Posts Tagged ‘IRS’

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More on the Buffett challenge

February 3, 2012

When Warren Buffett challenged Mitch McConnell to help him pay down the deficit, McConnell paid him no never-mind—but a teenage girl in Northbrook, IL heard and responded, sending $300 to the Feds and asking Buffett to do the same.  This is an adorable story, and the video makes it more adorable still.

But let’s not let this young woman’s sense of civic duty and remarkable act of civic participation distract from the real point of the Buffett challenge, which is that without increased taxation of the wealthy, jerks like Mitch McConnell will free-ride on public-spirited souls like Katie Murphy.

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Posted in Current Affairs, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Volunteers/Volunteerism | Leave a Comment »

The billionaire vs. the free riders

January 13, 2012

The Nonprofiteer’s readers might enjoy this account of a pissing match between Warren Buffett and Mitch McConnell.  The Senator from Kentucky has been urging the Sage of Omaha to make voluntary contributions to the Treasury if he felt he was undertaxed.  Buffett has now responded that he’ll match any such contributions made by Republican Senators.

This dialogue makes in a different form Milton Friedman’s point as recounted by the Nonprofiteer yesterday.  Voluntary contributions to reduce poverty (or do any of the other things we rely on the government to do) are insufficient, because everyone would be willing to pay his/her share only if s/he could be sure that everyone else would be willing to pay his/her share.  Otherwise, no dice.

Doubtless McConnell will ignore Buffett’s challenge and continue his nonsensical bluster about Buffett’s freedom to pay extra if he feels “guilty” about his low tax rate.  But the point isn’t, of course, how Buffett feels, or even what he does—it’s what everyone else does.  And if McConnell and his buddies don’t donate to the Treasury, then they are poster children for the free-rider problem—thereby proving Buffett right: philanthropy is not sufficient and taxation is necessary.

H/T the indispensable Rick Cohen at The Nonprofit Quarterly.

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Posted in Coverage of nonprofits, Current Affairs, Finances, Government grants, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy | Leave a Comment »

Taxes vs. philanthropy: the view of a raving lefty

January 11, 2012

I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people’s charity therefore partly accrue to me.  To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did.  We might not be willing to contribute the same amount without such assurance.

Therefore, this wild-eyed radical continues, the government must step in.  If poverty is to be alleviated, everyone must be taxed so that no one gets a free ride to the benefits of poverty eradication.

How appalling!  How socialistic!  Of course, what else could one expect from an ivory-tower academic complete with Nobel prize?

No, not that one (or even that one): Milton Friedman.

When the man said “There ain’t no such thing as a free lunch,” he meant it.

H/t Allen R. Sanderson.

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Posted in Coverage of nonprofits, Finances, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Poverty, Private Philanthropy | 1 Comment »

At war with oneself over the charitable deduction

January 10, 2012

From an article in the New York Times whose date the Nonprofiteer neglected to notice:

“It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity.  “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”

“The kind of loopholes . . . “  Is there some other kind?  That is, can we have the tax code encourage individual generosity without delegating to private individuals decisions about what constitutes the public good?  The Nonprofiteer doesn’t see how.  Either you have a tax subsidy—which means by definition that other taxpayers bear a bigger burden—or you don’t. 

Without the subsidy, current donors might give less but the government would have more to give out to public causes (health, education, welfare) now privately supported.  And perhaps without the subsidy, current donors would be replaced by those less-burdened other taxpayers in a burst of their own generosity.  And maybe this would mean fewer snow-globe museums and more attention to human services in the nonprofit sector.

Or maybe it would just mean a reduction in charity and an increase in the government’s resources, which could then be used on public education and public housing.  Or missiles and drones.

This is why the Nonprofiteer remains at war with herself over the charitable deduction.  She wants a thousand flowers to bloom.  She believes any free society requires a counter-balance to whatever the current government has decided about anything.  And she believes this counter-balance requires money.  The whole point of the nonprofit sector is that it permits people to identify and respond to their own needs in their own communities, producing a closer fit between service and community than is possible with centralized programs.

But she also believes that society-wide priorities should be funded society-wide, which means limiting the number of pots of money exempted from inclusion in the public fisc.  And she doesn’t want society-wide priorities to be determined by people who have so much money they can buy entire public school systems and experiment on them.

To quote the great Yul Brenner: Is a puzzlement.

