Tuesday, January 31, 2023

Name, Image and Likeness (NIL) Nonprofit Organizations

I am glad student athletes can be paid for their game, but I swear, the whole NIL infection has pretty much ruined everything from a fan standpoint.  Before NCAA v. Alston, when everybody made money except players, and players were locked into their team (economically, if not legally) like indentured servants or baseball players before free agency, you could watch a kid for at least three years.  You kinda felt like you "knew" the kid and the team, and that feeling contributed to your rabid affinity for your team.  But the market is amoral and doesn't care about your stinking feelings!  So I guess we better get used to student athletes acting just like the head coaches who condemn NIL money have been acting for years.  Go where the money is, forget team loyalty.  


Anyway, here is an excerpt from an interesting Forbes article regarding NIL money being funneled through nonprofit organizations:

Across the country, groups known as collectives have sprung up to channel money to high school and transfer-willing superstars looking to finally get their cut of the multibillion-dollar enterprise that is college athletics. Some of the groups — at least five by Forbes’ count — do so as IRS-approved, tax-exempt organizations. Rather than stuffing paper bags with cash in the hopes of luring a can’t-miss prospect to campus, donors can make “charitable” gifts that, after a bit of transmogrification, are every bit as tax deductible as a check sent to St. Jude. Think of it. For decades, college football’s legions of followers have shown they’re not only willing to pay for game tickets and jerseys, they’ll fork over cash just for the remote possibility their team might beat State, or whomever their rival is, with no other return on investment expected.

That’s where non-profit collectives come into play. “The primary purpose for the tax-exempt collectives was to enable individuals to make tax-deductible charitable contributions,” Larry Mohr, a tax partner at Baker Tilly, told Forbes. “The key with the tax-exempt organizations is making sure they have a charitable mission.” Rather than raising money from the local car dealership or fireworks store, it’s coming from donors. But there’s a rub. For a collective to be a nonprofit, contributions can’t go directly to players.

The workaround involves a bit of theater. Donations to the nonprofit collective are said to be a gift to a charitable organization (which may or may not be directly affiliated with the collective itself). But rather than, you know, give the money to the charity to do its good deeds, the money is earmarked to pay players to, at least on paper, serve as fundraisers. The arrangement leads to a whole host of other questions. Unlike a business, charities can’t pay people whatever they feel like. To keep their tax-free privileges, charities must pay compensation considered “fair value.” And if players are essentially being paid to do charitable work, is it even charity? Stepping afoul of either guideline could put the player and the charity in jeopardy with the IRS.

“A commonly cited example of an appropriate payment is the payment of a ‘fair market value’ appearance fee at a fundraiser for a nonprofit organization,” attorneys Tom Molins and Ethan Sanders from Stinson LLP told Forbes in an email. “On the other hand, just paying a student-athlete a large sum to sign autographs may not be viewed as fulfilling a collective's charitable purpose. Similarly, paying student-athletes to donate their time working at a soup kitchen or homeless shelter probably will also not suffice. While those are clearly charitable endeavors, paying a student-athlete to do volunteer work is really not serving a public good that justifies payment.”

Something stinks, alright, but I think both points made in the article are incorrect and I sent a note to the author about it.  Here is the email I sent:

I just finished reading your interesting article “Looking for A Tax Break?  Buy Your Alma Mater Its Next Football Star.”  A few important quibbles:  (1) Actually, charities can indeed pay employees whatever they want.  That is, charities can pay “going rate,” and they are allowed to use for-profit business to determine going rate.  That’s why the head of Red Cross or some big nonprofit hospital can earn as much as the head of American Airlines or a for profit hospital.  So if the going rate for celebrity endorsements – broadly defined – is $13 million, a charity hiring a college football or basketball player to endorse it can pay whatever for-profits would have to pay for the same endorsement from a pro football or basketball player.  (2) People who work for charities – even just to appear at a “volunteer event” – are entitled to be paid the “going rate.” 

Once these two issues are understood, the only real (and real big) issue in your article is whether the charitable collectives are operating for a “public” rather than “private” purpose.  Clearly, there is a strong legitimate question whether these organizations deserve or qualify for tax exempt status.  I don’t think the article makes this point strong enough though it does quote a practitioner who says “charitable mission is key.”  And even that is a bit imprecise.  A hospital, for example, that dispenses health care might be deemed charitable, but if it does not distribute its beneficial impact to a broad swath of people, without regard to ability to pay in some instances, it is operating for a private purpose (that of those who can pay) rather than a public purpose.  It’s all right there in the easily accessible, fun to read (oh boy, oh boy!) tax regulations.  The collectives are likely operating for private benefit and therefore not entitled to charitable tax exemption. 

Besides, donors can get a trade or business expense deduction for the amount paid for NIL licenses, easy enough, and with a little creative or not so creative planning (form an LLC that does "something" business, and pay the kid to use his or her pic on a billboard or mailer!)  I am not quite clear what benefits are derived from funneling the money through a nonprofit but there must be something there because according to the article, two senators -- a Democrat and a Republican -- have sponsored a bill that would deny the charitable contribution deduction for NIL payments.  Here is how the bill was described in the Senators' press release:

“In this new NIL era, we want to ensure that the opportunities available for student athletes to benefit from their own name, image and likeness are protected,” said Senator Cardin. “We also have an obligation to protect taxpayer funds, which means that charitable deductions should be reserved for charitable activities. Purposefully blurring the line between private expenses and charitable contributions dilutes both these efforts.” 

“College athletes have the ability to benefit from opportunities related to their own name, image, and likeness, but outside organizations and collectives should not be able to write contributions off their taxes that are used to compensate athletes,” said Senator Thune. “This common-sense legislation would prohibit these entities from inappropriately using NIL agreements to reduce their own tax obligations. These basic taxpayer guardrails would protect athletes, strengthen NIL, and uphold the responsible stewardship of taxpayer dollars.”   

