LUCINDA JESSON, Health Law Institute, Hamline University School of Law
Email: ljesson01@hamline.edu
MYRON L. FRANS, Faegre & Benson LLP
Email: mfrans@faegre.com

Set against the national backdrop of increased scrutiny of nonprofit governance and community benefit, this article examines two new Minnesota Supreme Court decisions which address a subset of tax exempt nonprofits considered "purely public charities" and the benefits that accrue to the community in lieu of foregone tax revenue to the federal, state, and local governments. Through the examination of Under the Rainbow Child Care Center, Inc. v. County of Goodhue , the authors conclude that the Minnesota Supreme Court changed the landscape for public charities that charge for their services. Today, the fundamental definition of a charity in Minnesota is not the nature of what is provided but whether what is provided is a gift. This shift in the law leaves many questions which explored by the authors, only a few of which are answered in the second case, Afton Historical Society Press v. County of Washington. In Afton, the Court held that incidental commercial undertaking by institutions does not erode their status as a pure public charity; in other words, charities can engage in commercial activities so long as they are incidental to the mission.

In conclusion, the authors outline considerations for Boards of Directors of public charities to review the provision of benefits offered by their organizations in context of the standards set by the Minnesota Supreme Court. These include assessing the level of goods or services provided free or at discounted rates; making the charity policy of the organization public; tracking bad debt levels and collection policies that meet guidelines; cataloging donations and tabulating the value of volunteer work; and accounting for negative returns and commercial income.

KENNETH ANDERSON, Washington College of Law, American University, Stanford University - The Hoover Institution on War, Revolution and Peace
Email: kanders@wcl.american.edu

This essay, intended as a chapter in a book on ethical issues in global philanthropy, analyzes the problematic relationship between the United Nations and global civil society. Offering a brief history of the ideological transformation of international NGOs into 'global civil society', it critiques the idea of global civil society as representing the world's peoples to international organizations. It notes, however, that the idea of global civil society is considered somewhat passe today as a vehicle of legitimacy for global governance - likewise, for that matter, the UN, also somewhat passe in leading intellectual circles as the chosen vehicle for the platonic ideal of global governance. Leading intellectuals of global governance today lean instead toward such ideas as global government networks and other forms of governance that look to technocratic expertise in particular, indeed narrow, areas as their source of (deliberately limited) legitimacy, rather than seeking broad-based political legitimacy for governance. The debate over the legitimacy of the UN via legitimation from global civil society, while of great importance, perhaps, to the UN and to global civil society, appears in important respects to have been by-passed by theorists of the technocracy that has no more 'global' ambition than to ensure that the internet arrives on time. (The essay proceeds through stylized, highly notional time periods as a means to offer a convenient way of characterizing different phases of conceptualization of global governance, global civil society, the UN, and legitimacy.)

KATHRYN FUEHRMEYER, affiliation not provided to SSRN
Email: soleil822@gmail.com

In November 2003, attorneys in Chicago, acting on research conducted by the Hospital Accountability Project, began to file class action suits on behalf of former patients against nonprofits hospitals for neglecting their duties to the community in which they operate, in particular to uninsured individuals. A Mississippi attorney took up the same crusade, filing at least 49 class action lawsuits between June and December 2004 charging approximately 370 nonprofit hospitals in 24 states with failing to provide adequate charity care. While federal judges have dismissed the majority of these cases, the issue of nonprofit hospitals providing charity care gains notoriety.

Although Senator Grassley argues otherwise, imposing more stringent requirements on hospitals in order to qualify for the federal tax exemption is unlikely. Thus, some states have begun to combat this problem through the enactment of state charitable care requirement statutes in order to force hospitals to examine the amount of charity care they provide. While some states have instituted statutorily mandated charitable care requirements, Illinois has yet to implement this requirement, though there is legislation pending. Part I of this Note looks at the tax-exemption received by hospitals, both at the federal and state level. Part II looks at the charitable care requirement as enacted in Texas. While many states have discussed a charity care requirement and some have gone so far as to implement one, the Texas statute provides a good benchmark for examining the analogous proposed Illinois statute. Part III examines the Provena case and the proposed legislation in Illinois which has garnered national attention and found a place in a national debate. Part IV examines the overarching policy questions of whether a charity care requirement is good healthcare policy and whether the various benefits should be linked to specific requirements.

KATHRYN FUEHRMEYER, affiliation not provided to SSRN
Email: soleil822@gmail.com

On September 7, 2007 Rep. Sander Levin introduced legislation which would permit tax-exempt organizations to invest in onshore hedge funds without being subject to the unrelated business income tax ("UBIT"). The legislation amends section 514(c) to add an exception to "acquisition indebtedness" for "indebtedness incurred or continued by such partnership in purchasing or carrying any qualified security or commodity." A "qualified security or commodity" is "any security . . . any commodity . . . or any option or derivative contract with respect to such security or commodity." By providing an exception for acquisition indebtedness with respect to securities, those securities are removed from the definition of debt-financed property - property held to produce income that is subject to "acquisition indebtedness" during the tax year. As a result, any income from the debt-financed securities is excluded from debt-financed investment income, which is taxable under the UBIT regime. This would not create an entirely new investment vehicle for tax- exempt investors. They have been utilizing these types of investment vehicles for years by employing blocker entities to avoid paying UBIT on the income generated. Although some members of Congress are arguing for a prohibition against the use of blocker entities, their use has traditionally been blessed by the Internal Revenue Service ("IRS").

This note first examines the unrelated business taxable income ("UBTI") regime, the prohibition against debt-financed investments, and the current use of blocker entities. In Part II, this note examines the historical legislative policy reasons for enacting these prohibitions and the applicability of these policy reasons to investments in debt-financed investments, such as hedge funds. Part III of this note offers explanations as to why these historical rationales do not adequately support the continuation of the unrelated debt-financed rules. Part IV offers additional policy reasons outside the federal tax regime as to why the prohibition on debt-financed investments should be repealed