Lead Stories

When Congress passed the Religious Liberty and Charitable Donation Protection Act of 1997, it provided that debtors could make charitable contributions up to 15% of their gross annual income.  But it didn’t say how to calculate the gross annual income.

A bankruptcy court in Colorado, saying the question had not been decided by any other court, has held that gross annual income does not include social security payments received by the debtor. (In Re. McGough, D. CO, Bkrptcy. No. 09-37932, 7/7/11.)

The Intermediate Court of Appeals of Hawai‘i has reversed a probate court and ordered it to approve a complicated settlement of a charitable contribution under the doctrine of cy pres.  As a result, the state will have a new watershed and forest reserve, the Hawaiian Humane Society will have a $1 million educational fund, and the heirs of the donor will have unrestricted interests in residential properties.  (In Re: Elizabeth J.K.L. Lucas Charitable Trust, No. 30306, 6/30/11.)

We get large numbers of questions involving youth sports leagues, booster clubs and other primarily volunteer community organizations.  Here is a sample of the recurring themes.

The Court of Appeals of Texas has ruled that a member of a nonprofit association has the right to inspect the association’s records, but must submit to a confidentiality agreement with respect to some non-financial records, prohibiting disclosure even to other members who have their own right to inspect.  (Gaughan v. National Cutting Horse Association, Ct. of App. TX, Ft. Worth, No. 02-09-00450-DV, 7/28/11.)

When membership in the nonprofit Wapsi Hunting Club in Iowa declined to only five members in 2008, they hired an attorney to review their articles of incorporation and bylaws and make recommendations for moving forward.  In response, four of the members, over the objection of the fifth, Paul Jochimsen, amended the mutual-benefit corporation’s bylaws to make it possible to admit members without a unanimous vote, to provide that each member would be a director, and to provide that net assets would be distributed pro rata among the members upon dissolution.  They rejected several proposals from Jochimsen, including a suggestion that memberships be redeemable at a proportionate value of the assets and that assets be distributed to charity upon dissolution. In addition, they admitted a new member without introducing him to Jochimsen or having him participate in club events before admission.

The Fifth Circuit Court of Appeals has partially reversed a trial court and has held that Texas may require professional solicitors of clothing and other household goods to tell donors that they will be involved in selling the goods and giving proceeds to charity.