Wednesday, June 29, 2022
Last week's Supreme Court decision in Dobbs v. Jackson Women's Health Organization has left the American public very divided. Many are angry; many are happy. The debate over the right to an abortion and women's rights to make their own decisions about their bodies has heated up. In the midst of this heated atmosphere, RNS reported today that in defiance of some U.S. Roman Catholic bishops, Speaker of the House Nancy Pelosi received Communion during a Mass presided over by Pope Francis on Wednesday (June 29) for the celebration of the feast of Sts. Peter and Paul.
Back in Speaker Pelosi's home diocese of San Francisco, California, Archbishop Salvatore Cordileone announced on June 1 that the Catholic congresswoman is banned from receiving Communion due to her abortion rights stance. Since then, she has been barred from receiving the sacrament in four other dioceses.
Pelosi called the Supreme Court's decision in Dobbs an “outrageous and heart-wrenching” decision. The US Catholic Bishops lauded the court's decision, which they said overturned “an unjust law that has permitted some to decide whether others can live or die.”
But earlier today, Wednesday, Speaker Pelosi met with Pope Francis before the service and received a blessing, according to one of the Mass attendees.
Sitting in the VIP section during the traditional Mass at St. Peter’s to celebrate the patron saints of Rome, Pelosi listened to Pope Francis’ homily before receiving Communion from one of the many priests in the basilica, according to eyewitnesses. Francis has rarely distributed Communion, citing precisely the desire to prevent politicization of the sacrament.
In his homily, Francis urged the faithful to “Go to the crossroads and bring everyone: blind, deaf, lame, sick, righteous, sinful, everyone, everyone! This word of the Lord must resound, resound in the mind and heart: everyone! In the church there is room for everyone!” He added that “many times we become a church with open doors but to dismiss people, to condemn people.”
The RNS article concludes by noting that
Last year, Pope Francis told reporters on his return flight from Central Europe that he has never denied Communion to anyone and criticized bishops who didn’t act as shepherds and “aligned themselves with political life, on political problems.” The Vatican’s doctrinal department, in a letter in May of last year, urged the U.S. bishops to engage in dialogue among themselves and with Catholic politicians before reaching any decision.
Well, in this, as in an increasing number of philosophies, there appears to be a great divide between these United States of America and the Rest of the World!
Prof. Vaughn E. James, Texas Tech University School of Law
Friday, June 24, 2022
Today, the Supreme Court overturned Roe v. Wade in Dobbs v. Jackson Women's Health Organization, a historic decision holding there is no longer a federal constitutional right to an abortion. While the nation reacts in various ways to the decision, it is undeniable that nonprofits played a major role. Since there are restrictions on the political activity of 501(c)(3) organizations, 501(c)(4) organizations also known as “social welfare organizations” featured heavily. For a brief summary of advocacy groups and respective restrictions, including 501(c)(3) organizations, 501(c)(4) organizations, and political action committees, see the website of the non-partisan 501(c)(3) Open Secrets.
The anti-abortion group Susan B. Anthony List was created in the 1990s after the formation of Emily’s List, a political action committee (PAC) designed to support abortion rights candidates. Susan B. Anthony List’s 501(c)(4) is permitted to engage in some lobbying and political activity as long as they do not eclipse its primary purpose. Susan B. Anthony List’s 501(c)(3) called the Susan B. Anthony Education Fund is subject to lobbying restrictions but can disseminate the group’s anti-abortion message. Here is further reading about Susan B. Anthony's List and today’s decision.
Thursday, June 23, 2022
In thinking about the recent Supreme Court decision in Carson v. Makin, No. 20-1088, which deals with private religious schools and state tuition programs, I raised the question of whether government aid should be awarded to private schools at all. One reason I raised this issue is because private schools are not subject to the same civil rights laws as public schools. Almost one year ago to the day, I blogged about how historically private schools have not been subject to federal civil rights laws because they did not receive federal funds. I also noted that perhaps unknowingly, by virtue of receiving P.P.P. loans during the pandemic, private schools became subject to such laws, including Title VI of the Civil Rights Act of 1964 (“Title VI”), which prohibits discrimination on the basis of race, color, or national origin. In other words, private schools with P.P.P. loans cannot engage in racial discrimination against employees, students, parents, or other participants. This includes in terms of employment, admissions, enrollment, and other treatment.
