Monday, September 30, 2019

NCAA Suffers another blow to asserted amateur status as California enacts "Fair Pay to Play Act"

From Sports Illustrated:

California Gov. Gavin Newsom has signed legislation to allow college athletes to be paid for the use of their name, likeness and image.  California Senate Bill 206, more commonly referred to as the Fair Pay to Play Act, now makes it illegal for California universities to revoke an athlete's scholarship or eligibility for taking money. Under the new law, schools will not pay athletes, but athletes can hire agents to seek out business deals for them. The bill will not go into effect until Jan. 1, 2023.  California schools and the NCAA have long opposed the bill, which makes it impossible for schools to follow the NCAA's amateurism rules.  The NCAA sent a letter to Newsom earlier this month calling the state's legislation "unconstitutional."  The NCAA issued the following statement this morning in response.

As a membership organization, the NCAA agrees changes are needed to continue to support student-athletes, but improvement needs to happen on a national level through the NCAA’s rules-making process. Unfortunately, this new law already is creating confusion for current and future student-athletes, coaches, administrators and campuses, and not just in California.   We will consider next steps in California while our members move forward with ongoing efforts to make adjustments to NCAA name, image and likeness rules that are both realistic in modern society and tied to higher education.  As more states consider their own specific legislation related to this topic, it is clear that a patchwork of different laws from different states will make unattainable the goal of providing a fair and level playing field for 1,100 campuses and nearly half a million student-athletes nationwide."

For prior coverage on the new law (prior to enactment), see here.  

Darryll K. Jones


September 30, 2019 | Permalink | Comments (0)

Friday, September 27, 2019

Afik, Benninga & Katz on Grantmaking Foundations' Asset Management, Payout Rates and Longevity Under Changing Market Conditions

Zvika Afik (Ben-Gurion University), Simon Benninga, and Hagai Katz (Ben-Gurion University) have published Grantmaking Foundations' Asset Management, Payout Rates, and Longevity Under Changing Market Conditions: Results From a Monte Carlo Simulation Study in the Nonprofit and Voluntary Sector Quarterly. Here is the abstract:

Today’s uncertain financial markets could affect foundations’ future grantmaking capacities. We review foundations’ financial decision-making patterns and their effect on foundations’ assets, longevity goals, and payouts. Using three fictional foundations with different longevity goals and grantmaking preferences, we demonstrate the delicate balance and tight nexus between asset management strategies, payout rates, and longevity. To do so, we perform stochastic Monte Carlo simulations of multiple foundation life cycles, conducted under diverse capital market scenarios. The findings suggest that foundations should (a) readjust their return expectations to today’s less favorable markets; (b) reduce their reliance on past portfolios’ investment returns or unique “success stories” in making decisions; (c) appreciate the strong interdependence between portfolio-mix, payout rates, and longevity; (d) consider effects of their particular mission/problem area on these parameters; and (e) use tailored projection analyses that simulate various investment strategies, payouts rates, and longevity to meet their grantmaking goals.

Lloyd Mayer

September 27, 2019 in International, Publications – Articles | Permalink | Comments (0)

Cordery & Sim on Distinguishing Between Mutual-Benefit and Public-Benefit Entities

Carolyn Cordery (Aston University Business School) (pictured) Corderyand Dalice Sim (University of Otago) have published Regulatory Reform: Distinguishing Between Mutual-Benefit and Public-Benefit Entities in the Journal of Public Budgeting, Accounting & Financial Management. Here is the abstract:


The purpose of this paper is to analyse nonprofit regulation through comparing and contrasting mutual-benefit and public-benefit entities. It ascertains how these entities differ in size, publicness, tax benefits and whether these differences might suggest regulatory costs should be differentiated.


This mixed-methods study utilises financial data, submissions and interviews.


There are stark differences in these two types of regulated nonprofit entities. Members should be the primary monitoring agency/ies for mutual-benefit entities, but financial reports should be understandable to these members. Nevertheless, the availability of tax concessions, combined with the benefits of limited liability, suggest mutual-benefit entities should be regulated and monitored by government in a way sympathetic to their size.

Research limitations/implications

As with most research, a limitation is this study’s focus on a single jurisdiction.

Practical implications

The differences in these entities’ characteristics are important for designing regulation.

Social implications

Better regulation is likely to require a standard set of financial reporting standards. Government has the right to demand disclosures due to benefits mutual-benefit entities enjoy.


In comparison to studies utilising only public-benefit data, this study uses unique data sets to compare public-benefit and mutual-benefit entities and presents nonprofit sector participant’s perceptions of these differences in context. This enables analysis of how better regulation could be achieved.

Lloyd Mayer

September 27, 2019 in International, Publications – Articles | Permalink | Comments (0)

DeYoung et al. on Who Consumes the Credit Union Tax Subsidy?

Credit UnionRobert DeYoung (Kansas School of Business), John Goddard (Bangor Business School), Donal G. McKillop (Queen's University Management School), and John O.S. Wilson (University of St. Andrews) have posted Who Consumes the Credit Union Tax Subsidy? on SSRN. Here is the abstract:

Credit unions are exempt from paying income taxes, and these tax savings are supposed to subsidize the provision of financial services to credit union members. In this paper, we investigate whether the entire credit union tax subsidy is being passed along to credit union members — in the form of increased quantities of financial services and/or better-than-market interest rates — or whether some of the credit union tax subsidy is being consumed by inefficient credit union operations. We estimate a structural model of profit inefficiency for US commercial banks between 2005 through 2017, and use the estimated parameters to evaluate the relative performance of US credit unions and commercial banks. When inputs and outputs are valued in terms of market prices, profit inefficiencies at credit unions exceed those at similar commercial banks by an economically significant order. About half of this inefficiency gap can be attributed to legally mandated credit union activities — such as producing loans and issuing deposits — while the remainder can be attributed to operational inefficiencies at credit unions relative to banks. When inputs and outputs are valued in terms of the prices that credit unions actually pay, our results suggest that over nine-tenths of the tax subsidy is simply passed through to credit union members in the form of higher deposit interest rates.