The bill proposes a new IRC 170(p).  Here is the gist of it:


‘(1) IN GENERAL.—No deduction shall be allowed for any contribution any portion of which is used by the donee to compensate 1 or more secondary or post-secondary school athletes for the use of their name, image, or likeness by reason of their status as athletes.

 (2) EXCEPTION.—Paragraph (1) shall not apply to any contribution made directly to an organization which is an eligible educational institution (as defined in section 25A(f) (2)).’’

I suppose a nonprofit can be structured to work, as suggested in this interesting On3 NIL article on the topic:

Winter says there is a way collectives can operate within the 501(c)(3) world, especially if the groups are paying the student-athletes for work that is serving a charitable purpose. For example, Winter said paying a student-athlete fair-market value to make an appearance on behalf of the charity at a fundraiser would probably “pass muster.” “But if you’re just paying guys for serving soup, I don’t see how that necessarily aligns with the charitable mission of the collective,” Winter said. “How does that serve the public good by paying to do volunteer work?”

Sure it works, even if you pay a celebrity to serve soup.  The celebrity is paid for the association of her name, image and likeness with the charity while serving soup.  Not for serving soup!  The celebrity endorsement need only be reasonably conducive to the accomplishment of the charitable purpose, it seems to me.  A celebrity endorsement -- like a commercial or billboard featuring a college athlete asking for donations to Save the Children or Ronald McDonald House -- seems reasonably conducive.  Maybe the issue is whether exempt organizations should even be paying for celebrity endorsements, particularly when the payment for the endorser is millions more than the cost of the soup.  Ahh, yes, now we have the private benefit issue cornered.  Read Judge Posner's opinion in United Cancer Council for an explanation of the private benefit issue when we suspect that the costs of charitable operations outweighs the charitable benefits derived by several multiples.  Anyway, all of this gnashing of teeth makes me ask the question, why?  What is the benefit derived from using a nonprofit? 


darryll jones




January 31, 2023 in Federal – Legislative | Permalink | Comments (0)

Monday, January 30, 2023

EO Updates TG 58 Excise Taxes on Self-Dealing under IRC 4941

Last week, the Service released recently updated Technical Guide 58, regarding IRC 4941 excise taxes on self-dealing.  I was particularly tickled to see the announcement in the IRS email update to which I subscribe because the update is based on Chief Counsel Advisory 202243008.  The Advisory was written to Casey Lothamer, Area Counsel (Tax Exempt and Government Entities), Mid-Atlantic Region.  Casey is one of my former students from my days at Pitt.  It makes me wanna hitch up my pants and brag when I see one of my former students out in the trenches.   "Yeap.  I taught that boy dang near ere'thang he knows about exempt organizations!" 



January 30, 2023 in Federal – Executive | Permalink | Comments (0)

Pittsburgh Follows Familiar Script to Extract Payments In Lieu of Taxes

Pittsburgh Mayor Ed Gainey displaying executive order requiring audits of nonprofits in Pittsburgh ensure they are "purely public charities."


Pittsburgh Mayor Ed Gainey is following a familiar script in seeking to supplement the city's budget with up to $36 million in PILOTS from the city's nonprofit organizations.  First, announce the City's budget is stretched to the limit, but the Mayor is holding the line against higher taxes.  Second, note the presence of apparently wealthy nonprofits sitting around doing nothing while eating up more than their "fair share" of public services.  Third, make explicit that tax exempts pay no taxes, free-riding all over the working and tax-paying folk.  Fourth suggest some sort of legal scrutiny, short of legal process because the City would lose probably.  Fifth, ride the media circuit shaming the big nonprofits for bringing nothing to the cookout.  Sixth, wait until one of the big nonprofits  --UPMC, Pitt, Duquesne or Carnegie Mellon -- get tired of bad press and finally just pay up.  Wash, rinse, repeat.  You can watch Mayor Gainey's the press conference here.   The City has even established an email address citizens can use to report the untaxed excesses of nonprofits, including excessive compensation practices.  Tax law in the court of public opinion, I guess.


If you believe that a charitable organization in Pittsburgh does not pass the Pennsylvania Purely Public Charity Test, let us know at Report@PittsburghPA.gov PittEO

darryll jones

January 30, 2023 | Permalink | Comments (0)

Friday, January 27, 2023

Call for Papers (deadline: 3/15/23): 2023 Modern Studies in the Law of Trusts, Wealth Management & Philanthropy Conference

Download (1)I received a call for papers for the fifth conference in the Modern Studies in the Law of Trusts, Wealth Management & Philanthropy series to be held at Yong Pung How School of Law, Singapore Management University on July 27-28, 2023. The deadline is March 15, 2023. Here is the full announcement:

Call for papers for Modern Studies in the Law of Trusts, Wealth Management & Philanthropy 2023

The fifth conference in the “Modern Studies in the Law of Trusts, Wealth Management & Philanthropy” series will take place on 27-28 July 2023 at the Yong Pung How School of Law, Singapore Management University (Singapore). The 2023 conference will be co-organised by Singapore Management University, Centre for Commercial Law in Asia, the University of York, and The Dickson Poon School of Law, King’s College London.

The theme of the conference is “The Law of Trusts, Wealth Management & Philanthropy: Innovation and Reform in the Law of Trusts”. The conference will focus on current developments and challenges facing trust law, wealth management and philanthropy, with particular focus on the need for innovations responding to contemporary developments and emerging issues – for example, technological disruption, new forms of regulation, climate change and sustainability goals - that impact global families and how they manage their wealth. The conveners of the conference (Richard Nolan (York), Tang Hang Wu (SMU), Yip Man (SMU) and James Lee (KCL)) plan to publish a selection of the papers presented at the conference in a special edition of a journal (subject to review and availability of space).

If you would like to offer a paper, please submit a working title and an abstract (of no more than 1500 words) by 15 March 2023 by email to James Lee ([email protected]) and Yip Man ([email protected]).  The conference conveners are particularly keen to hear from Global South, women and emerging scholars in the field. Acceptance will be on a rolling basis and the conference conveners will be grateful for early submissions. There are no speaker registration fees for those whose papers are accepted this conference. Speakers and attendees are expected to meet their own travel costs and accommodation for this conference.

