Charity Governance

“THERE’S JUST NO POINT IN DOING IT:” CALLS TO PERVERT THE LAW SHOULD BE IGNORED

DATELINE: July 24, 2008, Chicago

"There's just no point in doing it," claims Jon Shirley, who together with his wife, has donated major works of art to the Seattle Art Museum. In A Portrait of Art as a Tax Deduction, Wall Street Journal reporter Mike Spector explains why. Prior to the enactment of the Pension Protection Act (PPA) in 2006, rich art lovers could give their works to art museums in what were highly tax-favored transactions. To illustrate, assume Tom Collector owns a Jackson Pollock valued at $10 million. He paid $2 million for it. The tax law said that if Tom gave it to the Art Institute of Chicago, he could claim a $10 million deduction for it, even though he paid $2 million for the painting. That means his $8 million gain escaped tax, but he received credit for the gain in calculating the amount of his tax deduction.

Now, let's consider a plumber who has bills at $150 per hour. He donates 20 hours of his time to the Art Institute of Chicago to...

FASB SHOULD WAKE UP AND SMELL THE COFFEE: MASSACHUSETTS TAX ON ENDOWMENTS

DATELINE: May 12, 2008, Chicago

As regular readers know, we are dissatisfied with proposed FSP 117-a, a rather obscure proposal being considered by the Financial Accounting Standards Board (FASB). It would extend current accounting principles to the financial statements of charities operating in states that have adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA). UPMIFA is spreading like wildfire, with at least 20 states enacting versions of it.

To make a long story short, FSP 117-a will continue the accounting profession's practice of overstating the amount of a charity's assets that are freely spenadable. For institutions with large endowments, this means that to donors and legislators, much of endowment looks like it is available for current expenditure despite legal restrictions which prohibit the institution's board from spending the funds. As our Jack Siegel pointed out in his recent article, FASB Puts Infinity Up on Trial: Accounting for Endowments, 60 EOTR 23 (April 2008), the inaccurate reporting mandated by FASB will pose serious problems for colleges and universities. For example, rising tuition and related costs...

WHAT ARE THE INTERNATIONAL RELIEF ORGANIZATIONS DOING ABOUT MYANMAR AND WHAT ARE YOU DOING ABOUT IT?

DATELINE: May 7, 2008, Chicago

We suspect that the established disaster relief organizations are not receiving an outpouring of donations following Cyclone Nargis' direct hit on Myanmar. Many people don't know where Myanmar is, and those that do, are likely to be put off by the military government, particularly following the crackdown several months ago on Buddhist monks. Nevertheless, there probably are more than a few people who still want to do something. After all, those who...

BUILD IT AND THEY WILL FUND IT: WRONG

DATELINE: May 6, 2008, Chicago

The Museum of Broadcast Communications was located in the Chicago Cultural Center, a temporary location, for many years.  Over the last several years, the museum has been constructing a new museum on Chicago's State Street. The museum archives hold over 85,000 hours of broadcast and radio programming.

We hadn't been actively following the construction's progress, but we did notice when we walked past the facility that it was taking what seemed to be a...

MICHAEL, WHAT’S THE RUSH?

DATELINE: April 16, 2008, Chicago

The New York Times Freakonomics blog is reporting that Michael, a 31-year old Harvard University graduate, faces a problem. He is about to inherit an unspecified amount of money and wants to give $70 million to worthy causes. The Chronicle of Philanthropy's Give and Take column posed the question: Where should Michael donate his money? Not surprisingly, the story has generated what would appear to be record number of comments. Many suggest that Michael give his money...

FIDELITY CHARITABLE GIFT FUND: IT’S LIKE MAGIC

DATELINE: April 3, 2008, Chicago--A Personal Story

With tax time fast approaching, it should come as no surprise that we have been working on our taxes. As we went through our receipts and acknowledgements for charitable gifts, we began to think about why we have not been giving appreciated stock in lieu of cash. The answer is quite simple: We aren't making gigantic contributions, but we do make several larger ones each year—size in this area is relative. Yet, those larger ones aren't large enough to warrant the hassle of transferring 30 or 50 shares of highly appreciated stock to several charities. We'd have to make several phone calls, follow up, and maintain more detailed records. It's simply not worth the trouble, particularly if we use the technique for contributions to several charities. But as tax lawyers, we knew...

JUDGE ELLEN HOBBS LYLE REACHES A DECISION IN THE FISK UNIVERSITY CASE, BUT THE EXTERMINATING ANGEL IS UNLIKELY TO GO AWAY

DATELINE: March 7, 2008, Chicago

Poor Fisk University. Recall that this Nashville-based institution has faced financial difficulties in recent years. The seemingly simple solution would be to sell just two paintings from its valuable Stieglitz Collection of art, which includes works by Georgia O'Keeffe, Picasso, Renoir, and Cezanne, among other notable artists. During the last two years, Fisk has been asking Davidson County Judge Ellen Hobbs Lyle whether it can do just that.

We had hoped that Judge Lyle would put an end the dispute between Fisk and the Georgia O'Keeffe Foundation when she rendered her decision following a trial that began February 19, 2008. As we discovered late last night, that is...

FAMILY FOUNDATIONS MAY BE THE BENEFICIARIES AS WELL AS THE VICTIMS OF INSIDER TRADING

DATELINE: March 4, 2008, Chicago

The securities laws prevent insiders from profiting from non-public information. These laws take two forms. The first is the rule against short-swing profits, with its focus on sales by insiders at a profit within six months of acquiring the stock. The second is the anti-fraud rule found in Section 10b-5 of the Securities and Exchange Act of 1934. These laws prevent insiders from profiting through sales and purchases of stock when they are deemed to or actually possess inside information, but a professor at New York University's Stern School of Business has just published a study suggesting that some chairmen and CEO's of publicly-traded companies may be maximizing the value of their contributions...

CHEAP SHOTS WHEN IT COMES TO WILLIAM BARON HILTON’S PLEDGE OF $1.2 BILLION

DATELINE: January 7, 2008, Chicago

Several weeks ago, William Barron Hilton announced that he was pledging $1.2 million to the Conrad N. Hilton Foundation. Since then, there has been much more focus on what the public perceives as Paris Hilton's lost inheritance than on the gift itself. Unlike Bill and Milanda Gates' or Warren Buffet's generosity, Hilton's generosity has met with...

GIVER BEWARE: THE WASHINGTON POST’S EXPOSE ON VETERANS GROUPS RAISES LEGITIMATE CONCERNS, BUT COULD RESULT IN POLICYMAKER OVERREACH

DATELINE: December 14, 2007, Chicago

Philip Rucker of the Washington Post had an interesting article in yesterday's paper covering veterans charities and their generally poor performance in terms of serving veterans. Study Faults Charities for Veterans: Some Nonprofits Shortchange Troops, Watchdog Group Says, Dec. 13, 2007. At the outset, we should point out that not all veterans charities are or should be suspect, but for purposes of this post, we focus on the troublesome ones when we refer to veterans charities.

The numbers will be shocking to the public, but will come as...