Nonprofit Law Prof Blog

Ellen Aprill's Review of Hamburger's "Liberal Suppression: Section 501(c)(3) and the Taxation of Speech"

Ellen Aprill (Loyola-LA) recently posted a review of Professor Philip Hamburger's (Columbia) "Liberal Suppression: Section 501(c)(3) and the Taxation of Speech" at HistPhil.org.     HistPhil, which is "a web publication on the history of the philanthropic and nonprofit sectors, with a particular emphasis on how history can shed light on contemporary philanthropic issues and practice."   Prof. Hamburger's book argues that, as a constitutional law matter,

    

...  theopolitical fears about the political speech of churches and related organizations underlay the adoption, in 1934 and 1954, of section 501(c)(3)’s speech limits. He thereby shows that the speech restrictions have been part of a broad majority assault on minority rights and that they are grossly unconstitutional.

 

Prof. Aprill bring a tax lens to this issue, highlighting the history of the Johnson Amendment.   The review introduces readers who might not be familiar with the public subsidy theory of exemption to a different approach to the Constitutionality issues and highlights much of the tax-focused scholarship in the area.

 

EWW

Research Handbook on Not-For-Profit Law

Edward Elgar Publishing has released the Research Handbook on Not-for-Profit Law, edited by Matthew Harding of Melbourne Law School. Here is the description:

This Research Handbook provides a comprehensive overview of scholarship on not-for-profit law. The chapters, written by world leading experts, explore key ideas and debates in relation to: theories of the not-for-profit sector, the composition and scope of that sector, not-for-profit organisations and the constitution, the legal conception of charity, the tax treatment of not-for-profit organisations and the regulation of not-for-profits. The book serves to represent not-for-profit law as a field of academic inquiry, and to point the way to future research in that field.

And here is the table of contents:

Introduction
Matthew Harding

Part I Theories of the Not-for-Profit Sector
1. A Law and Economics Perspective on Nonprofit Organizations
Richard Steinberg and Brian Galle

2. A Primer on the Neo-Classical Republican Theory of the Non-Profit Sector (And the Other Three Sectors Too)
Rob Atkinson

3. A Charity Law Perspective on a Liberal Perspective on Charity Law
Adam Parachin

4. The Not-for-Profit Sector: A Roman Catholic View
Fr Brian Lucas

Part II The Composition and Scope of the Not-for-Profit Sector
5. An Overview of the Not-for-Profit Sector
Myles McGregor-Lowndes OAM

6. The Boundary between Not-for-Profits and Government
Darryn Jensen

7. The Boundary between the Not-for-Profit and Business Sectors: Social Enterprise and Hybrid Models
Benjamin M Leff

8. Donor Intention and Dialectic Legal Policy Frames
John Picton

Part III Not-for-Profit Organisations and the Constitution
9. Not-for-Profit Organisations, Public Law and Private Law
Kathryn Chan

10. Not-for-Profit Organisations and Equality Law
François du Toit

11. Charity Law and Freedom of Political Communication: the Australian Experience
Jenny Beard

12. Not-for-Profit Law and Freedom of Religion
Pauline Ridge

Part IV The Legal Conception of Charity
13. The History and Future of the Law of Charity
G E Dal Pont

14. Charity in Common Law and Civilian Jurisdictions
Michael H Lubetsky

15. The Heads of Charity in Comparative Perspective
Debra Morris

16. Public Benefit Post-Pemsel
Mary Synge

Part V The Tax Treatment of Not-for-Profit Organisations
17. Taxation and the Not-for-Profit Sector Globally: Common Issues, Different Solutions
Ann O’Connell

18. Subsidizing Charity Liberally
Miranda Perry Fleischer

19. Ways the Charitable Deduction Has Shaped the US Charitable Sector
Roger Colinvaux

20. The Major Tax Concessions Granted to Charities in Australia, New Zealand, England, the United States of America and Hong Kong: What Lessons Can We Learn?’
Fiona Martin

21. Reforming Tax Policy with Respect to Non-Profit Organisations
Evelyn Brody

Part VI The Regulation of Not-for-Profit Organisations
22. Principles of Regulation of Not-for-Profits
Jonathan Garton

