Nonprofit Organizations Law Commons^™

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 …

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 …

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 …

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 …

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 …

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 …

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 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 …

Putting The Community Back Into The "Community Benefit" Standard, Jessica Berg

Georgia Law Review

Disputes about tax exemption for hospitals are occurring all over the country. Local tax authorities have revoked tax- exempt status for some hospitals. State governments are considering whether to require minimum amounts of charity care in exchange for tax exemption. Congress is debating whether hospitals should remain a part of the nonprofit sector at all. At the same time, uninsured individuals are suing hospitals for unfair billing and collection practices. Creative accounting and expansive definitions of "free" care have led to a variety of non ideal practices by hospitals in order to balance their bottom line, while maintaining tax-exempt status. …

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. …

Assaulting America's Mainstream Values: Hans Zeiger's “Get Off My Honor: The Assault On The Boy Scouts Of America”, Eric Alan Isaacson

The University of New Hampshire Law Review

[Excerpt] “Lieutenant Colonel Oliver L. North’s Foreword to Hans Zeiger’s book Get Off My Honor: The Assault on the Boy Scouts of America warns that one of America’s most trusted institutions, the Boy Scouts of America (BSA), is under siege for advancing “what many of us euphemistically call traditional values.

Euphemistically?

North’s choice of words inadvertently reveals what he and many other so-called “social conservatives” obviously know in their hearts—that the BSA’s recent campaign against gay youth and religious liberals is grounded in something other than America’s proudest traditions and values. Hans Zeiger proceeds himself to remove any illusions in …

Modernizing Charity Law In China, Rebecca Lee

Washington International Law Journal

In recent years, the cultivation of domestic charities has been an important item on the development agenda of the Chinese government. In pursuit of this end, China has attempted to modernize its laws governing charitable organizations. Despite these welcome attempts and a rich tradition of philanthropy, China’s existing legal framework still fails to support an effective charitable sector. The government, noting the crucial role of the charitable sector, has begun drafting a comprehensive statute that will govern charities. In light of these emergent trends, this paper critically examines the inadequacies of the existing legal structure, highlighting the need to devise …

What Ngo Accountability Means - And Does Not Mean, Kenneth Anderson

Book Reviews

This essay offers a review (4000 words) of "NGO Accountability: Politics, Principles and Innovations," Lisa Jordan and Peter van Tuijl, eds. (London: Earthscan 2006); following AJIL permission, it is given in unedited form and is available in final form in 103 AJIL 1 (January 2009). International and transnational NGOs have been under criticism for alleged lack of accountability since they emerged into prominence in the 1990s. In recent years, the debate over NGOs has shifted from legitimacy and "representativeness" to accountability in the narrower senses of internal governance, fiduciary responsibility, relationships with national governmental authorities, and similar issues. The volume …

Recruiting And Selecting Child Welfare Staff, Michelle Graef, Megan Paul, Tara L. Myers

Center on Children, Families, and the Law: Faculty Publications

In this chapter, the focus is on recruiting and selecting new staff and on the steps agencies can take to ensure that they are doing the best possible job to attract and hire a high-performing, committed workforce. This chapter reviews a number of strategies for improving recruitment and selection processes and provides case examples from the authors' work with child protection agencies in several states. These projects have been accomplished by a team of researchers at the University of Nebraska-Lincoln's Center on Children, Families, and the Law (CCFL). Some of the techniques described here will be familiar, whereas others are …

Nonprofits And Narrative: Piers Plowman, Anthony Trollope, And Charities Law, Jill R. Horwitz

Articles

What are the narrative possibilities for understanding nonprofit law? Given the porous barriers between nonprofit law and the literature about it, there are many. Here I consider two. First, nonprofit law and nonprofit literature are each enriched and made fully explicable by reference to the other. Nonprofit law has grown in parallel with literature. It may even be that important legal texts, texts about doing and being good, were imported directly from literary sources into law. Second, in writings ranging from sensational journalism to high literature, nonprofit laws and the scandals involving their violations have captured the public imagination for …

