Volume 17, Issue 1-2

This study examines the dynamics of nonprofit engagement in advocacy, lobbying, and civic activities through the lens of bounded rationality. Although 501(c)(3) nonprofits are legally permitted to advocate and lobby on behalf of their constituents and the sector, only 31 % reported engaging in such activities over the past five years. To better understand this relatively low level of involvement, our analysis first investigates nonprofits’ understanding of federal and Internal Revenue Service (IRS) regulations governing permissible activities, as well as the factors that shape their knowledge of these rules. Second, we analyze the relationship between regulatory knowledge and policy engagement, controlling for organizational and contextual variables that are informed by the existing literature. Our findings show that, while internal and external factors can mitigate the constraints imposed by bounded rationality, knowledge of the rules is significantly associated with policy engagement. We conclude that limited understanding of the legal parameters surrounding 501(c)(3) advocacy and lobbying remains a significant barrier to nonprofit policy engagement.

Across the globe, there has been a selective closure of civic space and a corresponding increase in scholarly research exploring the impact of authoritarianism on civil society organizations. This article examines the rollback of nonprofit First Amendment rights in U.S. states, an area overlooked to date by civil society scholars. A framework for categorizing authoritarian strategies used against nonprofits outside the U.S. is applied to current U.S. state policies and tested against a compilation of U.S. state laws and executive actions restricting nonprofit activity. A case study conducted in Texas involving interviews with migrant-serving nonprofits demonstrates the impact of these policies on direct service organizations on the ground. This analysis documents a new state authoritarianism that is restricting nonprofit service and advocacy space. The key conclusion is that U.S. nonprofit scholars should pay closer attention to the downstream effects of American authoritarianism as nonprofit civil liberties and behavior are being curtailed.

A fiduciary of a charity has a fundamental duty to act in good faith and in a manner the fiduciary reasonably believes to be in the best interests of the charity in light of its purposes. In theory, this duty of loyalty seems uncomplicated and, in simple cases, it often is. In practice, for many fiduciaries discerning the content of the duty of loyalty, and sometimes even identifying the charity and the legal purposes to which the duty is owed, is not in fact so simple. Challenges to identifying and complying with fiduciary duties can arise when board members serve a charity because they reflect the experiences of certain constituencies or identities. Examples abound. University boards, for instance, have long included members who are students, union members, or other stakeholder representatives. Complications related to intersecting entities can also muddle understanding of a fiduciary’s responsibilities. In this Article we offer a brief examination of the complications raised by various forms of constituency memberships, the ways in which fiduciary law attempts to clarify duties, and some tentative suggestions to ameliorate confusion regarding these duties.

Donor-advised funds are a prominent and rapidly growing charitable giving vehicle. There is substantial information about the money flowing into them, but we know relatively little about what they ultimately support, and anecdotal news stories have raised questions about the role they may be playing in high-profile policy-oriented giving. With this in mind, we examine whether donor-advised funds are disproportionately supporting politically engaged charities. We find that donor-advised fund sponsors distribute grants to politically engaged charities – those engaged in lobbying or affiliated with organizations supporting political campaigns – at a rate nearly 1.7 times that of other giving sources. We further show that this feature is more pronounced with giving to fringe political groups, as donor-advised fund sponsors give to anti-government and hate groups at a rate 3.5 times that of other giving sources; in fact, we find that donor-advised funds account for more than one-quarter of all contributions received by these organizations. To focus on whether one motivation for such giving is the layer of opacity donor-advised funds create, we also examine private foundation grants to donor-advised funds. Private foundations are required to publicly disclose the identities of both their major donors and beneficiaries. Donor-advised funds, on the other hand, must only disclose grant recipients, and those disclosures are aggregate and not at the fund or donor level. For this reason, when a private foundation distributes to a donor-advised fund rather than directly to a beneficiary charity, donor privacy is a principal consequence. We find that donor-advised fund sponsors give disproportionately more to politically engaged charities when more of the sponsor’s revenue comes from private foundations.