Lloyd Mayer

January 27, 2023 in Conferences, Paper Presentations and Seminars | Permalink | Comments (0)

Wisconsin 3rd DCA Holds Catholic Charities Bureau is Not "operated primarily for religious purposes," must pay unemployment tax


The Catholic Charities Bureau, Superior Diocese, does not operate primarily for religious purposes, court rules.  There are about 60 nonprofit operating "under the CCB umbrella" and the ruling means the CCB must pay unemployment tax for all employees, despite a provision in Wisconsin law exempting nonprofits operating primarily for religious purpose.   


It is always dangerous for a court or tribunal to scrutinize an organizations' religious bona fides to determine whether it operates for a religious purpose.   But on a quick first read, I kinda think a Wisconsin Court of Appeals opinion's  counter-intuitive conclusion that CCB (which holds a group ruling from the IRS that it operates for religious purposes) does not operate primarily for a religious purpose under state law might actually be right!  Its a winding path to that conclusion so I won't even try to summarize it here.  I could be wrong though, considering that the first Wisconsin administrative agency to consider the matter ruled that CCB was not operated primarily for religious purposes, that decision was then reversed by an ALJ, the ALJ's decision was then reversed by another administrative tribunal, that decision was reversed by a circuit court opinion, and then the circuit court was reversed by Wisconsin's 3rd DCA.  CCB has petitioned the Wisconsin Supreme Court for review.  Clearly there is a difference of learned opinion here, and the case has national implications for the Catholic Church, unemployment and state and federal tax law, not to mention the Religious Freedom Restoration Act and the First Amendment (which the 3rd DCA said "ain't got nothing to do with it!").  If CCB loses before the Wisconsin Supreme, it will no doubt petition the U.S. Supremes.  I think CCB makes that last point in a veiled threat sort of way in its petition to the Wisconsin Supremes (see the last paragraph of the introduction below).  "Listen to me now, believe me later on!" CCB's petition, filed just this week, looks like a great read.  Pass me the popcorn because this oughta be good!  Here is how  CCB's Petition for Review begins:



The court of appeals’ published decision stands church-state relations on their head. At the heart of its decision is the astonishing conclusion that the Catholic Charities Bureau of the Diocese of Superior—one of Wisconsin’s largest religious charitable organizations—does not qualify for the religious exemption from the State’s unemployment compensation system because it is not “operated primarily for religious purposes.” Wis. Stat. § 108.02(15)(h). To reach that remarkable conclusion, the court of appeals relied on two equally remarkable—and false—premises of law.

First, the court of appeals decided that the purposes of the Diocese of Superior are irrelevant to determining whether CCB is operated for “religious purposes,” as described in Section 108.02(15)(h). But CCB and its sub-entities are entirely creatures of the Diocese, and of the broader Catholic Church. As the court of appeals acknowledged, the government does not dispute, and CCB’s name indicates, the Diocese specifically formed CCB to carry out its mandated social ministry in northern Wisconsin, and the bishop of the Diocese has complete control over CCB’s ministry. CCB’s purposes and the Diocese’s are thus one and the same. The court of appeals’ conclusion to the contrary is plain error and flies in the face of common sense and the typical treatment of parentsubsidiary relationships in Wisconsin.

Second, the court of appeals held that the word “operated” in the statutory phrase “operated primarily for religious purposes” means “actions” or “activities” rather than the more obvious mean ing of “managed” or “used.” The court of appeals’ attempt to shoehorn the word chosen by the Legislature into a subsidiary meaning found on Dictionary.com is untenable when read in pari materia with the other provisions of Section 108.02(15)(h). Those errors of law, which run directly counter to the text, structure, and context of Section 108.02(15)(h), are reason enough for this Court’s review. But the court of appeals’ published decision does not just contort Wisconsin law. Uncorrected, it will also put a Wisconsin statute at odds with the First Amendment to the United States Constitution and Article I, Section 18 of the Wisconsin Constitution. The decision below runs afoul of both constitutional provisions in three ways.

First, it violates the church autonomy doctrine, which preserves a sphere of control over internal church affairs to religious bodies. Here, the court of appeals effectively severed CCB from the Diocese of Superior for purposes of Section 108.02(15)(h). That constitutes gross interference with the ability of the Church in this State to structure itself freely in accordance with its beliefs about religious polity.

Second, the decision violates the Free Exercise Clause by penalizing CCB for serving non-Catholics and for avoiding proselytism when engaging in ministry. The undisputed belief that the Church ought to help all who are in need is core to Catholic social teaching. Yet the lower court held that because of these beliefs, CCB could not invoke Section 108.02(15)(h). That burdens CCB’s religious exercise in violation of the Free Exercise Clause.

Third, the decision violates the Establishment Clause by entangling church and state. By forcing Wisconsin executive branch officials and Wisconsin courts to finely parse all the activities of religious bodies in the State and decide whether those activities are “inherently” or “primarily” religious, the court of appeals has thrust those officials and courts into a constitutional thicket. That is the opposite of church-state separation. * * *

Because the court of appeals’ decision was published, only this Court (or the United States Supreme Court) can repair what the decision below has broken. This Court should therefore grant review to put Wisconsin law back onto a sounder footing and eliminate the conflict with the First Amendment. 

darryll jones


January 27, 2023 | Permalink | Comments (0)

Chief Counsel Advises that Crypto Donations Require Qualified Appraisal

A January 10, 2023 Chief Counsel Memorandum concludes that cryptocurrency donors must obtain a qualified appraisal to claim a charitable contribution deduction.  Donors hoped to rely on the exception set out in 170(f)(11)(A)(ii)(I).  But Chief Counsel concluded that cryptocurrency traded on a crypto exchange is not a "publicly traded security:"

A qualified appraisal is not required for donations of certain readily valued property specifically set forth in the Code and regulations, namely: cash, stock in trade, inventory, property primarily held for sale to customers in the ordinary course of business, publicly traded securities, intellectual property, and certain vehicles. See section 170(f)(11)(A)(ii)(I); Treas. Reg. section 1.170A-16(d)(2)(i). Section 1.170A13(c)(7)(xi) defines the term “publicly traded securities” for purposes of section 170 to mean securities as defined by section 165(g)(2). Section 165(g)(2) defines a security as a share of stock in a corporation; a right to subscribe for, or to receive, a share of stock in a corporation; or a bond, debenture, note, or certificate, or other evidence of indebtedness, issued by a corporation or a government or political subdivision thereof, with interest coupons or in registered form. Cryptocurrency B is none of the items listed in section 165(g)(2), and therefore does not satisfy the definition of a security in section 165(g)(2).

