Nonprofit Law Prof Blog

Congress Members Reintroduce Spotlight Act Dealing with Dark Money Disclosure

U.S. Senators and Representatives reintroduced the Spotlight Act again to repeal the regulations issued by Treasury and the IRS in 2020 that eliminated the requirement for many tax exempt organizations to have to disclose substantial donor names and addresses.

"U.S. Senators Jon Tester (D-Mont.) and Ron Wyden (D-Ore.) along with U.S. Rep. David Price (D-N.C.) today are reintroducing their Spotlight Act to shine a light on dark money political donors and hold the government accountable to enforce our nation's campaign finance laws. This legislation is also supported by Senators Bennet, Carper, Whitehouse, Blumenthal, Murray, Van Hollen, Merkley, Klobuchar, Hirono, King, Brown, Cortez Masto, Booker, Menendez, Casey, Warren and Baldwin.

The Spotlight Act would require certain political non-profit organizations to disclose their donors to the Internal Revenue Service (IRS), reversing a Trump-era rule that eliminated the requirement and allowed such organizations to keep their donors secret."

You can find the Act here.

Philip Hackney

Activist Group Guerrilla Girls Put Pressure on MOMA Over Chair of Board, Leon Black

Fascinating collision of art and activism with an art museum's brand attached to the chairman of its board of trustees. The Activist artist group the Guerrilla Girls have posted a prominent ad outside the Modern Museum of Art calling for it to end its relationship with Leon Black as a board member because of his strong connection to Jeffrey Epsten.

"The Museum of Modern Art (MoMA) in New York is facing increasing pressure to part ways with the chairman of its board of trustees, Leon Black, following revelations about the billionaire’s close ties with convicted sex offender Jeffery Epstein. The activist group Guerrilla Girls, which has been voicing this demand since 2019, revealed that it had canceled a book contract with Phaidon Press that same year after realizing the art publisher is owned by Black.

Guerrilla Girls claim that they contracted with Phaidon Press in 2018 to publish a book that surveys their activism since 1985. In a report by the New York Times, the group first revealed that it broke the contract a year later after news surfaced about Black’s relationship with Epstein. Instead, the group published Guerrilla Girls: The Art of Behaving Badly with Chronicle Books in 2020."

Philip Hackney

 

Law and Religion: Catholic Bishops Split on How to Deal with President Biden

The Washington Post reports that Joseph Biden, the second-ever Roman Catholic U.S. president, was greeted on his Inauguration Day with contrasting messages from his church: A warm blessing from Pope Francis — and a statement by the president of the U.S. Conference of Catholic Bishops saying that Biden “will advance moral evils,” including contraception, abortion and same-sex marriage.

The statement by Los Angeles Archbishop José Gomez immediately set off a debate among U.S. bishops, who, like U.S. Catholics, are bitterly divided on the direction of their extensive denomination and its entanglement with partisan politics. Those divisions are coming to a head in the figure of Biden, who makes it clear with his weekly churchgoing, his frequent references to Catholic teachings and culture, and his use of Catholic symbols that he is indeed a part of the church. 

The current dispute over how to contend with the new president features dueling comments from leading bishops.

On one hand, Archbishop Gomez stated:

In a time of growing and aggressive secularism in American culture, when religious believers face many challenges, it will be refreshing to engage with a President who clearly understands, in a deep and personal way, the importance of religious faith and institutions. I must point out that our new President has pledged to pursue certain policies that would advance moral evils and threaten human life and dignity, most seriously in the areas of abortion, contraception, marriage, and gender. Of deep concern is the liberty of the Church and the freedom of believers to live according to their consciences.

Cardinal Blase J. Cupich, rejects this thinking:

Today, the United States Conference of Catholic Bishops issued an ill-considered statement on the day of President Biden’s inauguration. Aside from the fact that there is seemingly no precedent for doing so, the statement, critical of President Biden came as a surprise to many bishops, who received it just hours before it was released. The internal institutional failures involved must be addressed, and I look forward to contributing to all efforts to that end, so that, inspired by the Gospel, we can build up the unity of the Church, and together take up the work of healing our nation in this moment of crisis.

