Nonprofit Law Prof Blog

Abely, The Uncertain Role of Reliance in the Enforcement of Charitable Subscriptions

Christine Abely (New England Law) has posted The Uncertain Role of Reliance in the Enforcement of Charitable Subscriptions, 26 Lewis & Clark L. Rev. (2022) to SSRN. Its abstract reads:

In cases where charitable promises are made and later retracted, the Restatement (Second) of Contracts provides conflicting guidance as to how a court should factor in reliance by the charity when considering whether to enforce the promised donation by way of promissory estoppel. Specifically, the text of § 90(2) within the Second Restatement provides that a charitable subscription is binding “without proof that the promise induced action or forbearance.” The adoption of this provision represented a departure from the requirement of reliance historically necessary for the enforcement of most types of promises by promissory estoppel. According to the Second Restatement, however, reliance remains relevant to the determination of whether enforcement of a promise is necessary to avoid injustice, which is a required element to enforce a charitable subscription pursuant to § 90(2). Namely, Comment b to § 90, discussing the character of reliance protected, notes that enforcement of the promise must be necessary to prevent injustice, one factor of which is the nature and extent of reliance; such reliance “need not be of substantial character in charitable subscription cases.” Comment f states that for charitable subscriptions where recovery is rested on reliance, “a probability of reliance is enough,” although American courts “have found consideration in many cases where the element of the exchange was doubtful or nonexistent.” Moreover, Illustration 17 to Comment f describes a situation where reliance does in fact support enforcement of a charitable subscription.

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Lu, "Fundamental National Public Policy" and Critical Race Theory in a Delicate Democracy

Lynn D. Lu (CUNY) has published Who’s Afraid of Bob Jones? “Fundamental National Public Policy” and Critical Race Theory in a Delicate Democracy in the CUNY Law Review. Here is the abstract:

Calls to defund critical race theory aim to freeze civil rights progress where it stood decades ago with the formal prohibition of intentional race discrimination in federally funded programs. In the notorious case of Bob Jones University v. United States, 461 U.S. 574 (1983), the U.S. Supreme Court confronted the federal tax exemption for public charities and ruled that the Internal Revenue Service (IRS) properly withheld tax-exempt status from otherwise qualifying private religious schools that denied admission to students based on race. In particular, the Bob Jones Court recognized the “fundamental national public policy” against racial segregation as a compelling government interest outweighing any burden on private schools’ religious exercise. However, the Court left unresolved vital questions of how (or indeed, whether) to allocate public resources affirmatively to foster diversity, equity, inclusion, or accessibility in democratic society.

This Article examines the lessons of Bob Jones for civil rights advocates as informed by critical race theories that have developed amid a federal-court retreat from enforcement of antidiscrimination norms. It also explores the case’s symbolic value for conservatives motivated to prevent its expansion, even as the Bob Jones Court narrowly constrained its own decision’s impact by refusing to engage a number of crucial substantive questions: 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 economic justice in civil rights claims. This Article ultimately concludes that the legal reorientation critical race theorists have helmed in the wake of Bob Jones remains crucial for identifying and challenging ongoing power disparities in and through every level of democratic government and society.

Lloyd Mayer

Bernardo: The interconnection between welfare services and the market in the United States with a focus on the elderly: the application of antitrust law to nonprofits

Julia Ortego Bernardo (Universidad Autónoma de Madrid) has posted The interconnection between welfare services and the market in the United States with a focus on the elderly: the application of antitrust law to nonprofits. Here is the Background and Introduction section (footnotes omitted):

It is widely acknowledged that the US welfare system evolved differently from other industrialized countries’ welfare regimes. From a neutral standpoint, scholarly works evidence that the US social service framework cannot be compared to the welfare states implemented in Western Europe over the 20th century−which remain in place. This is due to the different approaches to welfare objectives. The prominent role of private organizations and nonprofits is one of the US system’s defining features, although public authorities’ action (or, better said, government intervention) has not been set aside completely.

The underlying rationale of the US welfare system largely relies on two premises: first, welfare benefits qualify as commodities that can be delivered by private entities (i) operating in the market; and thus (ii) able to meet the existing demand. Second, social service recipients or, where appropriate, welfare officials, have somewhat free choice to a certain extent regarding the services, which, also, would be available to anyone.