Lloyd Mayer

September 27, 2019 in Publications – Articles | Permalink | Comments (0)

Park & Peng on Nonprofits' Revenue Streams and Provision of Collective Goods

Park-2018 Peng-headshotYoung Joo Park and Shuyang Peng (both at the University of New Mexico School of Public Administration) have published Advancing Public Health Through Tax-Exempt Hospitals: Nonprofits' Revenue Streams and Provision of Public Goods in the Nonprofit and Voluntary Sector Quarterly. Here is the abstract:

Nonprofit organizations play an essential role in the provision of collective goods. Focusing on a unique subsector in the United States, this study examines the extent to which nonprofit hospitals’ provision of community benefits is related to their revenue streams. Building on existing theories, we postulate that as the proportion of a certain revenue source (i.e., government grants, private contributions, and program fees) increases, its corresponding benefits also increase. Using data from the Internal Revenue Service (IRS) 990 filed by tax-exempt hospitals nationwide, we performed panel data analysis with year and id fixed effects using robust standard errors. The findings show that the proportion of private donations is positively associated with community benefits, whereas that of program income is negatively related to community benefits. Overall, nonprofits’ decision to serve disadvantaged groups and larger communities is associated with their income sources. The study raises implications that are pertinent to nonprofit management, public administration, and health administration.

Lloyd Mayer

September 27, 2019 in Publications – Articles | Permalink | Comments (0)

Sidel on The Drive to Securitize Foreign Nonprofit and Foundation Management in China

Sidel-110311-2-tj-09Mark Sidel (Wisconsin) has published Managing the Foreign: The Drive to Securitize Foreign Nonprofit and Foundation Management in China in the August issue of Voluntas. Here is the abstract:

In recent years, China has sought to tighten regulation of foreign nonprofit organizations and foundations operating or funding in China, including through a new Law on the Management of the Domestic Activities of Foreign Non-governmental Organizations in China, enacted in April 2016. This article analyzes the history of China’s regulation of foreign nonprofits and foundations, the effect of external and domestic events on China’s shifting policy climate, the emergence of security-based intellectuals and their role in policy on foreign nonprofits and foundations in China, the new policy framework and the new Overseas NGO Law enacted in 2016, and initial implementation of this new framework in China. These developments provide background to other aspects of nonprofit and philanthropic performance in China that are discussed in this special issue.

Lloyd Mayer

September 27, 2019 in International, Publications – Articles | Permalink | Comments (0)

Thursday, September 26, 2019

California Assembly Passes Law Regulating Donated Medical Supplies

0CORRECTION: A reader commented that AB 1181 actually regulates the way that the recipient nonprofit reports the contribution, not the deductibility of the part of the donor.

Earlier this month the California Assembly passed legislation (AB 1181) to limit charitable contribution deductions for donated medical supplies that are conditioned on being used outside the United States, as well as strengthening the state's charitable solicitation laws in a variety of other ways. This legislation presumably grew out of several enforcement actions taking by the California Attorney General targeting such activities, one of which resulted in a $410,000 settlement. The bill is now on the governor's desk, where it joins the previously passed bill (SB 206) "to allow athletes at California's 58 NCAA schools the right to receive compensation for the use of their names, images and likenesses" and a bill (AB 136) to ensure that defendants in the Varsity Blues college admissions scandal are refused a deduction under state law, whether as a charitable contribution or a business expense, for any unlawful payments. Governor Gavin Newsom has until October 13th to decide whether to sign or veto each bill, along with hundreds of others currently on his desk.

Bills to regulate community foundations (AB 1338), charitable crowdfunding (AB 1539), and donor-advised funds (AB 1712) were also introduced in the current legislative session, but have not advanced.

Lloyd Mayer

September 26, 2019 in State – Executive, State – Legislative | Permalink | Comments (2)

Liberty University: Allegations of Possible Self-Dealing, Lax Board Oversight

DownloadA lengthy Politico article details numerous alleged concerns relating to Liberty University and its President, Jerry Falwell Jr. Included in the story are a number of allegations that are likely familiar to readers who have dealt with family-run nonprofits before:

  • The hiring of a company started by the son of the President to manage properties owned by the University, including a shopping center.
  • The promotion by University employees of a nearby hotel, in which the son of the President may be "a silent shareholder."
  • University loans to friends of the Falwell family, at least one of which may not have been repaid.
  • Assertions by unnamed University officials that the school's board of trustees rarely question decisions by the President, even relating to significant financial transactions.

In addition, the story reports certain facts indicating that the University may have tried to influence a poll that aided then candidate Trump, raising political campaign intervention concerns. 

It should be noted that President Falwell denies that he or the University has engaged in any wrongdoing, and called on the FBI to investigate a criminal conspiracy at the University after the Politico story was published. In the meantime, the University's accreditor is reportedly asking for more information relating to the allegations in the story.