One must consider the compelling question whether private schools (which in the absence of a P.P.P. loan or other federal funding) are permitted to run afoul of civil rights laws, should be able to receive government aid under a state tuition program, which appears to be the case with the Maine law. Granted, private schools (non-religious and religious) are subject to nondiscrimination requirements by virtue of their 501(c)(3) status, which they must attest to annually either by filing Form 990 or a statement with the IRS, respectively. Nevertheless, it is important to consider that Title VI imposes prohibitions against racial discrimination not covered by section 501(c)(3). One definite difference is that private schools who become subject to federal civil rights laws, e.g., those who receive P.P.P. loans, may have to pay compensatory damages to individuals who prove intentional discrimination in lawsuits against the schools. In addition, injunctive relief may be awarded to such individuals. In other words, these private schools are no longer shielded from causes of action from individuals and families who have faced racial discrimination at their hands.
In the opinion, Chief Justice Roberts himself acknowledged the distinction between public schools and private schools in this regard: “[T]o start with the most obvious, private schools are different by definition because they do not have to accept all students…” Given that private schools (who have not received federal funds) largely are shielded from damages or injunctions for intentional discrimination which can be proven, should they be allowed to receive government aid? This is the larger question that must be answered.
Hoffman Fuller Professor of Tax Law
Tulane Law School
Tuesday, June 21, 2022
Today in Carson v. Makin, No. 20-1088, the Supreme Court ruled that Maine cannot exclude religious private schools from a state tuition program. According to NBC News, under the state tuition program in Maine, taxpayer money is made available to families in remote areas that lack public high schools. Under the state law, these families could use taxpayer money to send their children to public or private schools in other communities, as long as the schools were not “sectarian,” i.e., did not promote a particular belief or faith system and teach “through the lens of this faith.” It was a 6 to 3 vote against the Maine law led by a conservative majority. Chief Justice John G. Roberts Jr. wrote for the majority and stated the ruling does not require states to support religion. He notes that it requires states that choose to subsidize private schools not to discriminate against religious ones. In separate dissents, Justice Sonia Sotomayor and Justice Stephen G. Breyer strongly objected on separation of church and state grounds. A full copy of the decision may be found here.
One of the lawyers for the families who challenged the Maine law summed up the decision as “a major step for religious schools to receive the same kind of government aid as other private schools.” Even if one agrees that religious private schools should not be treated differently than non-religious private schools, an important and long-standing threshold question remains: Should taxpayer money be made available for private school tuition at all?
Hoffman Fuller Associate Professor of Tax Law
Tulane Law School
Wednesday, June 15, 2022
In Peltier v. Charter Day School, the United States Court of Appeals for the 4th Circuit, sitting en banc, held a charter school in North Carolina to be a state actor for purposes of Section 1983 (for an Fourtheenth Amendment Equal Protection claim) and for purposes of Title IX. This meant that the charter could not apply its traditional rules and require girls to wear skirts.
Like most charters, Charter Day School is a nonprofit that is recognized by the IRS as a charitable organization exempt from tax under section 501(a) because described in Section 501(c)(3). Charter Day School and its management company argued that as a private entity it was not a state actor.
"CDS, a public charter school in Brunswick County, North Carolina, educates male and female students in kindergarten through the eighth grade. The founder of the school, Baker A. Mitchell, Jr., incorporated defendant Charter Day School, Inc. in 1999. The following year, he obtained a charter from the state of North Carolina, pursuant to the North Carolina Charter Schools Act of 1996, N.C. Gen. Stat. § 115C-218 et seq. CDS’ policies are established by the volunteer members of its Board of Trustees (the Board). Mitchell initially served as the Board’s chairman and now serves as its non-voting secretary."
For those interested in conflict of interest and for profit charter management companies, Charter Day School entered into a charter management contract with Roger A Bacon, Inc. This is a for profit company owned and managed by Mitchell the founder of the Charter Day School who also sits on the board of Charter Day School.
