Tuesday, November 17, 2020
Election 2020: Pre-Election Walking Up To (and Over?) the 501(c)(3) Political Campaign Intervention Line
As happens every election season, in the run-up to the 2020 election there were a flurry of news stories about Internal Revenue Code section 501(c)(3) charities pushing up against, and maybe pushing through, the political campaign intervention prohibition. With over 65 years of guidance from the IRS, as meticulously compiled by Steven H. Sholk of Gibbons P.C., you would think just about every possible situation has been addressed, yet charities and candidates continue to come up with new ways of walking right up to, and maybe crossing, that line.
For example, in mid-October the Washington Post reported on a closed-door session of conservative activists, including leaders of a number of 501(c)(3)s, discussing electoral tactics from challenging mail-in ballots to ballot harvesting. The story quoted nonprofit experts Roger Colinvaux and Marcus Owens as being concerned that the involvement of 501(c)(3) leaders raised questions about their organizations' compliance with the political campaign intervention prohibition. In response, some of those leaders stated they were not there on behalf of the groups they lead.
At the more local level, in Kansas a state senate candidate included on his campaign signs not only that he had founded a church and thrift store, but also included the organization's logo. The candidate insisted that the sign was purely informational. But as I noted to the reporter who wrote the story, the problem is the inclusion of the group's logo, which constitutes the use of the charity's property for the candidate's benefit. And the story also reported appearances by the candidate at two churches, which did not provide his opponent with a similar opportunity to appear.
And of course there were other reports of more common but still problematic support of candidates. These included a Kansas state house candidate using mailing equipment owned by a church; his campaign reimbursed the church for the cost of that use, but it does not appear that the church made the equipment generally available for use by the public or other candidates on similar terms as required by IRS guidance. And a Catholic priest in Mississippi called then candidate Joe BIden "an embarrassment to Catholicism" from the pulpit in late October.
There is no indication that any of these events have led to adverse IRS attention, although of course the IRS has a number of years to pursue an audit or, in the case of the churches, a church tax inquiry.
Tuesday, October 6, 2020
Brescia, Ansari & Hage, The Legal Needs of Nonprofits: An Empirical Study of Tax-Exempt Organizations and Their Access to Legal Services
Raymond H. Brescia (Albany Law School), Bahareh Ansari (Ph.D. candidate, University at Albany), & Hannah Hage (JD, Albany Law School) have posted The Legal Needs of Nonprofits: An Empirical Study of Tax-Exempt Organizations and Their Access to Legal Services to SSRN. Here is the abstract:
This empirical study, using quantitative and qualitative techniques, attempts to assess the state of the legal needs of non-profit organizations, with an emphasis on the ways in which non-profit organizations are or are not accessing assistance addressing their legal services needs. While most research into the extent to which Americans may or may not be accessing legal services focuses on the legal needs of individuals and families, this study focuses on the legal needs of non-profit groups. Our goal with this research project is to contribute to the growing literature on the scope of unmet legal needs in the United States. The findings from this study suggest that many of the groups we surveyed and with which we communicated do have access to legal representation, particularly as groups grow in terms of their financial wherewithal (that is, the size of their budgets). Smaller groups appear to face greater barriers to obtaining legal services, and we attempt to probe some of the reasons that is the case. At the same time, many groups, large and small, are meeting their legal needs through a range of legal services providers: whether they use legal services providers that are themselves non-profit entities that offer them assistance; they obtain the volunteer services of private lawyers who provide representation; or they are simply paying for legal services themselves. Often, as our findings indicate, they are using a mix of these different resources: they are paying for services, obtaining non-profit legal services free-of-charge, and/or utilizing the services of pro bono counsel. This study attempts to begin to fill the gap in the research by exploring not just the unmet legal needs of non-profit groups, but also probing the ways in which non-profit entities that are accessing legal services are able to obtain those services, and from whom. It also attempts to create a taxonomy of needs: an assessment of the types of legal needs the organizations we surveyed face.