23. Design and Implementation of a Charitable Regulation Regime
Brian Galle

24. Redefining the Measure of Success: A Historical and Comparative Look at Charity Regulation
Oonagh B Breen

25. A Regulator’s View
Susan Pascoe AM

Lloyd Mayer

Point/Counterpoint: Section 501(c)(3) and the Taxation of Speech

Mark Pulliam (Law & Liberty Blog; Retired Partner, Latham & Watkins), Is Section 501(c)(3) a Form of Censorship?:

Columbia Law School Professor Philip Hamburger is a prodigious and iconoclastic legal scholar. ... Hamburger’s latest subject, in Liberal Suppression ([University of Chicago Press] 2018), is an inquiry into the legitimacy of restrictions on the political speech of non-profit organizations.  Section 501(c)(3) exempts religious, educational, and charitable organizations from federal income tax but denies them this exemption if they engage in campaign speech for or against any candidate for public office or devote a substantial part of their activities to propaganda or other attempts to influence legislation. Section 170(c) makes contributions to qualifying non-profits tax-deductible to the donor. According to Hamburger, these exemptions and deductions amount to “many billions of dollars annually.”

Most people’s knee-jerk reaction is that section 501(c)(3)’s restrictions are justified by the tax-exempt status such non-profit organizations applied for and received. Rejecting such preconceptions in his trademark fashion, Hamburger strongly disagrees. Although non-profits are free to express a wide range of opinions—even political opinions—outside of political contests, Hamburger views section 501(c)(3) as “an extraordinary abridgement of an essential freedom,” which ought to be considered unconstitutional. Inasmuch as the Supreme Court has unanimously upheld the lobbying restrictions in section 501(c)(3), Liberal Suppression is nothing if not ambitious, but is it persuasive? Realizing that his arguments may appear to be an “uphill struggle,” early on Hamburger asks readers to “hold their skepticism in abeyance.”

After reading the book, my skepticism remains stubbornly intact.

Hamburger reminds the reader that from colonial times until the amendment of section 501(c)(3) in 1934 (and further tightening in 1954, and again in 1987), which imposed the restrictions he finds objectionable, American clergy actively participated in politics from the pulpit. The timing of the 1934 and 1954 restrictions, he points out, coincides with a period of “liberal” anti-Catholic sentiment in America. The principal culprits in Hamburger’s tale are nativists such as Ku Klux Klan imperial wizard Hiram Evans and then-Senator Lyndon B. Johnson, who faced a Catholic opponent in the 1954 senatorial primary.  Hamburger portrays them as the instigators of section 501(c)(3)’s “oppressive” political restrictions. ...

Does section 501(c)(3) “threaten the core of most First Amendment freedoms,” as Hamburger claims? Liberal Suppression, despite its undeniable erudition and interesting digressions into American political (and theological) thought and historical asides, falls short of making a compelling case. Hamburger is likewise unconvincing in his attempt to make a connection between the restrictions in section 501(c)(3) and contemporary forms of censorship such as campus speech codes. While Hamburger’s theoretical arguments seem to miss their mark, they are always engaging and sometimes contains gems like this:

"American religion has increasingly been aligned with popular liberal and progressive opinion—even to the point of looking for salvation not in another world but in this one, and not so much from God as from democratic government."

 

Philip Hamburger (Columbia), Section 501(c)(3)’s Legacy of Prejudice: Mark Pulliam Sees No Evil:

My new book, Liberal Suppression, argues that section 501(c)(3)’s speech restrictions are prejudiced and unconstitutional. These conclusions run counter to widespread assumptions, and it is therefore understandable that Mark Pulliam and other thoughtful readers find them difficult to stomach. All the same, it is important at least to come to grips with the realities that underlie the book’s conclusions, and Pulliam’s review fails to do this. To evaluate the prejudice, one must understand its nature; and to judge the constitutional arguments, one must recognize their breadth and strength.

The prejudice underlying section 501(c)(3) arose from theologically liberal anxieties about the speech of churches. And as traced by my book, the prejudice gradually expanded into a broader liberal fear about the speech of all sort of idealistic organizations. Indeed, these liberal concerns have expanded to include fears about the orthodox or stereotypical speech of individuals. It is therefore disappointing that Pulliam reduces my account of prejudice to a simplistic complaint about narrow anti-Catholicism.

