Nonprofit Law Prof Blog

University of Idaho Will Create Nonprofit to Acquire University of Phoenix in a $550 Million Deal

The Washington Post reports that the public University of Idaho will create a nonprofit to acquire a for-profit online college, the University of Phoenix. The University of Idaho will be the sole member of the new nonprofit, and the parent company of the University of Phoenix will have no role in the school if and when the deal is completed. The deal is moving forward in the wake of a board vote rejecting a similar deal with the University of Arkansas System. The deal is subject to approval by relevant accreditors.

Additional coverage: Businesswire; Inside Higher Ed.

Lloyd Mayer

Colorado Enacts Hospital Community Benefit Transparency and Accountability Law

Earlier this month Colorado enacted HB23-1243 relating to hospital community benefit. According to the a press release from the Colorado Department of Health Care Policy & Financing, the bill, which takes effect in August 2023, does the following:

1. It requires hospitals to provide more specific and detailed spending information, so policymakers and communities across the state can tell what activities and initiatives are being funded, and how those initiatives compare with what the community asked for. 
2. The bill requires the hospital to solicit, consider, and provide the community the opportunity for feedback in creating their community benefit spending plan and any changes to spending priorities, improving on the current annual public engagement process.  
3. The bill expands requirements for HCPF to undertake stakeholder work to develop community engagement best practices and efficiencies.
4. The bill includes the calculation of the value of the nonprofit hospitals’ tax exemption. Colorado’s communities need sound estimates of the value of the tax exemption to understand the value of hospitals’ community benefit spending in lieu of paying taxes.
5. The bill adds reasonable non-compliance measures.

Coverage: Denver Post (subscription required); Greeley Tribune.

Lloyd Mayer

Former Governor Sues Middlebury College Over Removal of Donor's Name

In one of the latest disputes over attempts to remove the names of past donors, WCAX reports that former Vermont Governor Jim Douglas is suing Middlebury College for the removal of a donor's family name from the school's chapel. The donor, former Governor John Mead, allegedly gave the funds for the chapel in 1914 on the condition that it bear his family's name. But in 2021 the school removed the name because of Governor Mead's "role in advancing eugenics policy." Governor Douglas filed the lawsuit on behalf of the Mead family, seeking to have the name restored and compensation for the litigation costs.

Additional coverage: AP News; Wall Street Journal (subscription requried).

Lloyd Mayer

How to Not (and Maybe How To) Make Money Off of Tax-Exempt Political Organizations

Late last month, the U.S. Department of Justice announced the sentencing of three individuals "for soliciting millions of dollars in contributions to scam PACs." The press release further states:

According to court documents, from 2016 through at least April 2017, Tunstall, Reyes, and Davies operated two PACs – Liberty Action Group PAC and Progressive Priorities PAC – that solicited contributions from the public via robocalls and radio and internet advertisements. The two PACs represented that the contributions would be used to support the presidential nominees of the two major political parties, respectively.  Instead, the co-conspirators used the funds to enrich themselves and to fund additional fraudulent solicitations. Specifically, the two PACs raised approximately $4 million in contributions during the 2016 election cycle and subsequent months.

The penalties for this deception? A sentence of 10 years in prison, a sentence of 7 years in prison, and a sentence of 5 years of probation. Additional coverage: CNN.

As previously discussed in this space, the N.Y. Times recently had a lengthy story about five other tax-exempt political organizations that reportedly raised almost $90 million while only spending $800,000 on actual political activity. Yet that story indicates the four of those organizations still in existence have so far survived IRS scrutiny of their operations in the form of examinations that began a year or so ago. It remains to be seen whether this high profile coverage will lead to more critical IRS, and perhaps DOJ, attention.