Questions about donor advised funds (DAFs) abound in the nonprofit sector. Every year more money is contributed, with donations to DAFs doubling in the past five years. A key set of questions about DAFs relates to how long that money stays in DAFs before being redistributed. Writing previously in Nonprofit Policy Forum, Murray (Murray, I. 2020. “Donor Advised Funds: What Can North America Learn from the Australian Approach?” Canadian Journal of Comparative and Contemporary Law 6: 260–304) proposed the use of normative theories of intergenerational justice to address such questions and discussed how the duties that apply to directors/trustees of the public charities that sponsor DAFs might be one mechanism for incorporating intergenerational justice principles. DAF sponsor policies are a key tool for directors/trustees to meet their duties and to set the scope for delegations of authority and to review and monitor those delegations. Heist and Stone (Heist, D., and K. Stone. 2023. Self-Regulating Donor Advised Funds: An Analysis of Inactive Account Policies and Endowed DAFs. DAF Research Collaborative Working Paper) published a white-paper reviewing timing-relevant policies from the largest 150 DAF sponsors in the US. The empirical findings in that paper and the organizational policies assembled by Heist and Stone provide an opportunity to explore whether Murray’s suggested approach is reflected in DAF sponsor policies on inactive accounts, endowed DAF accounts, and succession. In this article, we therefore seek to answer the question: to what extent do current DAF sponsor policies reflect principles of intergenerational justice? We provide evidence that current DAF policies do, to some extent, reflect norms of intergenerational justice, but that there is room for improvement.

Charitable Oversight : Insight from Regulators and Enforcers , examines the critical role of state charity officials in oversight of the nonprofit sector within the United States, including current and anticipated challenges to their regulatory authority. As charitable giving and the number of nonprofit organizations in the U.S. continue to grow, effective regulation is essential to ensuring that donations to charity are used appropriately and for their intended charitable purposes. State charity regulators, who often operate with limited resources, are at the forefront of these efforts, working to detect and prevent fraud, mismanagement, and other violations of law. The article begins with a discussion of the educational initiatives undertaken by state regulators to address potential compliance issues within the charitable sector. By providing training and guidance to nonprofit boards and donors, regulators help ensure that nonprofit leaders are aware of their fiduciary responsibilities and that donors are informed about how to donate wisely. These educational efforts are essential tools in preventing fraud and enhancing accountability, particularly given the limited resources available for enforcement in many states. Enforcement strategies are another central focus of the article. Charity regulators often employ a blend of progressive-enforcement methods, such as inquiry letters or informal resolutions, and more formal actions, including lawsuits and multistate enforcement initiatives. The paper highlights the importance of multistate collaboration, which has enabled state charity regulators to leverage their combined resources to target wide-spread fraud and pursue comprehensive actions that might not be possible if each state acts alone. For example, enforcement cases, brought by the Federal Trade Commission (FTC) and multiple states against fraudulent charities and deceptive solicitations, have had broad, nationwide impact. The paper raises concerns about the limited capacity of the IRS to serve as an effective gatekeeper. The IRS’s adoption of Form 1023-EZ in 2014, intended to streamline the tax-exempt application process, has led to a sharp increase in the number of organizations granted tax-exempt status, yet with fewer controls to verify their eligibility. For example, a substantial percentage of organizations using Form 1023-EZ may not actually qualify for the tax-exempt status they receive, creating added regulatory burdens for state charity officials who must monitor compliance with their limited resources. The article also addresses how technological advancements are reshaping the landscape of charitable giving and regulation. Digital platforms, crowdfunding sites, social media, and the growing popularity of online donation portals have made fundraising more accessible but also present new regulatory challenges. Regulators are increasingly faced with questions about the applicability of traditional laws to digital fundraising methods, the risks associated with online payment platforms, and the potential for AI-driven fraudulent solicitations that can manipulate donors with personalized, deceptive messages. Future challenges in the regulatory environment include the expected increase in the number of charitable organizations, an increasingly globalized solicitation landscape and social and environmental factors that result in more frequent disaster-related giving. The article argues that these changes will require regulators to expand multistate collaboration and develop more efficient systems for information sharing, cross-jurisdictional investigations, and collective enforcement actions. In conclusion, the authors advocate for expanded educational outreach and a strengthened network of collaboration among state charity regulators as essential to sustaining effective oversight of the nonprofit sector. By fostering a culture of compliance through education and leveraging collective resources for enforcement, state charity regulators can better protect donors, ensure transparency, and promote the health and integrity of the charitable sector in the United States. The article suggests that, with continued adaptation to technological and societal changes and more collaboration, charity regulators can effectively navigate the future challenges facing nonprofit oversight, safeguarding both public trust and charitable missions in an evolving landscape.