The Catholic Bishops have in the past taken a more positive and collaborative tone towards new presidents. For example, in 2016, the conference put out a statement congratulating Donald Trump, saying it “looks forward to working with President-elect Trump to protect human life from its most vulnerable beginning to its natural end.”

San Diego Bishop Robert W. McElroy said he was “echoing Pope Francis’ message to President Biden and calling for dialogue, not judgment; collaboration, not isolation; truth in charity, not harshness. … It is a pathway of reconciliation that places the healing of our society ahead of any specific policy issue, in the recognition that repairing the soul of our country is the pre-requisite for any sustainable effort to advance the common good. … Most importantly of all, Pope Francis’ message to President Biden fundamentally speaks to him in his humanity, a man of Catholic faith striving to serve his nation and his God.”

On Wednesday morning, President Biden received a message from the Pope: “Under your leadership, may the American people continue to draw strength from the lofty political, ethical and religious values that have inspired the nation since its founding,” said Francis, who had called Biden on Nov. 12 to offer his congratulations and to discuss working together on issues including poverty, climate change and integrating immigrants and refugees.

Thursday morning, the USCCB put out four statements — an unusually busy morning for the Conference — praising actions Biden took the day before, including lifting the Muslim ban, and fortifying the “Dreamers” program that allows young immigrants to stay in the U.S. for work and school.

Prof. Vaughn E. James, Texas Tech University

Metroplitan Museum of Art Receives Endowment for Directorship

The Metropolitan Museum of Art in New York City (The Met) on Tuesday announced that it has received a gift from trustee Marina Kellen French to endow the museum's directorship position. 

The gift is being awarded through the Marina Kellen French Trust Foundation and the Anna-Maria and Stephen Kellen French Foundation. The gift will also provide support for general operating expenses. In recognition of the gift, the director's position, which has been held by Max Hollein since 2018, will be renamed the Marina Kellen French Director.

According to a January 19 press release from The Met,

The Director is responsible for the vision and leadership of the Museum and its encyclopedic collection of nearly 2 million objects spanning 5,000 years. The Director’s responsibilities include oversight of the Museum’s curatorial, conservation, and scientific research departments; its exhibition and acquisition activities; education and public outreach; and other mission-oriented areas, including the libraries, digital initiatives, publications, imaging, the registrar, and design.

The release also quoted Daniel H. Weiss, President and CEO of The Met, as saying,

We are immensely grateful to Marina Kellen French for this remarkable gift, which helps ensure the Museum’s strong artistic leadership for many years to come. For more than 70 years—almost half of The Met’s history—her family has championed the arts and enabled the Museum to become a global leader in the cultural sphere.

French previously endowed The Met's Department of European Sculpture and Decorative Arts' Marina Kellen French Curatorship and helped pioneer the museum's Executive Leadership Program.  

Prof. Vaughn E. James, Texas Tech University 

 

University of Southern California Study: COVID-19 Has Reduced U.S. Life Expectancy

A recent press release from the University of Southern California reveals that research conducted by the University of Southern California and Princeton University has concluded that the COVID-19 pandemic has significantly reduced life expectancy in the United States, with Black and Latinx Americans disproportionately impacted.  

Based on estimates of deaths under four scenarios — one in which the pandemic had not occurred and three that include COVID-19 mortality projections — by the Institute for Health Metrics and Evaluation, the report, Reductions in 2020 US Life Expectancy due to COVID-19 and the Disproportionate Impact on the Black and Latino Populations, found that as a result of pandemic deaths in 2020, Americans' overall life expectancy will fall 1.13 years, to 77.48 years — the single largest decline in at least forty years and the lowest number since 2003. 

The study also identified significant disparities by race, with researchers projecting that life expectancy for African Americans will fall 2.1 years, to 72.78 years; by 3.05 years, to 78.77 years, for Latinx individuals; and by 0.68 years, to 77.84 years, for white Americans.