However, note that these ideas regarding the efficient operation of social service markets might not be true in practice. In fact, often there are market failures, i.e., the price, quantity or quality of the delivered social services may be unsuitable or simply not enough to meet society’s needs. The most common market failures in the field of social services, although not the only ones, are the so-called “informational market failures” or information asymmetries. If they lack information, welfare recipients can hardly assess the quality and value for money of welfare services. Ultimately, users are unable to choose correctly between services. These and other market failures trigger government intervention, which relies on two instruments: (i) regulation; and (ii) antitrust law. As for (ii), it is worth noting that it qualifies as a paramount example of indirect economic regulation. In the United States, the scope of antitrust law covers a wide range of social services, insofar as their provision is totally or partially subject to market conditions. By fining anticompetitive practices and behaviors, public authorities indirectly enhance the system, since the fines have a positive impact on the price and quality of services.

Within the field of US welfare, public action has been somewhat superseded by private entities’ initiatives (including both companies and nonprofits) and market-based management. This poses several challenges and concerns. Does the protection provided by antitrust law cover the activity of non-profit organizations? We will answer this question below. This paper examines (i) the development of strictly assistance-based services or benefits in the US (section 2.1); (ii) their current legal framework (section 2.2) with regards to other social services, particularly those catering to older adults (section 2.3); and (iv) the positive and negative outcomes (section 3.1) and oversight (section 3.2) of private initiatives, including not-for-profit action (section 3.3).

Lloyd Mayer

Binfarè & Zimmerschied: Doing Good and Doing it with (Investment) Style [private foundation investing]

Matteo Binfarè and Kyle Zimmerschied (both University of Missouri at Columbia) have posted Doing Good and Doing it with (Investment) Style. Here is the abstract:

We study the asset allocation, spending behavior, fees, and investment performance of U.S. private foundations, which have different economic objectives than other institutional investors. We find that large foundations generate positive risk-adjusted returns of about one percent per year and document considerable variation in alphas over time. Larger and more sophisticated foundations perform better and invest more aggressively. Foundations with concentrated stock holdings have higher returns, but also take on more risk. Because of the constraints imposed by the five percent minimum spending rule and accommodating monetary policy, private foundations also increase their risk-taking and reach for yield. Due to these constraints, a conservative asset allocation will decrease real wealth over time resulting in less charitable giving.

Lloyd Mayer

Goldeberg & LeClair: A proposal for a new type of charitable-business structure

Robert S. Goldberg (Adelphi University) and Mark S. LeClair (Fairfield University) have published A proposal for a new type of charitable-business structure: the donor-investor organization in the Journal of Sustainable Finance & Investment. Here is the abstract:

Non-profits redistribute assets in pursuit of a social goal, and for-profits organize assets to generate income and growth. While both organizations face a principal-agent problem, non-profits face unique challenges ensuring that managers adhere to the goals of endowers or donors. Regulations have failed to successfully address the principal-agent problem, and hybrid structures such as Benefit Corporations have profit as one of the objectives. We propose a new type of entity with both a business arm and a charitable arm, with a social purpose as the only objective, committing all profits to the entity’s charitable mission. Investors, both small and large, receive a stream of future tax deductions based on outlays for the organization’s mission, while retaining legal control of the entity’s operations. While not meant to replace all charities, the proposed structure provides a new way for investors, business people and non-profit professionals to work towards a social good.

Lloyd Mayer

Molk: Where Nonprofits Incorporate and Why It Matters

Peter Molk (Florida) has posted Where Nonprofits Incorporate and Why It Matters, forthcoming in the Iowa Law Review. Here is the abstract:

Nonprofit corporations account for over a trillion dollars of American annual GDP, employ twelve million people, and include some of the most well-known organizations in the world. Yet despite their significance, many core corporate governance issues about nonprofits remain a black box. This Article, using newly available data, begins to remedy this gap in the literature.