My book, in his view, argues that section 501(c)(3) speech restrictions were added “in order to reduce the influence of the Catholic Church.” Certainly, anti-Catholicism was the opening wedge. But as my book repeatedly emphasizes, the relevant prejudices were not narrowly anti-Catholic. Already in the early nineteenth, they were broadened out to take aim at business corporations, and in the strain that is central to my book, they soon reached not only churches—Protestant as well as Catholic—but also the full range of churchy organizations, including eventually all sort of idealistic groups that were not religious. ...

[T]he prejudiced sentiment about the speech of ecclesiastical and other idealistic organizations is painfully evident in section 501(c)(3). Pulliam protests that I have not shown this. Well, consider just one phrase—the section’s limit on “carrying on propaganda, or otherwise attempting to influence legislation.” Those words were no accident. They came directly out of nativist literature—a literature that, again, reached across much of American society, from KKK klaverns to Ivy League philosophy departments. Once more, the low and the high had more in common than the latter wanted to acknowledge.

Pulliam’s review, in short, recognizes neither the broad character of the prejudice nor its societal depth. And in taking a confined view of both, he misunderstands the antagonisms that underlay section 501(c)(3) and still undergird a host of other speech restrictions. ...

Tax lawyers and First Amendment lawyers tend to have very different sensibilities about the speech restrictions. Tax lawyers usually observe that churches etc. are only slightly quieted down, for they can convey their messages through auxiliary organizations, such as section 501(c)(4) organizations and section 527 PACs. First Amendment doctrine, however, treats even the slightest restriction on political speech with apprehension. And the freedom of speech is not merely the freedom to have one’s message come out of someone else’s mouth; most basically it is the freedom to speak—to speak through one’s own mouth, in one’s own voice.

Unlike Pulliam, most Americans, on both sides of the issue, understand that section 501(c)(3) matters for speech. It is the only subsection of the Internal Revenue Code that is widely known—even by its section number—and that is no accident. The whole point of the section’s speech restrictions was to satisfy deeply felt theo-political anxieties about speech—anxieties that remain pervasive. And this is why so many Americans care. Whether they like or fear the speech of ecclesiastical and other idealistic organizations, they understand that section 501(c)(3) chills such groups.

 

[Hat tip:  TaxProf Blog]

NMirkay

Fleishman, Putting Wealth To Work: Philanthropy for Today or Investing for Tomorrow?

I missed this last fall, but Joel L. Fleishman (Duke) has written a new book, Putting Wealth to Work: Philanthropy for Today or Investing for Tomorrow? Here is the abstract:

By 2025, Americans will likely be donating over half a trillion dollars annually to nonprofit organizations. Those philanthropic gifts will transform significant parts of America’s civic sector landscape.

 

Philanthropy is entering an era of unprecedented growth and innovation. Established foundations such as Ford and Rockefeller are doubling down on programs tackling long-simmering problems, including global inequality, less-than-stellar education, and uneven access to health care. Many foundations are engaging in advocacy on controversial issues, exploring venture philanthropy solutions, and experimenting with impact investing. And philanthropists such as Bill Gates, Warren Buffett, New York’s high-profile financiers, and Silicon Valley’s billionaires are planning to put their wealth to work as never before: Mark Zuckerberg and Priscilla Chan recently pledged to donate 99 percent of their Facebook shares during their lifetimes, and nearly 150 others have signed the Giving Pledge to increase dramatically their “giving while living.”

 

In Putting Wealth to Work, Joel L. Fleishman provides expert analysis of contemporary philanthropy, offering invaluable insight for those engaging with and affected by charitable foundations. This is the fascinating and definitive account of philanthropy today, and an indispensable guide to understanding its inner workings, impact, and expansive potential.

For reviews, see Kirkus Review and Publishers Weekly.

Lloyd Mayer

Mayer, Fiduciary Principles in Charities and Other Nonprofits

I have posted Fiduciary Principles in Charities and Other Nonprofits, which will be published in The Oxford Handbook of Fiduciary Law (Evan J. Criddle, Paul B. Miller, and Robert H. Sitkoff, eds.). Here is the abstract:

This book chapter provides an overview of the fiduciary principles that apply to charities and other nonprofit organizations. More specifically, it discusses the criteria that trigger a fiduciary relationship, the duties of loyalty and care, other legal obligations that may apply to nonprofit fiduciaries, and the extent to which those duties and obligations may be modified or avoided. In the course of doing so, it discusses and critiques the approaches taken to these principles by the draft Restatement of the Law, Charitable Nonprofit Organizations.

