Governing Nonprofit Organizations: Federal and State Law and Regulation

Sampul Depan
Harvard University Press, 15 Des 2008 - 570 halaman
The nonprofit sector is a vital component of our society and is allowed the greatest freedom to operate. The public understandably assumes that since nonprofit organizations are established to do good, the people who run nonprofits are altruistic, and the laws governing nonprofits have reflected this assumption. But as Marion Fremont-Smith argues, the rules that govern how nonprofits operate are inadequate, and the regulatory mechanisms designed to enforce the rules need improvement. Despite repeated instances of negligent management, self-interest at the expense of the charity, and outright fraud, nonprofits continue to receive minimal government regulation. In this time of increased demand for corporate accountability, the need to strengthen regulation of nonprofits is obvious. Fremont-Smith addresses this need from a historical, legal, and organizational perspective. She combines summaries and analysis of the substantive legal rules governing the behavior of charitable officers, directors, and trustees with descriptions of the federal and state regulatory schemes designed to enforce these rules. Her unique and exhaustive historical survey of the law of nonprofit organizations provides a foundation for her analysis of the effectiveness of current law and proposals for its improvement.
 

Isi

The Nonprofit Sector in the TwentyFirst Century
1
The Legal Meaning of Charity
3
Size and Characteristics of the Nonprofit Sector
4
Current Challenges for Specific Components of the Sector
9
Educational Organizations
10
Arts and Cultural Organizations
11
Foundations and Other Grantmakers
12
How Extensive Is Wrongdoing in the Sector?
13
The Operational Test
247
Prohibition against Private Inurement
248
Limitation on Private Benefit
250
Prohibition against Excess Benefit Transactions Applicable to Publicly Supported Charities
252
Disqualified Persons
253
Excess Benefits
255
RevenueSharing Arrangements
257
Rebuttable Presumption of Reasonableness
258