The Court concluded as follows:
"In sum, we hold that CDS, a public school under North Carolina law, is a state actor for purposes of Section 1983 and the Equal Protection Clause. By implementing the skirts requirement based on blatant gender stereotypes about the “proper place” for girls and women in society, CDS has acted in clear violation of the Equal Protection Clause. We further hold that sex-based dress codes like the skirts requirement, when imposed by covered entities, are subject to review under the anti-discrimination provisions of Title IX. We therefore affirm the district court’s award of summary judgment to the plaintiffs on their Equal Protection claim against CDS and affirm the court’s award of summary judgment to RBA on that claim. We vacate the district court’s judgment on the Title IX claim and remand for an evidentiary hearing on that claim asserted against all defendants."
In concluding that Charter Day School is a state actor the Court focused particularly upon the fact that the North Carolina Constitution committed to providing free, universal elementary and secondary schooling to the state’s residents and that charters were ensconced as a part of state law to providing that public education.
Notably though, the for profit management company was not found to be a state actor. This will continue to be an interesting area to watch given that states allow charters to not have to follow many state laws required of public schools.
Saturday, May 21, 2022
In Reserve Mechanical Corp. v. Commissioner, the U.S. Court of Appeals for the Tenth Circuit upheld the Tax Court's decision affirming the IRS' decision that the company did not qualify as tax-exempt status under section 501(c)(15). Here is the court's summary of the decision:
Reserve Mechanical Corp. appeals the decision of the Tax Court affirming the decision of the Commissioner of Internal Revenue that it did not qualify for an exemption from income tax as a small insurance company and that the purported insurance premiums it received must therefore be taxed at a 30% rate under I.R.C. § 881(a). We hold that the record supports the Tax Court’s decision that the company was not engaged in the business of insurance. The court had two grounds for deciding that Reserve was not an insurance company. First, it determined that Reserve had not adequately distributed risk among a large number of independent insureds—a hallmark of any true insurance company. Virtually all the insured risk was that of one insured, a company that had the same ownership as Reserve itself. To appear to distribute risk, Reserve entered into an insurance pool with other purported insurance companies, each owned by an affiliate of its insured, but the arrangement lacked substance and the pool itself did not distribute risk. Second, the Tax Court determined that the policies issued by Reserve were not insurance in the commonly accepted sense. For example, the premiums were not the result of arm’s-length transactions and were not reasonable, and Reserve was not operated in the way legitimate insurance companies operate. In addition, Reserve argues that if it was not an insurance company, the premiums it received must be treated as nontaxable capital contributions. We also reject that argument.
The decision is significant in part because there are number of other, similar cases, on appeal involving other companies, and the possibility of more IRS action in this area with this victory for the government to support them. For a detailed analysis, see this Forbes article.
Tuesday, May 10, 2022
The recent Supreme Court ruling in Austin v. Reagan National Advertising was about billboard signs, but the majority had a lot to stay about regulation of charitable solicitation. The case here was about whether a law that distinguished between on-premises and off-premises advertising was content-based or content-neutral. Applying the Court’s decision in Reed v. Gilbert, the Fifth Circuit held the distinction was content-based—and thus subject to strict scrutiny—because it required the reader to determine who the speaker was and what the speaker was saying. The Supreme Court reversed, saying the key question is whether the government’s restriction is based on “substantive” content, and a location-based distinction doesn’t qualify. Thus, the Court held that the distinction was content-neutral and subject only to intermediate scrutiny. Read more for what the Court said -- and didn't say -- about regulation of charitable solicitation.
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, March 23, 2022
Today is Day 3 of Judge Ketanji Brown Jackson's confirmation hearings for the Supreme Court and, since I'm blogging this week, I thought it might be worth seeing if she had ruled any cases dealing with tax exemption during her time as a district court judge. With nearly 600 opinions, it seemed at least plausible.
And it turns out she has at least one.[fn1]
In 2009, Z Street was incorporated as a Pennsylvania nonprofit. Its original purpose was to " educat[e] the public about Zionism; about the facts relating to the Middle East and to the existence of Israel as a Jewish State; and about Israel's right to refuse to negotiate with, make concessions to, or appease terrorists.” But when Z Street applied for federal tax exemption the following year, it was informed that the IRS carefully scrutinized 501(c)(3) applications related to Israel to make sure their activities didn't contradict Administration policies.