Reporting on the projections, today's Philanthropy News Digest quotes Theresa Andrasfay, a postdoctoral fellow at the USC Leonard Davis School of Gerontology and co-author of the report as stating: "While the arrival of effective vaccines is hopeful, the U.S. is currently experiencing more daily COVID-19 deaths than at any other point in the pandemic. Because of that, and because we expect there will be long-term health and economic effects that may result in worse mortality for many years to come, we expect there will be lingering effects on life expectancy in 2021. That said, no cohort may ever experience a reduction in life expectancy of the magnitude attributed to COVID-19 in 2020."

As an African American, I dare say the result of this study does not make me too happy.

Vaughn E. James, Texas Tech University 

 

 

The changing face of policing nonprofits

An article written by Joshua Rosenberg of Law360 last month provides interesting insight for persons not intimately familiar with the oftentimes intricate subject area of tax-exempt organization regulation. Where once the IRS led the way in prosecuting potential tax infractions by nonprofit organizations, it now seems that state governments have stepped to the fore in that arena. As illustration, Rosenberg points to events such as the recent victory by New York’s attorney general in bringing a case against the National Rifle Association which made headlines nationwide last year. Developments such as this, says the article author, “have set the tone at the state level for policing charities, even though they’re unable to directly adjudicate the tax-exempt status of those organizations.”

Balanced against this upswing in the vigilance of state governments is a certain amount of apathy by the Internal Revenue Service in policing nonprofit organizations. This is likely due in no small part to dramatic funding cuts in 2013 when the Agency faced criticism (and indeed was ultimately found liable in the matter) for subjecting to strict scrutiny a number of conservative groups applying for charitable organization status 

For Rosenberg’s succinct and informative discussion of the topic including what this means for nonprofit tax infraction enforcement moving forward, see: https://www-law360-com.ezproxy.law.uky.edu/articles/1336984/states-not-irs-lead-in-policing-tax-exempt-organizations

David Brennen, University of Kentucky College of Law

Philip Hackney Receives 2020 Outstanding Academic Award in the Nonprofit Sector

Congratulations to fellow blogger Philip Hackney (University of Pittsburgh) on being the 2020 recipient of the Outstanding Academic Award in the Nonprofit Sector from the Nonprofit Committee of the ABA's Business Law Section. A very well deserved honor for his many contributions to both scholarship in the field and the public's understanding of the law relating to nonprofits.

Lloyd Mayer

Accountants Plead Guilty in Syndicated Conservation Easements Case

And the Atlanta Journal-Constitution reports the latest major development relating to conservation easement deductions. Two accountants have plead guilty to conspiracy to defraud the United States through promoting syndicated land conservation easements. The scheme they promoted allegedly resulted in more than $1.2 billion in fraudulent charitable deductions. It will be interesting to see whether in exchange for sentencing leniency (the charge carries a sentence of up to 5 years in prison) the accountants provide important evidence relating to their clients and other promoters.

Lloyd Mayer

Big Pharma, Charities, and Kickbacks

While not necessarily covered much in the nonprofit press, there has been a steady stream of news about federal officials charging pharmaceutical companies with using charities to funnel illegal kickbacks under Medicare. Just last month, Biogen agreed to pay a $22 million fine to resolve claims it used two 501(c)(3) foundations as conduits to cover the copay obligations of Medicare patients in order to induce those patients to purchase its drugs. In its press release, a Department of Justice official noted that is but the latest of a number of settlements relating to similar misconduct.

And also last month, a federal district court denied the motion of pharmaceutical company Regeneron Pharmaceuticals to dismiss similar charges brought against it. The 501(c)(3) foundation involved in that case is the Chronic Disease Fund, now operating as Good Days, which allegedly received tens of millions of dollars from Regeneron.

Lloyd Mayer

Trump Associates and Nonprofit Problems

Even as the Trump Administration comes to an end, news continues to come out about alleged scandals involving those associated with him and nonprofits they control or have controlled in the past. This may not be surprising given the well known problems with the President's own foundation, but these scandals  highlight continuing concerns not only about the ethics of those in his circle but also about oversight of nonprofits more generally.

