Friday, August 19, 2022
Two recent examples of nonprofit reporting moving slowly into the 21st century. First, as of September 19, 2022 the New York Attorney General's Charities Bureau will require all annual filings to be submitted online. The website provides an instructional video and an interactive online checklist for charities unfamiliar with the online submission process. Second, earlier this week the IRS announced that Form 990-N filers will need to use the IRS authentication platform to submit this form. This requires either an active IRS username or an account with ID.me.
Tuesday, August 16, 2022
Earlier this month the IRS released a spreadsheet showing the excise taxes reported by charities, private foundations, and split-interest trusts on Form 4720 for calendar year 2021. It included two notable figures relating to new excise taxes enacted by Congress in 2017.
First, 516 tax-exempt organizations reported owing $210 million in IRC section 4960 excise taxes on excess executive compensation (over $1 million annually paid to covered employees, plus certain excess parachute payments). This compares to only 302 tax-exempt organizations reporting owing $96 million in such taxes for calendar year 2020, likely reflecting increased awareness among tax-exempt organizations and their advisors about the tax as opposed to a large jump in the amount of excess executive compensation. The IRS has also made compliance with this tax a compliance focus, stating that "[o]n-going review of filing data shows there continues to be a high volume of exempt organizations that paid compensation of over $1 million to at least one 'covered employee' but did not report IRC Section 4960 excise tax on Form 4720" (see Tax Exempt & Government Entities – Compliance Program and Priorities).
Second, 33 tax-exempt organizations reported owing $68 million in IRC section 4968 excise taxes on investment income of certain private colleges and universities. This compares to fewer than 10 organizations reporting owing less than $3.2 million in such taxes for calendar year 2020. Given the relatively high profile of this new tax, and the fact that only colleges and universities with very large endowments relatively were affected, it is unclear why there was such a large increase in both the number of organizations reporting the tax and the amounts owed.
The IRS yesterday released final regulations under IRC section 6104(c) relating to how states may obtain non-public tax-exempt organization information from the IRS, including involving final and proposed denials and revocations of tax-exempt status. Only one comment was submitted in response to the 2011 (yes, 11 years ago) proposed regulations, issued in response to statutory changes made by the Pension Protection Protection Act of 2006. According to the Preamble to the final regulations, there is only one clarifying substantive change to the proposed regulations (as well as several non-substantive clarifying changes). The substantive change was to make it clear that the agent-contractor disclosure prohibition applies both to IRS disclosures and to appropriate State officer (ASO) disclosures.
One interesting piece of information from the Preamble is that the IRS now has section 6104(c) information sharing agreements with nine ASOs, all of whom are State tax officers responsible for administering State tax laws. The Preamble also indicates the IRS is hopeful that the issuance of final regulations will facilitate additional such agreements. That said, the requirements states must satisfy under section 6104(c) to access non-public information are relatively strict, and the final regulations necessarily have to reflect the strictness of the statutory scheme.
Thursday, August 4, 2022
Propublica reported a few weeks ago that the IRS had granted church status to a right-wing think tank, the Family Research Council. Sam Brunson blogged on here about why FRC might be interested in obtaining this special status.
"We are writing to express concern regarding the Family Research Council’s (FRC) tax-exempt status as an “association of churches.” In addition, we request a review of the existing Internal Revenue Service (IRS) guidance related to political advocacy organizations self-identifying as “churches” to obtain the status of churches, integrated auxiliaries, and conventions or associations of churches.
As you know, Congress has enacted many special tax rules that apply to churches and religious organizations. Under Section 501(c)(3) of the Internal Revenue Code (Code), churches are tax exempt organizations and are not required to file IRS Form 990, which provides transparency on tax-exempt organizations’ board members, key staff salaries, donations, and large payments to contractors. Further, there are special limitations on how and when the IRS can conduct an
examination of churches. In accordance with section 7611 of the Code, the IRS cannot conduct tax inquiries of churches without approval from a “high-level Treasury official.”