Nongovernmental organizations (NGOs) in the United States and globally are at a historic juncture. The available data on trust and confidence in NGOs internationally suggests that NGOs suffer from trust and reputation deficits, implying that concerns about NGO effectiveness and accountability may not be adequately addressed through existing systems of oversight and regulation. Compounding this challenge, NGOs in many countries face a backlash in which governments restrict, reduce, or eliminate funding sources for NGOs and curtail freedoms with implicit and explicit threats. This paper argues that understanding the nature of this inflection point in the United States is enhanced by placing it in the larger context of the global NGO regulatory architecture. The past few decades have seen the proliferation across the globe of a wide variety of institutional arrangements for regulating NGOs, resulting in a complicated patchwork of governmental and nongovernmental regulatory regimes operating across many overlapping jurisdictions. We examine the nongovernmental regulation of NGOs as a response to information deficits that remain under-resolved by governmental regulation. We argue that NGOs require trust and reputational legitimacy to attract public support and funding. But NGOs face real challenges to greater transparency at the same time that government regulation struggles to provide adequate quality assurances for current information disclosures to the satisfaction of all relevant stakeholders. This gap creates a market for information that is often filled by nongovernmental regulation systems. In this article we explore the structure of these private, nongovernmental regulation regimes at the national and transnational levels to derive insights for increasing NGO trustworthiness and legitimacy by bolstering the NGO data ecosystem.

This article discusses where US tax law falls short in facilitating unrestricted giving from US foundations to non-US non-governmental organizations (NGOs). Current tax law mechanisms for foundations and donor advised funds to make unrestricted grants to NGOs in other countries are severely limited and US-centric. Some of these rules have no context outside of the US, and ultimately stifle rather than facilitate philanthropy in favor of legitimate charitable organizations. This topic is particularly relevant now as more funders embrace “trust-based philanthropy” and other giving practices that respect nonprofit organizations’ ability to choose how to spend grant funds effectively. If US tax law does not take into account more ways in which US funders can support legitimate charitable endeavors globally, we risk further enhancing the wealth gap between countries and reducing the potential for international cooperation and diplomacy. Rather than providing more paths to recognize legitimate non-US NGOs as acceptable grantees, the Treasury Department continues to add new kinds of vetting and due diligence requirements on US funders and their overseas grantees. The result is that the cost of compliance and monitoring often outweighs the benefits of making overseas grants, particularly by smaller foundations and donor advised funds. This article provides examples of where US tax law currently falls short in recognizing and promoting ways to give unrestricted grants internationally. It also presents concrete proposals for helping to bridge this gap in a way that recognizes international differences and increases the potential for unrestricted giving without sacrificing compliance obligations.