For example, this week the District Columbia Attorney General filed suit against Public Media Lab (PML) and Manifold Productions, Inc., alleging that PML CEO and Manifold founder Michael Pack used the nonprofit PML to funnel millions of dollars to for-profit Manifold. Park is currently the presidentially appointed head of the U.S. Agency for Global Media, and concerns about how he operated PML arose during Senate consideration of his nomination. And the DC Attorney General continues to investigate the activities of the Trump Inaugural Committee, with the deposition of Ivanka Trump last month. These examples are on top of reports from last fall and summer relating to federal charges against former Trump senior advisor Steve Bannon and others arising out of their control of the 501(c)(4) We Build the Wall, Inc. and a related nonprofit, and a ProPublica report that 501(c)(3) nonprofit Turning Point USA, run by Trump supporter Charlie Kirk, may have engaged in questionable financial arrangements with insiders.

Finally, buried among the President's many recent pardons was the commutation of the sentence for former Texas congressman Steve Stockman. Stockman had been serving since 2018 a 10-year sentence for nearly two-dozen felonies arising out of misuse of charitable contributions from political donors. Some of his former congressional colleagues had called for his release, particularly given his age and health conditions that placed him at heightened risk from the pandemic.

Lloyd Mayer

Negative Scrutiny of Nonprofit Hospitals Continues, Along With Consolidations

Nonprofit hospitals are, along with all hospitals, struggling with the COVID-19 pandemic. But that role has not caused a let up in negative scrutiny of their activities by journalists, Senator Chuck Grassley, or state legislators. It also has not halted the continuing consolidation of health care entities.

For example, ProPublica reports that "Nonprofit Hospital Almost Never Gave Discounts to Poor Patients During Collections, Documents Show," describing the practices of Methodist Le Bonheur Healthcare, Memphis' largest health care system. And the N.Y. Times reports that "The largest hospital system in New York sued 2,500 patients for unpaid medical bills after the pandemic hit," describing the activities of state-run Northwell Health system, which consists primarily of 501(c)(3) tax-exempt nonprofits. 

Responding to these and other concerns, Senate Finance Committee Chairman Chuck Grassley wrote a public letter to every member of the Senate Finance and Judiciary Committees about the need for new attention to the tax laws governing nonprofit hospitals. Senator Grassley is rotating off of the Finance Committee, having hit his term limit for that committee under Senate GOP rules, and of course his influence would have been reduced by the Democrats taking control of the Senate under any conditions. But he likely will still have influence over such matters in the new Congress, giving his longstanding interest in the rules for tax-exempt organizations.

In the states, the Philadelphia Inquirer reports that "New Jersey may be the first state to impose per-bed fees on nonprofit hospitals for municipal services." The $3 per day per licensed bed fee is paired with preservation of nonprofit hospital property tax exemption, which has been under increasing attack in New Jersey, with approximately two-thirds of the state's nonprofit hospitals having been taken to tax court. However, Governor Phil Murphy has not yet said if he will sign the bill.

Finally, consolidation of nonprofit health care providers also continues. For example, the Federal Trade Commission recently lost an appeal of a federal district court's denial of a motion for a preliminary injunction to block the merger of Thomas Jefferson University and Albert Einstein Healthcare Network in the Philadelphia area. And 501(c)(4) nonprofit health insurers Tufts Health Plan and Harvard Pilgrim Health Care have now completed their merger after having received federal and state approvals (after some divestment).

Lloyd Mayer

Watchdog Group Lists Nonprofits That Supported Save America March

The watchdog group Documented reports that a number of nonprofits were listed on the March to Save America website as supporting Wednesday's Save America March that led to the attack on Congress. The link to that website provided in the article no longer shows the list, but the article names eleven groups, including the following eight ones I have verified are tax-exempt nonprofits using the IRS Exempt Organization Search feature:

• Black Conservatives Fund (527) (federal PAC)

• Moms for America (501(c)(3)) (website appears to be down)

• Peaceably Gather (501(c)(3) if, as appears, its legal name is First Liberty Institute)

• Phyllis Schlafly Eagles (501(c)(3) if, as appears, its legal name is the Eagle Forum Education & Legal Defense Fund)

• Rule of Law Defense Fund (501(c)(4))

• Tea Party Patriots (501(c)(4))

• Turning Point Action (501(c)(4)) (lists March to Save America prominently on website)

• Women for America First (501(c)(4))

The article notes that the Rule of Law Defense Fund, which states on its website that it is "the public policy organization for issues relevant to the nation’s conservative attorneys general," is the 501(c)(4) arm of the Republican Attorneys General Association.