I wonder if IRS Chief Counsel ran this through SEC Chief Counsel.  I thought the SEC was seeking to regulate cryptocurrency and that a necessary condition for SEC jurisdiction is that cryptocurrency be as a security.  The qualified appraisal must meet the requirements of 1.170A-17, but wouldn't an appraiser just go look up the price at which the crypto is selling on a crypto exchange to determine value?  It just seems unnecessary to require a qualified appraisal when there is a market in which buyers and sellers are, for reasons I still don't understand, valuing the crypto.  

An infographic showing how the basic principles of supply and demand affect cryptocurrencies value.


I cannot get my head around it.  Crypto is not backed by gold or a country with lots of guns and bombs or taxing authority.  As best I can tell, its somebody's computer program from which invisible tokens are minted, and then offered to customers.  Something about blockchains, too.  Apparently, as explained below, if a big institutional buyer purchases an amount of tokens, that signals value to other buyers who follow suit.  As demand increases, value increases, assuming a fixed supply.  This strikes me as if I were a small cow in a large herd.  The heard is too large for me to see what we are eating or where we are going, but since the big bull up front is eating imaginary bramble bushes, the rest of the herd follows suit.  The herd assumes that the big bull is big because he eats imaginary bramble bushes. Or the big bull, because he is out front, has the best  information so his tastes must be reliable and superior.  So we all eat imaginary bramble bushes, convincing ourselves we are full, and suddenly demand increases and I should go buy more imaginary bramble bushes.  Sounds either Orwellian or Darwinian, I don't know which.  I get the idea of following the successful investor's tastes, but I don't understand what makes the big bull up front decide that imaginary bramble bushes are valuable in the first place!  This article is helpful but I still don't get it:  

Demand can increase as a project gains awareness or as utility increases. Broader adoption of a cryptocurrency as an investment also increases demand while effectively limiting the circulating supply. For example, when institutional investors started buying and holding Bitcoin in early 2021, the price of Bitcoin increased significantly as demand outstripped the pace at which new coins were created, effectively decreasing the total available supply of Bitcoin.

Likewise, as more decentralized finance (DeFi) projects launch on the Ethereum blockchain, the demand for Ether increases. Ether is required to perform transactions on the blockchain regardless of what cryptocurrency you're transacting with. Or, if a DeFi project takes off itself, its own token will become more useful, thereby increasing demand.


January 27, 2023 | Permalink | Comments (0)

More on Pittsburgh's Audit of Nonprofits


The Cathedral of Learning at the University of Pittsburgh


PILOTS depend on public shaming for their implementation and perpetuation.  The process of imposing PILOTS invariably follows a well worn pattern:  (1) a local government official searches for revenues while maintain an incumbent's aversion to any type of tax increase.  (2) The official floats the idea that "hey, those rich nonprofits don't pay for anything!"  (3) There follows a media campaign -- press releases and the release of official reports, maybe a board of carefully selected local citizens appointed to study the issue -- to keep attention focused on the "rich" nonprofits.  (4) Nonprofits, fearing damage to their brands more than a legal challenge, eventually agree to another round of PILOTS.  Sometimes the nonprofits offer a feeble defense of their status, pointing to their economic impact on the city and county.  But they don't push too harshly, lest they erode their goodwill in the community.  When they inevitably pay, its all very much "voluntary," though. 

So Pittsburgh is at step 3.  Here is a recent editorial in the Pitttsburgh Tribune, following up on the Mayor's call for a complete audit of all nonprofits in the city.  

On Tuesday, Pittsburgh Mayor Ed Gainey called for a deep dive into the city’s “purely public charities.” According to Pa. Act 55 of 1997, a purely public charity has to meet certain requirements. It has to have a charitable purpose directed in one or more of six areas: poverty relief, education, religion, health care, government and “accomplishment of a purpose which is … important and beneficial to the public.” It also must be “entirely free from private profit motive.” It must “donate or render gratuitously a substantial portion of its services.” It must “benefit a substantial and indefinite class of persons who are legitimate subjects of charity.” And, notably, it must “relieve the government of some of its burden.” The problem is that charity is big business. Of the top 30 employers in Pennsylvania, 11 are nonprofits. They include UPMC, the University of Pittsburgh and Allegheny Health Network.

In some ways, this is a good thing. These are industries that rebuilt Pittsburgh’s economy as it transitioned away from steel. But they do so without paying taxes, which makes it a lot easier to expand. That means more of the tax map is ceded to nonprofits, which puts more of a burden on the government and other property owners. Gainey isn’t the first mayor to deal with it. His predecessor, Bill Peduto, tried to bring the government and charities together with his ONE PGH collaboration aimed at creating up to $115 million for city projects. Gainey walked away from it last summer, favoring pursuit of voluntary payments in lieu of taxes. But if payments are voluntary, unlike taxes, they are an unreliable foundation for building a budget. Gainey’s call is long past due. It isn’t because the nonprofits are untrustworthy. They are a critical part of the city, county and state economic infrastructure. It is important because, like a car’s inspection, it is an impartial assessment of where the entity stands.

darryll jones

January 27, 2023 in State – Executive | Permalink | Comments (0)

Thursday, January 26, 2023

Nominations Sought for 2023 Outstanding Nonprofit Lawyer Awards

DownloadHere is the Call for Nominations (including for the Academic category):

The Committee on Nonprofit Organizations of the American Bar Association's Business Law Section is calling for nominations for the "2023 Outstanding Nonprofit Lawyer Awards."  The Committee presents the Awards annually to outstanding lawyers in the categories of Academic, Attorney, Nonprofit In-House Counsel, and Young Attorney (under 35 years old or in practice for less than 10 years).  The Committee will also bestow its Vanguard Award for lifetime commitment or achievement on a leading legal practitioner in the nonprofit field.  Nominations are due by March 31, 2023.