Lloyd Mayer

September 26, 2019 in In the News | Permalink | Comments (0)

Philanthropy in the Age of Social Media, Permanent Memory, and the Inability of Forgiveness

Two recent stories about the power of social media and its impact on social media raise difficult questions.  We recently posted about the moral obligations of charities to return or disdain donations from donors who were proven, after the donation, to have engaged in dastardly deeds unrelated to the monies donated.  Similar but not quite the same type of stories have been reported about two guys recently thought as "good guys" who donated lots of money but then were exposed as having said something stupid --  not just stupid but explicitly racist in one instance, and implicitly racist in another.  The by now predictable result was that their altruistic behaviors were recast as "filthy rags" and the benefactors quickly disassociated themselves lets they be tainted by the donors' recent and past mistakes.   

In the first, Dr. Ed Meek donated $5.3 million dollars to the University of Mississippi School of Journalism.  The donation was so significant that the School was renamed after him.  By the time the controversy arose, the endowment had earned more than another million dollars.  But then one evening, apparently after one of Ole Miss rare wins, Ole Miss students were out and about partying and someone took the photos shown in one of Mr. Meek's Twitter posts.  I wanted to insert the posts but apparently Twitter won't let me.

The picture is of two young African American women out in the "square" partying with the rest of the students, many of who were white and no doubt many of the white women were similarly clad.  I mention women only because we unfairly demonize women for being gorgeous, and we certainly don't hold men to the same standard, but that is a different subject.  Side note:  As a 19 year old undergrad, I see no problem.  But as a 58 year old dad of four daughters I probably would yank their parental scholarship, that's just me!  But that's beside the point.  The message of the tweet, at least to many people was that the loss of "innocent fun" after a football game is directly attributable to scantily clad African American women, and perhaps their African American male admirers in the background.  Dr. Meek wasn't explicit but the message was not lost.  University administration, having become aware of the tweet, immediately went into crisis communication mode and the Chancellor issued his own tweet, no doubt after much roundtable discussion with his cabinet:

I don't suggest the Chancellor Vitter was pandering to the mob; subsequent news reports confirmed his view that many people thought the tweet unfairly focused on the minority of African Americans, and African American women in particular, as the source of whatever dying gentility is occurring in the land of "Hoddy Toddy."  Anyway, the rest is history.  After weeks and months of vilification, justifiable or not, Dr. Meek asked that his donation be returned and his name be removed from the School of Journalism.  Whatever the merits, its seems a sad ending, particularly as I read about Dr. Meek's efforts during the civil rights era when he encouraged James Meredith not to give up his fight to integrate Ol Miss. 

In a story that unfolded just last week, a college kid from Iowa State held up a sign during ESPN College Game day that basically said "send money for Busch Light!"

People thought the sign was funny and lighthearted and even started sending him money.  Eventually, and with the help of matching funds from Anheuser-Busch, Carson King -- the sign's maker -- received more than $1 million dollars, all of which (except for the matching grant), he could have spent on tuition or just beer and pizza.  There was no fraud in the inducement so he could have just pocketed the money.  Instead he donated all the money to the Iowa Stead Family Children's Hospital.  But then a reporter from the Des Moines Register called to ask him about some explicitly offensive posts he made when he was 16 years old (about 8 years ago).  "The exact content of the offensive posts have not been released (though social media never forgets and I am sure they can be found), but the Des Moines Register reports that the posts compared black mothers to gorillas and make light of black people killed in the holocaust."  Soon enough, even before the Register published the story (the reporter had given him a heads up and asked him about the posts), Carson issued a public policy.  Anheuser-Busch quickly disassociated itself from Carson and, although the money already raised will go to the Hospital, the matter will end with Carson having to live with the infamy generated by his 8 year old posts.

I do not yet have the moral certitude to pontificate on all of this.  I remember my father saying he would never forgive Governor George Wallace even after Wallace made a complete 180 and denounced his segregationist past.  I didn't understand it at the time, but then I had not lived through the hate and fear my father had, growing up in Memphis Tennessee.  The title of this post includes "the inability of forgiveness."  I have to admit to some sympathy for Dr. Meek and Carson King, but then, who is to say what irredeemable harm was set in motion by their words?

Darryll K. Jones


September 26, 2019 | Permalink | Comments (0)

CRS Updates Report to Reflect Possible Impact of 2017 Tax Changes on Charitable Contributions

DownloadThe Congressional Research Service has updated its Tax Issues Relating to Charitable Contributions and Organizations report (R45922). Most notable is this passage from the Summary, reflecting the possible impact of the 2017 tax law changes:

Comparing giving levels in 2017 and 2018 provides some insight into the possible impacts of the 2017 tax revision on charitable giving and the charitable sector. Compared to 2017, 2018 contributions from individuals and bequests declined as a percentage of GDP (by 6% and 5%, respectively), while corporate contributions were virtually unchanged and foundation contributions rose by 2%. In 2017, an estimated 80% of individual contributions benefited from the tax subsidy for itemized deductions. Surveying the literature can also provide some insight regarding the effect of tax subsidies on charitable giving. Based on statistical estimates of the responsiveness of individual giving to tax subsidies, a decrease in individual giving of around 3% to 4% might be expected from the 2017 tax revision. Limitations in the data make the effect on estates difficult to estimate, but it could be a decrease of up to 8%; the small share of bequests in total giving, however, would lead even that effect to reduce overall charitable giving by less than 1%.