I have not done a deep dive into the documents detailing the finances of either set of groups, but the key difference may be that the money flowing out of the tax-exempt section 527 organizations has to at least arguably go to outside vendors for actual services rendered, even if those services are mostly generating additional fundraising appeals.  Of course the fact that those vendors have financial connections to the individuals who also run the tax-exempt organizations sets off alarm bells, but that fact by itself does not make the payments illegal. And the organizations also have to be careful what is actually said in the irappeals for donations, as making specific promises to potential donors that are not kept is also problematic.

This last point is demonstrated by the recent sentencing of two individuals involved in the tax-exempt section 501(c)(4) organization "We Build The Wall" fundraising effort to 51 and 37 months in prison, respectively. The court also ordered that those individuals pay millions in restitution. In that case, one individual promised that he would  “not take a penny in salary or compensation” and that “100% of the funds raised…will be used in the execution of our mission and purpose.” In fact, the individuals involved directed for their personal benefit and use hundreds of thousands of dollars out of the more than $25 million raised.

Lloyd Mayer

Some Benefits of Donor-Advised Funds for the Merely Rich

The books I posted about yesterday and Tuesday are both quite critical of donor-advised funds (DAFs), and I hear a lot of criticism of DAFs these days. I am persuaded that current law permits some specific abusive uses of DAFs, but I am not (yet?) persuaded that among those abuses is the fact that DAFs avoid the 5% payout requirement of private foundations. The argument that I attributed to Rob Reich yesterday – that DAFs are like kudzu, crowding out donations to operating charities and so delaying the benefits of philanthropy – is well represented in the literature. So, I’d just like to share a single anecdote today about the benefits of a DAF for one real person.

Let’s call this person Mrs. Smith to protect her privacy. Mrs. Smith spent her life as a relatively frugal middle class woman, and found in her eighties that she had amassed a greater fortune, worth several millions of dollars, than she ever thought she would. She knew that she should be increasing her charitable giving, but felt somewhat overwhelmed by the multiple solicitations she received and so ironically gave less than she thought she should. She was persuaded to open a DAF at her city’s community foundation, largely because it would enable her to choose an amount that she intended to give for the year and give it, without agonizing about each specific charity.

The DAF has several additional benefits that she likes. First, it makes her donations of appreciated securities much easier than it would be if she tried to make them to individual charities. Because she is elderly, a significant portion of her wealth is in highly appreciated securities, and the tax benefit of using them for charitable contributions is well known. But because she still makes many charitable contributions of a few hundred dollars, it is quite complicated to try to make donations of appreciated securities to individual charities, many of which would much prefer to get a cash donation from a DAF than a donation of a few shares of stock from an individual. Second, because she feels overwhelmed by charitable solicitations (which are extremely costly to the charities), she would prefer to donate anonymously. The DAF permits her donations to individual charities to be anonymous and the DAF sponsor has assured her that it keeps private its own information about her. Third, because her DAF sponsor is a community foundation in her city, she appreciates the work that it does to recommend worthy charities and she reads its annual report diligently. She has said that she feels good about the (quite small) fees that the community foundation collects because she supports the work it does in turn supporting charities in her community. Fourth, as she ages she is quite anxious about charitable fraud, and feels comforted by knowing she can conduct her charitable giving and only have to interact directly with one trusted institution. Finally, the fact that she can track all her charitable giving on the community foundation’s website both helps her feel organized about her charitable activities and helps her act on her internal commitment to be more charitable. In her personal experience, investing through a DAF has enabled her to increase her charitable donations very significantly, even when measuring only donations that actually get transferred to active charities. Looking back over the past three years she has had the DAF, about 70% of her contributions into the DAF have already been transferred out to individual charities.

Interestingly, more than a decade ago, Mrs. Smith opened a different DAF at a major financial institution. She had converted a traditional IRA to a Roth IRA and for a single year was in a higher tax bracket than normal. She was advised to use that opportunity to make a significant charitable contribution into a DAF, which she could then distribute gradually in the following years. She also thought that having the DAF would facilitate discussions with her grandchildren about charitable giving as they chose recipients together. Because of where she was in her life, that just didn’t happen, and the balance sat in the DAF paying fees to the financial institution for seven years. Perhaps surprisingly, she continued to make the small charitable contributions she had always been making out of her regular checking account, but did not use the DAF at all. Finally, she decided to liquidate the DAF by making a (very large for her) single contribution to an active charity in her community.