Thursday, July 7, 2022
The GivinG USA Foundation published its annual Giving USA report on charitable giving in 2021. According to the Indiana University Lilly Family School of Philanthropy, which researches and writes the report, here are some of the highlights:
- Total charitable giving grew by 4.0% to $484.85 billion, with $326.87 billion or slightly less than 70% coming from individuals. The remaining giving came from foundations ($90.88 billion), bequests ($46.01 billion), and corporations ($21.08 billion).
- The largest recipient area remained religion at $135.78 billion, followed by education at $70.79 billion, human services at $65.33 billion, and foundations at $64.26 billion, with lesser amounts to public-sector benefit organizations (e.g., United Ways and national donor-advised fund sponsors), health, arts, international affairs, and environmental.
Separately, the IRS Statistics of Income Office released spreadsheets with data on Noncash Charitable Contributions by individuals for tax year 2019. Highlights include:
- Over 3.9 million returns reported over 12.5 million noncash charitable contributions on Form 8283, with a total fair market value of over $96.5 billion.
- Donated investments accounted for almost half of the value donated ($45.0 billion), with real estate (including land and easements) accounting for an additional $33.9 billion and other categories such as clothing, household items, and art/collectibles making up the rest.
Wednesday, July 6, 2022
N.Y. Times, led by Pulitzer Prize-winning reporter David Fahrenthold, has been gathering information about the IRS exemption application process. In a story over the holiday weekend, it reported on a single individual who created dozens of fake charities and obtained IRS recognition of tax-exempt status for them, even after being warned about the scam by the American Cancer Society. The story highlights what nonprofit legal experts have long known - the application process has essentially become a registration process, particularly for applications submitted using the Form 1023-EZ. Combined with the less than 0.2 percent examination rate for exempt organization returns, and the very limited and inconsistent level of resources states devote to overseeing charities, it should be no surprise that fraudsters often use purported charities to enrich themselves, banking on the halo effect of IRS recognition to fool donors.
The 2021 IRS Data Book, covering the fiscal year that ended on September 30, 2021, contains its usual treasury trove of information about exempt organizations. Notable facts include:
- There are 1,980,571 tax-exempt organizations, nonexempt charitable trusts, and split-interest trusts (Table 14), of which 1,828,187 are recognized under IRC section 501(c) (1,431,266 under section 501(c)(3)) and 42,697 under IRS section 527 (political organizations).
- The IRS closed 94,466 applications for recognition of exemption (Table 12), approving 81,583 (86.4%), disapproving 84 (0.1%), and resolving 12,793 (13.5%) in other ways (including withdrawal, lacking required information, or incomplete). The vast majority (90,461 or 95.8%) of the applications were under IRC section 501(c)(3), with the next closest categories being approximately a thousand applications each under section 501(c)(4) and section 501(c)(6).
- The IRS also received 3,334 notices of intent to operate under Section 501(c)(4) (Table 13), of which it rejected 465 for a variety of reasons, including that notice was not required because of a previously filed annual information return or application for recognition of exemption, or the organization was exempt under a section other than 501(c)(4).
- The IRS examined (Table 21) only 1,383 Forms 990, 990-EZ, and 990-N, an additional 203 Forms 990-PF, 1041-A, 1120-POL, and 5227, 748 Forms 990-T, and 301 Forms 4720. This compares to 1,360,719 exempt organization returns filed in 2020 and 1,722,803 filed in 2021, which figures include all of the above forms except for Forms 1041-A and 1120-POL This means even taking into account examination lag the examination rate was less than 0.2%.
Monday, June 27, 2022
The Office of Tax Legislative Counsel in the Treasury Department's Office of Tax Policy is seeking an Attorney Advisor with exempt organizations experience, as well as in other areas. The just extended deadline for applying is this Thursday, June 30th. Here are the qualifications (emphasis added):
You must meet the following requirements by the closing date of this announcement.