For a nomination form, please go to the Nonprofit Organizations Committee webpage and scroll down to find the form under "2023 Outstanding Nonprofit Lawyer Awards."  The Awards will be discussed at the Business Law Section's Spring Meeting on April 27-29, 2023. The Committee expects to formally announce the awardees in late May.

Send nomination forms by March 31, 2023 to:

Emily N. Chan
Adler & Colvin
135 Main Street, 20th Floor
San Francisco, California 94105
(415) 421-7555
(415) 421-0712 (fax)
[email protected]

Lloyd Mayer

January 26, 2023 in Other | Permalink | Comments (0)

Murray: Donor Advised Funds & Delay: An Intergenerational Justice Solution?

DownloadIan Murray (University of Western Australia) has published Donor Advised Funds & Delay: An Intergenerational Justice Solution in the Nonprofit Policy Forum. Here is the abstract:

Much writing on Donor Advised Funds (DAFs) relates to whether they ‘unduly’ delay the direct application of donated funds to achieve public benefit. However, the discussion rarely touches on a normative basis for determining what is ‘undue’ or that can be used to shape potential reforms, which are typically framed with reference to a private foundation payout rate or time limit for expending contributions. Research on charity accumulation conducted across the United States, United Kingdom, Canada, Australia and New Zealand, suggests that the normative principle of intergenerational justice is helpful for grounding such discussions (Murray, I. 2021. Charity Law and Accumulation: Maintaining an Intergenerational Balance. Cambridge: Cambridge University Press). This article considers intergenerational justice in the context of DAFs and considers whether the principle can be implemented in ways that support DAF sponsor independence and flexibility. One way that this could be achieved is by imposing (or enforcing existing) procedural obligations on decision-makers to give genuine consideration to intergenerational justice when making decisions about how much to spend and retain.

Lloyd Mayer

January 26, 2023 in Publications – Articles | Permalink | Comments (0)

Book Talk & Discussion (February 7th; Zoom available): For-Profit Philanthropy

6a00d8341bfae553ef02af1c94a571200d-320wiA reminder that Brooklyn Law School will be hosting a conversation with Dana Brakman Reiser and Steven A. Dean on Tuesday, February 7th to discuss their new book For-Profit Philanthropy: Elite Power & the Threat of Limited Liability Companies, Donor-Advised Funds, & Strategic Corporate Giving. Attending by Zoom is available, but RSVPs are due by February 2nd. Here is the abstract:

In For-Profit Philanthropy, the authors reveal that philanthropy law has long operated as strategic compromise, binding ordinary Americans and elites together in a common purpose. At its center stands the private foundation. Prophylactic restrictions separate foundations from their funders' business and political interests. And foundations must disclose more about the sources and uses of their assets than any other business or charity. The philanthropic innovations increasingly espoused by America's most privileged individuals and powerful companies prioritize donor autonomy and privacy, casting aside the foundation and the tools it provides elites to demonstrate their good faith. By threatening to displace impactful charity with hollow virtue signaling, these actions also jeopardize the public's faith in the generosity of those at the top.

Private ordering, targeted regulation, or a new strategic bargain could strike a modern balance, preserving the benefits of the compromise between the modest and the mighty. For-Profit Philanthropy offers a detailed roadmap to show how it can be accomplished.

Lloyd Mayer


January 26, 2023 in Books | Permalink | Comments (0)

Minnesota Appeals Court Upholds Removal of Otto Bremer Trust Trustee

Obt-logo-lt-bgIn this space we have previously reported on first the Minnesota Attorney General seeking to replace the trustees of the Otto Bremer Trust, and then on the decision by a Minnesota trial court to remove one trustee but not two others. That decision led to an appeal by the removed trustee, and last week the Minnesota Court of Appeals upheld the removal.

Applying an abuse of discretion standard, the appellate court found that the district court had properly removed the trustee for a "serious breach of trust" arising from self-dealing in the form of misuse of the Trust's assets, violations of his duty of loyalty for allowing his personal interests to significantly and negatively impact his decisions and behavior as a trustee in the form of inappropriate and abusive behavior, and a violation of his duty of information by refusing to disclose his designated successor's identity to the Attorney General until forced to do so while testifying at trial. The appellate court further found that the district also properly removed the trustee because it was in the best interest of the Trust and its beneficiaries given these continual breaches of his duties that rendered the removed trustee unfit to administer the Trust.

Media Coverage: Minnesota Lawyer; Pioneer Press; Star Tribune

January 26, 2023 in In the News, State – Judicial | Permalink | Comments (0)

Give.Org Publishes 2022 Donor Trust Report

Social Trust Factor: 10 Tips to Establish Social Business Credibility | Pam  Moore Speaker, Trainer, Consultant


Give.Org published its 2022 Donor Trust Report last month.  The report provides data points from which to critique laws and rules designed to increase nonprofit transparency.  The report reminds us that the survival of the sector depends on the extent to which the sector's reputation and "halo" is maintained.  Here is the opening summary:

The 2022 Donor Trust Report marks BBB®’s Give.org (also known as BBB Wise Giving Alliance) fifth year tracking public attitudes about charity trust and giving. Every December (since December 2017) we survey more than 2,100 adults across the United States, and another 1,100 adults in Canada, to explore how the public feels, thinks, and intends to act around charity trust and generosity. In 5 years of donor trust surveys, we consistently find that there is ample space to build trust in the sector, with most participants expressing that it is essential to trust a charity before giving, but only 17-20% (depending on the year) reporting a high level of trust in charities. We know charities play a role in shaping the way donors feel toward the sector; and our surveys consistently remind us that reaching a diverse set of donors requires a deliberate strategy to connect with their preferences, language, and culture.