Using filing data from 300,000 charitable nonprofits, I examine the foundational issue of where nonprofits incorporate, a decision that determines both the law of nonprofit corporate governance affairs and public oversight apparatus for governance and compliance. Unlike publicly traded corporations, I find nonprofit incorporation choice is not a vigorously competitive race to the top or bottom, but instead is better characterized as a stroll. A nonprofit’s headquarters jurisdiction is the most popular incorporation destination - far more common than for publicly traded corporations. However, among those nonprofits that incorporate out-of-jurisdiction, Delaware is the most popular destination, with the District of Columbia a surprising second. The findings are consistent with nonprofits’ selecting weaker governance and oversight rules, suggesting a potential “stroll to the bottom” among nonprofits. Using these results, I offer evidence-based policy implications to improve governance of nonprofits, to reverse the potential stroll to the bottom, and to invigorate beneficial state competition for nonprofit incorporations.

Lloyd Mayer

Murray: Charities & Discrimination

Ian Murray (University of Western Australia) has published Charities & Discrimination: Is Charity Law Always a Better Solution than Public Policy? in the Nonprofit Policy Forum. Here is the abstract:

Discrimination by charities raises questions about the appropriate extent of equality regulation and has implications for government outsourcing through charities and for the provision of tax concessions. Professor Parachin has recently provided a justification for denying the application of public equality norms to charities through the public policy test of charity law. This paper builds on that work by considering whether liberal societies might, however, have good grounds to apply public equality norms to charities in circumstances such as the provision of outsourced government services, state enforcement of egoistic giving, or where doing so is a proportionate means to prevent harm.

Lloyd Mayer

Overgaard & Kerlin: A legally-informed definition of volunteering in nonprofits and social enterprises

Charlotte Overgaard (MacQuarie) and Janelle Kerlin (Georgia State) have published A legally-informed definition of volunteering in nonprofits and social enterprises: Unpaid work meets profit motives in Nonprofit Management & Leadership. Here is the abstract:

This article presents a definition of volunteering that will help organizations and workers, especially those engaged in commercial activity for a social purpose, determine when U.S. organizations can legally draw on volunteer labor. By drawing on recent U.S. court cases, the intentions of the Fair Labor Standards Act (FLSA) to protect vulnerable workers and the wider framing literature on organizational logics, work, and volunteering, we outline under which circumstances workers are considered employees rather than volunteers and therefore covered by the FLSA and entitled to minimum pay. We show that in order to determine the legalities of work under current law, it is necessary, but not sufficient, to consider whether activities are carried out for commercial purposes. What matters most for a legally-informed definition is the role performed within organizations and the promises made to individual workers in terms of compensation.

Lloyd Mayer

Salamon, Haddock & Toepler: Conceptualizing, Measuring, and Theorizing the Third Sector

Lester M. Salamon (Johns Hopkins), who died in 2021, and Megan A. Haddock (ISTR) and Stefan Toepler (George Mason Schar School), who revised and completed the article after Professor Salmon passed away, have published Conceptualizing, Measuring, and Theorizing the Third Sector: Embedding Statistical and Methodological Developments Awaiting Broader Scholarly Take-up in VOLUNTAS. Here is the abstract:

This article reviews and calls attention to the work underlying significant improvements in the conceptualization, measurement and analysis of the third sector on a comparative basis worldwide that have been made over the past three decades. This article provides an update on the current status of each measurement instrument, their institutionalization in the world’s major official statistical systems, and describes how they can work in concert to provide regular, robust, and accurate information about the third sector at the national level around the world. This article also represents a call to action for the research community to advocate for having these research tools implemented in their own countries, to protect the progress made, to support and provide oversight of their implementation, to use the resulting data in their own research, and to initiate improvements in the development of these tools in the future. Doing so will grow the base of cross-nationally comparable data on the third sector, will provide lenses for us to better see the features that make the civil society sector in each country distinct, and will open the way for vastly expanded empirically grounded theory-building in this field.

Lloyd Mayer

Conservation Easements Update: Circuit Split, DOJ Indictment, Biden Administration Proposal, IRS Exam Guidance, Recent Articles

Conservation easements continue to be a hot topic for the federal courts, the executive branch, and scholars. Here are some recent developments:

• 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.

