Nonprofit Organizations Law Commons^™

Keeping Promises And Meeting Needs: Public Charities At A Crossroads, Allison Anna Tait

Law Faculty Publications

When a charitable organization cannot fulfill the terms of a charitable gift agreement, it must decide whether to keep a promise or meet a need. That is to say, a charitable organization can either preserve original donor intent, adhering to conditions placed on a gift, or it can attempt to modify the terms of the gift in order to budget and spend the funds more effectively. If an institution chooses to keep a promise, it might be stuck with a fund it cannot use because of conditions placed on the money at the time of the gift. In order to …

Reforming The Regulation Of Political Advocacy By Charities: From Charity Under Siege To Charity Under Rescue?, Adam Parachin

Chicago-Kent Law Review

A newly elected liberal federal government in Canada has pledged to reform the legal distinction between charity and politics. This paper provides context to this reform initiative, linking it to a controversial political activities audit program funded by the former conservative federal government. It identifies three distorting ideas about charity—that charity can be understood as a tax expenditure, economic or neutral concept—that should be eschewed in the reform process. It also identifies three characteristics of charity—the capacity of charities for thought leadership, the pervasiveness of messaging in charitable programming and the distinctiveness of charity and government—that should guide reformers.

Australia – Two Political Narratives And One Charity Regulator Caught In The Middle, Myles Mcgregor-Lowndes

Chicago-Kent Law Review

After two decades of debate about the regulation of the nonprofit sector, Australia established a national charity regulator in December 2012. The creation of the Australian Charities and Not-for-profits Commission (“ACNC”) had as one of its objectives to reduce red tape, and to increase clarity by enacting a statutory definition of charity. Less than two years later, a new government proposed to abolish the ACNC, also in the name of reducing red tape. There appears to be a paradox—or at least diametrically opposed views about red tape reduction and how it can be achieved. With the government nearly two-thirds through …

The Charity Commission For England And Wales: A Fine Example Or Another Fine Mess?, Debra Morris

Chicago-Kent Law Review

The ability of the Charity Commission for England and Wales to regulate the charitable sector effectively has been repeatedly called into question in recent years. At the same time, public sector funding cuts have led to its budget being almost halved in real terms since 2007/08. Numerous official reviews and inquiries into its effectiveness have highlighted its weaknesses and raised concerns about it failing to take sufficient action to prevent abuses of charitable status. In response to the Commission’s claims that it lacks sufficient legal powers to deal with such abuse, new legislation has been passed which will fill some …

Chapter 11 Reorganization And The Fair And Equitable Standard: How The Absolute Priority Rule Applies To All Nonprofit Entities, Pamela Foohey

Scholarly Works

In recent years, nonprofit entities increasingly have sought bankruptcy protection. Though the Bankruptcy Code does not prevent nonprofits from reorganizing, Chapter 11 was designed for and applies best to for-profit businesses. This creates challenges for courts evaluating a nonprofit’s reorganization plan. This Article focuses on one crucial aspect of a court’s evaluation — the fair and equitable standard, a necessary, but not sufficient condition of which is satisfaction of the absolute priority rule.

The few courts addressing absolute priority claims in nonprofit reorganizations have held that the rule is categorically inapplicable to nonprofit entities except in limited circumstances. These courts …

Keeping Republics Republican, Rob Atkinson

Scholarly Publications

No abstract provided.

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 …

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 …

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 …

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 …

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 …

Policing The Good Guys: Regulation Of The Charitable Sector Through A Federal Charity Oversight Board, Terri Lynn Helge

Faculty Scholarship

Recently, public confidence in the charitable sector has eroded due to a barrage of media reports on scandals and abuses. The principal parties charged with regulation of the charitable sector, the Internal Revenue Service and state attorneys general, are saddled with bureaucratic constraints that make it difficult to enforce the laws governing the fiduciary responsibilities of charity managers. Substantial reform in the regulation of charitable organizations is necessary to curb the reported abuses that have undermined confidence in the charitable sector.

Some advocate expanding private regulation of the charitable sector to improve enforcement of the fiduciary responsibilities of charitable managers. …

Confidence In The Nonprofit Sector Through Sarbanes-Oxley-Style Reforms, Joseph Mead

Law Faculty Articles and Essays

Over the past several years, the nonprofit sector suffered a series of highly visible scandals that shook the public's confidence in charitable organizations. Concerned politicians and nonprofit leaders responded with a variety of reforms inspired by the Sarbanes-Oxley Act. The Note focuses on three such reforms: requiring nonprofit officers certify financial statements, mandating audits of nonprofits' financial statements, and imposing independent audit committees on nonprofit boards of directors. This Note argues that, contrary to the conclusions of many commentators, these reforms will provide a net benefit to the nonprofit sector by increasing donor confidence while imposing minimal costs.