Lloyd Mayer

Updates for Fishman/Schwarz Casebook Available

For those who use Jim Fishman and Steve Schwarz's casebook, Nonprofit Organizations, Cases and Materials (4th ed. 2010), the 2014 Student Update is available here and 2014 Teacher's Manual Update is available here (instructor login required).  (Full disclosure: I collaborated on these updates.)

Lloyd Mayer

Brewer: "Gift Horses, Choosy Beggars" (plus the BNA Portfolio on Social Enterprise)

Cass Brewer (Georgia State) has posted Gift Horses, Choosy Beggars, and Other Reflections on the Role and Utility of Social Enterprise Law. Here is the abstract:

The U.S. law of social enterprise is growing rapidly. Since 2008, one-half of all U.S. states have modified their business law to establish special legal forms designed for social enterprise. Meanwhile, even with twenty-five states adopting special laws for social enterprise, the legal debate surrounding social enterprise continues. Rather than rehashing that debate, this essay sets forth the author’s personal perspective on the role and utility of social enterprise. The essay argues that, except in limited circumstances, social enterprise is superior to traditional philanthropy when it comes to solving longstanding humanitarian or environmental problems. U.S. business law thus should continue to evolve to facilitate social enterprise.

He also is a co-author (with Elizabeth Carrott Minnigh and Robert Wexler) for the just released BNA Tax Management Portfolio Social Enterprise by Non-Profits and Hybrid Organizations, No. 489-1st.

Lloyd Mayer

Is the Independent Sector Any Better at Saving the World than Government? Book Review

Last week's Wall Street Journal had an interesting op-ed piece reviewing Steven Goldberg's new book, "Billions in Drops in Millions of Buckets." The book makes the assertion, essentially, that the nonprofit sector is just as inefficient as government (if not more) in solving social problems precisely because of the lack of sector "government:"

But what about America’s nonprofit sector—organizations that ­concentrate their efforts on exactly such problems, with money from charities, trusts and personal ­philanthropies? They too spend enormous sums. Is their record any better? Not really, says Steven H. Goldberg in “Billions of Drops in Millions of Buckets.” We should not, he ­cautions, blame the American character for this failure: There is plenty of compassion and generosity to go around. Nor is bad thinking at fault: There are plenty of bright ideas and innovative programs. No, it is the whole structure of giving that condemns even the best efforts: We collect and spend our charitable dollars in a haphazard and fragmented way, he argues, diluting whatever problem-solving force they may have. 

The reviewer, William A. Schambra, takes issue with the book's essential points.  My reaction was based more on the irony of the assertion, to wit:  "government is inefficient because it is too regimented and nonprofit is inefficient because it is insufficiently regimented.

dkj

NGOs and Human Rights

Peter Spiro has posted "NGOs and human Rights:  Channels of Power."  Here is the abstract:

This essay, a revised version of which will appear in the Research Handbook on Human Rights (Edward Elgar, forthcoming 2009), attempts to systematize NGO activity relating to human rights. It first describes why human rights supplies fertile ground for the study of non-governmental organizations. As human rights obligations cannot be explained in terms of reciprocal state interest, non-state actors are a probable causal agent in the entrenchment of human rights regimes. The chapter confronts NGOs as agents of material power. The chapter then describes four primary pathways for the exercise of NGO power: through and against states, international organizations, corporations, and each other. Only by situating NGO power relative to state and non-state entities does the breadth and novelty of NGO participation in today's global decision-making come into full relief. Given the fact of that broad power, the chapter concludes by addressing the question of NGO accountability, suggesting that institutionalization of NGO power holds the most promise for appropriately constraining its exercise.

dkj

Administration of Charitable Trusts in Florida

Alex Espenkotter and Jennifer Facarazzo published Administration of Trusts in Florida: Charitable Trusts (Ch. 16).  Here is the introduction:

Charitable trusts are excellent vehicles for persons with philanthropic intentions to effectively give money to their favorite charitable causes while obtaining valuable tax benefits. Not to be overlooked, however, is the need for proper implementation and administration of these entities. “[F]or the estate planning attorney, [trustee,] and financial planner, a thorough study of the issues surrounding charitable... trusts is an imperative to their successful utilization.” Callister, Charitable Remainder Trusts: An Overview, 51 Tax Law. 549, 569 (1998). This chapter addresses various aspects of charitable trust formation and administration.