Specialized experience for the GS-15: You must have one year of specialized experience at a level of difficulty and responsibility equivalent to the GS-14 grade level in the federal service. The expectation for selection for grade GS-15 will be at least the following: 12 months of pertinent legal experience at the GS-14 (or equivalent) level. Specialized experience for this position is defined as proven proficiency and experience in the following:
-Experience providing counsel in the area of federal taxation including guidance on: income and transfer tax rules for individuals, trusts, and estates; rules related to charities and other exempt organizations, as well as state, local, or Indian tribal governments; taxation of partnerships, S corporations, or other pass-through business entities and their owners and/or energy tax incentives. AND
- Experience conferring with persons or groups interested in their suggestions for new legislation or on complaints with respect to existing legislation, answering questions relating to tax legislation, conferring with the appropriate interested officials, attorneys, or other technical employees with respect thereto. AND
- Experience with original investigation and research, preparing detailed memoranda and making recommendations on action to be taken.
This experience may have been gained in either the public or private sector. One year of experience refers to full-time work; part-time work is considered on a prorated basis.
Saturday, May 21, 2022
Two recent news stories underline the importance of crowdfunding for supporting Ukraine and Ukrainians. The N.Y. Times reports that Ukrainian appeals to private individuals and companies have led to contributions of numerous items that have military applications, including drones, night vision scopes, body armor, rifles, and ammunition. The Chronicle of Philanthropy reports that the Ukrainian government is enhancing its crowdfunding efforts to keep support flowing even as the Russian invasion of Ukraine passes the three-month mark.
And even the incredibly busy IRS has taken the time to ease ways of supporting Ukraine. Notice 2022-28 provides guidance on how employers can adopt leave-based donation programs to aid citizens and residents or Ukraine, individuals presently in Ukraine, or refugees from Ukraine. Importantly it states:
Employer leave-based donation payments made by an employer before January 1, 2023, to section 170(c) organizations to aid victims of the further Russian invasion of Ukraine (qualified employer leave-based donation payments) will not be treated as gross income or wages (or compensation, as applicable) of the employees of the employer. Similarly, employees electing or with an opportunity to elect to forgo leave that funds the qualified employer leave-based donation payments will not be treated as having constructively received gross income or wages (or compensation, as applicable).
Monday, April 25, 2022
IRS issued a useful reminder last week that May 16, 2022 is the upcoming deadline for filing the Form 990 series and Form 4720.
IR-2022-93, April 21, 2022
WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations that many have a filing deadline of May 16, 2022. Those that operate on a calendar-year (CY) basis have certain annual information and tax returns they file with the IRS. These returns are:
- Form 990-series annual information returns (Forms 990, 990-EZ, 990-PF)
- Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or Form 990-EZ
- Form 990-T, Exempt Organization Business Income Tax Return (other than certain trusts)
- Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code
Mandatory electronic filing
Electronic filing provides fast acknowledgement that the IRS has received the return and reduces processing time, making compliance with reporting requirements easier.
Organizations filing a Form 990, 990-EZ, 990-PF or 990-T for CY2021 must file their returns electronically. Private foundations filing a Form 4720 for CY 2021 must file the form electronically. Charities and other tax-exempt organizations can file these forms electronically through an IRS Authorized e-File Provider.
Organizations eligible to submit Form 990-N must do so electronically and can submit it through Form 990-N (e-Postcard) on IRS.gov.
"To help exempt organizations comply with their filing requirements, the IRS provides a series of pre-recorded online workshops," said Robert Malone, Exempt Organizations and Government Entities Director. "These workshops are designed to assist officers, board members and volunteers with the steps they need to take to maintain their tax-exempt status, including filing annual information returns."
The IRS also reminds organizations to submit complete and accurate returns. If an organization's return is incomplete or the wrong return for the organization, the return will be rejected. Common errors include missing or incomplete schedules.
Extension of time to file
Tax-exempt organizations that need additional time to file beyond the May 16 deadline can request a 6-month automatic extension by filing Form 8868, Application for Extension of Time To File an Exempt Organization Return . In situations where tax is due, extending the time for filing a return does not extend the time for paying tax. The IRS encourages organizations requesting an extension to electronically file Form 8868.