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Posted in Finances, Government grants, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Relations with funders, Social Service Agencies | Leave a Comment »

Guest post: One Book, Three Challenges

January 1, 2012
by Lesley Rosenthal

Good Counsel: Meeting the Legal Needs of Nonprofits
by Lesley Rosenthal
(John Wiley & Sons 2012)

As I embarked on writing Good Counsel: Meeting the Legal Needs of Nonprofits, well-meaning and concerned folks cited at least three reasons why no one had written such a book before, and (implicitly) why I shouldn’t try: it’s too dangerous, too hard, too scary.

The “too-dangerous” crowd, personified by some of the most successful leaders of nonprofit turnarounds on several continents, worried that legal information in non-lawyers’ hands would result in the unlicensed practice of law by a bunch of irresponsible, budget-strapped do-it-yourself nonprofiteers. Who knows what kinds of mission mischief non-lawyers would make with their newfound knowledge – the legal equivalent of sewing your own sutures! Fortunately my own boss, the President of Lincoln Center, and several of my other mentors before him, including a former Bar Association president and a federal judge, helped forge my conviction that the law belongs to the people. They encouraged my desire to put it into plain English for all to know.

The “too-hard” folks, also well meaning, recognized the enormous variety of laws that commonly arise in nonprofits and thought it impossible to provide a general overview in one volume. I know what they meant: the tangle of specialized state and federal laws that make our sector one of the most highly regulated in the whole economy, such as state nonprofit corporations laws, Section 501(c) of the internal revenue code, IRS rules, regulations and expectations surrounding the tax exemption and good governance, multi-level filing and disclosure requirements, pension, endowment and investment laws, lobbying restrictions, and a web of 50 different states’ fundraising laws. Many fine books have been written on each of these subjects, but rare is the legal resource that touches upon them all. Then, the skeptics continued, there are also general business laws that apply to these organizations – contract law, labor and employment laws, intellectual property laws, consumer regulatory laws, real estate laws, building codes and more. And business laws apply to the nonprofit sector in weird ways not necessarily intended by lawmakers, forcing volunteer-driven organizations, for example, to think long and hard about how to structure their activities to comply with minimum wage and hours laws. Pile on top of all of those layers the additional specialized laws that apply to the wide world of nonprofits, such as FDA regs for blood banks, student privacy laws for higher ed, permitting and accreditation for hospitals and mental health facilities and so on, and the whole enterprise of writing a book about the legal context of nonprofits threatens to die under its own weight.

The “too-scary” people are the most sympathetic people of all. They are the good-hearted lawyers who are already serving as counsel, as board members – or as both simultaneously – to nonprofit organizations. Their values may line up perfectly with the mission of the organization they serve – an elder care lawyer, for example, serving on the board of a community-based senior center, a real estate lawyer counseling a neighborhood development organization, a sports and entertainment lawyer doing board duty on her town’s local Little League or scout troop – but their legal expertise may be far afield of the legal issues facing the organization. It scares them to no end when a legal question arises in the boardroom and all eyes turn toward them. UBIT – what’s that? Conflict of interest policy pertaining to co-investment interests? Ugh. Section 501(h) election for lobbying activities? Isn’t this meeting almost over? They could have just begged off answering these questions – that’s not my area of law, you see, you wouldn’t ask a dermatologist about your chest pains, would you? – if only Good Counsel didn’t exist to connect the dots between the law they do know and the law they need to know to better serve their favorite charity.

Good Counsel is intended – charitably – to defy all three objections. In 300 pages it places the law of nonprofits in the hands of board members that oversee and executives that actually run the organizations – CEOs, CFOs, program managers and staff, fundraisers, personnel directors, communications professionals, operations and facilities managers and more. Does it answer every question? No. Does it sensitize non-lawyers to common legal issues in the highly regulated context in which they operate? I sure hope so.

Lawyers who make their living practicing in this field needn’t worry that this one volume will displace them; to the contrary, placed in the right hands, the book will generate more sophisticated questions and ultimately more and better client relationships. Corporate and transactional lawyers who have not yet found an outlet for their volunteer yearnings – because it seems that most pro bono projects are more aligned with the skills of litigators, not business lawyers – may feel empowered to see how readily they can translate what they know to the legal needs of prospective nonprofit corporate clients.

Law school deans concerned about the criticism being leveled at the entire enterprise of legal education may find a path forward in Good Counsel. With case studies, work plans and focus questions following each chapter, the book lays out a path for law students supervised by clinical professors to engage with a particular nonprofit organization and assess its legal needs – growing the students’ legal skills and stretching their capacities as counselors in ways that will serve them well even if they do end up in private practice after graduation, as most do.

