Last year we wrote on the Top 10 Events of the Decade. This year we decided to do another list on the Top 10 events of 2010 affecting the nonprofit sector (listed in chronological order). We welcome your additions in the comments. Have a happy holiday season!
- Haitian earthquake and social media relief effort
- Citizens United v. Federal Elections Commission
- BP Oil Spill
- Social Innovation Fund Investigation
- The Giving Pledge
- Mark Zuckerberg, the Philanthropist
- Senator Baucus’ letter to the IRS
- Benefit Corporation
- IRS offers one-time relief for up to 380,000 organizations
- 2010 Tax Relief Act
1. Haitian earthquake and social media relief effort – The 7.0 magnitude earthquake that shook Haiti on January 20, 2010 left the country in devastation and killed close to 100,000 people. Although this was not the first time in recent years that a tragic natural disaster was followed by an outpouring of help and worldwide attention, there was an unprecedented presence of social media to generate aid. As the Nonprofit Times noted: “Within 42 minutes of last January’s earthquake in Haiti, the Mobile Giving Foundation (MGF), in Issaquah, Wash., launched its first text-to-give campaign for the nonprofit Yele Haiti. Charity founder Wyclef Jean used his celebrity status to alert his 1.5 million followers on Twitter that they could text their support for Haitian relief. He raised $3 million in the first 72 hours and the age of mobile giving was born.” The American Cross also raised an estimated $200 million through text messages that included a five-digit code and the word “Haiti,” raising $2 million of that in the first 24 hours of the earthquake. This amplitude of social media philanthropy has yet to be matched since then and commentators continue to discuss what we should expect of social media and philanthropy in the future. These conversations about social media have produced interesting debates such as Malcolm Gladwell's article, "Small Change: Why the revolution will not be tweeted" and ideas such as co-Facebook founder Chris Hughes’ beta launch of Jumo, a social network site for nonprofits, in November.
- A Deluge of Donations via Text Messages; Nonprofits Rush to Solicit Donations via Text, but the System Is Flawed – New York Times
- 5 Social Media Lessons From the Haiti Earthquake Relief Effort – Mashable
2. Citizens United v. Federal Elections Commission – On January 21, 2010, the Supreme Court of the United States handed down a 5-4 decision that held corporations may make direct expenditures on political advertising for or against a candidate for public office, thereby striking down part of the Bipartisan Campaign Reform Act of 2002. This was a major decision that sparked much concern about the potential for political corruption by corporations, including non-501(c)(3) nonprofit corporations. It was even met with public criticism from President Barack Obama who in a New York Times article called the decision, "a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans." Members of Congress attempted to respond in the months that followed the January decision with the DISCLOSE Act (Democracy is Strengthened by Casting Light on Spending in Elections), introduced in the House by chief sponsor Rep. Chris Van Hollen (D-Md.), and in the Senate, by chief sponsor Sen. Charles Schumer (D-N.Y.) on April 29, 2010. The DISCLOSE Act attempts to react to the concerns of the Citizens United decision by requiring increased disclosures. The Senate Bill, S. 3295, was last referred to committee and the House Bill, H.R. 5175, has only been passed by the House and is waiting to be voted on by the Senate. Politicians, the public, and media got to see first-hand what, if any, influence the Citizens United decision would have on political campaigns. According to America.gov, organizations outside of the political parties and individual candidates contributed $211.5 million into various 2010 federal contests (as of October 20, 2010), a huge figure especially when compared to the $68.8 million contributed by such organizations to the entire 2006 election cycle.
- Citizens United v. Federal Elections Commissions (opinion)
- Citizens United v. Federal Elections Commissions – SCOTUS Blog
- Citizens United Ruling – Nonprofit Law Blog
3. BP Oil Spill – The BP Oil Spill was one of the worst oil spill disasters in U.S. history, dumping as much as 4.9 million barrels of oil into the Gulf of Mexico after a drilling rig explosion on April 20, 2010 and with costs for cleanup, government fines, lawsuits, legal fees and damage claims estimated as high as $200 billion by some experts. An interesting dilemma that arose for some nonprofits was how best to respond to public concern about previously receiving contributions from or engaging in business with the now soiled name of BP. Prior to the oil spill, BP had made considerable donations to well-known organizations such as the Nature Conservatory and Sierra Nevada, and in some cases, even worked in collaboration with those nonprofit organizations in order to promote an environmental friendly image for BP. After the spill, nonprofit organizations associated with BP were faced with much scrutiny and criticism. Questions circulated in the sector about the appropriate relationship between nonprofits like environmental groups and for-profit companies. Some suggested partnerships were important in order to engage industry leaders to incorporate better values at for-profit corporations while others took the stance that such working relationships and acceptance of money by the nonprofit organizations from such for-profit corporations undermines the nonprofit’s mission and values.
