Nonprofit Law Prof Blog

What the COVID Relief Bill means for nonprofits in 2021

After a bit of a back-and-forth, the Consolidated Appropriations Act, 2021 was signed into law by President Trump on December 27, 2020. Alongside the new year, the new law brings new implications for nonprofits across the country continuing operations into 2021.

In July 2020, the National Council of Nonprofits advocated for several specific requests, including the continuation of emergency funding programs, providing low-cost loans to mid-size and larger nonprofits, strengthening charitable giving incentives, and providing full unemployment benefit reimbursement.  

What did they get? On December 21, 2020, the organization published a comparison chart highlighting what made it into the bill. Notably, the tax deduction for charitable donations for non-itemizers will be continued into 2021, and 501(c)(6) organizations are eligible for PPP relief.

Also included in the Act is a rider (unasked for) that continues to prohibit the IRS from finalizing regulations that would clarify the exemption standards for 501(c)(4) organizations.

2020 has been kind to no one, and that is certainly true for nonprofits which faced economic hardship and restrained hope as they see increased demand for their services with decreased supply of support. Future prospects remain grim. FEMA's  COVID-19’s Impact of the Human and Social Services Sector report emphasizes the dire situation of nonprofits as they continue amidst the pandemic into the new year: “Nonprofit revenues from all sources— government contracts, fee-for-service, and donations— are down and likely to remain so for years. Many organization will face unmanageable revenue declines given their liabilities and fixed expenses. Cash flow challenges will be daunting as near-bankrupt state and local governments struggle to pay their bills on time or may even renege on contracts at the same time as banks are reluctant to renew, let alone increase, lines of credit. Widespread distress will also erode charitable assets— among society’s most precious resources— if struggling organizations use them for mere survival rather than the effective and efficient pursuit of their missions…The COVID-19 crisis will drive many nonprofits into insolvency, unable to pay their bills when due or carrying liabilities in excess of their assets.”

See Also https://www.councilofnonprofits.org/nonprofits-and-coronavirus-covid-19 various information regarding COVID-19 as relating to nonprofits.

[This post was  authored by Cleveland-Marshall Law Student Victoria Kekel and Joseph Mead]

Summary judgment briefs filed in Girl Scouts v. Boy Scouts trademark litigation

The Washington Post has a story, "Girl Scouts rebuke Boy Scouts in escalating recruitment war," that begins:

The Girl Scouts are in a “highly damaging” recruitment war with the Boy Scouts after the latter opened its core services to girls, leading to marketplace confusion and some girls unwittingly joining the Boy Scouts, lawyers for the century-old Girl Scouts organization claim in court papers.

The Girl Scouts' summary judgment brief is available here and begins:

This is a trademark dispute brought by Girl Scouts to halt ongoing marketplace confusion caused by Boy Scouts throughout the United States, and to prevent further harm to the famous GIRL SCOUTS brand. The level of confusion resulting from Boy Scouts’ use of terms like GIRL SCOUTS, SCOUT, SCOUTS, SCOUTING, SCOUTS BSA and SCOUT ME IN to market its core programs to girls is both extraordinary and highly damaging to Girl Scouts.

On its motion, Boy Scouts asks the Court to ignore all of this and hold, as a matter of law, that confusion and dilution are unlikely, even though the GIRL SCOUTS trademark is concededly famous, the parties’ marks are obviously similar, and the services they offer are, since 2017, directly competitive. This proposition is untenable, and based on a wholly misleading factual presentation that sidesteps or ignores the mountain of evidence of confusion and dilution that is central to this case. Most fundamentally, Boy Scouts repeatedly downplays the momentous change in its business that was announced in 2017, when it decided to abandon its historic identity as an organization that only served boys by expanding to girls its two core programs: CUB SCOUTS and the program now known as SCOUTS BSA, formerly known as BOY SCOUTS. That major change brought the parties squarely into the same market

The Boy Scouts' summary judgment brief, available here, begins:

GSUSA's trademark lawsuit against the Boy Scouts of America (the “BSA”) arising from the BSA's 2018 “Scout Me In” marketing campaign is utterly meritless, and should never have been filed. The BSA is the senior user of SCOUT-formative branding, having been founded before GSUSA. When GSUSA chose to change its name from Girl Guides to Girl Scouts, it assumed the risk that Americans might assume the parties are related. Not surprisingly, GSUSA's own research confirms that half of Americans indeed held that belief as of 2017—before any of the events in question in this lawsuit. GSUSA also has voluntarily associated itself with the BSA for decades, including by participating in joint events and sharing facilities. And, GSUSA deliberately abandoned the use of SCOUT alone at least 30 years ago, in favor of always using GIRL before SCOUT.