Z Street sued the IRS claiming that this special scrutiny constituted constitutionally-prohibited viewpoint discrimination. The IRS moved to dismiss based on the Anti-Injunction Act (which prohibits taxpayers from filing suits that would interfere with the collection of taxes), the Declaratory Judgments Act (which allows declaratory judgments except in the case of taxes), and sovereign immunity.
I'm not going to summarize all of the facts here, though I do recommend reading Judge Jackson's opinion here (or, if you'd prefer, Law360's summary of the opinion here). Ultimately, though, she denied the government's motion to dismiss. She read the AIA's prohibition on suits for the collection of revenue narrowly; here, she said, the suit wasn't a tax claim "couched  in constitutional terms." Rather, it was a constitutional claim that didn't implicate the collection of taxes. Likewise, the DJA didn't prevent the suit. (As for sovereign immunity, she held that the APA waived sovereign immunity for claims like Z Street's.)
[fn1] She may have more, but this is a busy week for me and I don't have time to do an exhaustive review of her opinions.
Samuel D. Brunson
Friday, February 25, 2022
Last summer's Supreme Court decision in Americans for Prosperity Foundation v. Bonta, striking down California's requirement that charities submit their Form 990 Schedule Bs to the state attorney general, has led to two recent legal developments of interest to nonprofits.
First, as reported by The NonProfit Times, New York has proposed (see pages 21-23) amending its rules relating to annual financial reports filed by charities required to register with the state to conform with the Supreme Court's decision. More specifically, the proposed rule would provide the following regarding submission of IRS forms:
(a) a copy of the complete IRS form 990, 990-EZ or 990-PF with all required schedules including a Schedule B, unless exempt from such filing pursuant to subsection (b), and
(b) public charities required to submit Schedule B to the IRS must file either (i) a redacted Schedule B with the Charities Bureau, without the names and street addresses of the donors but including the amounts of donations and the states from which those donations were received during the reporting period, or (ii) a statement of the gross amount of contributions received during the reporting period from individuals and entities residing or domiciled in New York (see section C(1)), and
(c) a copy of the complete IRS form 990-T, if applicable.
Comments were due by January 30th. On February 1st, at the ABA Tax Section Meeting, James Sheehan, the Chief of the Charities Bureau at the the New York State Department of Law, said only two comments were received by the deadline. According to Sheehan, one comment said essentially "about time," and the other comment did not apparently relate to the donor disclosure issue at the heart of the Supreme Court's decision.
Second, the U.S. District Court for the District of Connecticut preliminary enjoined several rules applicable to paid solicitors in Kissell v. Seagull, including one requiring paid solicitors to disclosure the names and addresses of donors to the state Department of Consumer Protection upon request (see paragraph 4 of the order, copied below). The court in its opinion supporting the order based the last holding in part on the AFPF decision. More specifically, the court stated:
The Commissioner cannot meaningfully distinguish Americans for Prosperity Foundation. To the contrary, as noted above, Kissel’s First Amendment claim is stronger than the First Amendment claim in Americans for Prosperity Foundation because it rests not only on the First Amendment right to association but also on the First Amendment right to free speech that is burdened by a content-based law that applies to him as a paid solicitor and that independently triggers strict scrutiny apart from any associational rights.
The court then concluded that the donor record-keeping and inspection requirement was not narrowly tailored to serve a compelling purpose. However, in the actual follow-up order, the court limited the injunction to the inspection requirement while not enjoining the record-keeping requirement:
4. The requirement in Conn. Gen. Stat. § 21a-190f(k) that paid solicitors must disclose the names and addresses of donors to DCP upon request violates the First Amendment in its current form, and Defendant is enjoined from seeking to inspect such information under that provision. Nothing in this judgment and order shall impact or obviate a paid solicitor’s obligation to maintain records about any of the information contemplated by § 21a-190f(k), including but not limited to the names and addresses of donors, if known to the solicitor, or to disclose to DCP upon request any of the information contemplated by that provision other than donor names and addresses.
