Nonprofit Oversight Under Siege: An International Comparison of Regulatory Models

2015 Chicago-Kent Law Review Live Symposium

Symposium Editors

Professor Dana Brakman Reiser, Brooklyn Law School
Professor Evelyn Brody, IIT Chicago-Kent College of Law

Chicago-Kent College of Law
565 West Adams Street
Chicago, Illinois 60661
Thursday, November 19, 2015

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The Symposium is free, and lunch is provided for attendees with advance registration. Registration is now closed, thank you for your interest.


11:45am–12:15pm Arrival/Box Lunch Front Lobby
12:15pm–12:30pm Welcome and Overview Ogilvie Auditorium
12:30pm–2:00pm Panel 1: View from the U.S. Ogilvie Auditorium
2:00pm–2:15pm Break Front Lobby
2:15pm–3:45pm Panel 2: View from Abroad (In-Person)  Ogilvie Auditorium
3:45pm–4:45pm Panel 3: View from Abroad (Remote) Ogilvie Auditorium
4:45pm–5:00pm Closing Remarks Ogilvie Auditorium

Panel Participants


Dana Brakman Reiser, Brooklyn Law School
Dana Brakman Reiser is Professor of Law and former Vice Dean at Brooklyn Law School, where she has taught courses in Nonprofit Law, Social Enterprise, Corporations, Property, and Trusts and Estates since 2001. Her recent scholarship focuses on law and finance for social enterprises—businesses that pursue a social mission, and has appeared in Indiana Law JournalBoston College Law ReviewEmory Law Journal, and Notre Dame Law Review, among others.

Panel 1: View from the U.S.

Exile to Main Street: The I.R.S.’s Diminished Role in Overseeing Tax-Exempt Organizations
The Internal Revenue Service’s post-Citizens United approach to political activity by would-be tax-exempt organizations has threatened the financial health of the entire agency. Suffering from a siege mentality in the best of times, the IRS predictably and understandably responded to the asserted “scandal” by retreating into a shell of bureaucratic reshuffling, management mumbo-jumbo, and paper moving. A fresh cadre of senior management lacking relevant experience has overhauled the exempt-organization function and emphasized granting recognition of exemption now and (possibly) asking questions later. The new self-certification process of exemption for small charities could also be setting the agency up for the next debacle. There has never been a better time to apply for tax-exempt status or to push the boundaries of permissible activities. Will the IRS’s decision to exile the Exempt Organization Division from Washington to Cincinnati remove the exempt-organization function from the glare of DC’s partisanship or instead stifle the effectiveness of the IRS’s role in charity and nonprofit oversight? Should the IRS even be the locus of regulation for political activity by tax-exempt organizations? While we await revised regulations on political activity by social welfare organizations (promised after the 2016 presidential election), the IRS has the responsibility to promptly and transparently air appropriate substantive standards.

Evelyn Brody, IIT Chicago-Kent College of Law
Evelyn Brody is a professor at Chicago-Kent College of Law, Illinois Institute of Technology, and has spent semesters visiting at the University of Pennsylvania, Duke, and New York University law schools. She teaches courses on tax and nonprofit law. She previously worked in private practice and with the U.S. Treasury Department’s Office of Tax Policy.

Marcus S. Owens, Loeb & Loeb, LLP
Marcus S. Owens is a partner in the Washington, DC office of Loeb & Loeb, LLP, where he specializes in federal tax matters of tax-exempt organizations, including charities and issue advocacy groups. Before entering private practice, he spent 25 years with the US Internal Revenue Service, including serving as Director of the Exempt Organizations Division from 1990 until 2000.

Politics, Disclosure, and State Law Solutions for 501(c)(4) Organizations
Since the Supreme Court’s 2010 decision in Citizens United v. FEC, there has been an explosion in section 501(c)(4) organizations active in politics. Unable to effectively process applications, the IRS mishandled organizations with conservative political ties, producing a scandal from which the agency has yet to recover. It proposed regulations that would have helped it more easily determine eligibility for 501(c)(4) exemption, but after massive public outcry, the regulations were withdrawn. No new regulations will be proposed before the 2016 presidential election. Given the federal government’s inability to address the problem of dark money politicking by 501(c)(4) organizations through either federal tax law or federal election law, this article considers whether state nonprofit law can fill that gap. It describes the efforts taken by California and New York to limit the influence of out-of-state anonymous money in state elections, and considers the policies that states might pursue in regulating politicking by nonprofits under their jurisdiction. While it argues that states are appropriately concerned about protecting charities from the taint of political non-charitable nonprofits, and legitimately concerned about protecting donors to all nonprofits, it is ultimately skeptical of the states’ ability to protect charities, donors, and voters.