And the legal profession, which despite the canon of lawyer jokes is as public-spirited as any I know, may find that Good Counsel can be used to foster and strengthen more pro bono relationships between lawyers and organizations. There is a great deal of goodwill for nonprofit organizations among public-spirited lawyers. I know, because I have been both a purveyor and voracious consumer of pro bono legal services, that there is more time and willingness to serve among the legal profession than has been fully tapped to date. A pilot program of the New York State Bar Association and the New York Attorney General’s Office Charities Bureau has adopted Good Counsel as a training resource for that very purpose: to help launch up to 50 new pro bono relationships between lawyers and charities in the initial pilot year of a program called Charity Corps: Lawyers Helping Nonprofits.

Far too many of our nation’s one million public charities lack regular access to counsel. At the same time, good-hearted lawyers are floundering in their efforts to help their favorite nonprofits, or are afraid to try because they think the field is so distant from subject matter they know. Law students graduate in debt up to their ears but lacking the practical skills they need to begin servicing clients after law school. Good Counsel is a playbook, intended for all three audiences.

And while I admit it was a little hard, scary and dangerous, ultimately there were far more supporters than skeptics for this project. I invite readers – lawyers, nonprofit leaders, and academics – to take a look and let me know if it works.

Lesley Rosenthal
www.goodcounselbook.com

goodcounselbook@gmail.com

Schedule of upcoming Good Counsel events in NYC, LA, Detroit, Miami, Philadelphia, Boston, DC and Buffalo, NY available on www.facebook.com/GoodCounselBook or at the book’s website, www.goodcounselbook.com.

Available for purchase at http://www.amazon.com/dp/1118084047/ref=rdr_ext_tmb

Review copies for academics, media, upon request to tbatanchie@wiley.com

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Posted in legal services, Management Advice Day tip, Nonprofit management, Nonprofits--General | 3 Comments »

What should (but won’t) be the last word on the charitable tax deduction

December 20, 2011

The most powerful argument Jack Shakely makes in his LA Times op-ed piece opposing the charitable tax deduction is that it’s a poor trade-off.  The retired foundation executive points out that charities have permitted themselves to be shorn of their ability to influence policy and politics in return for a mess of pottage.  Of course the restrictions on charitable participation in the public arena aren’t as draconian as nonprofit executives (and especially Boards) think they are—but the point is that nonprofits understand themselves to be constrained, and rather than bothering with the details remain quiescent politically.

As strong a proponent as the Nonprofiteer is of the pursuit of individual gifts, in the real world virtually every social service agency needs seriously more government money if it’s going to make any dent in the social problems it faces.  The more social service agencies feel free to advocate for this particular budget bill or that particular provision in a piece of legislation—both prohibited by the current tax-code provisions—the more likely it is that those bills and provisions will pass, which would serve way more of the agencies’ clients than the most blue-sky estimates of their potential for growth in individual giving.

And for someone with foundation cred to say this!  All hail Jack Shakely.

h/t The Nonprofit Quarterly Newswire.

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Posted in Advocacy, Coverage of nonprofits, Current Affairs, Fundraising, Government grants, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Social Service Agencies | Leave a Comment »

By any other name . . .

November 4, 2011

The Nonprofiteer has never had much time for people who want to change the name of the sector to something non-”non”—something more positive, like “Civil Society Organization,” or less meaningful, like “independent.”  But this article about the connection between Herman Cain’s campaign and a Tea Party front group funded by the Koch Brothers has her rethinking her position.  Under the headline “Cain to Review Links to a Nonprofit” we learn that

An outside lawyer will review allegations that Herman Cain’s presidential campaign accepted tens of thousands of dollars in goods and services from a tax-exempt organization founded by his chief of staff . . .

The front group, “Americans for Prosperity,” is a Wisconsin nonprofit granted at least preliminary 501c3 recognition by the IRS.  And if it were actually nothing more than a group of citizens banded together to advocate for policies they believe will lead to prosperity, there would be nothing wrong with that.  But if instead it’s just a mouthpiece for the Koch brothers—an Astroturf, rather than a grassroots, organization—then there is something wrong.

The IRS requires 501c3s to raise a third of their money from the public precisely to prevent the creation of captive organizations of this kind.   Use of a tax-exempt entity to promote the interests of a single individual or family is a violation of Federal tax law.  Moreover, if the nonprofit paid some of the Cain campaign’s expenses, that’s a violation of Federal election law—perhaps one of the few activities left that is.