So far only one of these groups (Women for America First) has posted on its website a statement condemning the violence.

Lloyd Mayer

COVID-19, Nonprofits, and the Future of Giving

There have been a number of notable COVID-19 related developments for nonprofits, some bad, some controversial, and some good.

On the bad side, the Johns Hopkins Center for Civil Society Studies reported that the job recovery rate for nonprofits declined to 1.9 percent for November, and that full recovery for the sector could take almost two and a-half years, based on Bureau of Labor Statistics data. As of November, the nonprofit sector was down nearly 878,000 jobs as compared to February 2020, or about 7 percent. (Hat tip: Philanthropy News Digest.) 

On the controversial side, NPR reported that at least 120 foundations had received collectively more than $7.5 million in federal Paycheck Protection Program funding. Some of the foundations have ties to very wealthy individuals, including the Walt Disney family and Warren Buffett. While there is nothing to indicate that it is illegal for the foundations to claim this funding, doing so of course raises public perception concerns at a time when many Americans are struggling to make ends meet.

On the good side, charitable giving surged both on Giving Tuesday (up 25 percent) and through the third quarter of 2020 (up 7.6 percent), Reuters reported. This comes on top of longer-term positive trends in giving, including the addition of 13 more billionaires to the Giving Pledge (now up to 216 in total) and increased corporate giving from 2017 to 2019. And of course there was the dramatic announcement from MacKenzie Scott that she has given away nearly $4.2 billion since July.

All is not rosy with charitable giving, however. A consulting firm reported that more than a-third of Americans plan to donate less or no money to charitable causes in 2021 as compared to 2020, although its research also found stronger expected giving among younger Americans as compared to older ones. And Nicolas Duquette (USC) has now published his article showing that from 1960 to 2012, "[t]he share of donations accounted for by a minority of top donors rose sharply . . . both because the largest gifts have grown larger and because more households give little or nothing in any given year." The New York Attorney General also released the latest Pennies for Charity report, showing that of 824 fundraising campaigns conducted in 2019 by professional fundraisers in New York, 28 percent or over $384 million was paid to the fundraisers and in 17 percent of the campaigns expenses exceeded revenue. Finally, a coalition of wealthy donors and big foundations has formed the Initiative to Accelerate Charitable Giving to urge Congress to force foundations and donor advised funds to spend more of their accumulated funds because they believe "[e]xisting laws deliver significant tax breaks upon initial funding, but do not provide sufficient incentives or requirements to ensure that these funds will ever be distributed to working charities."

Lloyd Mayer

501(c)(3)s and Post-Election Activities

There are no indications that any nonprofits, including 501(c)(3)s, were involved in yesterday's shocking riot at the Capital Building. (UPDATE: But nonprofits were apparently involved in supporting the Save America March that turned into the riot.) This is not surprising, in part because of the longstanding prohibition on 501(c)(3)s and other types of tax-exempt nonprofits promoting illegal activity of any type. But a number of 501(c)(3)s have been involved in the legal challenges to the election of President Biden and Vice President Harris, raising questions about if and when such post-election activity constitutes prohibited political campaign intervention.

For example, the Washington Post reported that the 501(c)(3) Thomas More Society recent expanded its religious liberty mission to include "election integrity" work and launched "the Amistad Project" to file lawsuits alleging election problems in several battleground states both before and after the election. Its role came to light in part because of its ties to President Trump's legal adviser Jenna Ellis, who is special counsel to the organization. Fellow blogger Philip Hackney is cited as noting that the Society was "putting its tax-exempt status at risk" by working with partisan figures on these activities, although he also cautioned that the IRS would find it difficult to challenge the Society's claims that it was acting in the wider public interest and so not attempting to intervene in a political campaign. 

