Lead Stories

Not all securities frauds are Ponzi schemes, said the Fifth Circuit Court of Appeals.  And it makes a difference.  About $240,000 for the American Cancer Society in this case.

Clemson University has been awarded both a $100,000 bequest and a $100,000 retirement account beneficiary designation on the death of a donor seeking to endow a scholarship fund.  The Court of Appeals of South Carolina has affirmed a trial court decision denying a claim by the donor’s estate that she intended to make only a single $100,000 gift. (Estate of Gill v. Clemson University Foundation, Ct. of App. S.C., No. 4951, 3/7/12.)

A 4-3 decision of the Pennsylvania Supreme Court has rejected help from the state Legislature in defining the constitutional contours of an “institution of purely public charity” eligible for state real estate tax exemption and opened the way for local taxing authorities to challenge existing exemptions to generate more local revenue.  (Mesivtah Eitz Chaim of Bobov v. Pike County Board of Assessment Appeals, No. 16 MAP 2011, 4/25/12.)

Less than a week after the decision, a representative of the Philadelphia City Solicitor’s office suggested that tax-exempt hospitals and universities come to talk about payments in lieu of taxes in order to prevent challenges to their status, echoing the state-wide efforts of local governments to exploit uncertainty about the definition of charity to obtain PILOTS in the 1990s.

The volunteer board chair of a nonprofit drug and alcohol treatment program who made start-up and bridge loans to the organization and paid $193,000 in unpaid withholding taxes has lost a suit to recover the funds he personally advanced to pay the taxes.  A federal District Court in Tennessee has held that he was a “responsible person” and personally liable to pay the taxes the organization failed to pay itself.  (Bunch v. Commissioner, E.D. TN, No. 2:10-CV-122, 3/8/12.)

Ann Haskell created a charitable remainder unitrust in 1997 which provided that upon her death one-fourth of the residue would go to Lutheran Service Society of Western Pennsylvania in Pittsburgh, “to be used for benefit of Meals on Wheels, Squirrel Hill Chapter, … or any successor thereto.”  She further requested that if the funds could not be “used to full advantage” of that chapter, the board of the Society should distribute the funds to any one or more chapters of Meals on Wheels in Allegheny County.

Many years after the CRUT was drafted, the Squirrel Hill Chapter had disaffiliated from the Society and created a new nonprofit corporation to operate the program.  Who should receive the funds?  A divided appellate court in Pennsylvania has affirmed a trial court decision granting the funds to the Society and not the new organization. 

The Appeals Court of Massachusetts has affirmed an injunction against commercial co-venturers who failed to register under the state’s charitable solicitation registration law before promoting a designer “show house” in the name of a national charity.  The Court held that the companies were required to register under the statute.  (Attorney General v. Bach, App. Ct., MA, No. 11-P-1313, 4/4/12.)