The Cain campaign may collapse under the weight of far more interesting allegations (sex beats money every time); but if in fact this nonprofit was nothing more than a campaign slush fund, its existence represents a taint on the “nonprofit” label.  What a shame that “handmaiden to profit and to policies assuring that the profitable get more so and the rest of us get squat” is so unwieldy.

Maybe a new name for the sector wouldn’t come amiss; but let’s be realistic.  The Iron Law of Euphemisms means that whatever name is adopted instead will soon become an epithet itself.  This explains the “progress” in designating African-Americans, from “n****r” to “colored” to “Negro” to “black” to “Black” to “people of color”: as long as people using the term hate the people they’re describing, the term will be infected with their hatred and soon need to be abandoned.

And as long as the wealthiest people using the term “nonprofit” are determined to distort the form to support the worst excesses of the profit-driven world, it hardly matters what the rest of us call it.

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Posted in Advocacy, Advocacy groups, Campaign finance, Charity scandals, Coverage of nonprofits, Finances, Mission, Nonprofit management, Nonprofits--General, Private Philanthropy, Relations with funders | 6 Comments »

The Joyce Foundation, the Independent Sector and the facts

November 2, 2011

Ellen Alberding’s interview with the Chicago Tribune in advance of the Independent Sector‘s meeting in Chicago earlier this week pressed nearly every one of the Nonprofiteer’s buttons.  Ms. Alberding, head of the Joyce Foundation, described the Foundation’s approach to what even she characterizes as a perfect storm of increased need and reduced resources in the nonprofit sector:

We do what any good business person would do when faced with reduced resources. We have become very focused on first maintaining support of our core grantees. Foundations are required to spend a minimum amount — 5 percent of our assets. On occasion, we will overspend that in order to keep our grantees whole.

In other words, business as usual.  Most likely the Joyce Foundation’s governing documents prevent its Board from spending its assets down to zero, but there’s no reason why the Foundation shouldn’t use more than the statutory minimum 5% of its $800 million in assets to sustain the work it exists to support.  Foundations are NOT businesses; they exist to give their money away, and only in some vague theoretical sense is an institution with $800 million facing constraints preventing it from giving away more than $40 million.

If Joyce gave only 6% instead, that would be another $8 million available to nonprofits in its areas of concern—a not-insubstantial 20% increase.   What is stopping the Foundation from doing this, other than a misguided sense that preserving its capital is more important than doing its job?

And then the cherry on the sundae:

It’s the position of the Independent Sector that a cap [on charitable deductions] will reduce charitable contributions across the board and diminish support for nonprofit organizations. I believe it’s the administration’s view that the 28 percent cap might have some impact, but it wouldn’t have a dire impact. (But) I think we have to listen to the organizations themselves, who feel otherwise.

In other words, notwithstanding reality, the prejudices of self-interested parties will dictate the organization’s behavior.    Their minds are made up—don’t confuse them with the facts.  But as President of the organization, doesn’t it behoove Ms. Alberding to make sure her members don’t make their decisions based on fantasy?

Grrrr.

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Posted in Boards of Directors, Conflict of Interest, Coverage of nonprofits, Finances, Foundation Hall of Shame/Stupid Foundation Tricks, Fundraising, Investment, Mission, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Relations with funders | Leave a Comment »

Beyond “Will not!” “Will so!”

October 27, 2011

Kudos to the Nonprofiteer’s nonprofit consulting colleagues Campbell and Co. for sponsoring a study by the Indiana University Center on Philanthropy to determine the impact on giving of increased marginal tax rates and a cap the charitable-giving deduction.  While some of us have been arguing that both of these moves toward social justice should be supported by the nonprofit community, and others have been arguing that the world will come to an end if every penny of tax savings isn’t afforded to the generous rich, these institutions decided to look for the facts.

The facts–as elegantly stated in a Congressional Research Service study that came to the same conclusion–are these:

The estimated effects of the cap and other elements of the budget package depend on whether the proposals are compared with the current tax rates of 33% and 35% or the rates scheduled for 2011, 36% and 39.6%. Compared with current rules, estimated effects are between one-half a percent and 1% decline in charitable giving . . . . When compared with tax rate provisions in 2011, charitable deductions are estimated to fall by about 1.5% if only the cap is considered, but if income effects from the entire budget package are included contributions actually rise 2.5%.  The relatively modest effects of the proposal arise because (1) the effect of caps on the subsidy value is limited, (2) only a fraction (about 16%) of charitable giving is affected, and (3) because evidence suggests that behavioral responses to changes in subsidies are relatively small.