One could imagine changing the law to require all DAFs to function more like Mrs. Smith's current experience and to prohibit the experience she had previously. But it's not at all clear that those changes to the law are necessary. It just depends on the relative benefits and burdens imposed on donors and charities by the law.

Benjamin Leff

Ellen P. Aprill Reviews "For Profit Philanthropy"

The incomparable Ellen P. Aprill has written an insightful review essay (which is unfortunately behind a paywall) about Dana Brakman Reiser’s and Steven A. Dean’s book, For-Profit Philanthropy: Elite Power and the Threat of Limited Liability Companies, Donor-Advised Funds, and Strategic Corporate Giving.  She characterizes the book as lamenting the “unraveling of a pact between elites and the public that fueled half a century of philanthropic achievement.”  That pact, which Reiser and Dean call “the Grand Bargain,” is found in the Tax Reform Act of 1969, which created the rules for so-called private foundations.  “This bargain, they believe, enacted rules grounded on principles of targeting, timing, and transparency to ensure that elite resources serve public rather than private ends. For them, new approaches that renounce this Grand Bargain destroy trust in elite giving.”  In other words, a lot of money doesn’t flow through private foundations as much anymore, and that’s bad for the charitable sector. 

Aprill recognizes what a massive contribution this book makes to the literature critically evaluating the outsized influence of hyper-wealthy charitable donors.  But she is critical of several aspects of the book’s analytical frame. Among other things, she argues that one should not compare charitable LLCs (the first focus of the book’s analysis) to wealthy donors giving to private foundations, but to wealthy donors giving directly to charities, which of course was never blocked by the Grand Bargain. Since 20^th Century philanthropists like John D. Rockefeller and Andrew Carnegie waited until relatively late in life to establish their philanthropic foundations, contemporary philanthropists criticized by Dean and Reiser “do one better than the Grand Bargain” by actively pursuing their philanthropic activities when they are still young.

Aprill does acknowledge that charitable LLCs do benefit from “entity-ness” while avoiding the burdens that would be imposed if they were treated as corporations that would have to qualify for some form of tax-exempt status to avoid corporate-level taxes. She argues that the value of this “entity-ness,” which enables wealthy elites to develop a prestigious philanthropic identity should not be underestimated. She proposes a rule that would automatically treat philanthropic LLCs as corporations, forcing them to seek tax-exempt status, probably under section 501(c)(4). While they would still avoid the rules that apply to private foundations, they would at least be subject to self-dealing rules, and have some transparency through the filing of Forms 990.

Notwithstanding Aprill’s excellent observations, I highly recommend the book (as does she). It is really really good.

Benjamin Leff

"Taxes for the Masses" Podcast About IRS and Charities

Hello all!  First time blogger here at NLPB. Because I’m me, I can’t just make a recommendation for something I like without criticizing it. There’s a tax podcast that I like called Taxes for the Masses. A recent episode provided a brief introduction to section 501(c)(3), and then criticized the IRS for not policing the charitable sector better. The hosts point out that you would be a fool at this point to rely on an IRS approval of 501(c)(3) status for pretty much anything. The 1023-EZ asks for laughably little information, and it appears that the IRS is not systematically checking even that minimal information against any third-party source. So far, so good.