Friday, April 15, 2022
Charity Scandals: AME Church Suspends Pensions; Finance Director Stole $4.7 Million from WV Charity; Update on Minnesota's Feeding the Future
It sadly has become difficult to keep up with all of the news reports about charity insiders misusing funds - maybe it is time to update the 2003 paper by Marion R. Fremont-Smith and Andras Kosaras on Wrongdoing By Officers and Directors of Charities: A Survey of Press Reports 1995-2002, 42 Exempt Organization Tax Review 25. So I am going to limit my reporting here to several recent reports involving millions of dollars each:
- AME Church: The Wall Street Journal reports (subscription required) that the African Methodist Episcopal Church "has suspended retirement payments and discussed steep cuts to the savings of its ministers amid an investigation into missing funds." The church further said that there is an ongoing investigation, including by federal law enforcement, of a possible financial crime. The pension fund, which reportedly had about $120 million in assets as of 2017, serves about 5,000 retired clergy and church workers. Additional coverage: Religious News Service.
- River Valley Child Development Services (West Virginia): MarketWatch reports that a court has ordered the former director of business and finance of this charity to repay $4.7 million that she stole in the wake of her guilty plea and sentencing to seven years in prison. The article goes on to note that as part of her restitution agreement she has agreed to forfeit six airplanes apparently from a small aircraft charter and aviation services company she owned, the proceeds from the sale of three houses, and two cars.
- Feeding the Future (Minnesota) Update: I previously reported on the apparent diversion of tens of millions of dollars from federal funds provided to this charity. The Star Tribune reports that a judge will now oversee the closure of the charity after a request from the Minnesota Attorney General's office and the charity's board voting to voluntarily dissolve it. The court has begun the process of obtaining financial documentation and a complete inventory of the charity's assets. To date no charges have been filed, but federal and state investigations are ongoing. Extensive additional coverage: N.Y. Times.
Thursday, April 14, 2022
Conservation Easements Update: Circuit Split, DOJ Indictment, Biden Administration Proposal, IRS Exam Guidance, Recent Articles
- The U.S. Court of Appeals for the Sixth Circuit in Oakbrook Land Holdings, LLC v. Commissioner (March 14, 2022) upheld regulation 26 C.F.R. section 1.170A-14(g)(6) relating to when a conversation purposes for an easement is deemed protected in perpetuity even if some external event frustrates the conservation goals, affirming the Tax Court's holding on this point. This creates a circuit split with the Eleventh Circuit, which held in Hewitt v. Commissioner that a portion of the regulation is procedurally invalid under the Administrative Procedure Act. Possible next stop: the Supreme Court of the United States.
- The U.S. Department of Justice announced that a federal grand jury returned a superseding indictment charging seven individuals with federal crimes arising out of fraudulent tax shelters involving conservation easements, including one individual who had been previously charged. The DOJ's press release identifies three of the charged individuals as CPAs and two as licensed appraisers.
- The Biden Administration proposed a limit on the deduction available to partners from certain syndicated conservation transactions in its Budget for Fiscal Year 2023 (see p. 132). As detailed in the related General Explanations document (pp. 56-57), the proposal would "provide that a contribution by a partnership . . . is not treated as a qualified conservation contribution (and thus, the deduction for the contribution is disallowed) if the amount of such contribution exceeds two and a half times the sum of each partner’s relevant basis in such partnership." Certain exceptions apply, including if a three-year holding period requirement is satisfied. As proposed, this limit would be effective for taxable years ending after December 23, 2016 (December 31, 2018 for contributions to preserve a certified historic structure).
- The Internal Revenue Service has issued a memorandum addressed to IRS employees assigned to syndicated conservation easement examinations. It provides interim guidance updating certain procedures relating to these exams when the statute of limitations period is growing short.
- Amy Blake (Texas Tech) has posted How a New Farm Bill with a Twist on Conservation Easements Can Save the Environment and the Family Farm. Here is the abstract:
Have you ever considered how tax law impacts the environment? It certainly does. A simple, tax-based conservation program enacted in the next farm bill can solve two major issues that are rapidly destroying the environment and the world’s food supply.
The first of these issues is the loss of natural lands due to the rapid outward expansion of urban cities, permanently damaging the environment. Once concrete is poured and skyscrapers are built, the land below that once fostered carbon sequestering plants and soil will never be recovered. Properties that provide natural land, open space, critical habitat, and contribute to the world’s food supply are falling victim to continuous population growth and industrialization around the nation.