(Emphasis the Nonprofiteer’s.)  To paraphrase: the tax subsidy isn’t much reduced; that small reduction doesn’t affect 84% of charitable giving; and, in fact, charitable giving isn’t all that tied to tax benefit.

So whether we take the IUPUI findings that charitable giving is likely to decline modestly if these tax reforms are enacted, or the CRS findings that it might actually go up, we should realize that everyone who’s hyperventilating about the impact of these changes on their poor struggling private school, museum or hospital should just take a deep breath.   Given that the reforms will support many of the social programs, environmental protections, educational institutions and health care options the nonprofits themselves seek to provide, it’s about time for the community to stop whining and agree to pony up.

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Posted in Advocacy, Arts Organizations, Coverage of nonprofits, Current Affairs, Disease charities, Education, Environmental, Finances, Fundraising, Health care, Higher education, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Social Service Agencies | Leave a Comment »

Charity begins at home—and that means taxes

July 13, 2011

About a month ago the Nonprofiteer received a note from a public relations officer at the Jewish Federations of North America describing the Federations’ opposition to placing caps on tax deductions.  Being well aware that the debt ceiling negotiations are completely out of her control (and probably out of anyone’s control at this point), this letter failed to move the Nonprofiteer to leap to her telephone and urge her Congressbeing to beat back this latest assault on the nonprofit sector.

But it wasn’t mere laziness that kept her from the front lines in this particular battle; it was actual disagreement, based on the letter’s own summary of the horrifying proposal:

Specifically, the Administration has proposed limiting tax benefits for charitable contributions for those earning over $250,000 (married) or $200,000 (single). The tax benefit of all itemized deductions, including charitable contributions, would be capped at 28 percent and the Jewish Federations want the charitable portion to be exempted.

Thus, an extremely modest proposal for assuring that the wealthiest citizens pay some additional portion of our shared tax burden is considered a threat to the health and well-being of the hundreds of thousands of people served by the Jewish Federations.  This, despite the fact that deductibility’s impact on giving is far from clear.

Listen up, gang.   You want to see a threat to health and well-being?  How about cuts in Medicaid, in Medicare, in the Affordable Care Act, in Social Security, in food stamps, in child care, in education?  The fundamental problem of the American economy is that we don’t pay enough in taxes to support the services we very reasonably demand.  We don’t pay nearly as much in taxes as our quite conservative neighbors to the north, or our counterparts in Europe or Japan.  So we don’t have the health care, the educational system or the family support services we need.

Even complete abolition of the charitable deduction wouldn’t make much of a dent in the shortfall we’ve created out of pure political cowardice and foolishness.  The deficit is not the result of social spending but of three simultaneous wars piled on multiple tax cuts.  So the hideous notion of a cap on deductions fails on the Willie Sutton basis: you don’t rob nonprofits because that’s not where the money is.

But.   If there were what Everett Dirksen called “real money” hidden in the charitable deduction for wealthy families, it absolutely should be subject to revision, for the same reason every other deduction and credit and tax dodge should: because those dodges enable the wealthy to pay less than their share, and because this society needs more money than poor people’s taxes provide to continue those services necessary for us to remain a member in good standing of the developed world.

The Jewish Federations’ objection to this proposal—while completely understandable from their perspective—suggests that even the nonprofit sector has become infected with the shortsighted quarter-to-quarter thinking which addles Wall Street.  Rather than consider the long-term good of the society they serve, the Federations are concerned about balancing next year’s budget.  And while the Nonprofiteer doesn’t blame them for that—that’s their job—you’ll pardon her if she sides with (and cites) a different giant of the American Jewish community, Samuel Goldwyn*:

“Include me out.”

———————–

*Per Wikipedia: “In 1916, Goldfish partnered with Broadway producers Edgar and Archibald Selwyn, using a combination of both names to call their movie-making enterprise the Goldwyn Pictures Corporation. Seeing an opportunity, Samuel Gelbfisz then had his name legally changed to Samuel Goldwyn, which he used for the rest of his life. “

Could this possibly be because the alternative combination of their names is Selfish?

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Posted in Advocacy, Coverage of nonprofits, Current Affairs, Finances, Fundraising, Nonprofit management, Nonprofits--General, Philanthropy and Taxation, Private Philanthropy, Social Service Agencies | 5 Comments »

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