Here's the criticism: I’m not at all persuaded that the IRS ought to do the kind of investigative work the hosts propose. It might be better for it to get out of the approval/denial game altogether (or keep doing it in this admittedly pathetic way) and let charities themselves figure out how to build confidence in the sector. The IRS could focus its resources on finding fraudulent or non-compliant charities and shutting them down … or collecting punitive excise taxes from them.  For example, the hosts complain that the IRS failed to catch the fact that a charity founder had previously pled guilty to fraud and money laundering (as reported by the NY Times last summer). They also complain that the IRS didn’t notice that a charity that had “of Michigan” in its name even though it had a mailing address in Staten Island. But I’m not sure how suspicious that is. I know law professors who are officers of several small charities that don’t have their own corporate offices. These very same law professors sometimes use their own home addresses as the mailing addresses of those small charities, even when the charities conduct their activities in other states. It might annoy their wife, but it’s just not that suspicious. That being said, the hosts are probably right that the IRS should have done a better job revoking or refusing to grant charitable status to multiple charities with “American Cancer Council” in their name once the actual American Cancer Council complained that these organizations were not affiliated with it. 

Benjamin Leff

Tax Notes Look at IRS Tea Party Episode 10 years Later

Tax Notes has a look back at the IRS Tea Party episode 10-years later. I note I am quoted a good bit in this piece.

From the story:

"Ten years after the IRS acknowledged it had inappropriately given extra scrutiny to applications for tax-exempt status submitted by conservative organizations, debate continues as to what happened and how things stand today, with observers on the political right and left suggesting that more guidance on exempt organizations and political activity could help prevent such controversies from happening again.

Although passions seem less intense than they were in 2013 and beyond after then-IRS Exempt Organizations Director Lois Lerner acknowledged the agency had mishandled the exemption applications of Tea Party groups and other right-of-center nonprofits seeking section 501(c)(4) status, strong opinions about the episode persist and sometimes are voiced during debates about the IRS.

In January 2023 Rep. Jason Smith, R-Mo., following his election as chair of the House Ways and Means Committee, said the IRS has “a history of targeting conservative Americans.”

In March, in an online post attacking an IRS visit to the home of a journalist who was testifying before Congress about the weaponization of the federal government, the Center for Individual Freedom said the visit was made by “the same IRS that deliberately targeted conservative and pro-Israel nonprofit organizations under disgraced former director Lois Lerner.”

Philip Hackney

Politico Story on Leonard Leo

There is a new story up on Leonard Leo in Politico today by Heidi Przybyla, who has had some significant scoops on Leo and the Federalist Society. It's worth a read for understanding some of the turmoil that seems to be going on in the background of the Federalist Society regarding its relationship with Leo.

This blog's Lloyd Mayer is quoted within.

This story seems to be the irony that Leo runs the Federalist Society as a 501(c)(3), which is prohibited from any political campaign intervention. Nevertheless, it appears that he uses those connections from the (c)(3) to further political interests in many ways. 

One notable scoop here is that though Trump did rely upon the list provided by Leo as a member of the Federalist Society, no one from Federalist Society other than Leo controlled the names provided.

From the story:

"Interviews with people familiar with the internal workings of the Federalist Society, including two board members, paint a picture of a symbiotic relationship in which Leo uses his connection to the vast network of scholars in the society to earn credibility with donors, who then contribute to dark money operations that engage in the kind of partisanship the society officially eschews.

Leo’s political activism and his use of donor money to enhance his own wealth have prompted increasing tensions between him and his fellow co-chair, Northwestern University Law Professor Steven Calabresi, and Meyer, who has been executive director or president for more than 30 years, according to three people familiar with the society. But they said Leo’s ties to the conservative donor base fans fears that a rift would leave the society struggling for funds, while members also worry that any breach in the facade of the conservative legal movement would only empower the liberals that all sides disdain.

Leo’s business empire and his leadership position at the society “easily gets blurred,” creating “a public relations problem,” said professor Lloyd Hitoshi Mayer, an expert on nonprofit organization advocacy at the University of Notre Dame."

Philip Hackney

Montana Senate Passes Bill to Tax Nonprofits That Sue the State Under Environmental Laws

The Daily Montanan reports that the Montana legislature is seriously considering Senate Bill 524, which would impose the Montana business tax of 6.75% on spending by nonprofits incurred to sue the state under specific natural resources and environmental laws by treating those expenditures as unrelated business taxable income. (Yes, an expenditure would be treated as income.) Since the news report, the Senate passed a third reading of the bill (31 to 19) and transmitted the bill to the House for consideration, where it has been referred to the Committee on Taxation with a hearing scheduled for April 13th.