Samuel D. Brunson
Saturday, September 19, 2020
The Pittsburgh Tax Review has published a special issue marking the 50th anniversary of the Tax Reform Act of 1969. Here is the articles:
The 1969 Tax Reform Act and Charities: Fifty Years Later by Philip Hackney
The Private Foundation Rules at Fifty: How Did We Get Them and Do They Meet Current Needs? by James J. Fishman
The Private Foundation Excise Tax on Self-Dealing: Contours, Comparisons, and Character by Ellen P. Aprill
The Five Percent Fig Leaf by Ray D. Madoff
Foundation Regulation in Our Age of Impact by Dana Brakman Reiser
Private Operating Foundation Reform and J. Paul Getty by Khrista McCarden
Oonagh B. Breen (University College Dublin) has published Regulating European Philanthropy: Lessons from the Scholarly Legacy of Evelyn Brody in the Nopnrofit Policy Forum. Here is the abstract:
Throughout her long and distinguished academic career, spanning more than three decades, as a Professor of Law at Chicago-Kent University, Evelyn Brody’s work has interrogated three broad themes that underpin and drive charity law – the tax treatment of charities; the governance framework applicable to charities, its application, monitoring and enforcement; and the evolution of charitable structures over time, whether from an economic convergence perspective, a constitutional right of association perspective or from a public/private benefit perspective. This article reviews Brody’s contribution in these key areas. It explores the resonance of her work outside of the United States and its relevance for EU non-profit scholars before looking to Brody’s research legacy for future nonprofit scholars on both sides of the Atlantic.
Brian D. Galle (Georgetown) has posted The Quick (Spending) and the Dead: The Agency Costs of Forever Philanthropy, which will be published in the Vanderbilt Law Review. Here is the abstract:
American philanthropic institutions control upwards of a trillion dollars of wealth. Because contributions to these entities are deductible from both income and estate taxes, and the entities’ earnings are tax-free, that trillion dollars is heavily underwritten by contemporary taxpayers. Law offers little assurance that those who pay will be those who benefit, however. To the contrary, since these subsidies become more valuable the longer charitable assets are left unspent, law strongly encourages philanthropies to save rather than spend, even in situations of great current need. Other legal rules further encourage grant-making institutions to strive to exist “in perpetuity.”
This Essay offers new empirical evidence of the social cost of forever philanthropy, that is, of institutions that long outlive their founders. Drawing on a relatively unique dataset of foundation donors, and combining it with a large archive of tax returns filed by private foundations, I search for evidence that managers of long-lasting organizations depart significantly from the preferences of the organization’s supporters. I find that a firm’s overhead, or the ratio of administrative expenses to grants made, jumps by about 12% as soon as the organization’s last living donor dies. Payout rates, or the share of assets spent each year, move sharply in the opposite direction, falling about 7% at that time.
I interpret these findings as evidence of substantial agency costs. Since the timing of the donor’s death is relatively random, these outcomes offer convincing causal evidence that the ability of a donor to monitor her foundation’s managers importantly affects whether those managers follow her wishes. I argue that overhead and payout changes in the direction I observe strongly suggest that managers, once free from direct oversight, are operating the firm for their own comfort and security. Thus, by unnaturally extending the lifespan of foundations, law is encouraging wasteful allocation of taxpayer-supported charitable resources.
Therefore, I suggest several policy options that would reduce the agency-cost problem. Among others, I support maintaining or increasing legal requirements for mandatory distributions by private foundations, and closing legal loopholes offered by a relatively new charitable phenomenon, the donor advised fund.
Michael Haber (Hofstra) has posted Legal Issues in Mutual Aid Operations: A Preliminary Guide. Here is the abstract:
This is a preliminary guide to legal issues that impact groups engaged in mutual aid. It is targeted to groups that have been responding to the COVID-19 crisis in New York, but has information that may be relevant for groups engaged in mutual aid in other contexts and other places. It gives legal information on topics including: risk of liability; questions around governance and incorporation; safety policies, liability waivers, and insurance; banking and mutual aid; funding mutual aid and taxation of mutual aid; crowdfunding regulations; and food storage and safety rules.
