Sunday, October 24, 2021
In prior scholarship, I have addressed how the specific metrics used in the impact investing sector may be used to measure and report social good in the charitable sector to increase transparency and accountability about how donated funds are used. The issue of incomplete reporting in the nonprofit sector is highlighted in a recent ProPublica article about the shortcomings of reports by state school districts on how they have used federal aid funds disbursed to remedy educational fallout from the pandemic. Specifically, the ProPublica article addresses the gap between federal governmental aid to schools during the pandemic and measurable results from state school districts. According to the article, the federal government gave around $190 billion in aid to help schools reopen and to address the effects of the pandemic. In the year and a half since school doors were closed to millions of children, the Education Department has done only limited tracking to determine how the funds were used. As a result, Washington, D.C. is in the dark about the effectiveness of the aid, especially in terms of those communities that have struggled the most during the pandemic.
State education agencies were required to submit provisional annual reports to the federal government. However, their reports only utilized six very broad categories, including technology and sanitation, to disclose how funds were used. ProPublica analyzed more than 16,000 of such reports for the period March 2020 to September 2020 and found that billions of dollars were categorized as funding “Other.” For example, some of the largest school districts in the country categorized all of their aid under the “Other” category, including Los Angeles Unified, which spent $49.5 million, and New York City’s schools, which spent $111.5 million.
ProPublica points out that since there is not a centralized and detailed federal tracking system, monitoring of how the relief funds given to over 13,000 school districts has been up to individual states. Some school districts have expended the funds in a way that it is not at all consistent with the federal aid program, such as by using the funds for track and field facilities and bleachers. The article cited both a school district in Iowa (Creston Community School District) and one in Pulaski County, Kentucky as engaging in such spending.
Importantly, the federal aid program delineated at least one very clear goal. The funds were to be used to re-open schools to maximize in-person learning. Broadly speaking, the funds were to be used to address the impact of the pandemic. There have been numerous articles that have detailed the educational and emotional fallout from remote learning. It is surprising to learn that there have not been directed efforts to help students make a smooth transition back to in-person learning and to recover from any lapses in their educational and/or social, emotional development as a result of the pandemic. Instead, for example, in Texas, the McAllen Independent School District spent $4 million of its relief funds to build a 5-acre outdoor learning environment associated with a local nature and birding center owned by the city. Although the concept may be a good one in theory, it fails to address “the urgent learning needs of children who have been directly impacted by the pandemic.” Critics have pointed out that the outdoor area will not even be completed before 2024, so half of the children there will not benefit from the outdoor center at all.
Perhaps it is not too late for school districts to make the right choices in terms of spending federal aid. Although most of the aid was dispensed from March 2020 to March 2021, the school districts have until 2024 to budget how the funds will be utilized. Given the federal government has started to request basic information from states about how their school districts have used their funds, hopefully, the school districts will re-calibrate their spending and set forth goals consistent with the overall aim of the relief program.
Hoffman Fuller Associate Professor of Tax Law, Tulane Law School
Thursday, October 21, 2021
In prior posts, I have examined the problem of racial discrimination in private schools and how tax-exempt law might address this systemic problem. Today, I wanted to explore race issues that are present in tax-exempt law more broadly. Ideally, examining the issue from a broader perspective will produce creative ways of addressing racial discrimination in private schools.
A great primer on race issues and tax-exempt law is the 2004 article entitled Race and Equality Across the Law School Curriculum: The Law of Tax Exemption by David A. Brennen. As Brennen observes, race bias in terms of tax-exempt law is focused on the justice or injustice in regard to blacks of the statutory requirements to gain and keep tax-exemption. One of the main advantages of pursuing an activity through a tax-exempt organization is that such activity may be funded through public and governmental financial support, namely through tax expenditures. In other words, tax-exempt organizations receive a financial subsidy or financial benefit from the government by virtue of their tax-exempt status. Brennen asks a poignant question: “How should the government allow tax-exempt organizations to use this indirect, but admittedly financial government/public benefit?” Accordingly, he next turns directly to an examination of the Bob Jones University public policy doctrine and its implications for racial preferences of tax-exempt charities.
At the same time, Brennen raises at least two distinct issues aside from the public policy doctrine that are relevant to tax-exempt private schools. First, he queries whether a charity (such as a private school) should be required to have a racially diverse board of directors if indeed it is to represent the broad community that it claims it serves. This makes sense because one of the conditions for receiving tax-exempt status is to show that the organization will benefit the public broadly, rather than a group of pre-selected individuals. Second, Brennen considers whether the prohibition on tax-exempt social clubs’ engaging in racial discrimination should be expanded or revised. (As an aside, a third interesting point that Brennen raises is how restrictions on political activity might affect tax-exempt charities that have historically served as a meeting ground and voice for the black community, such as black churches). One must conclude as Brennen does that it is important to examine how certain laws are affecting different racial groups with an eye to possible correction. His solution of requiring board diversity in the context of tax-exempt private schools is one worth noting.