The sponsor of the bill accuses the targeted nonprofits, which are apparently tax-exempt section 501(c)(3) organizations, as "disrupting our lifestyles and economy." He also said "[i]f the IRS would be doing its job like it should be doing, we have a number of nonprofits and 501(c)(3)s that are operating outside of their scope and mission." 

During a Senate committee hearing, almost a dozen opponents spoke in opposition to the bill, citing constitutional and policy concerns. The opponents included the executive director of the Montana Nonprofit Association (MNA), who is also the board chairwoman of the National Council of Nonprofits. Here is the brief summary of the bill on MNA's website:

SB524 – Revise UBIT to Include Legal Fees

This bill proposes to charge tax on any income certain nonprofits use to “challenge or support certain government actions” under the presumption that this would be unrelated to the mission of the organization and therefore subject to Unrelated Business Income Tax. The bill is somewhat narrow in scope (see p. 2 lines 2-5) but it’s important to read and understand the impact on litigation, lobbying, or simply meeting with a legislator or member of administration. The hearing date is not set. MNA will oppose.

Lloyd Mayer

March Madness Highlights Growing Importance of NIL Deals at University of Miami

The N.Y. Times reports that the NCAA basketball tournament highlighted the importance of NIL deals for recruiting and retaining men and women basketball team members at the University of Miami. At the center of Miami's push in this area is John Ruiz, an alumnus and chief executive of LifeWallet. According to the article, LifeWallet has sponsorship deals with Jordan Miller, Nijel Pack, and Isaiah Wong on the men's side and sisters Haley Cavinder and Hanna Cavinder on the women's side. The story for the most part does not include details of these private arrangements, but it notes that transfer Nijel Pack;s deal is a two-year one for $800,000 plus a car.

Lloyd Mayer

For-Profit Thrift Store Secures First Amendment Dismissal of Deceptive Marketing Claims Relating to Nonprofits

The Supreme Court of Washington unanimously agreed with TVI Inc., doing business as Value Village, that claims brought by the state's attorney general for alleged deceptive advertising and marketing had to be dismissed because they infringed on the organization's First Amendment right to solicit contributions on behalf of nonprofit organizations.

According to the opinion, TVI operates about 20 for-profit thrift stores in Washington. It contracts with nonprofit organizations that either independently collect donations that they give to TVI or allow TVI to collect donations on their behalf at TVI's locations. What is in it for both parties? As the court summarized:

By working with charity partners, TVI obtains inventory at a lower price than it would pay a for-profit supplier. The charity partners, in turn, receive a predictable source of unrestricted funding, as well as publicity from TVI's marketing.

The attorney general raised concerns about "deceptive net impressions" in violation of the state's Consumer Protection Act. By the time the case reached the state supreme court, only three such impressions were still at issue: "(1) 'that [TVI] is itself a nonprofit or charitable organization,' (2) 'that in-store purchases . . . provide a financial benefit to [TVI's] charity partners,' and (3) 'that donations accepted at [TVI's] retail stores in the Spokane, Washington, market benefitted The Rypien Foundation' from January 2014 to February 2015." 

Applying the U.S. Supreme Court's charitable solicitation cases and other First Amendment precedents, the Washington Supreme Court held that TVI's marketing had full First Amendment protection as it inextricably intertwined charitable solicitations and commercial speech. Given the state's claims imposed content-based restrictions, the court further held the claims must survive exacting scrutiny. The court concluded they did not because "[t]wo of the State's claims are not based on properly tailored allegations, and the third is not supported by exacting proof."

Coverage: Seattle Times.

