Law Commons^™

The Taxation Of Cause-Related Marketing, Terri Lynn Helge

Chicago-Kent Law Review

With the economy in turmoil, charitable organizations are looking to nontraditional sources of financing to supplement contributions and fee-based revenues. One potentially lucrative source of revenue stems from cause-related marketing. Cause-related marketing is the public association of a for-profit company with a charitable organization to promote the company's product or service in order to raise money for the charitable organization. Introduced almost twenty-five years ago, cause-related marketing has now become a $1 billion a year industry. Cause-related marketing has evolved beyond mere use of a charitable organization's name to an apparent union for the purpose of promoting products that carry …

The Problems With Donor Intent: Interpretation, Enforcement, And Doing The Right Thing, Susan N. Gary

Chicago-Kent Law Review

In a number of recent controversies, the way the charities involved handled restricted gifts resulted in unhappy donors, negative publicity, and costly litigation. This paper examines several of these cases and then argues that donor intent is often more difficult to divine that many people have stated.

The law requires that a charity give effect to a restriction imposed by a donor. This paper examines the legal rules that govern donor-restricted gifts and considers the other reasons a charity will, in most cases, follow the donor's intent. The paper then describes several circumstances in which donor intent may not be …

The Law Of Philanthropy In The Twenty-First Century: An Introduction To The Symposium, Anne-Marie Rhodes

Chicago-Kent Law Review

No abstract provided.

Regulating Charities In The Twenty-First Century: An Institutional Choice Analysis, Lloyd Hitoshi Mayer, Brendan M. Wilson

Chicago-Kent Law Review

For more than fifty years scholars, practitioners, and government officials have debated whether the federal government, the state governments, or the charitable sector itself can best ensure that charity leaders fulfill their fiduciary duties. The dramatic growth of this sector, recent highly publicized governance scandals, and a push in Congress and the IRS for more federal involvement in this area have now brought this issue to a head. This article lays a foundation for resolving the dispute by developing an institutional choice framework for considering and comparing the various available options. Applying that framework, the article concludes that the best …

Helping Nonprofits Police Themselves: What Trust Law Can Teach Us About Conflicts Of Interest, Melanie B. Leslie

Chicago-Kent Law Review

Fiduciary duty law seeks to minimize agency costs that occur when the interests of the agent and principal diverge. That law is context specific: the substance depends upon the objectives of the fiduciary relationship and the degree to which other forces, such as markets and social norms, help align the incentives of principal and fiduciary.

Trust law has no business judgment rule, and prohibits even "fair" conflict of interest transactions unless they are approved by fully informed beneficiaries. Strict rules bolster norms against self-dealing and compensate for trust beneficiaries' poor monitoring abilities and inability to exit or diversify. Corporate fiduciary …

Respecting Foundation And Charity Autonomy: How Public Is Private Philanthropy?, Evelyn Brody, John Tyler

Chicago-Kent Law Review

Recent years have seen a disturbing increase in legal proposals by the public and government officials to interfere with the governance, missions, strategies, and decision-making of foundations and other charities. Underlying much of these debates is the premise—stated or merely presumed—that foundation and charity assets are "public money" and that such entities therefore are subject to various public mandates or standards about their structure, operations, and policies. The authors' experiences and research reveal three "myths" that, singly or collectively, underlie claims that charitable assets are public money. The first myth conceives of charities as shadow governments due to the requirement …

Governing And Financing Blended Enterprise, Dana Brakman Reiser

Chicago-Kent Law Review

The image of nonprofit and for-profit as dual and exclusive categories is misleadingly simple. This blurring of the boundary between for-profit and nonprofit has gone on for years and appears only to be gaining steam. Yet, traditionally, the law has put to organizations a choice of either the nonprofit or for-profit form of organization. In the first decade of this century, organizational law is beginning to catch up with the boundary-blurring trend. In the United States and abroad, legislatures are creating new forms for blended enterprise, including several U.S. states' low-profit limited liability company (the "L3C") and the community interest …

Recent Developments In Community Foundation Law: The Quest For Endowment Building, Mark Sidel

Chicago-Kent Law Review

Using legal and judicial means to build community foundation assets are the focus of some of the more interesting recent developments in community foundation law. This article discusses a recent state supreme court case that pitted a com- munity foundation against a trustee bank for control over the management and investment of a trust for the benefit of the community foundation; state incentive programs for community foundations, including tax credits and the use of gambling revenues to build community foundation assets; the growth of community foundation self-regulation; and other new developments that converge on a key issue—building endowment—that faces the …

The Role Of Social Enterprise, Robert A. Katz, Antony Page

Faculty Publications

A social enterprise operates a business in a manner intended to increase social welfare more than conventional businesses in the same sector. This notion of “social enterprise” was pioneered by nonprofit organizations seeking to advance their charitable missions through revenue-generating commercial activity, instead of relying on charitable donations. With increasing frequency the term is applied to for-profit business ventures whose founders seek to both address social problems while also generating acceptable returns for owner-investors. The article examines the notion of for-profit social enterprise, and explains how such entities may better achieve social goals than nonprofits engaged in revenue-generating commercial activity, …