The second issue is the federal estate tax inhibiting agricultural landowners from passing their land on to the next generation, resulting in forced land sales. The federal estate tax burden is causing owners of natural land and productive farmland to have no choice but to sell their property, resulting in more land being developed and industrialized. However, it is not too late to shape the future of land conservation on a large scale.
President Biden’s goal of conserving thirty percent of America’s lands and waters by 2030 can be met through the enactment of a new farm bill program with a twist on conservation easements to create a new, voluntary conservation tool that maintains land values and property rights. This proposed conservation program includes innovative tax incentives that better pair the needs of landowners with the goals of the government.
Family farms are becoming an endangered species. This Article proposes a farm bill conservation program that addresses not only land loss and estate tax issues, but also addresses various hardships that are consuming the agricultural industry such as changes in landowner demographics, falling commodity prices, misinformation, and rural economies’ dependence on the agriculture industry. This proposed conservation program should be enacted in the 2023 Farm Bill in order to yield the best results for environmental conservation, food supply, and rural economies.
- Bryan Camp (Texas Tech) has written Lesson From The Tax Court: Penalty Approval In Conservation Easement Cases for TaxProf Blog.
Wednesday, April 13, 2022
Cherry picking an issue flagged by the IRS in 2017 (Notice 2017-73) and addressed by one provision of the pending ACE Act (section 5), the Biden Administration's FY2023 Budget includes a provision (see page 132) that would bar private foundations from counting distributions to donor advised funds toward their minimum payout requirement under IRC 4942, except in limited circumstances (for more details, see pages 58-59 of the General Explanations of the Administration's revenue proposals). While passage of this provision is of course uncertain, it is important because it indicates that the Administration is at least tipping its toe into the DAF reform area. At the same time, 12 bipartisan members of the 43-member Ways and Means Committee issued a letter supporting DAFs and opposing recent DAF reform proposals. (Hat tip: Chronicle of Philanthropy (but incorrectly identifying the signers as all Republicans, when 7 of the 12 are Democrats)).
At the same time studies of DAFs continue to accumulate. The Institute of Policy Studies recently issued the results from two studies:
- Private Foundation Giving to Commercial Donor-Advised Funds based on the IRS returns of private foundations that filed electronically from 2016 to 2018 and a list of the 45 largest commercial DAF sponsors, with the following findings:
- Private foundation giving to these commercial DAFs averaged $737 million per year from 2016 to 2018.
- From 2016 to 2018, gifts from DAF-giving private foundations to these commercial DAFs averaged about $605,000 each, while their gifts to other recipients averaged just under $119,000 each.
- 229 foundations gave $1 million or more to these commercial DAFs from 2016 to 2018.
- Grants to these commercial DAFs made up one hundred percent of all charitable distributions for 157 foundations from 2016 to 2018.
- Larger Community Foundations Have Become Heavily Reliant on Donor-Advised Funds based on the electronically filed IRS returns of 206 community foundations that participated in Candid's 2019 Columbus Survey, with the following findings:
- DAFs accounted for a median 24 percent of assets.
- A median 41 percent of all incoming contributions consisted of contributions to DAFs.
- A median 42 percent of all outgoing grants were grants from DAFs.
- Larger community foundations tend to be much more heavily reliant on DAFs for their incoming revenue streams; DAFs account for a much larger proportion of their outgoing grants; and DAFs make up a much larger proportion of their total assets.
The Donor Advised Fund Research Collaborative also recently made available the result of this study:
- Donor-Advised Fund Account Patterns and Trends (2017-2020) based on 13,000 DAF accounts from 2017 to 2020 at 21 community foundations and religiously-affiliated DAF sponsors in the United States (but not including national, commercial DAFs), with findings including:
- While 11% of DAFs had over $1 million in assets, the typical DAF is equally likely to be a small-sized DAF with assets under $50,000 or a medium-sized DAF with assets between $50,000 and $1 million.
- The median four-year average payout rate among all accounts was 11%; among spendable DAFs, the median payout rate was 13%.
- Large accounts over $1 million were 11% of all accounts and represented at least 85% of the assets in the DAFRC sample.
