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No Free Lunch

What do the recent kerfuffle involving Boloco and Boston’s new plan to collect a “voluntary” payment from tax-exempt organizations with properties valued at $15 million or more have in common? As it has already been put well on this blog, the city’s request that tax-exempt organizations pay money that they do not actually owe is essentially an example of extortion—of the city’s requesting a “voluntary” payment from certain tax-exempt organizations with the implicit threat that if the organization does not comply with the city’s demands, the city could wreak havoc on it in any number of ways. The request at the heart of the Boloco incident is no different. According to the Boston Globe’s account, the Boloco incident “all started […]

The Compensation Conundrum

While the public and the media have been quick to criticize the “golden parachute” payments by Blue Cross Blue Shield to its former CEO as clearly improper, the broader questions raised regarding compensation paid by tax-exempt organizations—and in particular, when such compensation should be deemed inappropriately excessive—are far from straightforward. The Internal Revenue Code provides for so-called intermediate sanctions in the form of an excise tax when tax-exempt organizations are deemed to have provided an excess benefit to disqualified people (meaning those people in a position to exercise substantial influence over the organization’s affairs, such as its officers and directors). An organization can seek to avoid intermediate sanctions by following prescribed procedures to create a rebuttable presumption that a compensation […]

Tax-Exempt Organizations 101

During this year’s election season, controversy arose regarding disclosure requirements for tax-exempt organizations that spend money on political advertisements. In particular, the Chamber of Commerce and the identity (or lack thereof) of its donors came under scrutiny. This debate is just the tip of the iceberg in a very important area: government regulation and oversight of tax-exempt organizations. Organizations that are created under Section 501(c)(3) and related provisions of the Internal Revenue Code are generally exempt from paying federal income taxes, and under Massachusetts law, they are also generally exempt from paying state and local taxes. In other words, we have decided as a society that certain types of organizations are worthy of public support and should be excused from […]

Regulating Regulations

During the gubernatorial campaign, Governor Patrick promised that if he were reelected, he would borrow some ideas from Charlie Baker. One particular idea that he should consider adopting is Baker’s proposed review and reform of regulatory procedures. When Congress and state legislatures enact laws, they authorize certain agencies to fill in gaps in the legislation by issuing regulations that clarify and expand on various legislative provisions. For instance, in Massachusetts, agencies have issued regulations ranging from rules regarding the manufacture of ice cream to procedures governing the licensure of optometrists. (Regulations are available on the state’s website organized by topic.) Lawmakers authorize agencies to issue regulations for several reasons: Agency staffers have greater expertise in a given area than lawmakers […]