The Times They Are Not A-Changin': Reforming The Charitable Split-Interest Rules (Again), Wendy G. Gerzog

All Faculty Scholarship

The article reviews the history of the tax treatment of charitable split interest gifts, explains the inequities that Congress both cured and generated in its 1969 reforms, and proposes solutions that are consistent with the goals of the 1969 legislation. The article discusses variations in the 1969 definition of a charitable split interest, which, because of the enacted statutory language, applies in instances where there is no abuse potential. The inequity produced by that definition penalizes the donor and flouts the rationale behind the 1969 legislation. By contrast, the creation of some required statutory forms of charitable split interests in …

All Charities Are Property-Tax Exempt, But Some Charities Are More Exempt Than Others, Evelyn Brody

Evelyn Brody

Attention from the media notwithstanding, the nonprofit sector continues to achieve remarkable success in state supreme courts and statehouses in defending property-tax exemptions. But budget pressures remain. While the intermediate use of “payments in lieu of taxes” has not yet become a systematic compromise solution, PILOTs are attracting growing interest from local taxing jurisdictions. This Article highlights three issues— who decides the parameters of exemption, legislatures or courts; what are the specific factors and vulnerable subsectors; and how exemption is granted or withheld in practice—and concludes with several PILOT case studies. The Appendix sets forth a fifty-one-jurisdiction review of state …

Respecting Foundation And Charity Autonomy: How Public Is Private Philanthropy? (Symposium) (With J. Tyler), Evelyn Brody

Evelyn Brody

Recent years have seen a disturbing increase in legal proposals by the public and government officials to interfere with the governance, missions, strategies, and decision-making of foundations and other charities. Underlying much of these debates is the premise – stated or merely presumed – that foundation and charity assets are “public money” and that such entities therefore are subject to various public mandates or standards about their structure, operations, and policies. The authors’ experiences and research reveal three “myths” that, singly or collectively, underlie claims that charitable assets are public money. The first myth conceives of charities as shadow governments …

Evaluating Norms: An Empirical Analysis Of The Relationship Between Norm-Content, Operator, And Charitable Behavior, Brian Sheppard, Fiery Cushman

Vanderbilt Law Review

There are several kinds of norms, and this variety can lead to spirited debate about the best norm to employ for the regulation of a particular activity. Should the norm be mandatory or aspirational? A rule or a standard? One important area in which norm-choice has come to the fore is the American Bar Association's oversight of pro bono work. Currently, the organization utilizes an aspirational norm recommending that lawyers perform at least fifty pro bono hours annually, but there is pressure to adopt some sort of mandatory rubric. Inspired by this debate, we have designed and implemented an experiment …

The Attack On Nonprofit Status: A Charitable Assessment, James R. Hines Jr., Jill R. Horwitz, Austin Nichols

Articles

American nonprofit organizations receive favorable tax treatment, including tax exemptions and tax-deductibility of contributions, in return for their devotion to charitable purposes and restrictions not to distribute profits. Recent efforts to extend some or all of these tax benefits to for-profit companies making social investments, including the creation of the new hybrid nonprofit/for-profit company form known as the Low-Profit Limited Liability Company, threaten to undermine the vitality of the nonprofit sector and the integrity of the tax system. Reform advocates maintain that the ability to compensate executives based on performance and to distribute profits when attractive investment opportunities are scarce …

The Multiple Common Law Roots Of Charitable Immunity: An Essay In Honor Of Richard Epstein's Contributions To Tort Law, Jill R. Horwitz

Articles

Professor Epstein has long promoted replacing tort-based malpractice law with a new regime based on contracts. In Mortal Peril, he grounded his normative arguments in favor of such a shift in the positive, doctrinal history of charitable immunity law. In this essay, in three parts, I critique Professor Epstein’s suggestion that a faulty set of interpretations in charitable immunity law led to our current reliance on tort for malpractice claims. First, I offer an alternative interpretation to Professor Epstein’s claim that one group of 19th and early 20th century cases demonstrates a misguided effort to protect donor wishes. Rather, I …

The Wisdom Of Crowds? Groupthink And Nonprofit Governance, Melanie B. Leslie

Articles

Scandals involving nonprofit boards and conflicts of interest continue to receive considerable public attention. Earlier this year, for example, musician Wyclef Jean's Yele Haiti charity became the target of intense criticism after the charity disclosed that it had regularly transacted business with Jean and entities controlled by Jean and other directors. Although scandals caused by self-dealing undermine public confidence in the charitable sector, they continue to erupt. Why do charitable boards sanction transactions with insiders?

This Article argues that much of the blame lies with the law itself. Because fiduciary duty law is currently structured as a set of fuzzy …

Charities And Terrorist Financing, David G. Duff

All Faculty Publications

A decade after the bombing of Air India Flight 182 in June 1985, many Canadians were shocked to learn that the Babbar Khalsa Society – a militant organization dedicated to the establishment of an independent state in northern India, members of which are believed to have planned the Air India bombing – had been granted charitable status in Canada. Although the organization’s charitable status was revoked in 1996, reports also suggested that funds collected to support Sikh temples in Canada may have been diverted to support Sikh militancy in India. This article examines the relationship between charities and terrorist financing …