Lloyd Mayer

September 26, 2019 in Federal – Legislative, In the News | Permalink | Comments (0)

Courts Dismiss Two Lawsuits Brought By SPLC-Designated Hate Groups

DownloadWhile the recent House Ways and Means Oversight Subcommittee hearing focused on whether current tax benefits provided to charities also subsidize hate speech, readers may remember that a different controversy arose a couple of years ago when several groups identified as "hate groups" by the Southern Poverty Law Center (SPLC) filed lawsuits challenging that identification. Federal district courts recently dismissed two of those lawsuits, one against SPLC and the other against Amazon for using the SPLC labels.

In Center for Immigration Studies v. Cohen et al., the nonprofit Center for Immigration Studies (CIS) filed suit against two SPLC leaders, Richard Cohen (now former SPLC President) and Heidi Beirich (currently SPLC Intelligence Project Director), alleging a RICO violation. The U.S. District Court for the District of Columbia dismissed the lawsuit earlier this month, concluding that "plaintiff has
not sufficiently alleged a predicate offense or a pattern of racketeering." More specifically, the court found that while SPLC's designation of CIS as a hate group was "debatable" under the facts alleged in the complaint, it was not fraudulent and so did not constitute wire fraud, the asserted RICO predicate offense. The court also found that the complaint only alleged a single scheme, which was insufficient to constitute a pattern of racketeering.

Coverage: Yahoo! News.

In Coral Ridge Ministries Media, Inc., d/b/a James Kennedy Ministries v., Inc. et al., the nonprofit (Coral Ridge) sued not only SPLC but also, Inc. and AmazonSmile Foundation because they allegedly excluded Coral Ridge from receiving donations through the AmazonSmile charitable-giving program because of the SPLC's "hate group" designation. The U.S. District Court for the Middle District of Alabama in a lengthy opinion dismissed the lawsuit earlier this month for several reasons. First, the court dismissed the state defamation claim and federal Lanham Act claims against SPLC because it concluded that Coral Ridge was a public figure (which Coral Ridge conceded) and given the debatable meaning of the term hate group Coral Ridge could not prove it was false as assigned to Coral Ridge, much less that the designation actually was false, or that SPLC had made the designation with actual malice, as required under the First Amendment for the claims to be sustained. (The court also rejected the Lanham Act claims on statutory grounds.) Second, the court dismissed the Civil Rights Act Title II claims of religious discrimination against the Amazon defendants. While the court found that whether the Amazon defendants were places of public accommodation within the meaning of Title II to be a difficult issue of first impression, it ultimately did not reach that issue. Instead, it concluded that even if they were places of public accommodation the denial of Coral Ridge's ability to receive donations through the AmazonSmile program was not a denial of "goods, services, facilities, privileges, advantages, [or] accommodations" within the meaning of Title II because the AmazonSmile program is not open to the public because the program is limited to certain section 501(c)(3) organizations. The court also concluded that Coral Ridge failed to plead sufficient facts to support either a claim of intentional discrimination or a claim of disparate impact on religious or Christian groups.

Coverage:; South Florida Sun Sentinel.

Lloyd Mayer

September 26, 2019 in Federal – Judicial, In the News, Religion | Permalink | Comments (0)

Wednesday, September 25, 2019

How Not to Invest in For-Profit Businesses: Praying Pelican Ministries

EllisonPublic details are a bit scarce, but according to press reports a three-year investigation by Minnesota Attorney General Keith Ellison has raised questions about a nonprofit's investment of nearly a $1 million in for-profit companies owned by the nonprofit's CEO. Praying Pelican Ministries started a for-profit coffee shop in 2013 in order to raise money, with the CEO as the sole shareholder of the business (even though the board had approved the investment subject to the nonprofit being a 49% owner). After investing nearly $800,000 in the business, the coffee shop was sold for $16,000, with the sales proceeds used to pay off the shop's creditors. During approximately the same time period, the nonprofit referred participants in its mission trip to a  travel agency owned by - you guessed it - the CEO. The nonprofit also paid nearly $140,000 to the agency in purported reimbursements, but a later audit revealed that in fact the agency was obligated to repay this amount to the nonprofit.

In the wake of the investigation and the AG's allegations that they had violated their fiduciary duties in numerous ways, the CEO and four board members resigned earlier this year. Earlier this month the AG filed in court a stipulation and proposed order (agreed to by the nonprofit and its new leadership), which if accepted by the court would require the nonprofit to revise its policies and leadership. The "Petition for Order Approving Assurance of Discontinuance" is available here. At least at this point, no criminal charges have been filed.

Coverage: Duluth News Tribune; Star Tribune. Hat Tip: Nonprofit Quarterly

Lloyd Mayer

September 25, 2019 in In the News, State – Executive, State – Judicial | Permalink | Comments (0)

Tuesday, September 24, 2019

A Primer on Japanese Nonprofit Law

In the recent article, Recent Changes in Laws Regarding Nonprofit Corporations and Charitable Trusts in Japan, Nobuko Matsumoto provides an interesting overview of nonprofit law and taxation in Japan.  Here is the abstract:

Varies types of nonprofit organizations are active in Japan. A common feature of these is that they can earn profits but cannot distribute them to their members. Two systems of nonprofit corporations are known: general corporations and public interest corporations on the one hand, and NPO corporations and approved NPO corporations on the other. The Article examines the legal structure of these four entities. For this, it summarizes the status quo and discusses the latest trends.