Nomenclature around social enterprise, social entrepreneurship, the social economy, social business, or social purpose business means different things to different people under different circumstances. Sometimes, it means different things to the same people in the same circumstances – sometimes even in the same conversation. Clarity can be especially relevant for nonprofits – particularly charitable, tax-exempt nonprofits – for at least three reasons. First, they undertake their own strategic efforts to engage the marketplace to generate revenue and/or advance/scale their programmatic objectives. Second, they are often approached by enterprises purporting to be – even fully believing they are – social. Finally, charities increasingly compete with “social enterprises” for financial support, employees, customers, policymaker attention, etc. Given legal compliance mandates, charities must clearly understand who they are engaging with, how, and the extent of alignment or lack thereof. It can be reasonable to want government regulatory and policy interventions to help force much-needed clarity, which would also benefit the social enterprise movement and its enterprises. Regulatory and policy interventions could reduce green/purpose washing, ambiguity, and confusion and promote aligned engagement, but only if that “middle” space is sufficiently differentiated from traditional approaches and/or flexibility. Neither interest is served by vague invocations of nebulous degrees of attention to owner financial interests, market participation, and social good.Differentiation is important – if not essential. Differentiation must allow for reliably, consistently, and uniformly ascertaining over time what counts as a social enterprise and what does not. If “virtually any organization can call itself a social enterprise,” it will lead to “blurriness as to which business is actually a ‘social’ one,” which arguably describes the current state in the U.S. Whether through legal structure or modalities, social enterprises should exhibit the following: (1) heightened commitment to social good, (2) greater intentionality about predictably and reliably connecting their behaviors to socially good outcomes, and (3) consistency through time and persistence through circumstance. This essay submits that the U.S. lacks coherence, predictability, differentiation, critical mass, and a general will to enforce a reliable ordering of priorities that persists over time and can weather changes in ownership priorities and personnel. Even so, there are organizations whose operations are sufficiently different. There are also those that only purport to be different enough. Until there is differentiation at scale, this essay suggests that government regulation in the present will need to be through means applicable to for-profit businesses and, in the process, help identify green/purpose washing, promote clearer communication of purposes and priorities, and facilitate alignment. This essay first evaluates words commonly used in reference to social enterprise – impact, intentions, and outcomes – but finds them deficient. The essay next considers means for differentiation per the three characteristics listed above. Finally, the essay compares how other countries have invoked those concepts through legal structures or modalities, ultimately concluding that the legal structures and modalities in the U.S. do not support finding a cohesive “middle” space, yet.

We discuss the research process and outcomes related to updating and integrating two datasets containing information on nonprofit regulations: (1) the Legal Compendium (LC), a publicly available online resource that identifies important legal requirements for nonprofits in 56 U.S. states and jurisdictions, created in consultation with state charity regulators and (2) the Legal Text Data (LTD), a repository of digitized text of state regulatory statutes. We provide details on the process, the importance, examples of analysis that can be done with the data and potential next steps for the research agenda.

The Institutional Grammar (IG) is a rigorous tool for analyzing the laws and policies governing nonprofit organizations; however, its use was limited due to the time-consuming nature of hand-coding. We introduce an advance in Natural Language Processing using a semantic role labeling (SRL) classifier that reliably codes rules governing and guiding nonprofit organizations. This paper provides guidance for how to hand-code using the IG, preprocess text for machine learning, and demonstrates the SRL classifier for automated IG coding. We then compare the hand-coding to the SRL coding to demonstrate its accuracy. The advances in machine learning now make it feasible to utilize the IG for nonprofit research questions focused on inter-organizational collaborations, government contracts, federated nonprofit organizational compliance, and nonprofit governance, among others. An added benefit is that the IG is adaptable for different languages, thus enabling cross-national comparative research. By providing examples throughout the paper, we demonstrate how to use the IG and the SRL classifier to address research questions of interest to nonprofit scholars.

Nonprofit regulation in the United States is strongly influenced by society-wide political trends. This influence is especially evident today with respect to racial justice debates, partisan political divides, and significant changes in federal tax law. This commentary explores both how these trends are already affecting nonprofit regulation and how they might affect nonprofit regulation in the near future.

Section 501(c)(3) organizations in the United States work within a legal framework that was developed more than 100 years ago and that has not changed significantly in over 50 years. These rules are mostly designed to prevent and stop misuse of charitable funds Although that’s a laudable goal, those who write these rules seem to have lost sight of an equally important goal – to ensure that nonprofit leaders have rules that can help their organizations succeed. Nonprofits are more likely to succeed if their leaders understand the rules that guide them and have reasonable certainty the laws will be interpreted consistently. They also need rules that incentivize donors to provide maximum funding as quickly as possible, so that they have the resources to achieve their missions. With those principles in mind, this commentary suggests four major changes in the law: (1) the language in rules governing §501(c)(3)s should be stated more clearly and affirmatively; (2) the distinction between charitable and non-charitable activity should be clarified; (3) the charitable deduction rules should change; and (4) the distinction between private foundations and public charities should be eliminated.