Langford (two papers): Conflicts and Coherence in the Charities Sphere; Using the Corporate Form for Public Benefit
Rosemary Teele Langford (Melbourne) has posted two articles. The first is Conflicts and Coherence in the Charities Sphere: Would a Conflict By Any Other Name Proscribe the Same?, 14 Journal of Equity 1 (2020). Here is the abstract:
Proscriptions on conflicts of interest have long been a core component of governance regimes. In the charities sphere such proscriptions arise from a number of sources, including general law, statute and governance standards articulated by the regulator. Unfortunately the wording of relevant conflicts duties varies extensively, giving rise to acute incoherence and uncertainty. This article undertakes detailed critical analysis of the myriad of conflicts duties in order to provide certainty and comprehensive guidance. This resolution is relevant beyond the charitable sphere given the multitude of ways in which conflicts proscriptions are expressed in other governance contexts.
The second is Use of the Corporate Form for Public Benefit - Revitalisation of Australian Corporations Law, which will be published in 43 University of New South Wales Law Journal No. 3 (2020). Here is the abstract:
This article specifically addresses the theme of revitalisation of Australian law in the facilitation of purpose-based companies. It is the second of two articles on purpose-based governance in the charitable and for-profit spheres. Building on the first article, this article critically analyses relevant features of the Australian corporations law regime. It pays close attention to challenges relating to the application of directors’ duties where companies have multiple purposes and to the drafting of appropriate constitutional provisions. In so doing it draws on insights from overseas jurisdictions that have enacted legislation to enable purpose-based companies.
Shuoyan Li (Shanghai University) has published Global Civil Society Under the New INGO Regulatory Law: A Comparative Case Study of Two INGOs in China, in VOLUNTAS. Here is the abstract:
This paper tries to explain why similar International Nongovernmental Organizations (INGOs) have different scopes under the new regulatory law in China. While previous studies have often associated fragmented authoritarianism with more room for civil sectors, the unintended consequence has been largely ignored. The paper argues that while civil sectors benefit from decentralized bureaucratic politics, the conflict between bureaucracies may also become an obstacle. This argument is based on a comparative case study of two similar INGOs whose missions are to solve poverty issues. While World Vision International had difficulties becoming a national organization after establishing several provincial offices with the help of local authorities, Oxfam succeeded and received permission from CPAFFC because it terminated collaboration with other local authorities, which put CPAFFC at ease. The interviews illustrate that competition among different departments and concerns about political risk lead to different outcomes for civil society. Government agencies will doubt an INGO’s willingness to commit to a new relationship if it has too many partners. This implication reveals the complex effects of fragmented bureaucracy on INGOs. The decentralized political structure may lead to different outcomes for INGOs. It is necessary for INGOs to understand the political logic of the new INGO law so that they can choose the proper strategy to maximize their benefits.
Francisco-José López-Arceiz (Universidad Pública de Navarra) and Ana J. Bellostas (University of Zaragoza) have published Nonprofit governance and outside corruption: The role of accountability, stakeholder participation, and management systems in Nonprofit Management & Leadership. Here is the abstract:
Outside corruption implies that a nonprofit organizatio
n is used to commit an infraction or crime. In Spain, this type of corruption has been detected in the context of public nonprofits as a result of the legal reform that enabled the judgment of the criminal responsibility of legal entities. A large percentage of these entities were affected by the reform, but little is known about the possible practices that can altogether prevent this behavior. In particular, there are few studies that consider nonprofit governance as a possible measure to avoid corruption in this context. For this reason, our aim is to analyze the role of certain nonprofit governance practices in fighting corruption. Using structural equation modeling, our results reveal that nonprofit governance is a key tool for mitigating corruption, although the weights of the different practices are not the same.