In 2008, the Japanese nonprofit corporation law, that was originally enacted almost 100 years ago, was fundamentally reformed. The main purpose of this change was to make it easier to incorporate nonprofit corporations. In the reform, two new types of nonprofit corporations were introduced, namely, general corporations and public interest corporations. There are two types of these corporations: association-type corporations and foundation-type corporations. Association-type corporations have members, while foundation-type corporations do not. All that is required today to set up a general corporation is to enter it at a registry. Thus it has become much easier after the reform to incorporate such organizations. To turn a general corporation into a public interest corporation it has to obtain an additional authorization. The principal objective of a public interest corporation must be to operate a business which promotes the public interest.

Another category of Japanese nonprofit corporations is the NPO corporation, including the approved NPO corporation. The latter has an additional approval from the authorities. It is for historical reasons that Japan has these two different systems of nonprofit corporations. NPO corporations are among the most common nonprofit corporate structures in Japan.

The Japanese government is currently at work reforming the law governing charitable trusts, which has not been revised since 1922, when it was enacted. In 2016, within the Japanese Legislative Council, a section responsible of trust law, was set up and began discussing the reform of charitable trust law. In January 2018, a tentative report was published and the Ministry of Justice started collecting public comment. Charitable trusts in Japan have not necessarily been used actively as vehicles of charitable activities due to certain problems that have been experienced in practice in the past. The reform responds to these problems and is intended to make charitable trusts more flexible and easy to use.

Darryll K. Jones

September 24, 2019 | Permalink | Comments (0)

Monday, September 23, 2019

How The Tax Code Subsidizes Hate

Last Thursday, the Oversight Subcommittee of Ways and Means held a hearing entitled "How the Tax Code Subsidizes Hate."  The hearing lasted about two and a half hours and can be viewed in full by clicking on the YouTube video above.  The majority of the witnesses were relatives of victims of hate crime, such as the Pulse Nightclub shooting in Orlando in 2016.  The two legal experts were Marcus Owens, a well known expert on tax exemption doctrine, and Eugene Volokh, who might be best described in this context as a First Amendment purist.  Those two legal experts pretty much provided expected, if unimpressive, testimony.  Unimpressive only because they both agree that "hate speech" is something we hate, but also something that must be tolerated, and indeed subsidized through tax exemption, because that is the only way to preserve all forms of beneficial speech and debate.  Owens talked about the "methodology test" (Revenue Ruling 86-43) for determining whether a group is "educational," seemingly in support of applying that test in a manner which would deny tax exempt status to hate groups, though he didn't allow himself to explicitly state that much.  His principal contribution is that the IRS should more forcefully apply the methodology test, noting that the methodology test has been rarely utilized when perhaps it would be useful.

Having a standard, however, accomplishes little unless accompanied by an effort at enforcement.  While a few examples exist of Revenue Procedure 86-43 being used in the processing of applications for tax-exempt status, there is virtually no information regarding the extent to which the Revenue Procedure is utilized in IRS examinations of organizations after tax-exempt status has been recognized. Indeed, the data reported in the IRS Data Book for fiscal year 2018 reflects that the IRS received 1,603,499 returns from tax-exempt organizations that year.  The same Data Book, however, reports that only 2,816 returns of the same types included in the number filed were examined. While there are certainly concerns with the comparability of the two sets of numbers, 2,816 returns examined reflects a very small percentage of the universe of organizations filing returns, particularly when some unidentified number are Form 990-N filings made by very small organizations. The small number of actual examinations of tax-exempt organizations undoubtedly reflects resource allocation decisions within the IRS that ensure that the core mission of the IRS, tax collection to fund the government, continues, with those functions not generating significant tax revenue, as is the case with tax-exempt organizations, receiving reduced resources. The reduced resources have resulted in the consolidation of operational units and various technical functions, with a risk of dilution of institutional knowledge and a reduced flow of information about the tax-exempt sector to senior managers and policy makers in Washington, DC.

Professor Volokh's testimony followed the doctrine we are all primarily taught in law school.  That is, that the majority can never be trusted to be a referee of speech, not even speech universally considered beyond the boundaries of civilized debate, because a wrongly indoctrinated or intoxicated majority will inevitably narrow those boundaries until only the speech of an empowered minority will be considered within acceptable boundaries.  

But giving the government the power to discriminate against some such viewpoints necessarily means the government will also have the power to discriminate against others.  Would we feel comfortable giving this power to the Trump Administration? If we would, would we feel comfortable giving it to a possible Sanders Administration? I doubt there are many people who would trust both those Administrations; and this distrust of government power is one reason the First Amendment exists.  Many campaigns for democracy, liberty, and equality have been greatly helped by the First Amendment, and by courts’ willingness to enforce the First Amendment. But the Court has recognized that this protection against governmental suppression of speech must apply to foes of these principles as well as friends. As Justice Brennan wrote in NAACP v. Button (1963)—an important win for the NAACP—the NAACP’s civil rights mission was “constitutionally irrelevant” to the Court’s First Amendment analysis. “The course of our decisions in the First Amendment area makes plain that its protections would apply as fully to those who would arouse our society against the objectives of the [NAACP].  For the Constitution protects expression and association without regard to the race, creed, or political or religious affiliation of the members of the group which invokes its shield, or to the truth, popularity, or social utility of the ideas and beliefs which are offered.”