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.
Sunday, January 9, 2022
The litigation involving the NRA and the NRA Foundation continues its slow march without any recent major public developments. But in its latest IRS Form 990 (see page 46 of the 67-page filing, which provides Supplemental Information for Schedule L) the NRA acknowledged new excessive benefits paid to CEO Wayne LaPierre, the Wall Street Journal reports. The article says these include $44,000 in private jet flights, and notes that the NRA is investigating other transactions. And a detailed Open Secrets report shows how funds flowed between the NRA's section 501(c)(3) affiliates and its non-charitable entities. And I recently learned, thanks to the EO Tax Journal, that there is a donor class action suit pending in federal court against the NRA that is being tracked by NRA Watch. So lots to keep the NRA's lawyers busy for the foreseeable future.
Wednesday, January 5, 2022
Early last month New York issued a proposed rule amending the regulations relating charity annual reports to respond to the Supreme Court's decision in Americans for Prosperity Foundation v. Bonta. See NYS Register (Dec. 1, 2021), at 21-23. As our readers already know, the Court struck down as unconstitutional the California requirement that charities provide to state authorities unredacted copies of Schedule B to the IRS Form 990 series, which lists identifying information for significant donors. New York had a similar requirement, which it suspended in the wake of that decision.
The proposed rule gives "public charities" required to make annual filings (NY Form CHAR500) the option of providing either (1) a copy of Schedule B with the names and addresses of contributors redacted or (2) "a statement of the gross amount of contributions received during the reporting period from individuals and entities residing or domiciled in the state of New York." Note that the use of the term "public charities" apparently means that private foundations will still be required to submit their unredacted Schedule Bs to New York, presumably because those schedules are already publicly disclosed under federal tax law and so arguably are not reached by the Supreme Court's decision. The proposed rule also makes various unrelated amendments to the filing requirements.
Thursday, December 9, 2021
In November, the IRS issued an Action on Decision in the case of Mayo Clinic v. United States, 997 F.3d 789 (8th Cir. 2021),
rev’g, 412 F.Supp.3d 1038 (D. Minn. 2019). They will follow the precedent in the 8th Circuit, but refuse to accept the interpretation of the 8th Circuit reading out the Treasury regulation requiring formal instruction to be a primary function of an educational organization under section 170(b)(1)(a)(ii). I previously wrote about this case here.
It involves whether Mayo Clinic may use an exception to the unrelated business income tax provided to educational organizations under section 514(c)(9)(C)(i). Mayo Clinic claims to be "an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on." The IRS, relying upon Treasury regulations, that require that an educational organization must have as "its primary function . . . the presentation of formal instruction," did not allow Mayo the exception.
The district court held that the primary function test was not a legitimate interpretation of the statute. While the Appeals court disagreed in part, it held that the IRS was wrong in its application of a primary function test. It remanded the case to the district court with instructions to ensure that Mayo Clinic primarily promotes education.
I expressed concern regarding the case because I think it provides an easy path to public charity status for any organization that is primarily educational by normally having 1 faculty and some students. I did not expect the IRS to appeal, but thought they may choose to fight the case in other circuits. They have expressly taken this latter path.
In supporting its reasons the IRS stated: "We disagree with the Eighth Circuit’s invalidation of the long-standing regulatory requirement that the primary function of an educational organization described in section 170(b)(1)(A)(ii) must be formal instruction (the formal instruction requirement). First, in concluding that the formal instruction requirement “has no long history of congressional acceptance,” the Eighth Circuit did not consider the numerous times Congress has amended section 170(b), increasing the percentage of the allowable deduction and adding to the categories of organizations eligible for the preferential allowable deduction, since the regulations under section 170(b)(1)(A)(ii) were published in 1958, which is persuasive evidence of Congressional acceptance of such regulations. See, e.g., CFTC v. Schor, 478 U.S. 833, 846 (1986) (“It is well established that when Congress revisits a statute giving rise to a longstanding administrative interpretation without pertinent change, the ‘congressional failure to revise or repeal the agency’s interpretation is persuasive evidence that the interpretation is the one intended by Congress.’”). Second, the Eighth Circuit did not consider that the faculty-curriculum student-place requirement provides a statutory basis for the formal instruction requirement in the regulations. Finally, the Eighth Circuit did not consider the Government’s arguments regarding over one dozen Code sections cross-referencing section 170(b)(1)(A)(ii) (many of which predated the regulation’s 1958 publication), which further support the position that the purpose of the formal instruction requirement is to ensure that section 170(b)(1)(A)(ii) “could not reach very far, if at all, beyond schools, colleges, and universities in its coverage.” Brundage v. Commissioner, 54 T.C. 1468, 1474 (1970)."