GSUSA's present claim that the BSA's 2018 “Scout Me In” marketing slogan suddenly has caused marketplace confusion is bereft of any evidence supporting a causal connection to confusion. The Court should grant summary judgment in the BSA's favor on all claims.

-Joseph Mead

Current Link to Updates for Nonprofit Organizations: Cases and Materials (Fishman, Schwarz, Mayer 5th Edition)

I have received a couple of messages from adopters of the above casebook asking for access to the most recent student and teacher's manual updates, so here is a current link to those updates: https://faculty.westacademic.com/Book/Detail?id=17294&q=fishman#supplementupdate.

My co-authors and I prepared the updates last summer, but they still contain almost all recent developments. The one major exception is the September 2020 final Code section 4968 regulations (the college and university investment tax). A brief summary of those final regulations that I prepared is available here, and a number of law and accounting firms have also prepared more detailed, publicly available summaries that can be found with a Google search. 

Lloyd Mayer

CA Counters US Call for SCOTUS to Grant Cert in CA Sched B Disclosure Case

In Americans For Prosperity Foundation v. Becerra, California recently filed a Supplemental Brief countering the US brief in the case, which argued that while the US Schedule B requiring donor disclosure of charitable organizations was constitutional, the California version was unconstitutional:

"1. The United States principally contends that the court of appeals applied the wrong standard of scrutiny. U.S. Br. 8-19. But it is difficult to see any material difference between the standard embraced by the United States and the one applied below. According to the United States, “compelled disclosures that carry a reasonable probability of harassment, reprisals, and similar harms are subject to exacting scrutiny.” Id. at7. Exacting scrutiny, in turn, calls for “a form of narrow tailoring” (id.) that requires “‘the strength of the governmental interest [to] reflect the seriousness of the actual burden on First Amendment rights’” (id. at 9); that dem ands a means-ends fit that is “‘reasonable’” but not “‘perfect’” (id. at 16); and that ensures that the compelled disclosure does “not sweep significantly more broadly than necessary to achieve [a] substantial governmental interest” (id. at 12). See also id. at 9 (compelled disclosure requirements are valid where “the public interest in disclosure outweighs the harm”) (internal quotation marks and ellipses omitted). The United States also asserts that “narrow tailoring is to  some degree implicit in the requirement that the governmental interest in the compelled disclosure be ‘legitimate and substantial’” because “it is difficult to demonstrate a ‘substantial’ interest in a broad disclosure scheme when narrower disclosures would be sufficient.” Id. at 10-11.

The court of appeals held that California’s Schedule B filing requirement is subject to “‘exacting scrutiny,’” and it understood exacting scrutiny in the same way as the United States. Pet. App. 15a.1 It recognized that the “strength of the governmental interest must reflect the seriousness of the actual burden on First Amendment rights.” Id. (internal quotation marks omitted). It examined whether the State’s chosen approach swept too broadly. See id. at 19a-23a, 29a. And it determined that concerns about overly broad regulation are part and parcel of the substantial-relationship test. See id. at 15a-16a (requirement “that the State employ means ‘narrowly drawn’ to  avoid needlessly stifling expressive association” is not “distinguishable from the ordinary ‘substantial relation’ standard”).

The United States ignores the overlap between the court of appeals’ approach and its own and asserts that the lower court erred in declining to require an adequate means-ends fit. U.S. Br. 16. But what the court of appeals declined to adopt was “the kind of ‘narrow tailoring’ traditionally required in the context of strict scrutiny,” including the requirement that “the state . . . choose the least restrictive means of accomplishing its purposes.” Pet. App. 16a; see also Opp. 6, 14-15. And the United States itself agrees that strict scrutiny and its “particularly stringent form of narrow tailoring” do not apply to information-reporting requirements like the one at issue here. See U.S. Br. 16."

Philip Hackney

OECD report on Taxation and Philanthropy

The OECD recently  issued a report on Taxation and Philanthropy that will likely be of interest to our readers.

The summary provides: "This report provides a detailed review of the tax treatment of philanthropic entities and philanthropic giving in 40 OECD member and participating countries. The report first examines the various arguments for and against the provision of preferential tax treatment for philanthropy. It then reviews the tax treatment of philanthropic entities and giving in the 40 participating countries, in both a domestic and cross-border context. Drawing on this analysis, the report then highlights a range of potential tax policy options for countries to consider."

Philip Hackney