- The majority of DAF contributions were received in the fourth quarter, including approximately 55% of dollars contributed and 42% of contribution transactions.
The Chronicle of Philanthropy also reported that giving from two of the largest sponsors of donor-advised funds grew slower in 2021 than in 2020.
IRS on Crowdfunding, Suspension of Delinquent Notices, Private Foundation Info, and Religious and Apostolic Associations
- Crowdfunding Taxation and Reporting: In Fact Sheet FS-2022-20, the IRS says the following about taxation of crowdfunding proceeds:
If a crowdfunding organizer solicits contributions on behalf of others, distributions of the money raised to the organizer may not be includible in the organizer's gross income if the organizer further distributes the money raised to those for whom the crowdfunding campaign was organized.
If crowdfunding contributions are made as a result of the contributors' detached and disinterested generosity, and without the contributors receiving or expecting to receive anything in return, the amounts may be gifts and therefore may not be includible in the gross income of those for whom the campaign was organized. Contributions to crowdfunding campaigns are not necessarily a result of detached and disinterested generosity, and therefore may not be gifts. Additionally, contributions to crowdfunding campaigns by an employer to, or for the benefit of, an employee are generally includible in the employee's gross income.
In the same fact sheet, the IRS also notes that crowdfunding platforms "may be required to report distributions of money raised if the amount distributed meets certain reporting thresholds by filing Form 1099-K" (now generally $600, see Form 1099-K instructions). But it also notes recent legislation clarifies that no such reporting is required "if the contributors to the crowdfunding campaign do not receive goods or services for their contributions".
- Suspension of Delinquent Notices: The IRS announced in March that it is suspending the issuance of several notices generally mailed to tax-exempt or government entities relating to delinquent returns. These include notices relating to Form 990/990-EZ/990-N, Form 99o-PF, Form 990-T, Form 5227, and form 1120-POL.
- Private Foundation Revised Guidance & Updated Data: The IRS issued two revised technical guides relating to private foundations: Publication 5616 (relating to self-dealing under IRC section 4941), and Publication 5590 (relating to taxable expenditures under IRC section 4945). It also released microdata and tables with Tax Year 2018 data on private foundations, now available at the Statistics of Income private foundation webpage.
- Religious and Apostolic Associations: Finally, the IRS also issued a revised technical guide relating to religious and apostolic associations tax exempt under IRC section 501(d), Publication 5627.
The U.S. Department of Justice announced in February that it is seeking a court order to prohibit certain individuals and entities "from organizing, promoting or selling an allegedly unlawful tax scheme involving the use of charitable remainder annuity trusts (CRATs)." The government is alleging that the defendants were involved with at least 70 CRATS that resulted in $40 million of taxable income going unreported and at least $8 million in tax revenue losses." The complaint in United States v. Eickhoff, Jr. et al. (U.S. Dist. Ct. W.D. Mo.), which was amended in March, is unfortunately not readily available through a free source but can be accessed through Law360 and Tax Notes, among other paid sources.
Friday, March 11, 2022
We are seeing some familiar foolish provisions prohibiting the IRS and the SEC from engaging in rulemaking in Congress's Consolidated Appropriations Act of 2022. The Senate passed the $1.5 Trillion dollar spending bill last night for the fiscal year that started about 5 months ago. It is good to have an appropriations bill done, and these provisions were probably not worth fighting over to ensure the government has the money and certainty it needs to act.
In Div E, Title I, sec. 123 (p. 498) of the Act, Congress prohibits the IRS and Treasury Department from issuing rules about section 501(c)(4) organizations. I guess recognizing that there is some problem with this provision, because of the fact that the IRS continues to have to make judgments about these organizations on determination and audit, which surely could be construed as rules, provides that the law after the Act will be based upon the "standard and definitions as in effect on January 1, 2010, which are used to make such determinations . . . for purposes of determining status under section 501(c)(4) of such Code of organizations created on, before, or after" the Act.
Div E Title I sec. 610 prohibits the President's office from requesting a determination regarding an organization described in section 501(c). I am not certain why that is in the bill. Have not seen this one before, so appreciate anyone who has knowledge as to why this got added.