Since 2017, we have also explored certain special topics — including disaster relief; COVID-19; sexual harassment; charity impact; and diversity, equity, and inclusion — to help us identify opportunities to build trust or protect trust from being eroded. For example, we found that transparency and specificity in disaster relief appeals can help build trust; while red flags around sexual harassment or diversity, equity, and inclusion can fracture it. As stated in Most Trusted Brands’ 2022 Trust in Nonprofits special report, “High levels of trust put [nonprofits] in the position of needing to constantly defend their reputation. Nonprofits must take an active and consistent approach to maintain trust, while simultaneously avoiding actions that might endanger trust — not just for themselves, but for an entire sector’s reputation.”

darryll jones

January 26, 2023 in Studies and Reports | Permalink | Comments (0)

Campaign for Accountability Files Campaign Intervention Complaint Against Texas Public Policy Foundation

How LBJ Saved the Civil Rights Act - The Atlantic

The Campaign for Accountability, a Washington DC exempt organization whose mission is to serve as a "nonprofit watchdog organization that uses research, litigation, and aggressive communications to expose misconduct and malfeasance in public life," filed a detailed 15 page complaint this week against the Texas Public Policy Foundation, an Austin exempt organization whose mission is "to promote and defend liberty, personal responsibility and free enterprise in Texas and the nation by educating and affecting policymakers and the Texas public policy debate with academically sound research and outreach."  The complaint recites several instances the complainants assert show prohibited campaign intervention:



At the 2022 Victory Summit, TPPF hosted several political candidates who attended and spoke in their capacity as political candidates. Analyzed in accordance with Rev. Rul. 2007-41, the appearances of these candidates constitute prohibited political campaign intervention by a Section 501(c)(3) tax-exempt organization. Specifically:

• Equal opportunity provided to all candidates seeking the same office. Five Republican candidates up for election on November 8, 2022 appeared at the 2022 Victory Summit.19 None of these candidates’ political opponents from any party appeared at the event and there is no indication any such opponents were invited.

• No indication of support for or opposition to any candidate making an appearance (including candidate introductions and communications concerning the candidate’s appearance). TPPF executive staff serving as moderators and/or hosts offered strong support for each invited candidate’s campaign for elected office, providing glowing remarks in introductions, responses during question-and-answer sessions, and/or closing statements. Furthermore, TPPF executive staff serving as moderators and/or hosts frequently immediately affirmed political candidate statements in support of their own candidacy or attacks on their opponents, with responses like “Amen” and showed approval or praise by enthusiastically clapping.

• Presence of Political Fundraising. TPPF advertised the 2022 Victory Summit as a venue for political fundraising, specifically a “donor retreat” for “top conservative leaders from Texas and around the country” and noting that this was a “war to save our country. . . alongside the finest and boldest conservative minds. . .”

It is clear the Republican candidates who spoke at the 2022 Victory Summit, appeared in their capacity as candidates, as opposed to as non-candidates, for purposes of the Rev. Rul. 2007-41 factors, because the candidates made repeated references to their own candidacy, their political opponents, and/or the then-upcoming November 8th election. On Friday, September 23rd, 2022, at the Victory Summit, Arizona Republican gubernatorial candidate Kari Lake delivered “keynote remarks.” Ms. Lake was warmly introduced by TPPF Chief Executive Officer Greg Sindelar, who praised Ms. Lake and encouraged her to talk about her political campaign. Ms. Lake made a brief speech and participated in an extended question-and-answer session, moderated by Mr. Sindelar. Both Ms. Lake and Mr. Sindelar made statements that constituted political campaign intervention. Ms. Lake, for example, spoke in support of her own candidacy and attacked her Democratic opponent, Katie Hobbs. Mr. Sindelar expressed his approval of Lake’s statements.  These statements include:

During his introductory remarks, Mr. Sindelar demonstrated support for Ms. Lake’s candidacy in Arizona, telling Ms. Lake: “Well we’re so glad you’re here and we’re so glad and so happy for what you’re doing in Arizona.”

• Mr. Sindelar’s first question to Ms. Lake invited her to speak as a political candidate, asking her: “What made you want to switch from the media and get into politics and run for governor of Arizona?” Later, Mr. Sindelar continued to ask about her specific plans as a politician: “If you win you take over as Governor can you talk a little bit about how you would fight to implement that program and how you'd fight to ensure that parents continue to be the number one driver in their kids’ education.”

• Ms. Lake initially expressed apprehension about discussing politics and her political campaign, but Mr. Sindelar dismissed her concerns. Ms. Lake stated: “I looked at who was running and I realized that the Democrat running was in my opinion a real danger to Arizona. I know I am not supposed to get into too much politics here but. . . “ Mr. Sindelar immediately interjected “Oh it’s fine!” and Ms. Lake replied “I can ok.” Ms. Lake then proceeded to address various political issues in a manner akin to a political campaign stump speech.

• Ms. Lake called herself a candidate when describing her lawsuit to ban electronic vote counting: “I'm involved in a lawsuit in federal court to try to ban the use of electronic vote counting vote tabulating machines and we're working hard on that. We had it denied because of a standing they said I didn't have standing I mean I'm a voter I'm a candidate I mean I think I've got pretty big standing on that but we're appealing it and so uh we're continuing to fight that battle.”26 (emphasis added)

• Ms. Lake attacked her political opponent’s policy positions, including: “My opponent is all about gun control. Expanding gun-free zones. I call them sitting duck zones. We’re never going to budge an inch in Arizona.”

