that religious freedom cases remain scarce. Successful cases are even scarcer. Religious minorities remain significantly overrepresented in religious freedom cases; Christians remain significantly underrepresented. And while there was an uptick of litigation over the Affordable Care Act’s contraception mandate — culminating in Hobby Lobby and Little Sisters of the Poor — those cases have subsided, and no similar cases have materialized. Courts continue to weed out weak or insincere religious freedom claims; if anything, religious freedom protections are underenforced.
Our study also highlights three important doctrinal developments in religious freedom jurisprudence. The first is a new circuit split over the Religious Freedom Restoration Act. The second is confusion over the relationship between the Free Exercise and Establishment Clauses that is currently plaguing litigation over President Trump’s travel ban. The third is a new path forward for the Supreme Court’s muddled Establishment Clause jurisprudence.