Linda Sugin, Fordham Law School
Linda Sugin is a Professor of Law at Fordham Law School. Her scholarship and teaching are in the areas of Taxation, Distributive Justice, and Nonprofit Organizations. Her tax scholarship considers issues of distributive justice in the tax system, and the role of tax expenditures, while her nonprofits scholarship is primarily concerned with governance.

Fragmented Oversight of Nonprofits in the United States: Does It Work? Can It Work?
The United States is well known for its distinctive although not unique division of political authority, not only between the federal government and the various states but also between state and local governments.  This division is particularly evident when it comes to oversight of nonprofit organizations.  The historical focus of federal government oversight has been limited primarily to qualification for tax exemption and other tax benefits, with more plenary power resting with state authorities.  Over time, however, the federal government’s role has come to overlap significantly with that of the states.  States also have generally delegated some oversight functions to local government, particularly when it comes to administering often very valuable property tax exemptions.  Commentators have criticized this fragmentation of nonprofit oversight as being inefficient and vulnerable to regulatory arbitrage and have often compared it unfavorably to more centralized oversight regimes found in other countries. This Article explores whether the fragmented oversight of nonprofits organizations in the United States has potential advantages that if fully realized could actually result in better regulation of such entities in a variety of ways as compared to more centralized oversight.  While the current division of responsibilities among different levels of government and jurisdictions has some disadvantages, the key question is whether those disadvantages are inherent to any system with divided oversight or whether they can be cured or significantly ameliorated through a different allocation of authority and other measures, such as improved communications and coordination. This Article will seek to answer this question and so suggest ways to improve the comprehensive regulation of nonprofit organizations in the United States.

Lloyd Hitoshi Mayer, Notre Dame Law School
Lloyd Hitoshi Mayer joined the faculty of Notre Dame Law School as an associate professor of law in 2005 and became a full professor in 2011. His areas of research interest and expertise include the laws governing nonprofit organizations, the growing intersection of election law and tax law with respect to lobbying and other political activity by nonprofits, and the role of nonprofits both domestically and internationally.

Panel 2: View from Abroad (In-Person)

The Charity Commission for England and Wales: A Fine Example or Another Fine Mess?
The fact that the Charity Commission is the regulator of charities in England and Wales has rarely been called into question.  Until now.  Following a critical report from the National Audit Office in December 2013 which said that the Commission was in need of ‘radical change’, the Chair of the Public Accounts Committee (PAC) described the Charity Commission as not ‘fit for purpose’.  The PAC’s highly critical report warned that the Commission’s failure to investigate fraud and abuse was undermining public faith in good causes.  The main impetus for this scrutiny was the Cup Trust scandal, in which a charity submitted claims for £46 million tax relief on £176 million of payments from participants to a tax avoidance scheme, whilst giving just £152,292 to charitable causes over a period of four years.  In its formal response to the PAC report in April 2014, the Chairman of the Charity Commission stated that the Commission needs adequate funding and stronger legal powers if it is to meet Parliament’s expectations.  As registrar, enabler and tackler of abuse in a large, diverse and virtually entirely voluntary charitable sector, the Charity Commission, which has seen a budget cut of almost 50 per cent in real terms since 2007/08, faces an almost impossible task.  Controversy continues to surround the Commission and its increasing politicization and interest in charities’ political activity.  This paper will examine these developments and consider what the future may hold for the Commission at this crucial point in its history.

Debra Morris, University of Liverpool
Debra Morris is Professor of Charity Law & Policy at the University of Liverpool where she is the Head of School of Law and Social Justice.  She is also the Director of the Charity Law & Policy Unit within the School, where she leads research on a number of projects concerned with aspects of charity law.

Nonprofit Oversight Under Siege? The View from Asia
While some of the papers in this symposium are exploring the weaknesses of nonprofit oversight in the West, the critique of current modes of nonprofit oversight in Asia is moving strong states toward new and strengthened regulation and enforcement. From China to Hong Kong to Singapore, Vietnam, India, Pakistan, Bangladesh and elsewhere in the Asia Pacific region, nonprofit overseers are re-arming — with new powers, new legislation, and new divisions of responsibility that have, in a number of countries, strengthened the hand of security authorities and sometimes weakened the roles of more traditional government regulators. Overall, the picture is of strengthened and reshaped oversight, with a renewed focus on restricting advocacy, limiting foreign donations and the role of foreign organizations, and catching up with and controlling the advances in technology and communications used by the nonprofit sector. In this process a new group of indigenous philanthropic organizations, domestic nonprofits, and homegrown social enterprises are being molded and shaped by growing state power, and increased state suspicion of civil society.