Hoffman Fuller Associate Professor of Tax Law, Tulane Law School
Thursday, October 14, 2021
An article in today's Religion News Service reports that the most recent round of the Faith Communities Today survey (FACT), found a median decline in worship attendance of 7% between 2015 and 2020. What is also quite interesting is that the survey period ended before the onset of the COVID-19 pandemic.
The new survey of 15,278 religious congregations across the United States confirms trends sociologists have documented for several decades: Congregational life across the country is shrinking.
According to RNS,
The survey, fielded just before the coronavirus lockdown, finds that half of the country’s estimated 350,000 religious congregations had 65 or fewer people in attendance on any given weekend. That’s a drop of more than half from a median attendance level of 137 people in 2000, the first year the FACT survey gathered data.
Scott Thurman, director of the Hartford Institute for Religion Research and the survey’s author, had this to say: “The dramatically increasing number of congregations below 65 attendees with a continued rate of decline should be cause for concern among religious communities.”
Produced by the Hartford Institute for Religion Research, the FACT survey consists of self-reported questionnaires sent out to congregational leaders every five years since 2000 — mostly through 20 collaborating denominations and faith traditions. According to RNS, the most recent survey found that mainline Protestants suffered the greatest decline over the past five years (12.5%), with a median of 50 people attending worship in 2020. Evangelical congregations declined at a slower rate (5.4%) over the same five-year period and had a median attendance of 65 people at worship. Catholic and Orthodox Christian churches declined by 9%. The only groups to boost attendance over the past five years were non-Christian congregations: Muslim, Baha’i and Jewish.
The survey found that half of the nation’s congregations were in the South, even though only 38% of the U.S. population lives there. It also suggested that small congregations in rural areas and small towns may be unsustainable. Nearly half of the country’s congregations are in rural areas (25%) or small towns (22%), while the 2020 census found that only 6% of Americans live in rural areas and 8% in small towns.
One bright spot in the study is this: Congregations are becoming more racially diverse. In 2000 only 12% of congregations were multiracial. In the latest survey, the figure climbed to 25%.
The survey defined multiracial congregations as those where 20% or more of participants are not part of the dominant racial group.
Many researchers are now investigating if racial diversity also equals integration in relationships — or if people are simply attending church together. Previous research has also found increased diversity is one-directional.
“It’s still in the direction of predominantly white churches becoming less predominantly white, said Chaves. “It’s very little in the other direction. There’s not a big increase in diversity in predominantly Black churches.”
Professor Vaughn E. James, Texas Tech University School of Law
Tuesday, October 12, 2021
A special report published in yesterday's NonProfit Times revealed that more than half (53%) of nonprofits have had greater demand for their services during the COVID-19 pandemic, and one-third are experiencing higher operating costs. Indeed, four in 10 nonprofits have cut operating costs, and one-third have pared back programs or services.
The Times' report cites to the 2021 Nonprofit Leadership Survey Report from Grassi Advisors & Accountants. According to the report, cutbacks hit smaller nonprofits harder than larger ones, with 48% of those having costs less than $5 million experiencing cutbacks, compared with 37% of those with expenses in the $5 to $25 million range and 36% with costs greater than $25 million.
Nonprofits have explored a variety of cost-cutting and revenue-supplementing activities. Slightly fewer than one-quarter (23%) have renegotiated leases and other contractual financial obligations. Some 7% have terminated automatic payments and 15% have increased their draws on their endowments. And, 5% merged with another nonprofit during the past year.
Human capital is also being affected. Nearly one-third of nonprofits had layoffs and furloughs, while 12% reduced employee benefits. Two in 10 are operating under a hiring freeze.
Nonprofits are experiencing great difficulty in locating volunteers to make up for their lost employee time. According to the report, 22% report challenges recruiting and managing volunteers. Given COVID concerns, this is not surprising. More than two-thirds (68%) of nonprofits have at least some staff that work in close physical contact with the populations they serve. Officials at nearly that many (63%) said the outbreaks had been at least somewhat of a problem for them.
In more bad news, notwithstanding their cost cutbacks, nonprofits are not on steady financial footing: A mere 2% report having at least 12 months of liquidity, with officials at roughly one-third indicating they have fewer than three months, between four and six months or between seven and twelve months of liquidity.
The Times continues:
[W]hile fewer than half (47%) report drops in funding, that level is likely due to Paycheck Protection Program loans and other federal relief programs. Another quarter said their funding had remained steady, while only 26% reported funding increases.
Working capital lines of credit offer only finite hope for nonprofits. Overall, 63% have access to this resource while one-third do not. And of those with this resource, 27% have availed themselves of it during the past 12 months.
Nonprofits aren’t being static in the face of COVID-related challenges. More than seven in 10 (71%) implemented new technologies during the past year, although many of these likely were in support of remote or home-based staff. Another 42% created new programs and services, while 36% launched new collaborations with other organizations.