Lloyd Mayer

Federal District Court Affirms Bankruptcy Court's Approval of Boy Scouts Settlement

The Boy Scouts of America (BSA)'s comprehensive reorganization plan and global settlement of sex abuse claims continues its slow march through the federal judicial system. Late last month, the U.S. District Court for the District of Delaware affirmed the U.S. Bankruptcy Court's previous approval of a reorganization plan that provides $2.46 billion to settle sex abuse claims against the BSA, over the objections of some insurance companies and abuse claimants. While the opinion is lengthy (156 pages), here is the District Court's bottom line:

Appellants argue on many fronts that the Plan did not meet requirements for confirmation, and I have carefully considered each of these arguments. Based on the record, Appellants have failed to put forth evidence that would demonstrate clear error in the Bankruptcy Court's careful findings of facts. Finding no error in the Bankruptcy Court's legal conclusions either, I will affirm the Confirmation Order.

Coverage: Reuters.

Lloyd Mayer

Crowdsourcers, Ginni Thomas group, Uses Fiscal Sponsorship Via CRC

Interesting story out of the Washington Post this week looking at the use of fiscal sponsorship by a Ginni Thomas related group called Crowdsourcers, formed ostensibly to counter the left, via the Conservative nonprofit Capital Research Center (CRC), a group focused on uncovering dark money groups on the left. 

From the story: "A little-known conservative activist group led by Virginia “Ginni” Thomas, the wife of Supreme Court Justice Clarence Thomas, collected nearly $600,000 in anonymous donations to wage a cultural battle against the left over three years, a Washington Post investigation found.

The previously unreported donations to the fledgling group Crowdsourcers for Culture and Liberty were channeled through a right-wing think tank in Washington that agreed to serve as a funding conduit from 2019 until the start of last year, according to documents and interviews. The arrangement, known as a “fiscal sponsorship,” effectively shielded from public view details about Crowdsourcers’ activities and spending, information it would have had to disclose publicly if it operated as a separate nonprofit organization, experts said.

 

The Post’s investigation sheds new light on the role money from donors who are not publicly identified has played in supporting Ginni Thomas’s political advocacy, long a source of controversy. The funding is the first example of anonymous donors backing her activism since she founded a conservative charity more than a decade ago. She stepped away from that charity amid concerns that it created potential conflicts for her husband on hot-button issues before the court."

 

Also:

 

"Philip Hackney, a former IRS attorney who is now an associate law professor at the University of Pittsburgh, said such arrangements are not uncommon or improper. He said they do allow the start-up group to avoid having to disclose information that independent nonprofits must reveal in annual tax filings, such as its officers or details about its spending.

“You would be able to keep names and salaries off of any documents,” he said.

Indeed, Thomas’s title in Crowdsourcers is not a matter of public record and could not be determined."

Philip Hackney

Politics & Nonprofits: Déjà Vu All Over Again

Anyone who tracks legal developments relating to the involvement of nonprofits in politics would be forgiven if they felt they were in a particularly drawn out version of the movie Groundhog Day. That is because it appears everything that is new is something we have seen before. Here are some recent examples:

• DISCLOSE Act Introduced (again): U.S. Senator Sheldon Whitehouse (D-RI) and Representative David Cicilline (D-RI), along with 162 colleagues, reintroduced the Democracy Is Strengthened by Casting Light On Spending in Elections (DISCLOSE) Act in the new Congress. As noted in the press release, "Senate Majority Leader Chuck Schumer first introduced the DISCLOSE Act in the wake of the disastrous Citizens United decision in 2010, and Whitehouse has led the introduction of the legislation in every subsequent Congress."

• Treasury/IRS Barred From Issuing 501(c)(4) Guidance (again): The Consolidated Appropriations Act, 2023 (Pub. L. No. 117-328) continues the now longstanding prohibition on the Treasury Department, including the Internal Revenue Service, using any funds to develop guidance "relating to the standard which is used to determine whether an organization is operated exclusively for the promotion of social welfare for purposes of section 501(c)(4)" (Division E, Title I, Section 123, under Administrative Provisions - Department of the Treasury). The Act also continues now longstanding prohibitions on the IRS using any funds "to target citizens of the United States for exercising any right guaranteed under the First Amendment" or "to target groups for regulatory scrutiny based on their ideological beliefs." (Division E, Title I, Sections 106 & 107, under Administrative Provisions - Internal Revenue Service).