Wednesday, December 1, 2021
Today the Supreme Court hears arguments in Dobbs v. Jackson Women’s Health Organization, a case that will consider the constitutionality of a Mississippi law that entirely bans abortions after fifteen weeks of pregnancy.
The case is important and momentous. Important and momentous enough that more than 140 amicus briefs were filed with the Court. And a not-insignificant percentage of those briefs were filed by tax-exempt organizations. Those amici ran a relatively broad gamut of types of tax-exempts, views on the Mississippi law, and approaches toward the law. And I'm not going to pull out every single tax-exempt, but I'm going to highlight a handful. (I didn't read every amicus brief because SCOTUSblog did it so that I didn't have to! I'm not going to link to the org's briefs, but they're all linked on the SCOTUSblog post.) (I'll highlight which of the organizations that I list aren't 501(c)(3)s; if I don't list the section an org is exempt under, it is a 501(c)(3).)
Wednesday, November 17, 2021
Bloomberg Law is reporting on a number of nonprofit Christian schools, churches, and seminaries that are launching legal challenges to the OSHA test-or-vaccinate rules. (To add nonprofit on top of nonprofit, at least a handful of the cases are being handled by the nonprofit Alliance Defending Freedom.)
Essentially, the ADF's suit (and, I imagine, many of the others) assert that the OSHA mandate overreaches and represents a "serious intrusion on religious autonomy and free exercise that cannot withstand scrutiny under the First Amendment and the Religious Freedom Restoration Act."
I'm not a Religion Clauses scholar but I know enough to know that Religion Clause jurisprudence is kind of a mess. Enough of a mess that I wouldn't put money down on how these challenges turn out. Still, because the religious organizations challenging the test-or-vaccine mandate fit into the world of nonprofits, it's worth keeping an eye on how these challenges turn out.
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
Friday, September 3, 2021
Sackler Settlement Includes Releasing Control of Two Foundations and Temporarily Not Seeking Naming Rights
Tbis week a bankruptcy court approved a settlement with the Sackler family, which has faced allegations that it bore responsibility for the deadly opioid crisis. In-depth Coverage: NPR, N.Y. Times, Wall Street Journal. Several states have already announced they will appeal the ruling, and it remains to be seen whether the U.S. Department of Justice will join that appeal.
An earlier MarketWatch report on the settlement highlights two nonprofit-related provisions. First, the family has agreed to surrender control of two foundations to parties appointed by the bankruptcy court or to the trustees of the National Opioid Abatement Trust. Here is the relevant provision from the settlement:
In addition, the individual trustees of NOAT, or such other qualified party or parties as shall be selected by the Bankruptcy Court, will, subject to receipt of necessary approvals, become the controlling members of the Raymond and Beverly Sackler Foundation and the Raymond and Beverly Sackler Fund for the Arts and Sciences, which shall have an aggregate value of at least $175 million, and will be required to limit the purposes of the Foundations to purposes consistent with philanthropic and charitable efforts to ameliorate the opioid crisis.
Second, the Sackler familly will be barred from putting their names on buildings or institutions to which they donate money until they complete the agreed-upon payment of $4.5 billion (over nine years) and are no longer involved in the opioid business. Here is the relevant provision from the settlement:
A prohibition with regard to the Sackler family’s naming rights related to charitable contributions until they have fully paid all obligations owed by them under the terms of the contemplated settlement and exited, worldwide, all businesses that engage in the manufacturing or sale of opioids.
The settlement does not prevent the family from making charitable donations, and it does not require the removal of the Sackler name from existing buildings and institutions, although the report notes some charities have already done so and others are considering doing so.