Nonprofit managers also used the pandemic as a time for organizational self-reflection: 22% began to target and serve new client populations, 22% renewed their mission statements and 12% changed their mission.
Looking to the future, The Times -- and the report from Grassi Advisors & Accountants -- opine that to be successful, nonprofits will need
Funding, funding, funding. While 60% said their top priority was attracting [and] retaining qualified people, the next three priorities bunched revenue concerns, with 56% seeking improved fundraising, 55% indicating a pressing need for more funding for overhead costs, and 54% citing the need to stabilized revenue and cash flow.
For many, however, the future will look different. Currently 43% are considering working collaborations with other organizations to deliver their services, and 21% are mulling a merger. Two percent say closure is a possibility, and barely over half – 54% – indicated none of these options are on the table.
Things certainly look different for the future.
Prof. Vaughn E. James, Texas Tech University School of Law
Friday, October 1, 2021
WBEZ, Chicago's NPR station, is reporting that its board of directors approved a "non-binding letter of intent" to pursue the acquisition of the Chicago Sun-Times, one of two large legacy newspapers in Chicago.
The Sun-Times has, like many newspapers, been facing financial difficulties over the last couple decades. It filed for bankruptcy about a dozen years and has changed hands a few times since then.
As best I can tell from the article, the Sun-Times would continue as an independent organization, but would join WBEZ as a nonprofit, tax-exempt organization.
Thursday, September 30, 2021
In keeping with yesterday's discussion of college athletics, yesterday, an article about William Singer and the Varsity Blues admission scandal came up in my Twitter feed yesterday. And, while I haven't really thought about Singer in a year or two, it's worth revisiting a little.
The news hook is that the prosecution rested its case against Gamal Abdelaziz, who is accused of paying $300,000 to get his daughter into USC as an alleged basketball player, and John Wilson, who paid a total of $1.2 million to get his three kids into USC, Stanford, and Harvard as athletes. These are the first two parents to go to trial, though 33 of the 40 parents charged have pleaded guilty.
The news from yesterday has two main takeaways. First, a forensic accountant testified that Singer personally made nearly $28 million in the scheme.
Tuesday, September 28, 2021
A couple weeks ago, a California federal judge dismissed a lawsuit filed by James Huntsman against the Church of Jesus Christ of Latter-day Saints. The suit got a reasonable amount of attention in my (Mormon, legal) circles, and seems to have gotten a fair amount of play in Utah, for two reasons. One is that it involved the Mormon church and a mall (more on that in a minute). The second was, it involved James Huntsman, brother of former (among other things) Utah governor Jon Huntsman and part of the prominent-within-the-Mormon-church Huntsman family.[fn1]
And what was his suit? In short, Huntsman was suing for the return of a couple decades' worth of tithing he had paid into the church.
As we all know, unless you make a restricted gift to a charity, the general rule is that once you make a charitable contribution, the money is out of your hands. If you don't like what the charity does with the money, you take your charitable deduction and you stop donating to that charity going forward. But you can't get your unrestricted donations back. (And in case it doesn't go without saying, tithing payments are unrestricted gifts.)
Thursday, September 9, 2021
Writing for today's edition of Religion News Service (RNS) news, Kathryn Post states that the Supreme Court’s August 26 decision to end the federal eviction moratorium brings new challenges for religious leaders and organizations working to aid those at risk for homelessness. Post cites to recent data from the U.S. Census Bureau indicating that more than 3.6 million Americans say they could face eviction in the next two months.
This startling statistic has brought the following response from Sarah Abramson, vice president of strategy and impact at Combined Jewish Philanthropies in Boston: "We’re very, very nervous. There is already a tremendous housing shortage in Boston. And we know from our data, and from the experience of our partners who do this work, just how difficult it was for somebody who has been evicted in the past to get housing.”
Jerrel T. Gilliam, executive director of Light of Life Rescue Mission in Pittsburgh, also shared concerns: “We are going to need to be very creative, and to think outside the box in order to prepare for what could be a potential onslaught of people needing assistance in a short amount of time.”
In its August 26 decision, the Court ruled that the Centers for Disease Control and Prevention lacked the authority to establish a federal eviction moratorium. According to the Court, such a moratorium requires congressional approval. The decision comes as renters and landlords face a backlog of promised funds. According to Census Bureau data, the government has thus far distributed only about $5.1 billion of the $46.5 billion in federal rental assistance funds intended to prevent eviction.
“We definitely have to work hard to make sure that money reaches people,” said Shams DaBaron, a New York activist who also goes by “Da Homeless Hero.” “We have to cover both sides: these small landlords that need it, and those who are extremely poor.”
DaBaron is currently living in an apartment with the support of a voucher program, but he says the city is behind on three months of rent. An eviction moratorium is one measure that can help buy more time while such funds face bureaucratic delays.