In another example, the Houston Chronicle reported that a prominent donor to President Trump's campaign is now suing 501(c)(3) True the Vote for allegedly promising to use $2.5 million in donations to expose election fraud only to drop its post-election lawsuits after consulting with counsel for the Trump campaign. While the success of the lawsuit will turn on Texas law relating to charitable gifts, the alleged coordination with the Trump campaign raises questions about whether True the Vote engaged in political campaign intervention by seeking to support President Trump's reelection. (It also could raise questions about whether True the Vote made in-kind contributions to the Trump campaign that would be illegal under federal election law.) But as with the Thomas More Society, True the Vote presumably would argue its goal is to protect election integrity more broadly, a claim bolstered by its longstanding involvement with this issue (as reflected in its name).

There have also been reports of broader, election-related activities involving tax-exempt nonprofits. For example, Politico recently published "In final years of Liberty [University], Falwell spent millions on pro-Trump causes," including raising concerns about a university-funded "think tank" that ran pro-Trump ads, hired Trump allies as fellows,  and promoted Trump's false claims of election fraud.  And non-501(c)(3)s were also heavily involved in the 2020 election, and not only on the conversative side. For example, Politico published "Liberal dark-money behemoth raised nearly $140M last year," describing the issue advocacy, legislative, and election-related activities of the Sixteen Thirty Fund, a section 501(c)(4) social welfare organization. (Hat tip for both stories: EO Tax Journal.)

Lloyd Mayer

 

OECD report on Taxation and Philanthropy

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

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

Philip Hackney

NRA Admits to "Excess Benefits"

As previously blogged, the National Rifle Association and its executives continue to be under fire for excess personal benefit.  The Washington Post reported yesterday:  "After years of denying allegations of lax financial oversight, the National Rifle Association has made a stunning declaration in a new tax filing: Current and former executives used the nonprofit group’s money for personal benefit and enrichment."  In its 2019 Form 990 (not yet publicly available), the NRA confirmed its ongoing internal review of alleged "excess benefits" being paid to its chief executive Wayne LaPierre and five other former executives.  According to the Post article, the NRA disclosed in the tax filing that it “became aware during 2019 of a significant diversion of its assets.”  In its Form 990, the NRA estimates it paid nearly $300,000 in travel expenses on behalf of LaPierre between 2015 and 2019 and treats the payments as automatic excess benefits under Treasury Regulations section 53.4959-4(C).  In addition, the NRA states that LaPierre has repaid this excess benefit plus interest to the organization, concluding that the excess benefit has been corrected.

This new revelation comes four months after the attorney general of New York state filed a lawsuit accusing LaPierre and other NRA executives of misappropriating organization funds for decades, resulting in them receiving inflated salaries and large expense accounts.

(See also:  CNN, The Hill)

Nicholas Mirkay

 

 

DAFs: Surge in Giving Amid Concerns, Proposals for Change at Federal & State Levels, Maybe New Regs Soon

There has been a lot of news recently relating to the quickly growing universe of donor-advised funds. A recent analysis by the Chronicle of Philanthropy reports that eight of the nation's largest community foundations have seen giving from DAFs they oversee increase by 42% from March to April of this year. And a recent study by the Lilly Family School of Philanthropy (pictured)  finds that seven of ten nonprofits surveyed have received DAF grants, even as many nonprofit leaders expressed concerns relating to seeking and processing DAF gifts, especially relating to communicating with donors who give through a DAF.

Not surprisingly, the growth and spread of DAFs continues to attract proposals for increasing oversight of and rules for them. Last month the Chronicle of Philanthropy reported that billionaire John Arnold and law professor Ray Madoff have joined forces as part of their Initiative to Accelerate Charitable Giving to propose a set of federal tax law changes that would, among other goals, accelerate giving from DAFs. Push back was quick, including from the Philanthropy Roundtable.

At the same time, proposals related to DAFs are also being made at the state level. For example, members of the California legislature continue to pursue possible DAF-related bills, as detailed by Gene Takagi earlier this year. And a recent attempt in California to pass a bill (AB 2936) that would have established a state-law category of DAF sponsoring organizations failed in August, according to CalNonprofits. In Minnesota, a new report by the Minnesota Council of Nonprofits recommends that state law there be changed to "require charitable trusts transferring funds to a donor advised fund (DAF) to include in their annual trust filing with the office of the attorney general an itemized list of all grants and contributions made or approved for future payment during the year from that DAF."