Policy Issues Facing the Nonprofit Sector in the TwentyFirst Century
15
A Brief History of the Law of Charities
19
Islamic Foundations
21
Charities in England
22
Development of Trusts
23
Restrictions on Charitable Gifts
26
The Statute of Charitable Uses
28
The Role of the Attorney General and the Charity Commission
32
Regulation of Charities after 1950
35
Developments in Substantive Charity Law after 1601
36
Charitable Corporations
40
Charities in the United States
43
Development of the IMW of Charitable Trusts
44
Charitable Purposes
48
Charitable Corporations
49
State Regulation of Charities
53
The Internal Revenue Code
56
Deducibility of Contributions
62
Federal Reporting and Disclosure Requirements
65
Congressional Investigations of Charities prior to 1969
67
The Walsh Commission
68
The Cox and Reece Committees
69
The Patman Committee
72
1965 Treasury Department Report on Private Foundations
76
Tax Reform Act of 1969
77
Reactions to the Tax Reform Act from the Nonprofit Sector
80
The Filer Commission
81
Congressional Activity after the Tax Reform Act of 1969
84
Lobbying by Public Charities
86
Standards for Exemption of Hospitals
90
Regulation of Church Activities
91
Relief for Victims of the Terrorist Attacks of September 2001
93
The Effectiveness of the IRS as Regulator
97
Intermediate Sanctions for Excess Benefit Transactions
98
Other Changes in Substantive Laws after 1970
100
Application of the Public Policy Doctrine to Definitions of Charitable Purposes
101
The Subsidy Theory
104
Lobbying
106
UBIT and Commercial Activities
107
Regulation of Public Companies and Auditing Firms in 2002 and 2003
109
Treasury Department AntiTerrorist Financing Guidelines
110
Conclusion
114
Creation Administration and Termination of Charities
116
Charitable Purposes
117
Motives of Donors
125
Charitable Purposes for Nonprofit Corporations
126
Requirement of Indefinite Beneficiaries
127
Definitions in State Tax Laws
130
The Trust Form for Charities
133
Creation of Charitable Trusts
134
Duration and Restrictions on Remoteness of Vesting
135
Termination
136
Accumulation of Income
138
Administrative Powers of Trustees
143
Discretionary Powers of Trustees
145
Exercise of Powers by Majority of Trustees
146
Compensation of Trustees
147
Liability to Third Persons
148
Court Supervision of Trusts
149
Development of a Model Nonprofit Corporation Act
151
Creation of Charitable Corporations
152
Power of the Legislature to Modify Corporate Charters
153
Restrictions on Holdings of Charitable Corporations
154
Duration
155
Accumulation of Income
158
Administrative Duties of Directors
161
Administrative Powers of Directors
165
Discretionary Powers of Directors
168
Ultra Vires Contracts
169
Trust Rules Inapplicable to Corporations
170
Reporting Provisions
172
The Doctrines of Cy Pres and Deviation
173
Deviation
182
Application to Charitable Corporations
184
Fiduciary Duties State Law Standards
187
Duty of Prudence
188
The Modern Prudent Investor Rule
189
Standards for Investments
190
Diversification
194
Duty of Loyalty
195
Liability of Trustees for Breach of Trust
197
Exculpatory Clauses
199
Duty of Care
201
Reliance
205
Review of Current Law
207
The Business Judgment Rule Limitation on Liability
209
The Duty of Care as Related to Investments
211
The Uniform Management of Institutional Funds Act UMIFA
212
Loyalty Fair Dealing
215
Statutory Formulations of the Duty of Fair Dealing
218
Definitions of Conflicts of Interest
219
Duty to Mission and the Cy Pres Doctrine
225
Prohibition against Loans to Directors
226
Indemnification Insurance and Liability Shields
227
Shifting the Burden of Proof
229
State Prohibitions Based on Federal Tax Laws
230
Protection of Volunteer Directors from Tort Liability
232
Proposals for Reform
233
Duty of Loyalty
234
The Internal Revenue Code
238
Permitted Purposes for TaxExempt Charities
241
Basic Requirements for Exemption
246
Excise Taxes on Disqualified Persons
259
Excise Tax on Manager
260
Section 4958 and Revocation of Exemption
262
Restrictions on Private Foundations
264
Internal Revenue Code Definition of Private Foundations
265
Governing Instrument Requirements and Termination Rules
267
Disqualified Persons
268
SelfDealing
269
Mandatory Distributions
272
Excess Business Holdings
276
Jeopardy Investments
278
Taxable Expenditures
280
Impact of Chapter 42 on Charitable Fiduciaries
283
Reconciling Chapter 42 and the Excess Benefits Provisions
285
Restrictions on Lobbying Activities
286
Unrelated Business Income Tax
289
Joint Ventures and Taxable Subsidiaries Conducting Exempt Activities
295
The Role of the Internal Revenue Code in Assuring Compliance with Fiduciary Duties
299
Regulation of Charities in the States
301
The Courts
302
The Attorney General
305
Statutes Enhancing Attorney Generals Enforcement Powers
311
Registration and Reporting Requirements
315
Power to Conduct Investigations
317
Required Notice to Attorney General of Judicial Proceedings
318
Power of the Attorney General over Conversions
319
The Role of the Attorney General in Interstate Disputes
321
Charities Seeking to Move Out of the State of Origin
322
Charities Operating Outside Their State of Origin
323
Standing to Sue to Enforce Duties of Charitable Fiduciaries
324
Exclusion of the General Public
325
Standing to Sue Granted to Certain Interested Parties
328
Review of Recent Standing Cases
330
Proposals for Reform of Standing Rules
336
Reserved Rights of Donors and Heirs
338
Parties to Suits Involving Charities
342
Proper Parties
348
Statutes of Limitations and Laches as Bars to Actions
349
Effective State Enforcement Programs
351
California
352
New York
353
Ohio
356
Massachusetts
357
Other Jurisdictions
360
The Legislature
361
Supervision by Other State Agencies
364
Departments of Education Health and Similar Agencies
365
Supervision of Bank and Trust Companies
367
Departments of Tax and Revenue
368
Regulation of Charitable FundRaising
370
Proposals for Independent Boards for Charity Supervision
375
The Role of the Federal Government in the Regulation of Charities
377
General Accounting Office
381
The Treasury
382
Promulgation of Regulations
383
Treasury Oversight of Published Rulings
385
Treasury Department Antiterrorist Activities
386
The Internal Revenue Service
387
Regulation of Exempt Organizations in the Restructured IRS
389
Role of IRS Counsel
393
Commissioners Advisory Committee on TaxExempt and Government Entities
394
Components of IRS Regulation
395
Information Releases and Notices
396
Limits on Disclosure of IRS Actions
397
Department of Justice and the Solicitor General
400
The Courts
401
Declaratory Judgment Procedure on Denial or IMSS of Exemption
402
Appellate Courts
403
Tax Regulation in Operation
405
Information and Tax Returns
409
Record Retention
415
Audit Process
417
Appeals Process
421
Standing to Sue
422
Other Federal Agencies That Regulate Charities
423
FederalState Cooperation
426
Improving the Law and Regulation of Charities
428
State Laws Governing Charities and Their Fiduciaries
430
Duty of Care
432
Duty of Loyalty
435
Indemnification DO Insurance and Liability Shields
437
Cy Pres Deviation Amendment Powers
438
Rights and Duties of Members
440
Powers of Donors
441
State Regulation of Charities
443
Standing to Sue
448
Other State Agencies Regulating Specific Charitable Activities
449
Federal Laws Governing Charities and Their Fiduciaries
450
Financial Reporting
457
The Effect of Privatization on Nonprofits
459
Proposals to Change the Situs of Regulation
461
The Role of the Charitable Sector
466
Organizations Monitoring and Studying Nonprofit Activity
469
Measuring Performance
470
The Future of the Law and Regulation of Charities
471
Appendix
475
State laws governing creation administration and dissolution of charities
476
Cy pres doctrine applicable to outright transfers and trusts
512
Fiduciary duties under state laws
514
Index of Cases
519
General Index
525
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