DaBaron gained national attention as unofficial spokesperson for the residents of the Lucerne, a hotel-turned-shelter during the pandemic in Manhattan’s Upper West Side that became the center of New York’s “homeless hotel” debate. When he was not advocating for his fellow residents, DaBaron partnered with local group Open Hearts to develop a program called Soulful Walk and Talks. The program provided hotel shelter residents the opportunity to walk to the nearby Riverside Park with local faith leaders from a range of religious traditions who provided a safe space for spiritual reflection.
“We didn’t want to make it a religious thing, but we understand the value of spirit, of soul, of that deep essence within everybody,” said DaBaron. “One of the things that came out of it, from talking to many of the faith leaders, is that many of them were transformed, just as many of us were transformed.”
“It was definitely very impactful,” said Rabbi Lauren Herrmann of the Society for the Advancement of Judaism, who joined in the Walk and Talks and organized other clergy participants. “For one thing, I really understood for the first time in my life the issues surrounding the shelter system, and why people choose to be on the streets instead of being in shelters. … The shelter system is deeply broken, and some of the stories I heard were deeply upsetting.”
Herrmann and DaBaron see the Soulful Walk and Talks as tending to the essential spiritual needs of those facing homelessness. They hope to continue and expand the program as the federal eviction moratorium lifts. Yet, DaBaron and Herrmann also pointed to structural changes that need to take place. New York state implemented a new eviction moratorium on Sept. 1 that extends until January 2022. However, the moratorium does not address the city’s lack of affordable housing, the income cliffs that foster dependence on government programs and the health and safety risks facing those in congregate shelters, where many former Lucerne residents are finding themselves since the hotel shelter closed this summer.
In Pittsburgh, Light of Life Rescue Mission takes a multifaceted approach to homelessness by providing a range of services including case management, education, unemployment services and accommodations for those facing housing insecurity.
Gilliam, the Christian organization’s executive director, is concerned the end of the eviction moratorium will mean a sudden, sharp increase in the number of residents facing evictions. At one point during the pandemic, evictions in Pittsburgh slowed to a complete halt — in a typical year, according to Gilliam, Pittsburgh sees 14,000 evictions.
Gilliam suggested implementing preventive measures that would allow landlords to receive rent payments while enabling those at risk for evictions to find suitable housing.
“We’re pleading with everyone,” said Gilliam. “Let’s try to get people help while they’re still in the home and help the landlord have another month or two of rent, so that we can find a place for them without them having to pass through homelessness to get assistance.”
The pandemic has not been as kind to all religious organizations working to serve those facing housing insecurity. Chaplain Asma Inge-Hanif, founder and executive director of Muslimat Al Nisaa, has been serving the Baltimore community for 30 years. The organization provides health, education and social services to all, regardless of their ability to pay, and its Home Shelter is especially designed to meet the needs of Muslim women. She says her organization has served thousands of people over the years.
In the last year and a half, Inge-Hanif almost died from COVID-19 and lost her organization’s signature location. “I couldn’t pay the rent anymore, even though they claim there was an eviction moratorium,” she said. Now, Inge-Hanif is working to keep the shelter open on a small scale so she can help meet housing needs, especially those of people arriving from Afghanistan.
“I’m getting so many requests all the time from people who are getting evicted,” she said. “It’s often people who have no status and people of color. Everyday I get seven to 10 requests for shelter and housing. And I can’t help them.”
As the federal eviction moratorium ends, Inge-Hanif is hoping to raise money for an apartment building so she can house more people. She also says governments need to make rental assistance and other services more accessible.
“That’s why people are being evicted. They can’t get through the paperwork,” said Inge-Hanif. “The people who need the help are not in a position to maneuver through all the red tape. … The way the system is set up prevents the people who are most in need from actualizing success and being self-sufficient.”
That, indeed, appears to be the sad truth.
Prof. Vaughn E. James, Texas Tech University School of Law
Wednesday, September 8, 2021
In Revenue Procedure 2021-40, 2021-38, IRB (due for publication on September 20, 2021), the Internal Revenue Service is set to announce that it will no longer issue letter rulings on whether certain transactions are self-dealing within the meaning of section 4941(d) of the Internal Revenue Code. In making the announcement in a recent Guidewire release, the Service stated that specifically, it "will not issue rulings on whether an act of self-dealing occurs when a private foundation (or other entity subject to section 4941) owns or receives an interest in a limited liability company or other entity that owns a promissory note issued by a disqualified person." This approach amplifies Rev. Proc. 2021-3, 2021-1 IRB 140, which sets forth areas of the Internal Revenue Code relating to issues on which the Internal Revenue Service will not issue letter rulings or determination letters.
Prof. Vaughn E. James, Texas Tech University School of Law
Tuesday, August 24, 2021
As the Nonprofit Times reports: "
"Lester M. Salamon, a pioneer in the study of nonprofits and a prolific author about civil society and philanthropy, died on Friday at his home in Arnold, Md. He was 78. The cause of death was not announced.