• A Politician Benefitting from a Friendly 501(c)(4) (again): Politico reports that "A new nonprofit group is helping DeSantis go national." The new nonprofit, named And to the Republic, is reportedly a section 501(c)(4) organization that "is supporting Ron DeSantis’ national political activity."

• A Politician Accused of Misusing a Nonprofit (again): The Arizona Republic reports that a former Democratic primary candidate for Secretary of State Reginald Bolding is facing allegations of wrongdoing relating to a nonprofit he founded and helped lead ("Bolding, his nonprofit, referred to AG for investigation of connections, donations"). The referral from Arizona Secretary of State Katie Hobbs states there "is reasonable cause to believe [Bolding]  violated campaign finance law" based on a complaint filed by a Phoenix resident. The nonprofit is named Our Voice Our Vote, and according to IRS records it is a section 501(c)(4) organization.

Lloyd Mayer

Donor Questions & Fatigue For Contributions to Aid Ukraine

As the Russian invasion of Ukraine passes the one-year mark, donor questions and fatigue have started to become evident. On the questions side, the AP had a recent story titled For donors, wartime Ukraine aid creates blurry ethical line. It highlights the dilemma of some donors, and particularly U.S. nonprofits that face legal restrictions, who want to support Ukraine but do not want to support actual combat activities. This issue is of course complicated by the fact that some items can be used for either humanitarian or fighting purposes.

On the donor fatigue side, devex reported last month that Philanthropic donations to Ukraine have largely dried up. This story notes that over 70 percent of contributions for Ukraine relief were announced before July 2022, with fewer announcements since then, although there have been some notable exceptions. At the same time, the Chronicle of Philanthropy reports that Foundation Giving to Ukraine Peaked at Beginning of Invasion, but Has Stayed Steady Since (subscription required). It notes that Foundation Source found that more than $7 million has been given to support Ukraine by the 273 private foundations it analyzed.

Lloyd Mayer

New Nonprofit News Outlets: Chronicle of Philanthropy, The Intercept, Magnolia Tribune

The shift toward nonprofits in journalism continues, with three prominent announcements:

• Last month the Chronicle of Philanthropy announced that its plan to become an independent nonprofit organization this spring is moving forward, with over $6 million in commitments already received from major foundations.

• In January The Intercept announced it would restructure as a standalone nonprofit organization, spinning off from the First Look Institute. As part of the restructuring, the Institute has committed to provide a significant (but not quantified) multiyear gift.

• And in December, Mississippi Today reported that a prominent Mississippi conservative group leader is launching a new nonprofit news organization in 2023 called Magnolia Tribune (which now appears to be up and running). It has apparently absorbed the assets and work of a conversative blog, Y'all Politics.

In related news, a Texas legislator appears to have missed that nonprofit news outlets can be conservative as well as liberal. The San Antonio Express-News reports he has proposed a bill "that would ban colleges and universities in the state from supporting nonprofit news organizations." The story makes it clear his motivation is to cut off a revenue source for what he views as "mouthpieces for far-left liberal institutions." There is no indication to date that the bill has significant support in the Texas legislature.

Lloyd Mayer

Reporters in Action: In-Depth Investigation Into NFL Player Charities

Jason Wolf at the Arizona Republic led a six-month investigation that led to a five-part story about nonprofits founded by NFL players who have won the coveted Walter Payton NFL Man of the Year award. The stories are behind pay walls (at both the Arizona Republic and USA Today), but at least as of today you can read the follow-up Arizona Republic story Reddit had questions about our NFL charity investigation. Here are key answers. without a subscription. Here are some highlights:

• "The investigation found most athletes’ nonprofits largely serve as fundraising vehicles — they collect money to give to existing nonprofits like hospitals or food banks that perform programmatic activities. But some spend less than half of the donations they receive on charity, with the rest paying for overhead."