Lloyd Mayer

Aprill: Governmental and Semi-Governmental Federal Charitable Entities

Ellen Aprill (Loyola L.A.) has posted Governmental and Semi-Governmental Federal Charitable Entities and Michelle Layser (Illinois) has posted a review of the article. Here is the article's abstract:

The standard view of the relationship between government and the nonprofit charitable sector treats them as separate and distinct. But they are not. Numerous federal agencies have statutory authority to receive tax-deductible charitable deductions. Their ability to do so, however, undermines the oversight accomplished through the Constitutionally-mandated appropriations process. Congress has also created many nonprofit tax-exempt organizations. These entities enjoy flexibility as to fundraising, investment, and spending that government agencies lack. However, they avoid the accountability that various federal statutes impose on government agencies, on the one hand, and that state nonprofit laws accomplish for private nonprofit organizations, on the other. At the same time, these Congressionally-established nonprofits retain significant governmental ties, such as service by government officials on their boards and reliance on appropriations. These practices produce at best a precarious balance between the governmental and non-governmental. Moreover, Congress has bestowed honorific charters on dozens of on pre-existing nonprofit tax-exempt organizations, a practice that can erroneously imply Congressional endorsement and oversight of these groups.

For the first time in the scholarly literature, this article examines all of these types of entities and the issues they raise under tax law, nonprofit law, constitutional law and administrative law. As one example, the Smithsonian Institution, the first and arguably the most prominent Congressionally-created nonprofit, engaged an independent review commission in 2007 to investigate widespread reports of inappropriate behavior by its then Secretary. The commission identified failures of governance and management, faulting the lack of federal common law regarding board duties and obligations. It questioned the ability of the Chief Justice and the Vice President to devote the hours required to discharge their fiduciary duties as Smithsonian Institution board members. It called for the Smithsonian, which is funded primarily by appropriations, to adopt procedures for transparency, disclosure, and compensation consistent with statutes governing federal agencies. The Smithsonian accepted some but not all of these recommendations. In particular, no change to its board structure has taken place.

Emphasizing issues of governance, the article makes specific recommendations to increase accountability of both government agencies and Congressionally-established nonprofit entities, such as urging Congress to curtail the widespread practice of appointing government officials to nonprofit boards. More fundamentally, it calls for acknowledgment of these hybrid entities. It argues for viewing government and charity as resting on a continuum rather than each floating in its own untethered conceptual space. This new approach clarifies our understanding of government, the nonprofit sector, and the relationship between them. Use of a continuum reminds us that our nation faces a choice between the private and public – or some mix of the two – in funding activities in which both government and charitable nonprofits engage.

Lloyd Mayer

Zhang: Antidiscrimination and Tax Exemption

Alex Zhang has posted Antidiscrimination and Tax Exemption, 107 Cornell Law Review (forthcoming 2022). Here is the abstract:

The Supreme Court held, in Bob Jones University v. United States, that violations of fundamental public policy—including race discrimination in education—disqualify an entity for tax exemption. The holding of the case was broad, and its results cohered with the ideals of progressive society: the government ought not to subsidize discrimination, in particular of marginalized groups. But almost four decades later, the decision has never realized its liberal, antidiscriminatory potential. The IRS has limited implementation to the narrowest facts of the case. The scholarly literature has not formulated a systematic account of how to enforce the Bob Jones regime, in light of the expansion of antidiscrimination protections and the Court’s reasoning that is deeply rooted in common-law charity. At the same time, tax-exempt entities engage in a smattering of discriminatory activities, often with impunity.

This Article argues for extending the enforcement of Bob Jones to antidiscrimination on the basis of all protected traits. It first shows, through an examination of IRS written determinations, the inadequate scope of implementation by the agency, which has limited denials of tax exemption to racially discriminatory schools. Second, it contends that the goals of antidiscrimination and common-law charity coincide: both aim to ameliorate inequality by facilitating the entry of marginalized populations into the labor market. This affinity further justifies the Court’s holding that tax exemption requires conformity to the requirements of charity and established public policy. Third, it offers implementation strategies to minimize backlash and sketches a path toward an administrative model of antidiscrimination enforcement. As the Biden Administration continues to implement Bostock in its efforts to strengthen the federal antidiscrimination regime, Bob Jones could serve as a potent mechanism of advancing civil-rights enforcement.

Lloyd Mayer

Conservation Easements Update: IRS Has 80 Cases "Teed Up"; New McLaughlin Article

Litigation and scholarship on conservation easements continues apace. At the ABA Tax Section meeting, an official from Chief Counsel reported that the IRS has about 80 fraud cases teed up relating to syndicated conservation easement deals, and more than 425 docketed cases at the U.S. Tax Court. Coverage: Bloomberg (subscription required).