Salamon was Professor Emeritus at the Johns Hopkins University and was director of the Johns Hopkins Center for Civil Society Studies (CCSS). “While Dr. Salamon’s passing catches many of us off guard, true-to-form, he was actively working until the very last possible moment. His dedication, energy, and passion will be hard to match,” the center officials said via a statement issued today.
The statement continued: “Our collective loss will resonate across the field of nonprofit and third sector research in the United States and throughout the world. Dr. Salamon pioneered the empirical study of the nonprofit sector in the United States and then globally in partnership with extended network of colleagues.”
The New York Attorney General's Charities Bureau chose to suspend its collection of Schedule B with substantial donor information. It intends to study the question of whether it can constitutionally collect this information in light of the recent Supreme Court decision in Americans with Prosperity Foundation v. Bonta.
They state: "The New York Attorney General’s Charities Bureau has suspended its collection of IRS Form 990 Schedule B while we review any amendments that may be necessary to our policies, procedures and forms in order to comply with the U.S. Supreme Court’s decision in Americans for Prosperity Foundation v. Bonta (594 U.S. __, 2021). Effective immediately, charities’ annual filings will no longer require disclosure information that identifies donors. Any notices that charities have received regarding any deficiency due to missing or incomplete Schedule Bs are no longer operative as to such deficiency, and annual filings will no longer be considered deficient in such regard."
Thursday, August 19, 2021
In February, Lloyd mentioned that the 4th edition of the Model Nonprofit Corporations Act was available for comment.
In May, the ABA released the Final Exposure Draft of the Model Act. And while I have every intention of reading through it entirely, I haven't yet.
I did start it, though. And one change it makes is the introduction of "designated bodies." Under the new Model Act, a designated body is a group to whom some, but not all, of the powers, authorities, or functions of the Board of Directors have been designated.
In an Official Comment, the ABA committee explains that it created the concept of designated body because "it is sometimes desirable for a nonprofit corporation to depart from the traditional governance structure based on a board of directors and, in appropriate circumstances, members."
It is an interesting idea, but I'm trying to think through how this new designated body differs from a committee, which was explicitly authorized in the 3rd edition of the Model Act. I'd love to hear others' ideas about the relevance of this new governance body in the world of nonprofits.
Samuel D. Brunson
Friday, July 30, 2021
White House Announces New Religions Affairs Leaders, Including First Islamic Religious Freedom Ambassador
The White House announced Friday (July 30) a slate of nominations and appointments for top religious affairs roles, including the first Muslim American nominated to be the U.S. Ambassador-at-Large for International Religious Freedom.
According to a report by the Religious News Service (RNS), President Biden will select Rashad Hussain as his nominee for that post, filling a State Department slot vacant since former Kansas governor and U.S. Senator Sam Brownback left at the close of the Trump administration. Hussain, who would need to be confirmed by the Senate, currently works as director for Partnerships and Global Engagement at the National Security Council.
Mr. Hussain previously served as White House counsel under President Barack Obama, as well as U.S. special envoy to the Organization of Islamic Cooperation and U.S. special envoy for the Center for Strategic Counterterrorism Communications, among other roles.
Commenting on the upcoming nomination, Saeed Khan, an expert on American Muslim communities at Wayne State University, stated: “Rashad’s appointment demonstrates not only the importance the Biden administration places on religious freedom, it also shows the importance of the Muslim world to the administration both in terms of combatting Islamophobia and also promoting religious freedom in Muslim majority countries. Rashad’s background will allow him to have a frank discussion with Muslim majority countries about religious freedom.”
Anila Ali, a co-founder of the American Muslims and Multifaith Women’s Empowerment Council Iftar who has worked with Hussain in the past, also celebrated his nomination. “As AMMWEC, and as a woman leader, I look forward to working with him because women play an important role in peace-making,” Ali said. “He has worked with Muslim communities during the Obama period and we hope his relevant experience is going to make him a voice for all of us.”
According to the RNS report, President Biden is also expected to nominate Deborah Lipstadt as the next U.S. special envoy to monitor and combat antisemitism. Lipstadt is a professor at Emory University in Atlanta and a prominent Holocaust historian. She is the author of Antisemitism: Here and Now and is known for successfully defeating a libel suit brought against her by Holocaust denier David Irving.
Commenting on the expected nomination of Prof. Lipstadt, Mark (Moishe) Bane, president of the Orthodox Union, had this to say: “She is a leader with great moral courage; her dedicated work, clear voice in fighting Holocaust denial and preserving the memory of the attempted destruction of the Jewish people make her an exemplary choice for this role.”
In addition, President Biden plans to appoint two new commissioners to the United States Commission on International Religious Freedom: Khizr Khan and Rabbi Sharon Kleinbaum.