I have posted Charitable Crowdfunding. Here is the abstract:
Charitable crowdfunding is a global and rapidly growing new method for raising money to benefit charities and individuals in need. While mass fundraising has existed for more than a hundred years, crowdfunding is distinguishable from those earlier efforts because of its low cost, speed of implementation, and broad reach. Reflecting these advantages, it now accounts annually for
billions of dollars raised from tens of millions of donors through hundreds of Internet platforms such as Charidy, Facebook, GoFundMe, and GlobalGiving. Although most charitable crowdfunding campaigns raise only modest amounts, every year several efforts attract tens of millions of dollars in donations. However, charitable crowdfunding also has its downsides. Donors may misunderstand how the beneficiaries will use the funds raised or a campaign that unexpectedly goes viral may overwhelm a small charity or greatly exceed an individual’s needs. There have also been instances of outright fraud, as well as concerns raised about money laundering and terrorist financing.
Existing laws relating to charitable solicitations and charities more generally have either uncertain or limited application to charitable crowdfunding. Broader fraud and money laundering laws may apply to the worst abuses, but these usually criminal statutes are rarely invoked. The challenge faced by government regulators is therefore whether and how to modify existing laws to address the downsides of this new activity without unduly inhibiting the generosity that charitable crowdfunding encourages. This challenge is made more difficult by the lack of information regarding the positive effects as well as the downsides of crowdfunding. Finally, existing scholarship relating to charitable crowdfunding focuses on either the motivations of donors or tax implications instead of addressing this regulatory problem, even as some governments are beginning to develop proposals to address this activity.
This Article fills this gap by reviewing the existing, incomplete information regarding charitable crowdfunding and theories for regulating in the face of uncertainty to develop recommendations for addressing this new and growing phenomenon. Given we know very little about the positive and negative effects of charitable crowdfunding, and given that any harms are likely modest, purely financial, and often readily cured, I recommend that governments should at this time only take two steps. First, governments should require notification of designated beneficiaries to help ensure funds raised reach those beneficiaries. Second, governments should require notification of regulators, but only for the small subset of campaigns that cross a relatively high threshold, to both provide information about the scale and growth of charitable crowdfunding and deter problems with the largest campaigns. Additionally, I disagree with initial steps taken by some governments to impose more comprehensive consent and administration requirements on many or all charitable crowdfunding campaigns because such requirements are unnecessary hindrances on this new and innovative way of encouraging generosity, given there is little evidence of widespread problems and given that any potential harm is almost certainly relatively small and easily remedied if it occurs.
McMillan: Noncharitable Nonprofit Organizations and Tax Policy: Working Toward a Public Benefit Theory
Lori A. McMillan (Washburn) has posted Noncharitable Nonprofit Organizations and Tax Policy: Working Toward a Public Benefit Theory, which will be published 59 Washburn Law Journal No. 2 (2020). Here is the abstract:
Noncharitable Nonprofits in Canada are exempt from federal income tax, but are subjected to little scrutiny to qualify for this exemption. The tax policy behind this exemption is explored in this paper, trying to determine what should underpin the exemption for these types of organization.
The stakes for proper nonprofit governance are extremely high. Over 1.5 million nonprofits are registered with the IRS, collectively empl
oying 12 million people and accounting for 5.4% of US GDP. Yet while for-profit companies have significant checks on the behavior of boards and management, nonprofit firms lack many of the same types of internal and external governance control mechanisms. COVID-19 is just the latest in a long history of shocks to expose the lack of preparedness and capability of many nonprofit boards in fulfilling their essential governance functions.
This Article contributes to the corporate governance literature by identifying aspects of nonprofit governance that create unnecessary risk to nonprofit entities and to society overall. Currently many governance failures that would be corrected in traditional for-profit entities go unaddressed among nonprofits. We make unique contributions to addressing these governance shortcomings by suggesting an enforcement reorientation by both public and private actors. Our novel solutions encompass disclosure, certification, oversight by state attorneys general, and federal actors.