Regardless of whether any of these proposals advance, we do know that Treasury is working on regulations relating to DAFs. As tweeted by Gene Takagi, Cindy Lott said at the NAAG/NASCO conference to expect some sort of DAF regulations in the next few months.

Finally, the Stanford Law School Policy Lab on Donor Advised Funds published Are Donor Advised Funds Good for Nonprofits? in the Stanford Social Innovation Review (SSIR). That article follows an earlier SSIR podcast on How Nonprofits Are Leveraging Donor-Advised Funds.

Lloyd Mayer

Conservation Easement Battles Continue in Congress, DOJ, IRS, and the Courts

There is some much continuing activity relating to to conservation easements that it is difficult to keep track of everything. Fortunately, fellow blogger Nancy McLaughlin (Utah) has recently updated her comprehensive summary of court decisions, Trying Times: Conservation Easements and Federal Tax law (Sept. 2020). It undoubtedly will need to be updated for many years, as just last month taxpayers filed at least 27 Tax Court petitions relating to claimed conservation easement deductions according to Tax Notes (subscription required).

The Department of Justice has also provided more information in its lawsuit against promoters of syndicated conservation easements, including identifying 42 additional such deals, again according to Tax Notes. The Internal Revenue Service this week issued a memo emphasizing the use of summons and summons enforcement in syndicated conservation easement cases, among others, and  Chief Counsel recently issued a Notice providing further guidance about the settlement of such cases. Finally, Senators Grassley, Daines, and Roberts recently reintroduced the Charitable Conservation Easement Program Integrity Act targeting abusive conservation easement arrangements.

Additional Coverage: Washington Post ("Wealth investors seem to be exploiting land-conservation breaks, and the Senate is taking notice").

Lloyd Mayer

COVID-19, Donations & Grants: Donations Up and Restrictions from Foundations Down

A recent report indicates that donors are increasing their giving in response to the challenges of 2020, including the pandemic. The Association of Fundraising Professionals' Fundraising Effectiveness Project reports that charitable giving in the first half of 2020 increased by 7.5% over the first half of 2019, a sharp increase after a decline for the first quarter of 2020 as compared to the first quarter of 2019. The number of donors also increased, by 7.2%, with an increase of 12.6% in new donors offsetting a decline in new retained donors. Coverage: Chronicle of Philanthropy (subscription required).

And according to a recent report from the Center for Effective Philanthropy, a survey of 236 foundations found that 66 percent had loosened or eliminated restrictions on existing grants since the pandemic began. A majority of respondents also reported that since the pandemic began they have reduced what is asked of grantees, made new grants as unrestricted as possible, and/or contributed to emergency funds. Coverage: Chronicle of Philanthropy (subscription required); The NonProfit Times.

Lloyd Mayer

COVID-19 & Museums: Deaccessioning Disputes and Grim Projections

It probably comes as no surprise that the pandemic is hitting museum finances particularly hard. Recognizing this fact and as reported by artnet, last spring the Association of Art Museum Directors temporarily loosened its guidelines on how members could use the proceeds of art sold from their collections. As artnet detailed, this led to a number of major museums announcing sales to shore up their finances.

But such moves risk controversy, as the Baltimore Museum of Art (pictured) found out. When it announced the sale of three paintings, including one by Andy Warhol, two trustees resigned in protest, two major donors reportedly decided to withhold $50 million in pledged funds, and criticism from other sources mounted, according to the Baltimore Sun. As that paper reported in a later story, this led to an emergency board meeting and cancellation of the sale only days before they were to occur.

Regardless of what particular museums do, the predictions for museums more generally are grim. The N.Y. Times reports that a new survey of 850 museum directors conducted in October found over half reporting their institutions had six months or less of financial operating reserves left, and that museums are overall operating at about a third of their capacity. Nearly one in three respondents said their institutions were at risk of permanent closure if additional funding was not found in the next 12 months.

Lloyd Mayer