Khan became famous in 2016 when he and his wife, Ghazala, spoke during the Democratic National Convention as “Gold Star” parents, discussing their son, Humayun, a U.S. Army captain who died in Iraq in 2004. Mr. Khan, the founder of the Constitution Literacy and National Unity Project, runs his own law practice and has authored three books, including This is Our Constitution: Discover America with a Gold Star Father.
Kleinbaum, for her part, already served as a USCIRF commissioner in 2020 and leads the Congregation Beit Simchat Torah in New York City, a community that centers LGBTQ people. A human rights advocate, she also sits on Mayor de Blasio’s Faith Based Advisory Council and serves on New York City’s Commission on Human Rights. In addition, she is a board member of the New York Jewish Agenda and the New Israel Fund.
Prof. Vaughn E. James, Texas Tech University School of Law
As we enter the weekend, here is some news that makes the heart glad:
Created in 2017 by the city commission to stabilize the city's budget, lower property taxes, and address poverty, the foundation aimed to raise a total of $500 million by 2019. The new commitment, to be funded over a ten-year period, will establish a $500 million endowment and enable the city to balance its budget, maintain the 2017 property tax decrease for home and business owners, and support projects that address intergenerational poverty, economic development, parks improvements, youth development, affordable housing, and neighborhood infrastructure.
Speaking upon the announcement of commitment, Kalamazoo city manager and FFE co-founder and board president, Jim Ritsema, stated: "This remarkable gift is like none other. This is to our knowledge the largest gift in history to support a municipality."
"It is my hope," said Kalamazoo mayor, David Anderson, "that FFE can serve as a model to transform how we live together in community in a way that gives all of us more hope for the future."
FFE was launched with an initial donation of $70.3 million from William Johnston, head of the Greenleaf Cos., and William Parfet, retired chairman and CEO of MPI Research Co. The foundation has since received gifts including $57 million and $28.2 million from the Stryker Johnston Foundation. To date, the foundation has invested more than $120 million in support of efforts to address needs and projects identified by residents.
Prof. Vaughn E. James, Texas Tech University School of Law
Wednesday, July 28, 2021
The Giving Environment: Understanding Prepandemic Trends in Charitable Giving, a new study by the Indiana University Lilly Family School of Philanthropy at IUPUI, examines giving patterns across the past two decades from five nationally representative studies and concludes that giving to charity by U.S. households has been on the decline not only since the Great Recession but since the turn of the century: One out of two American households donated to charity in 2018 compared with two out of three in 2000.
The report, based on research funded by the Bill & Melinda Gates Foundation, noted that 66.2% of American households gave charitable contributions in 2000, a figure that dropped by 17% to 49.6% in 2018, the latest year for which data is available. It is the first time that giving has dipped below 50% of U.S. households since the studies began tracking this information.
It is also the first time since the Philanthropy Panel Study (PPS) began tracking the share of American households that donated to charity in a given year that the participation rate dropped to half.
Commenting on the study's conclusions, Una Osili, Ph.D., associate dean for research and international programs at the Lilly School, stated, “The new research offers clear evidence of a substantial decline in formal charitable giving rates prior to the unprecedented challenges of 2020.” With an eye on crowdfunding and impact investing as additional means of charitable giving, Dr. Osili further stated, “It’s also important to acknowledge the many additional ways individuals are participating in philanthropy today.”
According to a report in the NonProfitTimes which analyzed the study:
Data is not yet available to show whether the decline in participation continued in 2020. The study analyzed the latest data from the PPS, a module of the University of Michigan’s Panel Study of Income Dynamics. The study follows more than 9,000 households over time and provides the most comprehensive data available on giving trends by U.S. households.
Giving participation rates decreased for members of all racial and ethnic groups studied between 2000 and 2019. While giving to religious groups began its decline before the Great Recession in 2008-09 — 46% between 2000 and 2004 to 29% in 2018 — giving to secular causes didn’t begin to dip until after the economic downturn of 2008-09. In 2008, about 57% of households donated to secular causes, down to 52% in 2010, and a low of 42% by 2018. The decline in average amount donated to religious causes ($1,107 in 2000 to $771 in 2018) has outpaced the decline in average amount given to secular causes ($684 in 2000 to $509 in 2018).
The Times continues:
The largest drops in giving participation were found among Hispanic households, from 44% in 2000 to 25.5% in 2018, about 18.5%. During the same period, giving by Black households declined from almost 49% to less than 33% (16%) while participation by White households dropped from 71% to 58% (13%).
About one-third of the decrease in participation from 2000-16 can be directly attributed to shifts in income, wealth, and homeownership, according to the report’s authors, suggesting that factors like interpersonal trust, empathy and compassion, among others, also may play a role.
The General Social Survey (GSS), which includes questions about interpersonal trust, was another study examined for the report. It indicated that trust and giving participation rates declined simultaneously between 2002 and 2014:
The drop was more severe among Americans 30 and younger than among those older than 30. Younger Americans in 2002 reported giving participation of 84.5% with a 24.7% trust rate, compared with 78.9% and 18.6%, respectively, in 2014. Although the correlation does not mean that the decline in trust helped cause the decline in giving participation, it suggests there may be a relationship, according to researchers.