David M. Schizer (Columbia) has posted Enhancing Efficiency at Nonprofits with Analysis and Disclosure. Here is the abstract:
The U.S. nonprofit sector spends $2.54 trillion each year. If the sector were a country, it would have the eighth largest economy in the world, ahead of Brazil, Italy, Canada, and Russia. The government provides nonprofits with billions in tax subsidies, but instead of evaluating the quality of their work, it leaves this responsibility to nonprofit managers, boards, and donors. The best nonprofits are laboratories of innovation, but unfortunately some are stagnant backwaters, which waste money on out-of-date missions and inefficient programs. To promote more innovation and less stagnation, this Article makes two contributions to the literature.
First, this Article breaks new ground in identifying sources of inefficiency at nonprofits. The literature focuses on incentives, arguing that managers and board members are less motivated to run a nonprofit efficiently because they cannot keep its profits. In response, this Article emphasizes that the problem is not just motivation, but also information. Measuring success is harder at nonprofits. Instead of tracking profitability, they use metrics that are less reliable and harder to measure. These measurement challenges complicate the efforts even of dedicated and competent managers to operate efficiently. While this information problem is familiar, another has been largely overlooked in the literature: When success is hard to measure, incompetence and self-interested practices are less visible, and thus are harder to stop. For example, if managers regularly overpay vendors, the consequence at a for-profit firm (lower profits) is easier to observe than at a nonprofit (less effective service for beneficiaries).
Second, this Article recommends a response to this underappreciated source of inefficiency: better analysis and disclosure as a strategy for organizational change. In principle, nonprofits are supposed to maximize social return, but how can they operationalize this abstract principle? To help them do so, this Article recommends three questions that nonprofits should answer every year: first, how important are the challenges the nonprofit is trying to address?; second, how effective are the nonprofit’s responses to these challenges?; and third, is the nonprofit the right organization to respond to these challenges? These questions press nonprofit managers and boards to be more explicit about priorities, monitor progress, improve and expand high-value programs, and fix or shut down ineffective ones. This Article also recommends that nonprofits should disclose this analysis to the public, even though current law does not require them to do so. This disclosure would empower donors and rating agencies to be more effective monitors. It also would help donors make better informed philanthropic choices and would enable charities to borrow innovative ideas from each other more easily.
Thursday, August 20, 2020
I posted a new article on SSRN today that will be published in the Pitt Tax Review soon. This is an introduction to the symposium Pitt Law hosted back in November 2019 before the Covidian times on the 1969 Tax Act and Charities. I will post the link to the issue as soon as it goes live. It includes contributions from Ellen Aprill, Jim Fishman, Dana Brakman Reiser, Ray Madoff, and Khrista McCarden.
"Fifty years ago, Congress enacted the Tax Reform Act of 1969 to regulate charitable activity of the rich. Congress constricted the influence of the wealthy on private foundations and hindered the abuse of dollars put into charitable solution through income tax rules. Concerned that the likes of the Mellons, the Rockefellers, and the Fords were putting substantial wealth into foundations for huge tax breaks while continuing to control those funds for their own private ends, Congress revamped the tax rules to force charitable foundations created and controlled by the wealthy to pay out charitable dollars annually and avoid self-dealing. Today, with concerns of similar misuse of philanthropic institutions to further wealthy interests, it is worthwhile to reconsider this significant legislation fifty years later.
Natural questions arise. What was the goal of Congress with respect to charity and with respect to tax? Did it accomplish these goals? Are those goals still relevant? What goals might suggest themselves today? Do we have the ability to modify the law to support those new goals? On November 1, 2019, the Pittsburgh Tax Review hosted a symposium to examine the 1969 Tax Act."
The conclusion is kind of the kicker:
"As I reflect on this symposium that took place in 2019 before the origination of COVID-19 and the racial justice revolution ignited by the killing of Mr. George Floyd in Minneapolis, I think about the great potential of well-democratically-harnessed philanthropy and seriously doubt that can be accomplished within the space of “private” philanthropy. I lean strongly
towards eliminating tax benefits for this private “philanthropy” by denying tax exempt status to those organizations that are not public charities.