• Ms. Lake attacked her Democratic political opponent in the Arizona gubernatorial race, Katie Hobbs, stating: “I'm running against, by the way, Katie Hobbs who is our secretary of state who oversees the elections. She's not recused herself… Katie Hobbs is the one who gives guidance on how many ballots you're going to need each county. So she gives the guidance on that and in Pinal County, one of our largest counties, they ran out of ballots one hour into election day, and only the Republican ballots they ran out of by the way. So this is how messed up our elections are and I’m not ok with that. And, I hope that no Arizonan is ok with that. . . So that’s where I stand. It might not be popular for everybody but I’m not in this to be popular. I’m in this to do the right thing.”28 Immediately following Ms. Lake’s attack on her political opponent, Mr. Sindelar replied “Amen. Thank you, Kari” and clapped approvingly.29 • Mr. Sindelar further demonstrated his approval of Ms. Lake’s comments, closing the session stating, “Thank you so much for being here. Thank you for being in the arena and showing true courage. I think a lot of times people think courage is about fearlessness. You clearly have that. You don’t seem afraid of anything. But it is actually about sacrificing self for just goals, and you do that every day. We appreciate it.”

darryll jones

January 26, 2023 | Permalink | Comments (0)

Wednesday, January 25, 2023

Blitzburg Tackles Nonprofit Property Tax Exemptions . . . Again.

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Welp, my team is once again back home on the couch during this playoff season so I have lots of time to blog.  Pittsburgh, the city once known mostly for steel mill working, hard drinking, hard fighting, pierogi and Primanti Brothers-eating Steeler fans, is one of the best places to study "town-gown" relationships, particularly as relates to state charitable property tax exemptions.  Smoke stacks and fiery smelting pots have disappeared in favor of hospitals, universities, and sanctuaries for coders plotting world domination.  Places like UPMC, Pitt, Duquesne, and Carnegie Mellon, all with very well appointed surroundings showcasing grass lawns that stay green even during the winters.  And, as reported in the Post Gazette yesterday, the City has long waged a cold war of sorts trying to get the mega nonprofits to make "voluntary contributions" to the public fisc:

Pittsburgh Mayor Ed Gainey said Tuesday morning that he is ordering his law and finance department to begin a review of parcels owned by organizations claiming tax exemption based on their charitable status, a long-debated issue that could impact the city’s major universities and health systems.  This review is to ensure that the business is being conducted there are in compliance with the Pennsylvania public charity test, he said.  It marks yet another Pittsburgh mayor taking a run at an issue that has dogged the city for 20 years.  

Mr. Gainey said it’s estimated that $36 million is owed in property taxes by charitable organizations in the city if they fail the Pennsylvania public charity test. Places of worship, which are not listed under the Pennsylvania law, will not be subject to the review.  In the order, Mr. Gainey points out that 34% of parcels in the city are exempt from property taxes.  Over the past few administrations, Pittsburgh leaders have struggled with ways to increase financial contributions from some of the massive institutions such as universities and health systems that are major employers and economic drivers, but are exempt from things like property taxes that help fund city services.  

The state constitution doesn’t define “purely public charity.” Courts have relied on a 1985 Pennsylvania Supreme Court decision containing five criteria that nonprofits have to meet to be considered an institution of purely public charity. Among the requirements are advancement of a charitable purpose, donation of a substantial part of its services and operating entirely free from private profit motive.  The review of nonprofit properties began in 2003 with former Mayor Tom Murphy and a $60 million budget hole in the city budget.  Mr. Murphy proposed that the University of Pittsburgh, Carnegie Mellon University and other charitable organizations pay into a fund that would help offset the cost of providing municipal services such as fire protection and EMS.  In later years, the idea evolved into voluntary payment in lieu of taxes programs, none of which lasted.

If you are interested in PILOTS, you really oughta get this May 2022 study by the Pittsburgh City Controller's Office.   The report has a lot of good data and some neat pictures too if you are more of a visual learner, like me. 


darryll jones


January 25, 2023 | Permalink | Comments (0)

Massachusetts Universal Charitable Deduction Kicks in 23 Years After Enactment

Independent Sector Calls for Universal Charitable Deduction

From our friends at the Nonprofit Times:

You might forgive Massachusetts nonprofit leaders for thinking they might be waiting for Godot. The Bay State’s universal charitable deduction was overwhelmingly passed by voters in 2000 before being paused amid economic concerns two years later. The measure was on the cusp of returning in 2020 just as the pandemic hit and the tax break was paused again.  As of January 1, finally, the state charitable deduction is back in effect. Cue Didi and Gogo.

The provision was to kick in when the income tax rate dropped to 5%, which occurred in January 2020 – just before the COVID-19 pandemic was declared. Then-Gov. Charlie Baker vetoed a one-year delay in the state charitable deduction, which had been supported by The Massachusetts Nonprofit Network (MNN), but was overridden by the state’s legislature in August 2021. That pushed the start date for the deduction to January 1, 2023.  MNN estimates that a charitable deduction would benefit more than 600,000 low- and middle-income donors in the Bay State.

The state’s Department of Revenue estimates the charitable deduction would cost the state some $300 million while generating $6 billion in giving and deductions statewide.  At the federal level, there’s been a push for years by nonprofits to get a universal charitable deduction that would allow non-itemizers to write off their deduction. A temporary measure was included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in December 2020. Taxpayers could deduct up to $300 for cash contributions to charities, a provision that expired at the end of 2021.

I don't know.  This seems like such a no-brainer at the federal level.  Pay $300 million, get $6 billion.  That is a rate of return of . . . well, let's see . . . uhhh . . . just forget it, its a pretty high rate of return ok?!  It doesn't take a Ph.D in Differential Calculus to see that.  

darryll jones

January 25, 2023 | Permalink | Comments (0)

Tuesday, January 24, 2023

Fair Tax Eliminates Political Activity Restrictions, Taxes Unrelated Business Consumption

January 24, 2023 in Federal – Legislative | Permalink | Comments (0)

Is Healthcare a Public Good or Private Commodity?

Here are some interesting Gallop Poll data points suggesting, I think, that Americans consider healthcare a public good, but prefer its dispensation through the private market.  We want universal subsidization but prefer private ownership, with its profit motive and monopolistic tendencies.  This might help explain our schizoid attitude regarding healthcare tax exemption.  We implicitly accept that socialized (as in publicly-subsidized) healthcare is worthy, whilst we cringe at the idea of providing healthcare without capitalism, and often resent tax exemption for its tendency to undercut capitalists monopolies.  