Letting Good Deeds Go Unpunished: Volunteer Immunity Laws And Tort Deterrence, Jill R. Horwitz, Joseph Mead

Articles

Does tort law deter risky behavior in individuals? We explore this question by examining the relationship between tort immunity and volunteering. During the 1980s and 1990s, nearly every state provided some degree of volunteer immunity. Congress followed with the 1997 Volunteer Protection Act. This article analyzes these acts, identifying three motivations for them: the chilling effects of tort liability, limits on liability insurance, and moral concerns. Using data from the Independent Survey’s Giving and Volunteering surveys, we then identify a large and positive correlation between immunity and volunteering. We next consider the implications of the findings for tort theory and …

Managing Performance [In Child Welfare Supervision], Megan E. Paul, Michelle Graef, Erika J. Robinson, Kristin Saathoff

Center on Children, Families, and the Law: Faculty Publications

One of the primary roles of a supervisor is to manage worker performance. Performance management is the "continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization" (Aguinis, 2007, p. 2). Supervisors must regularly assess current performance levels and take steps to improve performance in a way that is congruent with agency goals. The ultimate goal is to achieve agency objectives through individual and team performance.

To effectively manage performance, supervisors must know what the performance expectations are for workers and clearly communicate these expectations to workers. …

Sit Down And Count The Cost: A Framework For Constitutionally Enforcing The 501(C)(3) Campaign Intervention Ban, Benjamin Leff

Scholarly Articles in Law Reviews & Journals

Section 501(c)(3) of the Internal Revenue Code prohibits charities from intervening in a political campaign for or against a candidate for public office. The IRS currently interprets the campaign-intervention ban to absolutely prevent charities from communicating their views on candidates, even if such communications are completely financed by non-501(c)(3) affiliates.

This article argues that the current IRS enforcement paradigm is unconstitutional because it exceeds the government interest in preventing tax-deductible donations to be used for campaign-intervention. A constitutional interpretation exists under the current statutory framework, but it would require the IRS to shift its focus exclusively to campaign-intervention-related expenditures. The …

Obedience As The Foundation Of Fiduciary Duty, Rob Atkinson

Scholarly Publications

No abstract provided.

The Low Road To Cy Pres Reform: Principled Practice To Remove Dead Hand Control Of Charitable Assets, Rob Atkinson

Scholarly Publications

In recent decades many scholars have called for reduction of dead hand control of charitable assets. These scholars have recommended the "high road" to reform: sweeping, wholesale revision of legal doctrines by either courts or legislatures. These calls, for all their merit, have gone virtually unheeded. In the face of that apparent impasse, this article recommends a different route, a "low road," to reform: an immediately available set of strategies for removing dead hand control, strategies that can be deployed, in particular cases, right now. The net effect of this piecemeal, practical approach should be to move us, albeit in …

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.

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

Michigan Law Review

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.

What Qualifies As A Public Charity? Minnesota Enters The National Debate, Lucinda E. Jesson, Myron L. Frans

Journal of Law and Practice

No abstract provided.

Public Charity Update: Other Courts Weigh In, Lucinda E. Jesson, Myron L. Frans

Journal of Law and Practice

No abstract provided.

An End To Federal Funding Of For-Profit Charter Schools?, Mark D. Evans

University of Colorado Law Review

In Arizona State Board for Charter Schools v. U.S. Department of Education, the Ninth Circuit validated a U.S. Department of Education policy that for-profit charter schools are ineligible for federal funding under the Individuals with Disabilities Education Act and Title I of the Elementary and Secondary Education Act. That policy now threatens to chill the growth of charter schools in states that would have otherwise encouraged their expansion. This Note examines the details of the Ninth Circuit's decision, its effect on states that allow for-profit charter schools, and its impact on the charter school movement.

The Low Road To Cy Pres Reform: Principled Practice To Remove Dead Hand Control Of Charitable Assets, Rob Atkinson

Scholarly Publications

No abstract provided.