Initially, the discussion focuses on the numerous specific federal requirements and restrictions that must be followed and adhered to for proper administration of charitable trusts. The various types of charitable remainder trusts and charitable lead trusts are discussed in detail. Next, the chapter discusses the payment of annuity and unitrust amounts under various charitable trust arrangements. Thereafter, the availability of the charitable deduction and its computation is covered. Following that is a discussion of the income tax consequences associated with various charitable trusts. The focus then shifts to application of the private foundation rules to charitable trusts. The chapter concludes by addressing the duties and powers of trustees and the compensation for trustees and attorneys of charitable trusts. These latter two subjects are also discussed in depth in Chapters 2 and 13, respectively, of this manual. For a discussion of the modification of charitable trusts, see §8.16 of this manual.

For the entire chapter, see Administration of Trusts in Florida: Charitable Trusts (Ch. 16) (available at the Florida Bar website CLE section).

DAB

Six Best Practices for Nonprofit Organizations

On March 14, 2008, the St. Louis Post-Dispatch published an article about a new book - "Forces of Good" by Leslie Crutchfield and Heather McLeod Grant - on the six best practices for nonprofit organizations.  Here is an excerpt from the text of the article:

• Advocate and serve. Crutchfield and Grant say the best in the world of nonprofits bridge the divide between service and advocacy. An example is the expansion of a North Carolina agency call Self-Help. It started as an agency assisting the needy in building houses and grew to become a powerful advocate for predatory-lending policy reforms across the country.

• Making markets work. Nonprofits succeed when they embrace an entrepreneurial spirit. Often disavowed by nonprofits, Environmental Defense partnered with fast-food giant McDonalds. The result was a dramatic reduction of the company's solid wastes by encouraging the switch to environmentally friendly materials.

• Inspire evangelism. This is done when volunteers see their role beyond fundraising and advice to that of missionaries helping sustain the group's mission. Habitat for Humanity exemplifies this through its meteoric rise from local Georgia roots to a global organization with a $1 billion budget that has successfully mobilized the public worldwide.

• Nurture nonprofit networks. Collaboration is not a common practice among nonprofits and yet the authors are emphatic that the best nonprofits thrive when they share their wealth, expertise and talents with their peers. The Exploratorium in San Francisco is cited for its collaborative success from its informal network.

• Master the art of adaptation. Demonstrating the willingness to make drastic changes to affect the overall goals of an organization is key to nonprofit success. Share Our Strength switched from direct mail to special events for fundraising, yielding extraordinary results for the organization.

• Share leadership. Recognized as one of the attributes that is paramount to becoming a force for good, sharing leadership is more about developing others and a team orientation within the organization and even the board.

For the entire article, see "Finally, the 'Good to Great Book' for non-profits" in the March 14, 2008, issue of the St. Louis Post-Dispatch.

DAB

Sidney Watson Publishes Review of Two Books on Medicaid and "Charity" Care in America

In December 2007, Professor Sidney Watson (St. Louis) published a law review article that contains reviews of two recently published books - Jonathan Engel's Poor People's Medicine: Medicaid and American Charity Care Since 1965 (Durham, NC: Duke Univ. Press, 2006) and Ronald J. Angel's Poor Families in America's Health Care Crisis (New York, NY: Cambridge Univ. Press, 2006).  Here is the introductory paragraph of the article:

Two new books examine Medicaid--one from a historical perspective and the other through a socioanthropological lens. Poor People's Medicine offers the view from the top: a history of Medicaid and charity care that focuses primarily on national policy developments. Poor Families in America's Health Care Crisis offers the view from the bottom: ethnographic interviews of poor families who discuss Medicaid and charity care from their vantage point at the bottom of the economy. Both books acknowledge Medicaid's many successes in improving access to medical care and the health status of America's poor, yet each reveals how America's deep and long-standing ambivalence toward the poor has produced a deeply flawed Medicaid program.

To see the full article, go to Journal of Health Politics, Policy and Law at 32 J. Health Pol. Pol'y & L. 1053.

DAB