And Nancy McLaughlin (Utah) has posted a new article on conservation easements titled Enforcing Conservation Easements: The Through Line, 34 Georgetown Environmental Law Review (forthcoming 2022). Here is the abstract:

In enforcement cases, courts tend to treat conservation easements as if they were traditional servitudes. This poses a major risk to the effectiveness of conservation easements as land protection tools. If, for example, courts extinguish conservation easements via merger, or bar holders from enforcing them on laches or estoppel grounds, or interpret them in favor of free use of property, many of the conservation gains made in the United States over the last three decades could end up being ephemeral.

This article tackles this problem by providing a solid foundation for the next chapter in conservation easement enforcement. It clearly articulates the ways in which conservation easements are different from traditional servitudes. It provides a roadmap of often-overlooked bodies of law relevant to their enforcement. It also brings together the handful of enforcement cases in which the courts (in one case, the dissenting judges) recognized the special status of conservation easements. These cases address different issues but there is a clear unifying theme—a through line: conservation easements are created to benefit the public and carry out legislatively stated public purposes, and it is contrary to the public interest to blindly apply to them principles intended to facilitate development or resolve disputes between private parties.

Armed with this knowledge, courts as well as nonprofit and government holders will be far better equipped to deal with the coming wave of enforcement cases in a manner that protects the public interest.

Lloyd Mayer

New Article: Does Mandatory Disclosure Matter? The Case of Nonprofit Fundraising

Interesting new article by Putnam Barber, Meghan Farwell, and Brian Galle entitled Does Mandatory Disclosure Matter? The Case of Nonprofit Fundraising:

The abstract: "Do donors seek out potentially adverse information about organizations making fundraising appeals? Do they react when it is readily available? Do they draw negative inferences when critical information is not available? To answer these questions, we consider previously unexamined large-scale natural experiments involving U.S. charitable organizations—tax-exempt organizations that file Internal Revenue Service (IRS) Form 990. Using standard difference-in-differences designs, we find that donors penalize organizations with high fundraising costs when there is mandatory disclosure or involuntary disclosure by a third-party reporter. Organizations with lower fundraising costs fundraise more successfully in the presence of these disclosures. The contrast with donors’ behavior when such information is not available suggests that donors do not draw correct inferences when potentially consequential information is not disclosed. Disclose-on-request requirements, in contrast, apparently do not have any significant impact on donors’ or organizations’ behavior. We then sketch implications for the regulation of donations to charities and their modern cousins, such as crowdfunding and social enterprise organizations."

Philip Hackney

Article: The Advocacy Universe: A Methodology to Identify Politically Active 501(C)(4) Organizations

Interesting new article by authors Margaret A. Post, Elizabeth T. Boris, and Carol L. Stimmel describing a methodology for researching dark money entitled: The Advocacy Universe: A Methodology to Identify Politically Active 501(c)(4) Organizations.

The abstract states: "This article provides a framework that defines politically active 501(c)(4)s organizations and describes a methodology for identifying them among more than 80,000 social welfare organizations. We estimate that approximately 15% of (c)(4)s likely pursue advocacy or political action, while most are engaged in unrelated activities. Understanding the distinctive features of the social welfare sector and the politically engaged organizations within it are essential tasks for nonprofit scholars, yet the methodological and empirical challenges are complex and significant. To date, there has been no systematic study of the nature and efficacy of these organizations. We create a multistage methodology that allows researchers to identify politically active (c)(4)s and to investigate subgroups focused on different policy issues and with different member groups. This article summarizes how we identify organizations and strategies needed to reveal whether an organization is engaged in political activities. We explain the approach we took and the challenges we encountered."

Philip Hackney

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.

Philip Hackney

Arya, Mittendorf & Ramanan, A Model of Equity Pricing in Light of Insider Stock Donations

Anil Arya (Ohio State), Brian Mittendorf (Ohio State) and Ram Ramanan (SUNY at Binghamton) have posted A Model of Equity Pricing in Light of Insider Stock Donations to SSRN. Its abstract follows:

Corporate insiders face substantial restrictions on stock sales, but many have viewed receiving tax deductions from charitable donations of stock holdings as an alternative way to benefit. In fact, empirical evidence consistently indicates that executives make use of their private information in determining the size and timing of their charitable giving. This paper develops a parsimonious model of informed stock trading that accounts for the practical consideration that disposal of stock by insiders often takes the form of charitable donations rather than direct trading. We demonstrate that equilibrium charitable gifts by insiders reflect their private information about firm value and do so in a manner that facilitates price discovery even more efficiently than routine informed trading does. Given the heightened sensitivity of stock donations to firm value, the results provide implications of such donations for market properties, market participants, and charity proceeds, as well as identify how these effects vary with prevailing tax policy.