Why do I say this? Fundamentally, I believe the effort of philanthropy should not be publicly supported if it is not collectively determined. To me, Professor McCarden makes the beginnings of a persuasive case that the values inculcated and supported through the private foundation system are likely predominately exclusive ones rather than public ones. I think that lack of a public nature should matter. Oddly, the private foundation tax architecture not only supports these wealthy exclusive preferences, but as Professor McCarden points out, it forces the private foundation to spend a lot of money every year into the future furthering those preferences of the wealthy. To be clear, the problem with this form of philanthropy is not that it might support abstruse interests such as senators complained about with respect to the Mellons, but that it works to provide significant and lasting governmental benefits to the private, perhaps well meaning interests, of people simply because they happen to be wealthy. The private foundation tax architecture provides this support, lifts these efforts up, in the name of supporting collective efforts, but they are far from collectively led.
I believe deeply in the power of a fiercely independent and courageous civil society that empowers the voices of all in our communities, particularly those voices that have been and continue to be disempowered. But, the private foundation tax architecture even at its best likely can never really support such a vision because it is defined privately. And, as Professor Aprill shows, the lack of IRS enforcement capability likely makes this architecture weak anyway and unlikely to be able to ever ensure such a democratically based vision. The private foundation community is imbued with some important social justice voices such as Darren Walker of the Ford Foundation and Elizabeth Alexander of the Mellon Foundation.
Still, I believe its predominate ethic is that of Carnegie from The Gospel of Wealth: that the wealthy man is the savior of the rest of us, both in terms of their ability to invest their dollars and to spend them in ways that improve all lives. I think that wrong and harmful. That vision is not just antithetical to democracy, but it is antithetical to racial, gender, sexual orientation, and social justice. Given this, I think we ought to eliminate tax benefits for the private foundation form."
Appreciate comments good and bad on this one.
By: Philip Hackney
Thursday, August 6, 2020
Putnam Barber, Megan Farwell, and Brian D. Galle have posted Does Mandatory Disclosure Matter? The Case of Nonprofit Fundraising to SSRN. Here is the abstract:
Do small-dollar 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 US charitable organizations – tax-exempt organizations that file 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. Fundraising efficacy for lower fundraising cost organizations is greater when disclosed in these ways. The contrast with donors’ behavior when such information is not available suggests that they 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.
Samuel D. Brunson
Tuesday, August 4, 2020
I recently posted an early draft paper to SSRN. Addressing Hate looks at both the nonprofit incorporation and the tax-exempt status of the 1916 Ku Klux Klan. Here's the abstract:
In 1944, the Ku Klux Klan officially suspended its operations. Two years later, it had entirely ended. In part this was the inevitable result of a decade of declining influence and membership. In part, though, it was the result of actions by the federal government and the state of Georgia.
In 1916 the Ku Klux Klan incorporated as a Georgia fraternal organization, following a model of the Masons and other fraternal organizations. It also claimed to be a tax-exempt fraternal beneficiary society under the new federal income tax. These legal statuses provided the Klan with legal rights and benefits and also shrouded it in a cloak of respectability: it could claim that it was not merely a terroristic white supremacist group, but that it provided fraternal benefits to its members and the surrounding community.
Its incorporation and tax status provided it with benefits, it also imposed obligations on the organization. The Klan ultimately proved incapable of meeting these requirements. It violated the terms of its corporate charter and of tax exemption as a fraternal beneficiary society. The Bureau of Internal Revenue assessed a $685,305 tax on the Klan and, when the Klan did not pay, filed a lien. The state of Georgia in turn revoked its corporate charter. While these moves did not cause the second Klan’s death, they did seal its death.
This Article relates the story of the Klan’s corporate and tax statuses. It focuses on this story both because the story has never been related in any detail and because it provides a perspective on how government can deal with contemporary white nationalist groups without violating the Constitution.