Div E, Title VI, sec 633 (p. 602) prohibits the SEC from issuing rules regarding the disclosure of political contributions to tax exempt organizations.
March 11, 2022
Friday, February 25, 2022
Litigation and scholarship on conservation easements continues apace. At the ABA Tax Section meeting, an official from Chief Counsel reported that the IRS has about 80 fraud cases teed up relating to syndicated conservation easement deals, and more than 425 docketed cases at the U.S. Tax Court. Coverage: Bloomberg (subscription required).
And Nancy McLaughlin (Utah) has posted a new article on conservation easements titled Enforcing Conservation Easements: The Through Line, 34 Georgetown Environmental Law Review (forthcoming 2022). Here is the abstract:
In enforcement cases, courts tend to treat conservation easements as if they were traditional servitudes. This poses a major risk to the effectiveness of conservation easements as land protection tools. If, for example, courts extinguish conservation easements via merger, or bar holders from enforcing them on laches or estoppel grounds, or interpret them in favor of free use of property, many of the conservation gains made in the United States over the last three decades could end up being ephemeral.
This article tackles this problem by providing a solid foundation for the next chapter in conservation easement enforcement. It clearly articulates the ways in which conservation easements are different from traditional servitudes. It provides a roadmap of often-overlooked bodies of law relevant to their enforcement. It also brings together the handful of enforcement cases in which the courts (in one case, the dissenting judges) recognized the special status of conservation easements. These cases address different issues but there is a clear unifying theme—a through line: conservation easements are created to benefit the public and carry out legislatively stated public purposes, and it is contrary to the public interest to blindly apply to them principles intended to facilitate development or resolve disputes between private parties.
Armed with this knowledge, courts as well as nonprofit and government holders will be far better equipped to deal with the coming wave of enforcement cases in a manner that protects the public interest.
Wednesday, February 23, 2022
UPDATE: Politico article summarizing all of the comments submitted.
Axios reports that nonprofits from across the political spectrum are raising concerns about possible changes to the Foreign Agents Registration Act (FARA) regulations that could impact many nonprofits. The Department of Justice formally announced plans for these changes in an Advanced Notice of Public Rulemaking (ANPR) issued in December. The ANPR includes questions relating to the scope of agency for purposes of identifying agents of foreign principals (including the definition of "political consultant"), the scope of various exemptions, and various procedural issues.
The 29 comments submitted in response to the ANPR include one from a group of 14 nonprofits, among them the Alliance for Justice, the ACLU, Americans for Prosperity, the NRDC, and Oxfam America, that is highlighted in the above Axios article. Their comment emphasized that "FARA’s overbreadth and vagueness can undermine and chill First Amendment rights to speech and association and the statute has a history of being used to target undesirable expressive conduct." Other comments from nonprofits, some of which were also part of the group of 14, include ones from the American Council on Education, the Institute for Free Speech, InterAction, the International Center for Not-for-Profit Law, the International Foundation for Electoral Systems, and the National Wildlife Federation.
Monday, February 21, 2022
Feds Target Two Alleged Multi-Million Dollar Thefts from Charities: Minnesota's Feeding Our Future; California's AME Zion Churches
I am not sure if anyone keeps a running list of the largest alleged thefts from charities, but if someone does they may have a new top-place finisher. The Star Tribune and other news outlets reported last month that federal authorities executed several search warrants on Feeding Our Future, a Minnesota anti-hunger nonprofit, and its leaders. Federal and state authorities are investigating whether the nonprofit defrauded the U.S. Department of Agriculture out of millions of dollars by spending federal funds to purchase personal real estate, cars, and other luxury items, along with personal vacations. The charity received hundreds of millions of dollars, and a more recent report says investigators now believe at least $48 million was diverted for personal expenses. Additional coverage: Sahan Journal (including details from the unsealed search warrants, although not a link to them). No charges appear to have been filed yet. Hat tip: Chronicle of Philanthropy.