Now, that is something to think about.
Prof. Vaughn E. James, Texas Tech University School of Law
Thursday, July 22, 2021
Thought I'd provide some quick reflections on the NCAA v. Alston a SCOTUS case handed down a month ago on June 21.
First a personal reflection. When I joined the IRS in the mid 2000s, I was told only somewhat in jest: there are two iron clad rules in exempt organizations -- preachers and college athletics ("hook em horns") always win. This latest case suggests that this iron clad rule may be beginning to subside in part at least.
Justice Gorsuch, writing for a unanimous Court affirmed the US 9th Circuit Court of Appeals in finding that the NCAA rules restricting educational benefits offered by colleges and universities to student athletes violated the Sherman Antitrust Act.
The Court affirmed the 9th Circuit that found that the NCAA limits on educational compensation violated the Antitrust Act only insofar as they involved educational benefits rather than other forms of compensation.
Probably the most significant aspect of the case that may have impact on other places for the NCAA and college athletics is that SCOTUS rejected the idea that the NCAA ought be treated differently because it deals with amateurs and is engaged in education rather than commercial activity.
This case does not change anything for how to think about universities and college athletics qualifying as charitable organizations under section 501(c)(3). John Colombo wrote an article The NCAA, Tax Exemption and College Athletics that is still relevant to this question today.
First, I would not expect this decision to effect college athletics entities like the NCAA or the university athletic activities to be found to be not charitable. This is because Congress amended the Code to provide that promoting amateur athletics is a purpose that meets the charitable requirement of section 501(c)(3). Perhaps, if universities start paying athletes and their amateurism is called into question, this would become an issue, but as of now, I do not see it threatening college athletics on the tax exemption angle.
Secondly, this ruling does not immediately impact the unrelated business income tax and college athletics either. The IRS and Courts have generally been favorable to college athletics. Just as Colombo concluded in his article some years ago, I think it still unlikely for that favorability to end because of the Alston holding.
However, as in the first matter, should the veneer of amateur begin to fall, and college athletics begin to compensate athletes, then the question of unrelated business income tax could become a real issue again for college athletics. The most dangerous possibility for college athletics and its expected tax treatment at least was raised in a concurrence by Justice Kavanaugh who suggested he would find the limitations on all forms of compensation to violate the Antitrust Act.
Tuesday, July 6, 2021
About two weeks ago, I read a New York Times article about the latest round of MacKenzie Scott's philanthropy. The article caught my eye for two reasons: first, a $2.7 billion round of donations is massive. And second, a lot of the money was going to arts organizations (and, as the article noted, dance organizations).
At this point, I kind of have a long history of attending dance performances. I'd been to very few before I moved to New York and met my now-wife. I'm more of a music person, personally, but my wife is a dancer and a dance teacher. So I'm familiar with several of the names on this latest round of funding.
And what was interesting to me was the framing. The donations were framed as being made to "organizations which are themselves historically underfunded." Which is hugely laudable and maybe not entirely accurate. Two names especially caught my eye: Alvin Ailey ($20 million) and Jazz at Lincoln Center (some amount that I can't find online in a quick search).
Monday, July 5, 2021
One June 30, Yale announced that its drama school had received a $150 million gift from David Geffen. With that gift, Yale has eliminated tuition for its drama students. It explained that his gift has "remov[ed] financial barriers to access."
According to the school, the $150 million donation is the largest in the history of American theater. And when you make the largest gift in the history of American theater, you get some benefits. Geffen's benefit? The Yale drama school has renamed itself--it is now the David Geffen School of Drama at Yale.
This isn't the first time a wealthy donor has gotten their name put on something they donated to, of course. It's not even the first time David Geffen has gotten his name on something: Lincoln Center's Avery Fisher Hall has been David Geffen Hall since he gave $100 million to Lincoln Center in the mid-2010s (or at least since Lincoln Center bought back the naming rights from the Fisher family).
Thursday, July 1, 2021
It’s rare we get a Supreme Court decision that falls squarely within the realm of “nonprofit law,” but today’s the day! The Court decided Americans for Prosperity Foundation versus Bonta. 501(c)(3)-exempt organizations challenged, on First Amendment grounds, a California law that required disclosure to the state of major donors to the organizations. Largely as expected, the Court vacated the 9th Circuit and struck down California’s donor disclosure requirements. Here’s my quick take, although I suspect other bloggers will be writing about this case as well.
No Threshold Chilling Showing is Required. One of the biggest divides between the majority and the dissent is whether the plaintiffs must first make a threshold showing that the disclosure requirement is meaningfully chilling its speech or its associational interests. As long as there is a “risk” of such a chill, the majority immediately places the burden on the government to show that the disclosure is justified. The dissent, in contrast, would first require "plaintiffs [to] plead and prove that disclosure will likely expose them to objective harms, such as threats, harassment, or reprisals."