- BP Oil Spill Washes Into Nonprofit Sector – Nonprofit Law Prof Blog
- BP and Environmental Nonprofits: Conflicts and Complaints – OMB Watch
4. Social Innovation Fund Investigation – This year we saw the first ever Social Innovation Fund (SIF) grant competition, a program created from the Edward M. Kennedy Serve America Act signed into law April 22, 2009 by President Obama. The SIF was intended to commit federal money to high-performing nonprofit organizations in order address urgent national challenges in the areas of economic opportunity, healthy futures, and youth development and school support. On July 22, 2010, the Corporation for National and Community Service (CNCS) federal agency announced the 11 winners. However, it is debatable whether the main event of the SIF this year was the announcement of the first-ever 11 winners and the $50 million that was awarded among them or the controversy that followed over the application and selection process. As Stephanie Strom wrote for the New York Times following the winners announcement, some of the independent reviewers of the applications were surprised by the winners selected and she also pointed to relationship ties between those involved in the Fund or who oversee the CNCS and those selected as winners. In the weeks that followed, many demanded full disclosure of all grant applications and their respective scores. The CNCS publicly responded to the concerns, releasing the applications for the 11 winners, a detailed description of the grant selection process, and the names of the applicants and reviewers who had consented to its release. The CNCS has additionally noted changes to be made for the 2011 SIF grant competition and is soliciting public feedback until Jan. 21, 2011.
- Nonprofit Fund Faces Questions About Conflicts and Selection Procedures – New York Times
- Social Innovation Fund Grant-Decision Process to Be Audited – Philanthropy News Digest
- Amid Concerns of Favoritism, Federal Officials Disclose New Details on Selection Process – The Chronicle of Philanthropy
5. The Giving Pledge – On August 4, 2010, a public statement was released from Warren Buffett that 40 of America’s wealthiest individuals and families made the moral commitment to pledge a majority of their assets to philanthropic causes or charitable organizations during their lifetime or at death. The Giving Pledge had been an idea of Bill Gates and Buffett to challenge their billionaire peers for nearly a year before they launched the project in June 2010. It had only been in effect for six weeks prior to this first announcement of 40 pledges. Buffett pledged 99 percent of his fortune and the Gates family, which has already given much of its fortune to the Gates Foundation, pledged its continued commitment to philanthropic efforts. As of December, the campaign included roughly 57 American billionaires with an estimated total pledge of somewhere around $600 billion. The Giving Pledge also spurred an interesting discussion about the culture of philanthropy across borders. When Buffett and Gates traveled to China for a dinner to promote the Giving Pledge project abroad in late-September, they were met with mixed reviews. Some of China’s wealthiest declined their invitations to the dinner altogether, leading some commentators to analyze the differences in other countries’ cultures of philanthropy as compared to the United States. While Buffett and Gates received pledges from Feng Jun and Chen Guangbiao, the full reach and effect of the Giving Pledge both domestically and abroad is probably yet to be seen.
- The Giving Pledge (official website)
- Giving (Almost) All of It Away – America.gov
- China’s Rich Split on Philanthropy – Wall Street Journal
- Billionaire vows to give fortune to good causes – China Daily
- China’s Wealthy Ponder Whether to Help Others – Washington Post
6. Mark Zuckerberg, the Philanthropist – Most famous for founding the leading social network site, Facebook CEO Mark Zuckerberg received an increased amount of attention this year due to the blockbuster hit movie, The Social Network. He also came under some heat for a comment made in a June interview that companies rather than nonprofits were better equipped to change the world. This media attention was only bolstered when Zuckerberg made his first major philanthropic gift in September, donating $100 million to the schools in Newark, New Jersey, one of the worst performing public school systems in the country. Zuckerberg, the world’s youngest billionaire at only 26 years old, then made more headline news in December when he joined the Giving Pledge along with a Facebook co-founder, Dustin Moskovitz. This month, Zuckerberg was also named "Person of the Year” for 2010 by Time magazine. Some have criticized and questioned Zuckerberg’s motives while others applauded the donations and commitment. Regardless, Zuckerberg’s participation in the philanthropic realm has generated much discussion about whether motives should matter and also speaks to another hotly discussed topic of how to engage the already successful or up-and-coming millennials early on to become big players in the nonprofit sector.