Mark Sidel, University of Wisconsin-Madison
Mark Sidel is Doyle-Bascom Professor of Law and Public Affairs at the University of Wisconsin-Madison. In 2016 he is also serving as the Charles Stewart Mott Foundation Visiting Chair in Community Foundations at the Lilly Family School of Philanthropy at Indiana University. Sidel has served in many consulting positions, and specifically as consultant on Asia on different issues.

European Non-profit Regulation: A Quixotic Chimera or Simply an Empty Promise?
This paper argues that those who regulate non-profits at a European level in many ways are finding themselves subject to the same pressures and constraints that face national regulators in this arena. Relationship dynamics between EU regulators and NGOs, so different to those found in domestic settings, have forced both sides to think differently about the nature of regulation and what constitutes an effective or even optimum outcome. To this end three different vignettes are explored. Part I outlines the recent bruising and ultimately unsuccessful attempt of the European Commission to bring about the passage of the proposal for a European Foundation Statute (‘EFS’). The paper reviews the rationale for the EFS proposal and the political concerns that left it vulnerable to veto before setting out the structural challenges faced by the Commission when it comes to legislating for non-profits at European level. Turning from hard law to soft law, Part II examines recent NGO attempts to influence the reform of the Financial Action Task Force’s Best Practice Principles. Non-profits, in this instance, successfully laid siege to the notional regulator in their efforts to extract a fairer process for dealing with them under FATF Recommendation VIII. Taking stock of pragmatic NGO-regulator engagement in the sphere of anti-terrorism financing and anti-money laundering regulation, it is argued that soft law efforts potentially achieved more for NGOs in this instance than EU Treaty-based enabling rights have won NGOs in the corresponding governance arena of the EU’s supra-national institutions. Finally, Part III of the paper examines recent movements in European policy on development assistance. This time, in contrast to the FATF experience, it is not so much NGOs laying siege to a European regulator but rather a joint NGO-Regulator alliance aimed at forcing developing nations’ powerbrokers to treat NGOs delivering European aid in their jurisdictions in a fair and transparently proportionate manner.

Dr. Oonagh Breen, Sutherland School of Law
Dr. Oonagh Breen is a Senior Lecturer in Law at the Sutherland School of Law, University College Dublin, Ireland where she teaches NGO Law, Governance and Social Change. A graduate of Yale Law School, from which she obtained her doctorate in law (JSD) in comparative non-profit regulation in 2006, Oonagh’s research focuses on issues relating to comparative charity regulation and governance and the role of non-profit-state collaboration in public policy formation and development.

Panel 3: View from Abroad (Remote)

Charity and the Neutral Regulator: Can Charity Be Regulated from the Vantage of Liberal Neutrality?
What would the ideal charity regulator look like?  Analyses of this topic tend to organize themselves along familiar lines.  These include debates between those who prefer a non-tax regulator versus a tax regulator, a state level regulator versus a national regulator, etc.  The model chosen obviously bodes significant implications for the kind of regulatory framework within which charities operate.  Common things being common, a tax regulator can be anticipated to approach legal charity from a tax expenditure perspective and a state regulator is perhaps more likely to approach charity from a more traditional trust or property law perspective.  These lines of debate, important though they may be, eclipse another fundamental distinction between a neutral versus a non-neutral regulator.  By neutral versus non-neutral I am not referring to whether the regulator achieves (as all plausible regulatory models aspire to achieve) independence from political interference.  By neutral versus non-neutral I am referring to whether charity regulation is developed from the philosophical vantage of liberal neutrality.  The paper links the enduring debate over the charity versus politics distinction (revitalized in Canada due to ongoing CRA audits of charities for political advocacy) to the philosophical commitments of liberal neutrality, arguing that liberal neutrality is a poor philosophical foundation for the regulation of charity.

Adam Parachin, University of Western Ontario
Adam Parachin is an Associate Professor at the Faculty of Law at Western University (Ontario, Canada).  He researches, writes and teaches in the areas of charities, trusts and property law.