How Will Non-Profit Law Change To Meet Shifting Expectations?

Gene Tagaki raises some interesting thoughts over on the Non-Profit Law blog on the question of how legal concepts and structures may need to adjust to reflect changing values in the non-profit sphere.  He lays out some thoughts in regard to Charitability, Philanthropy, Governance, Technology, Fundraising, Advocacy, and Employment.

I provide this list with the intention of sparking enough interest in folks to read more deeply because I am only going to touch on a few ideas that popped for me.

One question he raised was whether the IRS would need to adjust its definition of 501(c)(3) entities:

“Would relief of historically discriminated groups of individuals without regard to poverty or distress now qualify as charitable? Would the sale of alternative energy sources for personal use be charitable even if at market rates?”

Tagaki also points out that there is a growing shift in how fundraising is accomplished and how the work of social good is being framed. He notes that crowdfunding focused on supporting a specific project or individual versus organizations which help many. He also cites corporate efforts to “charity-wash” their activities by positioning themselves as reducing social problems.

“Fundraising trends also raise other legal concerns as nonprofit fundraisers face competitive pressure from those raising money from crowdfunding platforms to help specific individuals rather than charities, businesses proclaiming to do more social good than nonprofits, and entrepreneurs looking to both help charitable causes while creating for themselves an opportunity to earn substantial amounts of money.”

Finally, Takagi observes there is a trend not only toward remote work, but also shared leadership of organizations. This approach is likely to exist in tension, if not complete conflict with a hierarchical board governance model legally required of nonprofits in the US.

“Many organizations are struggling with this movement as there are clear and proven benefits with traditional hierarchies and the law is built on boards having ultimate responsibility and authority over the activities and affairs of their corporations. But there are shifts in power that are possible, and laws or regulatory guidance that confirm the appropriateness of certain delegations of authority may be helpful. What are some of the distributed leadership systems that would be helpful if recognized by sector leaders as good practice and by lawmakers and regulators as acceptable?”

As always, many things to think about for the future.

Time To Review Programming And Rental Procedures

Many people probably heard about a Minnesota venue cancelling Dave Chappelle’s show hours before it was suppose to occur.  Something similar happened a few weeks ago at a venue on the other side of my state where a comedy show with different comedians was cancelled the day before it was supposed to occur.

This has gotten me to thinking that art and cultural organizations need to be doing a better job developing and implementing policies and procedures. Putting aside the question about whether these shows should be cancelled,  the decision to cancel shouldn’t be made so close to the performance date. Regardless of the content of the performers’ show, cancelling anything so close to performance time is irresponsible, unprofessional and bad for community relations.  (I know how complicated it is move venues and re-seat people having done it during Covid. The fact the Minneapolis show was immediately moved to another venue suggests the decision and arrangements were made earlier, but only announced the day of.)

The organization on the other side of my state flubbed things even more by issuing a statement that said the show was cancelled due to the content and then issuing another statement saying it was because the proper paperwork and deposits were not received.   This sort of mixed messaging is an indication that there is not a good crisis management plan in place. I am not suggesting the social and political views of a performer constitutes a crisis, but if you have a plan to have one voice addressing your roof falling in during a performance or an entire cast testing positive for Covid after a week of shows, you have a process for communicating tough decisions.

I suspect the venue in Minneapolis was already generally aware of the controversy surrounding Dave Chappelle and the clamor of protest got to a point where it outweighed the benefits of hosting the show.  For most other programming, whether it is a solicitation to book a performance or for an outside party to rent the space, it is important to be very clear about the content and requirements of the proposed event. This is a good policy for reasons almost entirely unrelated to opinions about political and social issues.

Ninety-nine percent of the issues that have occurred in venues I have been involved with have been related to technical requirements. Often renters are too vague about their plans and technical needs or show up and add a ton of things they never mentioned before, resulting in a higher bill because we have to scramble to find equipment and staffing at the last minute. Most of our rental contracting has been held up because the technical director doesn’t have the information he needs to accurately estimate the event.  There are definitely people who neglect to submit deposits and paperwork on time, but we address that well in advance of the show.

Similarly, our biggest concern with shows we book is lack of technical details on one hand or assurances that the show will fit in our space despite misgivings. Agents and production offices 500 miles away are motivated to contract a show and leave it to the people on the ground to work around problems far too often.

We have declined to present productions or rent our venue due to technical concerns far more often than for content. Content needs to be reviewed and considered alongside technical requirements in a holistic process. Things shouldn’t reach the contracting stage if there are issues, much less be a matter of discussion a day or two before.  I suspect our colleagues on the other side of the state saw the opportunity to generate some rental revenue and didn’t really pay attention to who it was until the protests started a few days before the performance.

As for the policies and procedures you put into place, that is a matter for discussion with involvement from internal and external constituencies and some legal review. Those policies are going to differ for each organization and community.

Donor Advised Funds Receive More Giving Than Public Charities

Earlier this month Vu Le of the Non Profit AF blog linked to a piece reporting that Donor Advised Funds (DAF) had surpassed charities as recipients of charitable revenue.  The problem with this, as I have previously written, is that unlike public charities which are required to spend at least 5% of their funding each year, donor advised funds have no such requirement but the donor gains the tax benefit of making a donation.

In other words, the government is subsidizing giving that is not necessarily providing any charitable benefit. From the Inequity.org article:

Of particular concern are DAF sponsors that are affiliated with for-profit Wall Street financial corporations. As we have documented, these commercial DAFs provide enormous publicly-subsidized tax benefits to their high-rolling contributors while actively encouraging the warehousing of charitable wealth. And commercial DAFs have been growing explosively.

In fact, the largest commercial DAF sponsors now take in more money each year than our largest public charities.

The article has an animated graphic illustrating how over time DAFs have occupied six of the top ten recipients of charitable revenue, displacing United Way Worldwide from its top spot to number four.

There has already been some discussion about how the required minimum 5% annual distribution by charities was a low bar to meet, especially since some of the charity’s administrative expenses and activities can count toward the 5% expenditure rather than purely distributed as grants.  So the fact that so much more money is being directed toward DAFs than ever before with no requirement that it be distributed is of growing concern.

Where Is Your Favorite Podcast Getting Its Material?

h/t to Isaac Butler who retweeted a somewhat horrifying thread written by author Brendan Koerner recounting how one of his Atlantic articles, two of his books and a WIRED piece he authored have been ripped off by podcasters.

Koerner recounts how the person who created a podcast based on his Atlantic article blatantly told him he was going to rip it off.

A couple people Koerner confronts do give some cursory acknowledgements. He feels it is insufficient, but doesn’t have the energy to fight all these battles.

Given the ever broadening proliferation of podcasts, this is going to be something to which to pay attention. People want to jump on the wave but if they don’t have original material to share, apparently they don’t have many scruples about stealing it.

I suspect we are going to see people getting paid speaking engagements or interest in developing expanded work based on their podcasts only to find there are credible claims of plagiarism and theft.

But even if it goes no further than podcast episodes, as Koerner points out, people are creating ad revenue supported episodes that compete with his books and spoil the plot twists in his writing.