Standard of review. The biggest thing we needed from the Court was clarification about what the standard of review was. And we didn’t get that. Instead, we have this breakdown:
Chief Justice (plurality in part II-1-B): "Regardless of the type of association, compelled disclosure requirements are reviewed under exacting scrutiny."
Thomas: Apply strict scrutiny: "Laws directly burdening the right to associate anonymously, including compelled disclosure laws, should be subject to the same scrutiny as lawsdirectly burdening other First Amendment rights."
Alito + Gorsuch: don't need to decide between strict and exacting scrutiny because California's law fails both (and "[t]he question is not even close.")
We fortunately did get some clarification on what exacting scrutiny means, at least in this context: “Where exacting scrutiny applies, the challenged requirement must be narrowly tailored to the interest it promotes, even if it is not the least restrictive means of achieving that end.” So the government must show more than a “substantial relation” between its goals and its ends, but need not show that it is the least restrictive. We’ll see how that turns out in practice.
Applying the standard.
The majority agrees "that California has an important interest in preventing wrongdoing by charitable organizations." However, the Court perceives a mismatch between amount of info disclosed (tens of thousands of charities) and the number of cases where that information is used/investigated (tiny). The Court describes the State's interest in broad proactive disclosure as "less in investigating fraud and more in ease of administration." Via Twitter, Phillip Hackney (@EOTaxProf) argues that this downplays the State's interests: first as a deterrent to those who might misuse the laws, and second to know who might be misusing a charity for fraudulent purposes. Without that information regulators are in the dark and unable to see fraudulent patterns." But the Court does not discuss this.
It's also significant that the district court made factual findings following a bench trial that rejected many of the state's asserted interests. The majority's ability to cite deference to the district court's findings allowed it to avoid a fact-intensive application of the standard.
Tax-Exemption. The Court left open the possibility that such disclosure requirements could be validly imposed through "revenue collection efforts and conferral of tax-exempt status." Recall that the California rules were implicated not by a charity's tax exempt status but merely operating in the state/soliciting donations. As the Court's citation to Regan v. Taxation with Representation confirms, the government has more latitude to impose restrictions as a condition of tax-exempt status (which is considered a government benefit) than it does when limiting/restricting/impeding on a constitutional right. Therefore, there's nothing about the opinion's logic that would call into doubt the constitutionality of the disclosure requirements in federal tax law.
Optics. One final note from me is that I worry about the way that this decision has been described in public discourse. This is ultimately a case about disclosure requirements for nonprofits that are not engaged in electioneering. The plaintiffs had support from a range of nonprofit ideologies -- such as the ACLU and the NAACP. This was not simply a case about campaign finance, or about conservative dark money. The news clips and commentary that reduce the case along political lines may be more dramatic and may fit in with some broader narrative, but they elide the actual dynamics of what is going on in the case.
That's my quick take. Look forward to reading others' views!
Sunday, June 27, 2021
In a 2000 EO CPE article entitled Private Schools, the Service stated, “private schools have long been of concern to the Service.” As stated therein, the Service’s determinations of whether private schools qualify for exemption under IRC 501(c)(3) were addressed in many of the CPE texts from 1979 through 1989. In Private Schools, the Service provided an important historical review, a discussion on the requirements of Rev. Proc. 75-50, 1975-2 C.B. 587, and a summary of the various filing requirements that apply to private schools.
In recounting the history of this problem, the CPE article notes the background and current status of an injunction (still in effect) that requires the Service to deny tax-exempt status to racially discriminatory private schools in Mississippi. The injunction resulted from a 1970 class action filed to prevent the Service from recognizing the tax-exempt status of or allowing IRC 170 deductions to private schools that engage in racial discrimination against black students. See Green v. Connally, 330 F. Supp. 1150 (D. D.C. 1971), aff'd sub nom., Coit v. Green, 404 U.S. 997 (1971). It is interesting to examine the injunction in place for Mississippi in considering how to handle the systemic problem of racially discriminatory private schools today. The CPE article states the following regarding Mississippi private schools:
These so-called “Paragraph (1) Schools” must demonstrate that they have adopted and published a nondiscriminatory policy. They must also provide certain statistical and other information to the Service to establish that they are operated in a nondiscriminatory manner. Most importantly, they must overcome an inference of discrimination against blacks.
As of now, the injunction from Green only applies to Mississippi schools. Clearly, Green provides a model for how to implement the restriction against private schools’ engaging in racial discrimination. The focus on “statistical” information is really the key. As we all know, numbers do not lie. If private schools were free and open to all, the student body at private schools would not be 90% or more white. The same is true regarding the bleak number of black teachers at private schools. The injunction from Green could cure some of the prevalent and pervasive problems of racial discrimination in private schools throughout the South.
Hoffman Fuller Associate Professor of Tax Law
Tulane Law School