- Friended for $100 Million – Wall Street Journal
- Mark Zuckerberg's Philanthropy Is Reason Enough To Applaud Him – Huffington Post
7. Senator Baucus’ letter to the IRS – Though some types of nonprofit organizations may legally participate in political campaign activity subject to certain limitations in the Internal Revenue Code, organizations can sometimes engage in activities that blur the lines between permissible and impermissible, and even for those that stay within permissible boundaries, their participation may leave the public uneasy. On September 28, 2010, Senator Max Baucus, chairman of the Senate Finance Committee, made a written request to IRS Commissioner Shulman to “survey major 501(c)(4), (c)(5) and (c)(6) organizations involved in political campaign activity to examine whether they are operated for the organization’s intended tax exempt purpose and to ensure that political campaign activity is not the organization’s primary activity.” Subsequently, the IRS published its FY 2011 workplan, which emphasized that there would be an increased focus on such exempt organizations. Especially in the wake of the Citizens United decision, Senator Baucus was not the only one concerned with nonprofit involvement in political campaign activity and Senator Baucus’ letter in particular exemplified how media can influence governmental action. Interestingly, Senator Baucus’ letter cited to headlines in a New York Times article (“Hidden Under Tax-Exempt Cloak, Political Dollars Flow”) and Time magazine article (“The New GOP Money Stampede”) which discussed nonprofit spending on campaigns and that prompted him to write to the IRS.
- Senator Baucus’ letter to IRS Commissioner Shulman (reprinted in full by Caplin & Drysdale)
- Advocacy Groups Stir Call for Probe – Wall Street Journal
- Donor Groups Find Success in Elections – New York Times
8. Benefit Corporation – Although the first legislation allowing for this new corporate structure was passed in 2009 in Maryland, the law did not take effect until this year beginning on October 1, 2010. Approximately 11 businesses incorporated to become benefit corporations on the first day the Maryland legislation went into effect. In May this year, Vermont also followed Maryland in passing legislation that allows for a benefit corporation (takes effect July 1, 2011). The benefit corporation allows for the triple bottom line of people, planet, and profits. Among other things, it allows for a corporation to incorporate the pursuit of a general public benefit in the corporation’s governing documents and also creates a new right for certain individuals to bring a benefit enforcement proceeding against the corporation’s directors and officers if the corporation is not pursuing its stated general public benefit purpose. The benefit corporation is one of the hybrid structures that have been the center of much discussion this year (others include the Low-Profit Limited Liability Company (L3C) and the proposed Flexible Purpose Corporation in California). Critics and fans alike are curious to see how these structures will be utilized to achieve that which cannot be done with traditional nonprofit or for-profit forms.
- Maryland’s Benefit Corporation – Nonprofit Law Blog
- Hybrid Model for Nonprofits Hits Snags – New York Times
9. IRS offers one-time relief for up to 380,000 organizations that lost their tax-exempt status – This year, it became very clear that many organizations had not kept up with the changes created by the Pension Protection Act of 2006 (PPA). Two major changes from the PPA were the requirements that (1) all tax-exempt organizations (except churches and church-related organizations) file an annual return with the IRS (thus, the creation of a new filing requirement and the Form 990-N for small tax-exempt organizations) and (2) any tax-exempt organization that failed to file for three consecutive years would automatically lose its federal tax-exempt status. The IRS estimated in September that somewhere around 380,000 organizations had not kept up with the new requirements imposed by the PPA and were at risk of losing their tax-exempt status. The IRS allowed for a one-time relief program for small nonprofit organizations in which organizations that filed by October 15, 2010 would not lose their tax-exempts status despite being out of compliance for the years since 2007. An estimated 335,952 Form 990-Ns were filed by October 15, 2010. However, this number includes new small nonprofit organizations and regular filers that were already in compliance with the law. The IRS has yet to report the exact number of the organizations that failed to take advantage of the one-time relief program.
- IRS Announces One-Time Filing Relief for Small Exempt Organizations That Failed to File for Three Consecutive Years – Internal Revenue Service
- The End of Small Nonprofits That Have Not Filed Form 990 – Nonprofit Law Blog
10. 2010 Tax Relief Act – A number of tax provisions had expired in 2009 or were set to expire at the end of this year, leaving taxpayers speculating what new tax laws would be enacted or old laws extended and ultimately unsure as to how best to manage their assets. On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Tax Relief Act). As summarized by the Nonprofit Law Prof Blog, important provisions of the bill for nonprofits include lower estate taxes from the 2009 levels and the temporary 2 percent payroll tax cut, as well as the extension of expiring provisions that create incentives for charitable giving such as “the incentive for contributions by certain corporate farmers and ranchers of capital gain real property for conservation purposes (section 723 of the legislation), the IRS charitable rollover (section 725), and the enhanced charitable deductions for contributions of food inventory, of book inventories to public schools, and of computer inventory for educational purposes (sections 740 to 742)… [and] the special rule that permits interest, rent, royalty, and annuity payments by controlled subsidies to their parent tax-exempt organizations to be excluded from unrelated business income if not in excess of fair market value (section 747).” The 2010 Tax Relief Act now provides much needed certainty for taxpayers but only through 2012 when most of provisions will expire.
- New Tax Deal Lowers Estate Tax and Extends IRA Charity Break – The Chronicle of Philanthropy
- Tax cuts include take-home pay, mortgage insurance, IRAs – USA Today
- The 2010 Relief Act – IRA Charitable Rollover – Nonprofit Law Blog