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Crashing The Party: A State Regulator’s Observations and Suggestions Regarding The Near-Term Supervision of The Simultaneous Pursuit of Margin And Mission...

Spenard, David Edward

The question is not whether we will have state involvement in the activity of social enterprise or social mission organizations; additionally, the question is not whether we will have state involvement in the activity of for-profit/nonprofit hybrids. At minimum, states supervision through both criminal and civil proceedings will continue for allegations of fraud. Also, it is quite likely that local and state governments will be called upon to intervene and, perhaps, provide a remedy when there has been a failure of a social mission or hybrid organization in delivery of a public or government service. Rather, the questions about social mission or social hybrid organizations relate to the level of involvement. How do we tailor a reasonable state regulatory framework to incent and effectively supervise the social mission or social hybrid organizations especially in areas in which the entities seek to relieve the burdens of government? Further, when the activity involves charitable assets or includes the assertion that the activity has a charitable motive or produces charitable benefit, how does it impact the regulatory framework for the social enterprise organization? As we look into the future, at least for the near term – the next five to ten years, there is a need to make some assumptions regarding the community of state charity regulators. For this discussion, with one exception for the purpose of considering a specific scenario, the assumption is that Congress will not make any major changes to the Internal Revenue Code; therefore, our discussion holds the Internal Revenue Code and Treasury Regulations constant. A second assumption is that the majority of state charity regulators will not see an extraordinary or unusual increase in in-house personnel or expert assistants and consultants. So, we anticipate that the level of resource available to the state charity regulator will remain constant, and hopefully it will not decline. Finally, the assumption is that mixed-purpose entities and hybrid arrangements are here to stay. The purpose of these assumptions is to discuss the state charity regulatory response through a “what is” framework rather than a “what if” framework. State charity regulators should not expect the Internal Revenue Service to provide additional services to assist in the pursuit of state regulatory goals. State charity regulators should not wait for additional resource in pursuing, tailoring, and implementing a regulatory response.

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Notes

Other papers from the same panel are available in Academic Commons.

"Regulating Social Enterprise" by Dana Brakman Reiser - http://dx.doi.org/10.7916/D8TM7830
"Hybrid Enterprises and the Application of State Charitable Regulatory Principles as a Guide Toward an Effective Regulatory Framework" by Elizabeth Grant - http://dx.doi.org/10.7916/D8SN06X9
"Attorney General Regulation of Hybrid Entities as Charitable Trusts" by Robert A. Wexler - http://dx.doi.org/10.7916/D8Z03661

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