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January 24, 2023 in Studies and Reports | Permalink | Comments (0)

Monday, January 23, 2023

UAE Enacts First Ever Corporate Tax, Exempts Nonprofits

United Arab Emirates | History, Culture, Population, Map, & Capital |  Britannica

The United Arab Emirate (UAE) adopted its first ever entity level business tax late last year.  I hate to say it but it looks like His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates, whose decree established the law, did a cut and paste from Title 26.  I am not, by that observation, staking a claim to American exceptionalism to which other countries invariably aspire.  I mention the point because cutting and pasting necessarily takes the good with the bad.  For example, His Highness might have omitted "healthcare" as a separate basis for tax exemption.  One wonders if we, in the  United States, might decline to include "healthcare," writ large, as an exempt purpose if we were writing on a clean slate.  To provide healthcare for poor people we might instead use direct subsidies more precisely aimed at need.  UAE's law doesn't suggest there was robust consideration of the good, bad, and ugly of our law.  And we all know how much trouble is caused by exempting entities operated for "the promotion of social welfare."  But I guess a monarchy doesn't have to worry about "dark money" political intervention.  Still, what exactly is "social welfare," except charity with explicit politics?   Here is the provision of the law defining public benefit entities exempt from tax:  


Article 9 – Qualifying Public Benefit Entity

1.  A qualifying Public Benefit Entity shall be exempt from Corporate Tax where all of the following conditions are met:

 a. It is established and operated for any of the following:

1) Exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational, healthcare, environmental, humanitarian, animal protection or other similar purposes. 

2) As a professional entity, chamber of commerce, or a similar entity operated exclusively for the promotion of social welfare or public benefit.

b. It does not conduct a Business or Business Activity, except for such activities that directly relate to or are aimed at fulfilling the purpose for which the entity was established.

c. Its income or assets are used exclusively in the furtherance of the purpose for which it was established, or for the payment of any associated necessary and reasonable expenditure incurred.

d. No part of its income or assets is payable to, or otherwise available, for the personal benefit of any shareholder, member, trustee, founder or settlor that is not itself a Qualifying Public Benefit Entity, Government Entity or Government Controlled Entity.

e.  Any other conditions as may be prescribed in a decision issued by the Cabinet at the suggestion of the Minister.

2.  The exemption under Clause 1 of this Article shall be effective from the beginning of the Tax Period in which the Qualifying Public Benefit Entity is listed in the Cabinet decision issued at the suggestion of the Minister or any other date determined by the Minister.

3. For the purposes of monitoring the continued compliance by a Qualifying Public Benefit Entity with the conditions of Clause 1 of this Article, the Authority may request any relevant information or records from the Qualifying Public Benefit Entity within the timeline specified by the Authority.

darryll jones



January 23, 2023 | Permalink | Comments (0)

House Democrats Propose Constitutional Amendment Overruling Citizens United

Last week, House Democrats proposed a constitutional amendment (reprinted below) that would overrule Citizens United v. Federal Elections Commission.  In other news, scientists have discovered the theoretical possibility that Hell might freeze over. 





darryll jones




January 23, 2023 in Federal – Legislative | Permalink | Comments (0)

Mayer and Owens Offer Observations on Campaign Intervention

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Over at HuffPost last week, Lloyd  and Marcus were asked whether Trump's speech last Thursday at  Judicial Watch event violated the prohibition against campaign intervention.  Judicial Watch is exempt under IRC 501(c)(3), and describes itself as "conservative, non-partisan educational foundation, which promotes transparency, accountability and integrity in government, politics and the law."   Both gentlemen demurred, preferring instead to offer observations regarding whether something is really a duck just because it quacks, has feathers, a yellow or orange bill, and walks with an awkward sort of waddle, sometimes across busy streets:

“Making a big political speech today at TRUMP DORAL, in Miami," Trump Wrote.  “The Fake News says I am not campaigning very hard. I say they are stupid and corrupt, with the Election still a long time away.”  His appearance will be hosted by Judicial Watch, which has a 501(c)(3) tax exemption. This allows donors to deduct their gifts to the group but also prohibits it from engaging in politics.  Jill Farrell, Judicial Watch’s communications director, said she had no concerns about Trump’s planned remarks at a “private” event that is not permitting news media coverage.  “This is not a campaign speech,” she told HuffPost. “There is no ‘there’ there.”  Robert Maguire of the Citizens for Responsibility and Ethics in Washington said Judicial Watch’s coziness with Trump is proof that the IRS is incapable of enforcing regulations on tax-exempt groups. “This is further evidence of the absolute inability of the IRS to take action against these groups that are clearly political outfits that are using their tax-exempt status as a shield,” he said.

Lloyd Mayer, a professor and tax-exempt organizations expert at Notre Dame University’s law school, said Judicial Watch had the right to invite Trump as a former president and would not be breaking rules so long as Trump did not speak about his campaign. “And even if Trump makes such a mention, if Judicial Watch instructed him not to but he went off script, Judicial Watch would have a defense because it could claim it took reasonable measures to avoid any such mention,” Mayer said.  Marcus Owens, a former head of the Exempt Organizations Division at the IRS, said a “narrowly tailored” speech by Trump about his experience as president was legitimate. “The challenge for Judicial Watch is that it’s very difficult to imagine Donald Trump staying on script and not talking about his political future,” he said.

There is no audio or visual of the speech that I could find.  Judicial Watch seems to think even it it was a campaign speech, it was a private event so no violation, right? But that's not how any of this works.  Take a listen to the promo for the speech (below) and consider that Judicial Watch's  website contains universally negative posts about Biden, universally positive posts about Trump.  Ok guys, stop playing, jokes over.  This is a duck, isn't it?!     


darryll jones


January 23, 2023 | Permalink | Comments (0)