Samuel D. Brunson
Monday, July 20, 2020
COVID-19 pushed institutions of higher education into increasingly dire financial conditions, as exemplified by the recent mass layoffs of tenured faculty at the University of Akron. Although some of the worst hit have been state universities, who have seen the state funding levels drop overnight, nonprofit universities are hardly immune. As we enter a rocky period for universities and colleges, the research of Matthew Brucker (Howard) into university bankruptcy has become urgently (if unfortunately) relevant:
Bankrupt Public Colleges, forthcoming
Terminating Tenure: Rejecting Tenure Contracts in Bankruptcy, 92 AM. BANKR.L.J. 255(2018)
Bankrupting Higher Education, 91 AM.BANKR.L.J. 697 (2017)
Tuesday, June 30, 2020
Ellen P. Aprill has posted Standards for Charitable Disaster Relief In the Time of Pandemic, The Exempt Organization Tax Review (2020). Here is the abstract:
This short piece explains how exempt organizations currently face uncertainty about the standards for determining need for disaster relief, particularly in the time of a crisis, such as the current pandemic. The available IRS guidance is not any official document published in the Internal Revenue Bulletin, but only a Publication 3833, “Disaster Relief: Providing Assistance through Charitable Organizations.” This IRS publication states that organization must make an individualized, specific determination of need before giving such assistance. This piece argues that the IRS should issue official guidance for the COVID-19 crisis, modeled on that given in connection with the September 11 terrorist attacks. After 9/11, the IRS issued a notice permitting charities to distribute funds so long as payments were made in good faith using objective standards. The IRS should do the same now. If it does not, Congress should act, as it also did after 9/11.
Samuel D. Brunson
Tuesday, June 23, 2020
Back in March I missed this article in HistPhil by Ellen Aprill related to her work looking at federal charities that I think would be of interest to our readers. It is entitled Trump Donated His Salary to HHS. Is that Kosher?
"On March 3, President Trump’s Press Secretary, Stephanie Grisham, announced on Twitter that, consistent with his commitment to donate his salary while in office, President Trump was giving his 2019 fourth quarter salary to the Department of Health and Human Services “to support efforts being undertaken to confront, contain, and combat #Coronavirus.” The announcement prompted questions about whether such an earmarked donation to a federal agency is possible. The answer in this case is yes, but getting to that answer requires several statutory steps and implicates a set of issues I just happened to have begun to research."
For taxpayers who itemize rather than take the standard deduction, section 170(c)(1) of the Internal Revenue Code permits a charitable contribution deduction for “a contribution or gift to or for the use of . . . the United States or the District of Columbia . . . if the contribution or gift is made for exclusively public purposes.” In general, gifts to the federal government must go to the general fund of the Treasury; agencies cannot augment Congressional appropriations. To that end, the miscellaneous receipts statute provides that “an official or agent of the Government receiving money for the Government from any source shall deposit the money in the Treasury as soon as practicable without deduction for any charge or claim.” Governmental agencies, however, can be given specific statutory authority to accept and retain donations. It turns out that the Department of Health and Human Services is one of the federal agencies with statutory authority to accept gifts for its benefit “or for carrying out any of its functions.” Thus, Trump’s gift is kosher."
I also recommend HistPhil to our readers.
Friday, June 12, 2020
Bridget J. Crawford (Pace) has posted Taxation as a Site of Memory: Exemptions, Universities, and the Legacy of Slavery, SMU Law Review (forthcoming 2020). Here is the abstract:
Many universities around the United States are attempting to grapple with their direct and indirect involvement with the institution of slavery. Lolita Buckner Inniss’s book The Princeton Fugitive Slave: the Trials of James Collins Johnson (2019) enters directly into the conversation taking place on university campuses and nation-wide about what responsibilities institutions have to acknowledge their past and to create racially inclusive campuses in the twenty-first century. Because most universities are tax-exempt, it is important to understand that their activities are indirectly subsidized by local, state and federal governments. The lens of tax law facilitates better understanding of universities’ unique historic role in American economic activity as well as contemporary arguments about their obligations to workers and community constituents during the COVID-19 crisis.