Pollyannish though it may be, I have a little more faith in a world matured by having lived through slavery, the holocaust, Wounded Knee, Vietnam, Rowanda, the Bosnian War, xenophobia, and even the nativism that some feel is fueling "reactionary" election results around the world.  We even know that online bullying, which can only be viewed as speech, is actionable and we've taken legal steps against it.  But the wholesale spread of hate so close to violence, well . . . we fall back on old dusty doctrine because we don't want to do the hard work necessary to preserve free speech and human life simultaneously.  I no longer believe that we have to tolerate racial supremacists because if we don't, we will inevitably allow condemnation of those who talk about loving neighbors no matter their race, gender, or sexual orientation.  I am not a First Amendment Scholar, but it seems fairly apparent that traditional First Amendment doctrine -- protect even the most despicable speech inevitably to lead to violence so that we never squash universal ideas underlying our spirituality and humanity -- is outdated and hardly applied in recognition of the speed and frequency with which hate speech can be repeated and used as tools of indoctrination.  Yes, it is and will continue to be difficult to distinguish between "civilized," speech that advances the plight of humankind (even if debatable on the fringes -- like global warming), and speech of those in or out of power labeled, in an exercise in of understatement,  "contemptuous" even by Professor Volokh in his testimony.  But I am in favor of a sentiment expressed by one of the Republican members of the subcommittee.  That the law should preclude tax exempt status for those who advocate violence (explicitly or by implication sufficient that even Stevie Wonder could see it) -- how possibly could that be considered "charitable?" --  even if it takes a constitutional amendment to implement such a rule; Volokh would extend deny only groups that actually engage in violence and that position is consistent with traditional First Amendment doctrine.   But it is as outdated as the notion that a stalking victim must await actual violence before expecting protection from the law.  Anyway, this is a blog post not a law review article.  Simply put, it is not an inevitable requirement that we subsidize hate speech in order to protect real charity.

Darryll K. Jones

September 23, 2019 | Permalink | Comments (1)

Thursday, September 19, 2019

Tax History: Charity Deductions Are for the Rich — and That Was Always the Plan

The September 16th edition of Tax Notes included an interesting article entitled Tax History: Charity Deductions Are for the Rich -- and That Was Always the Plan.  The article reviews an article published by economist Nicolas Duquette in the Business History Review on the history of the charitable contribution deduction (see here).  The following are introductory paragraphs of the Tax Notes piece:

In 1917 Congress created an income tax deduction for charitable gifts. The provision was itself a gift — to the nation’s wealthiest philanthropists. And in the century since, it has remained a rich person’s benefit, subsidizing charitable giving by a relatively small slice of the taxpaying public.

That’s the takeaway of a new article on the history of the charitable deduction, published last month by the Business History Review. In “Founders’ Fortunes and Philanthropy: A History of the U.S. Charitable-Contribution Deduction,” economist Nicolas J. Duquette traces the deduction’s creation and evolution, emphasizing its focus on the nation’s economic elite. “The philanthropy of the very rich has always been the object of the tax deduction, and the modern conception of it as an incentive for giving more broadly is a new element of our discourse,” Duquette writes.

What’s less new, however, are other conceptions that helped spur the creation of the deduction and shaped its development over the past century. In particular, the deduction has drawn strength from a durable anti-government strain in American political culture that often prefers private to public forms of social welfare.

“We trust one another, and not just the government, to make important decisions and to take action,” observed Yale economist Robert J. Shiller in a 2012 New York Times article. “We don’t rely on government to set all of our goals — even our social goals, our wishes for the nation’s future. The essential question we all must answer is how we can achieve the good society.” . . .

[See also TaxProf Blog]

Nicholas Mirkay 

September 19, 2019 in Federal – Legislative, Publications – Articles | Permalink | Comments (0)

Madoff & Colinvaux: Charitable Tax Reform for the 21st Century

Ray Madoff (Boston College) and Roger Colinvaux (Catholic University) published Charitable Tax Reform for the 21st Century in the September 16th issue of Tax Notes.  The following are the introductory paragraphs of the article:

Charitable organizations play a fundamental role in American society, fulfilling functions that would otherwise fall to government, providing creative solutions to society’s most pressing problems, and serving our highest ideals. The federal government has long provided generous tax incentives for charitable donations, with current benefits reaching up to 74 percent of the amount of the gift. Unfortunately, however, the design of the tax incentives is now woefully out of step with their purpose and the realities of charitable fundraising today, resulting in a system that is incoherent, Colinvaux_Roger_20190829_webs-2019-33233 Colinvaux_Roger_20190829_webs-2019-33233 ineffective, and on the verge of failure.

Taking a broad view, we believe that there are two overarching policy goals of the charitable tax incentives. The first is to promote actual charitable work and the second is to foster a strong culture of charitable giving with broad participation.

The fundamental purpose of providing charitable tax benefits is to support charitable work. If the good work of charities never gets done, tax benefits are wasted, costing the government significant revenue but providing no benefit to the public. In order to encourage actual charitable work, Congress based the giving incentive on donors giving up dominion and control of their donations. Only when donors give up control are funds fully available for charities to deploy in support of their mission. . . .

To summarize our concerns, the system of charitable tax benefits is failing on three main fronts: (1) current rules provide no giving incentive for 90 percent of American taxpayers, leaving charities reliant on a shrinking and narrow base of support; (2) current rules no longer provide any assurance that tax-benefited donations will ever be made available for charitable use; and (3) long-standing rules designed to promote the public good (for example, on payout, disclosure, and lobbying) are easy to avoid through the use of DAFs.