Federal authorities have also been busy in California, where the L.A. Times reports that the U.S. Attorney's office for the Northern District of California (press release, but without a link to the actual indictment) has charged two former leaders of the AME Zion Church with defrauding California churches to the tune of $14 million. They allegedly did so by re-deeding local congregations' properties in the name of a legal entity they controlled and then using the properties to secure loans that benefitted themselves. Courthouse News Service reports that authorities have arrested both defendants, and one of them has pled not guilty while the other has not yet entered a plea. Additional coverage: Daily Beast. Hat tip: Ministry Watch.
Monday, January 17, 2022
New Article: Who’s Afraid of Bob Jones?: 'Fundamental National Public Policy' and Critical Race Theory in a Delicate Democracy
Professor Lynn Lu has a new interesting article forthcoming in CUNY L. Rev. looking at the broader impact of Bob Jones all these years later entitled Who's Afraid of Bob Jones?: 'Fundamental National Policy' and Critical Race theory in a Delicate Democracy. Here is the abstract:
In Summer of 2021, Republican legislators across the United States introduced a host of bills to prohibit government funding for schools or agencies that teach critical race theory (“CRT”), described by the American Association of Law Schools not as a single doctrine but a set of “frameworks” to “explain and illustrate how structural racism produces racial inequity within our social, economic, political, legal, and educational systems[,] even absent individual racist intent.” Characterizing such an explicitly race-conscious analysis of legal and social institutions as “divisive,” opponents of CRT, such as former Vice President Mike Pence, labeled it “nothing short of state-sponsored and state-sanctioned racism.”
The political campaign to “Stop CRT,” as articulated by strategist Christopher Rufo, seeks to redirect the time-honored civil-rights strategy of defunding racially discriminatory social institutions for use against race-conscious efforts to remedy the ongoing disparate racial, economic, and other social effects perpetuated by the same institutions. The movement to Stop CRT thus seeks to freeze civil rights progress where it stood decades ago, as when the Supreme Court acknowledged a “fundamental national public policy” against racial segregation in its 1983 decision in the notorious case of Bob Jones University v. United States, while leaving unresolved vital questions about whether and how to allocate public resources affirmatively to foster diversity, equity, inclusion, and accessibility in democratic society.
In Bob Jones, the Court upheld the federal taxation of private schools that excluded Black students because their religious beliefs allegedly mandated “racial separation.” Specifically, the Court ruled that the Internal Revenue Service (IRS) properly withheld federal tax-exempt status to otherwise qualifying entities to enforce “fundamental national public policy” (“FNPP”), as expressed by all three branches of the federal government, against racial segregation in schools, and deemed desegregation a compelling government interest that outweighed any burden on religion. As a private tax dispute, Bob Jones stands alongside legions of other complaints brought by taxpayers aggrieved by IRS actions. But as a case involving an educational institution raising a religious liberty claim against antidiscrimination regulation, Bob Jones raised broader public law issues involving constitutional and federal statutory interpretation, as well as judicial review of administrative action.
This article assesses the legal and symbolic influence of Bob Jones not to relitigate the case or to rewrite history, but to highlight the case’s lasting symbolic impact and lessons for future civil rights advocacy, especially as informed by CRTs that developed alongside the federal courts’ retreat from enforcing existing antidiscrimination norms. Part I examines the case of Bob Jones to show how its political and legal context shaped its unique posture and path to the Supreme Court. Part II examines the afterlife of Bob Jones and its symbolic importance to conservatives motivated to prevent its expansion, even as the decision limits its own impact by leaving crucial substantive questions unresolved: namely, the role of pluralism in enforcing civil rights against First Amendment claims, the viability of race-conscious remedies for racial discrimination, and the visibility of redistributive economic justice concerns. Finally, Part III shows how CRT’s insistence on confronting those same questions reveals persistent inequities sustained by U.S. social and legal institutions, drawing the fire of efforts to Stop CRT. Part III assesses the prospects for moving the difficult questions left unresolved in Bob Jones back to the center of analysis, even with the current Supreme Court in a polarized and partisan political climate. The Article ultimately concludes that the legal reorientation demanded by Bob Jones and initiated by critical theorists, whatever their fate in the Court’s jurisprudence in the near term, remains crucial for identifying and challenging ongoing power disparities in and through every level of democratic government and society.