Samuel D. Brunson

Flynn on Restoring the Conservation Purpose in Conservation Easements

Andrew Flynn (Ropes & Gray law firm) has published Restoring the Conservation Purpose in Conservation Easements: Ensuring Effective and Equitable Land Protection Through Internal Revenue Code Section 170(h) in the Stanford Environmental Law Journal. Here is the abstract:

Conservation easements are legal restrictions limiting development and are intended to preserve natural lands, historical areas, and open space. And for more than 50 years, Congress has permitted taxpayers to claim an income tax deduction when they make a charitable donation of an easement. These easements are now the primary form of environmental preservation in the United States.

But the current Internal Revenue Code provision authorizing this deduction invites donations with questionable preservation value to the public and high-profile instances of abuse. It also disproportionately favors the wealthy. Notably, most donations are not required to provide public benefit. Reform proposals and law journal articles discuss the challenges of valuing easements, but there is little discussion of how to ensure the deduction properly incentivizes quality conservation work.

This article fills that void. It examines the current law and discusses how Congress can ensure the deduction is available only to easement donations which further cohesive environmental protection goals. It proposes requiring all easement donations to provide a public benefit and to be in accordance with conservation and strategic goals developed by local governments and non-governmental organizations. It also proposes specific policy reforms, drawn from other sections of the Code, to achieve this goal.

Lloyd Mayer

Sholk: Updated Guide to Election Year Activities of Section 501(c)(3) Organizations

Steven H. Sholk (Gibbons law firm) has posted the annual update for his comprehensive and detailed 589-page Guide to Election Year Activities of Section 501(c)(3) Organizations. According to the Table of Contents, it includes:

• statutory provisions on contributions, expenditures, and electioneering
• statutory and regulatory provisions on contributions to and fundraising for section 501(c)(3) organizations
• regulatory provisions on contributions, expenditures, and electioneering
• voter registration and get-out-the-vote drives
• voter guides
• candidate appearances and advertisements
• candidate debates
• candidate use of facilities and other assets
• website activities
• campaign activities of section 501(c)(3) organizations' directors, offices, and employees
• consequences of violations

Lloyd Mayer

This Sunday: AALS Presentations on Nonprofits, Inequality, and Black Poverty

For people attending the virtual American Association of Law Schools (AALS) Annual Meeting this week, there are two nonprofit-related presentations of which I am aware that may be of interest.

On Sunday at 11:00 a.m. (Eastern), the Nonprofit and Philanthropy Law section will present A Subsidy for Inequality: Bob Jones and Fundamental Public Policy Today. The presenters are Provost JoAnne A. Epps (Temple), along with two of our blog contributors, Samual D. Brunson (Loyola-Chicago) and yours truly; the moderator is Khrista McCarden (Tulane), who is also a blog contributor.

And on Sunday at 4:45 p.m. (Eastern), the Tax Section will present New Voices in Taxation, including The Black Tax: How the Charitable Contribution Subsidy Reinforces Black Poverty by Nyamagaga R. Gondwe (NYU) (forthcoming in the Tax Law Review). Here is the abstract:

This paper analyzes tax-based welfare policy through the lens of Black economic history. It juxtaposes the tax treatment of Black Kinship Networks and the charitable contributions deduction in the federal tax code to show how the tax incentive for charity creates an economic burden for the Black community. The paper argues that when the tax code creates incentives to attract private capital to welfare projects without making antipoverty welfare a condition of the tax benefit, it shifts the burden and cost of providing welfare services back to communities in need. In the Black community, wealth and income disparities make the lack of public welfare accommodations an even greater burden. Still, Black Kinship Networks facilitate the survival of in-group members, as they have for generations, in an effort to counteract the effect of declining public welfare and ineffectual private welfare.

Lloyd Mayer