Both of us have written numerous articles and opinion pieces on ways to improve the tax rules to make them fairer and work better for the people who rely on charitable efforts, and there are many ways to approach these complex issues. In this article, we outline five proposals that we believe provide the best ways to fix the problems facing the charitable sector:

1.  replace the current charitable deduction with a credit for charitable giving available for all taxpayers who give more than a designated floor;

2.  reform the rules applicable to DAFs so that some tax benefits are conferred upon transfer to a DAF while others are deferred until the donation is no longer subject to the donor’s advisory privileges;

3. reform private foundation payout rules to close the loophole that allows a charity to avoid private foundation status by funding the charity through a DAF;

4. prohibit private foundations from counting a grant to a DAF as satisfying their 5 percent payout requirement, require disclosure of foundation to DAF grants, and bar foundations from counting payments to insiders (such as travel and compensation) as payments for charitable purposes; and

5. reform the excise tax applicable to private foundations to provide incentives for them to increase their charitable expenditures. . . .


Nicholas Mirkay

September 19, 2019 in Federal – Executive, Federal – Legislative, Publications – Articles | Permalink | Comments (1)

Finley: Reforming the Charitable Contribution Tax Deduction

Janene R. Finley (St. Ambrose University)  has published Reforming the Charitable Contribution Tax Deduction: Accounting for Random Acts of Charity, 10 Wm. & Mary Bus. L. Rev. 479 (2019).  The abstract:

Concern for the tax treatment of charitable contributions has increased as a result of the Tax Cuts and Jobs Act of 2017. Although the new law increased the limitation of deductible charitable contributions to 60 percent of adjusted gross income, the standard deduction was also increased. Increasing the standard deduction is expected to reduce the number of taxpayers who are able to itemize their deductions in the next tax year, which is expected to reduce charitable giving in the future. This Article discusses proposals to amend the Internal Revenue Code to promote charitable giving, including a non-itemizer deduction.

In addition, random acts of charity are explained, and consideration of those acts as charitable contributions for purposes of the charitable contribution tax deduction is proposed.

[Hat tip:  TaxProf Blog]

Nicholas Mirkay

September 19, 2019 in Federal – Executive, Federal – Legislative, Publications – Articles | Permalink | Comments (0)

Monday, September 16, 2019

Ways and Means To Hold Hearings, Requests Comments on Tax Exemption for Hate Groups

Sep 12, 2019 
Press Release

House Ways and Means Oversight Subcommittee Chairman John Lewis announced today that the Subcommittee will hold a hearing entitled How the Tax Code Subsidizes Hate. The hearing will be held on Thursday, September 19, 2019 at 10:00 a.m. in room 1100 of the Longworth House Office Building.  {Editor's Note:  The Hearing will be streamed live here:

In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only.  However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms.  From the Committee homepage,, select “Hearings.”  Select the hearing for which you would like to make a submission, and click on the link entitled, “Click here to provide a submission for the record.”  Once you have followed the online instructions, submit all requested information.  ATTACH your submission as a Word document, in compliance with the formatting requirements listed below, by the close of business on Thursday, October 3, 2019.  For questions, or if you encounter technical problems, please call (202) 225-3625.


The Committee relies on electronic submissions for printing the official hearing record.  As always, submissions will be included in the record according to the discretion of the Committee.  The Committee will not alter the content of your submission, but reserves the right to format it according to guidelines.  Any submission provided to the Committee by a witness, any materials submitted for the printed record, and any written comments in response to a request for written comments must conform to the guidelines listed below.  Any submission not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.

All submissions and supplementary materials must be submitted in a single document via email, provided in Word format and must not exceed a total of 10 pages.  Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official hearing record.

All submissions must include a list of all clients, persons and/or organizations on whose behalf the witness appears. The name, company, address, telephone, and fax numbers of each witness must be included in the body of the email.  Please exclude any personal identifiable information in the attached submission.

Failure to follow the formatting requirements may result in the exclusion of a submission.  All submissions for the record are final.

The Committee seeks to make its facilities accessible to persons with disabilities. If you require special accommodations, please call (202) 225-3625 in advance of the event (four business days’ notice is requested).  Questions regarding special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.


Darryll K. Jones

September 16, 2019 | Permalink | Comments (1)

Friday, September 13, 2019

ACLU, Consistent with its Principles, Files Suit Against NJ Donor Disclosure Law Aimed at 501(c)(4)s

From an ACLU-New Jersey Press Release:                                                                                           

SEPTEMBER 11, 2019

The American Civil Liberties Union of New Jersey and the national ACLU today filed a lawsuit challenging the constitutionality of a law requiring all social welfare organizations to disclose personal information about their donors and details about nonpartisan voter education and advocacy activities. The lawsuit calls for the court to invalidate provisions of S150, a bill that created vague and overbroad disclosure requirements for organizations that engage in public advocacy work, including even those that do not engage in electoral politics.  The ACLU’s lawsuit (PDF), filed in the U.S. District Court for the District of New Jersey, argues that mandatory disclosure of donors’ names and other personal information undermines New Jerseyans’ right to exercise free speech and free association – two fundamental freedoms afforded and protected by the First Amendment.  “This law discourages people from donating to non-profit organizations that advocate for causes that they believe make people’s lives better,” said ACLU-NJ Legal Director Jeanne LoCicero. “The law sweeps up hundreds of advocacy organizations, including those that don’t take sides in elections, and even some that don’t directly engage in lobbying the government.”