• "NFL players often start nonprofits without having the slightest idea what they’re doing, and without considering partnering with established organizations."

• "[N]either the NFL nor the NFLPA, which presents weekly and annual awards for community service, match their promotional efforts when it comes to educating players on the nonprofit sector."

Lloyd Mayer

Debating the Wisdom of Federal Tax Benefits for Charities

The past couple of months have seen several commentators questioning whether the federal tax benefits for charities should continue to exist, either in their current form or at all. Here are some examples:

• As reported by Peter J. Reilly in Forbes, in December EO Tax Journal editor Paul Streckfus floated the idea that calling for repeal of Code section 170 in its entirety could be used by a presidential candidate to help separate themselves in what may be a crowded field. Reilly further reports that Streckfus made it clear in response to a follow-up inquiry that he supports this proposal, given that the deduction in its current form primarily if not almost exclusively benefits the wealthy who tend to give to the organizations that the wealthy themselves are interested in, such as their alma maters and, if they are very wealthy, their own foundations.

• Shortly thereafter, Peter Coy wrote an Opinion for the N.Y. Times titled The Thorny Questions Raised by Charitable Giving (subscription may be required). He flagged important issues, including the relative roles of government and philanthropy, whether to give locally or globally, and the balancing of giving fish with trying to teach someone to fish. He also noted that philanthropic priorities tend to be set by people with money, citing the effective altruism approach championed by Sam Bankman-Fried as an example, and the fact that the charitable contribution deduction is no longer available to most people of moderate means.

• Then in the Chronicle of Philanthropy, Jeff Cain wrote an Opinion titled End the Charitable Tax Exemption and Remove the Conflict of Interest Baked Into Big Philanthropy. He highlights the bipartisan opposition to the Accelerating Charitable Efforts Act among private foundations, and argues that "philanthropists can use their tax-advantaged funds to advocate for greater tax-incentivized charitable laws through the tax-exempt nonprofits they support. And they do." He refers to this trend as "Big Philanthropy" and argues that the way to address it is "ending charitable tax exemptions and deductions of every kind."

• Finally, Business Insider published an article titled How the Rich Have Their Cake and Eat It Too by Using Trusts to Give to Charity, Collect Cash, and Save on Taxes at the Same Time (subscription required), critically highlighting the tax advantages provided for donors to charitable remainder trusts. 

An interesting recent example of how philanthropy favors the wealthy, including through tax benefits, is the Bloomberg News article Billionaire Donates $1.9 Billion to Art Museum Where He Lives (subscription required). The story notes the tax benefits that come with a donation along these lines, although often creating a legacy is more important to the donors.

Lloyd Mayer

AGs in Action: NASCO Report, Ohio "Charitable University", and Massachusetts Revised Guide for Board Members

With the well-known limits on IRS oversight of tax-exempt nonprofits, the burden of regulating charities has increasingly fallen to state attorneys general and other state officials. And the these officials have been active, both with respect to enforcement and education. This activity is demonstrated by several recent developments:

• The National Association of State Charity Officials issued last fall a Report on State Enforcement and Regulation. Covering the period from January 2021 to September 2022, it provides "[a] sample of cases in which NASCO members were involved in 2021 in these key areas: a. Deceptive Solicitation b. Nonprofit Governance c. Trust and Estates" and a summary of "[o]utreach efforts and published guidance issued in 2021 and 2022."

• As reported by WDTN, the launch by Ohio Attorney General Dave Yost earlier this year of "an effort to educate members of Ohio charity boards" under the heading Charitable University.

• The publication late last year by Massachusetts Attorney General Maura Healey of a revised Guide for Board Members of Charitable Organizations that "is provided by the Attorney General’s Office to help board members of charitable nonprofit organizations carry out their important responsibilities."

Lloyd Mayer