Here is the gravaman of the ACLU Complaint

1. Plaintiffs American Civil Liberties Union of New Jersey (“ACLU-NJ”) and American Civil Liberties Union, Inc. (“National ACLU”) bring this action pursuant to 42 U.S.C. § 1983 and N.J.S.A. 10:6-2 seeking a declaration that New Jersey Senate Bill 150 of 2019 (“S150” or “the Act”), P.L. 2019, c.124, et seq., to be codified at N.J.S.A. 19:44A-3, et seq., effective October 15, 2019, violates the First and Fourteenth Amendments to the United States Constitution and Article I, Paragraphs 1, 6, and 18 of New Jersey Constitution. Plaintiffs also seek an Order enjoining the Defendants from enforcing the Act.

2. S150, passed and signed into law despite New Jersey Governor Phil Murphy’s express concerns about its constitutionality, creates a new class of organization in New Jersey: the “independent expenditure committee” (“IEC”). S150 subjects any existing organization falling within that class to onerous regulations, including: 1) requirements that it publicly disclose certain donors; and 2) restrictions barring certain persons from holding leadership positions within that organization.

3. Specifically, S150 defines an IEC as any 501(c)(4) or 5271 organization that raises or spends $3,000 or more annually for the purposes of (1) influencing state or local elections, including the outcome of public questions; (2) influencing legislation or regulation; or (3) providing “political information,” broadly defined as any statement containing facts or reflecting the organization’s opinion about a candidate or public question, legislation, or regulation.

4. If an organization falls within the scope of this far-reaching definition, S150 requires it to disclose publicly the name, mailing address, occupation, and employer of any person contributing more than $10,000 to the organization. S150 also requires the IEC to disclose “all expenditures made by it in excess of $3,000,” including the name and address of the person to whom the expenditure was made.

5. S150 also restricts an IEC’s ability to choose its own leaders, by (1) barring any person who chairs a political party committee or a legislative leadership committee from serving as the IEC’s chairman or treasurer; and (2) barring any candidate or public office holder from “establish[ing], authoriz[ing] the establishment of, maintain[ing], or participat[ing] in the management or control” of an IEC.

6. By imposing these requirements on IECs, S150 burdens speech and expressive and associational conduct in a manner that goes far beyond what is permitted by the First Amendment to the Constitution of the United States and by the New Jersey Constitution of 1947. With respect to the Act’s donor disclosure requirements, S150 presents IECs with three untenable choices: (1) obey the law and publicly disclose their donors, though the First Amendment protects against being required to do so; (2) break the law and subject their staff and board members to criminal and civil penalties; or (3) extract themselves from the scope of the law by giving up the protected advocacy activities that would otherwise define them as IECs.  S150 likewise prevents IECs from freely choosing their own leadership unless they forgo the very activities that would otherwise bring them within the Act’s definition of an IEC. Furthermore, S150 runs afoul of the Fourteenth Amendment to the U.S. Constitution and New Jersey Constitution’s due process protections because its ill defined terms and poor drafting render the law—which includes criminal penalties— unconstitutionally vague.  


Darryll K. Jones


September 13, 2019 | Permalink | Comments (0)

Thursday, September 12, 2019

NCAA Loses Another Battle in War to Keep Athletes from Receiving Compensation

We have previously blogged about the efforts of the NCAA to assert its amateurism (and hence its deserving of tax exempt status).  Those efforts have not been entirely convincing, to put the matter charitably.  On Monday, the California State Assembly passed a bill by a vote of 72-0 that would allow athletes at California's 58 NCAA schools the right to receive compensation for the use of their names, images and likenesses.  The California Senate approved a previous bill by a vote of 31-4 and everyone expects the Governor to sign the bill soon.  The NCAA, which has lost a series of antitrust suits responded with a letter asserting that the bill is unconstitutional (one can only wonder how so, but presumably the NCAA has a lot of smart lawyers with whom to consult).  Here is the text of the letter:

Governor Newsom:

The 1,100 schools that make up the NCAA have always, in everything we do, supported a level playing field for all student-athletes. This core belief extends to each member college and university in every state across the nation.

California Senate Bill 206 would upend that balance. If the bill becomes law and California’s 58 NCAA schools are compelled to allow an unrestricted name, image and likeness scheme, it would erase the critical distinction between college and professional athletics and, because it gives those schools an unfair recruiting advantage, would result in them eventually being unable to compete in NCAA competitions. These outcomes are untenable and would negatively impact more than 24,000 California student-athletes across three divisions.

Right now, nearly half a million student-athletes in all 50 states compete under the same rules. This bill would remove that essential element of fairness and equal treatment that forms the bedrock of college sports.

The NCAA continues to focus on the best interests of all student-athletes nationwide. NCAA member schools already are working on changing rules for all student-athletes to appropriately use their name, image and likeness in accordance with our values — but not pay them to play. The NCAA has consistently stood by its belief that student-athletes are students first, and they should not be employees of the university.

It isn’t possible to resolve the challenges of today’s college sports environment in this way — by one state taking unilateral action. With more than 1,100 schools and nearly 500,000 student-athletes across the nation, the rules and policies of college sports must be established through the Association’s collaborative governance system. A national model of collegiate sport requires mutually agreed upon rules.

We urge the state of California to reconsider this harmful and, we believe, unconstitutional bill and hope the state will be a constructive partner in our efforts to develop a fair name, image and likeness approach for all 50 states. 
Members of the NCAA Board of Governors

For press coverage, see this LA Times article and this USA Today article.  


Darryll K. Jones

September 12, 2019 | Permalink | Comments (0)