Affirmative Action Litigation Update

• Date: 01 January 2021
• DOI: http://doi.org/10.1002/npc.30817
• Published date: 01 January 2021

Bruce R. Hopkins’ NONPROFIT COUNSEL

8 January 2021 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc

AFFIRMATIVE ACTION

LITIGATION UPDATE

Harvard University prevailed in its affirmative action

case on November 12, when the US Court of Appeals for

the First Circuit ruled that its admissions process, which

takes race into account, is permissible under civil rights

law (Students for Fair Admissions v. Harvard University).

This appellate court seemed to observe that the univer-

sity has nearly maxed out on the goals of its admissions

program, writing (in the course of 104 pages) that it

“has already reached, or at least very nearly reached,

the maximum returns in increased socioeconomic and

racial diversity that can reasonably be achieved through

outreach and reducing the cost of a Harvard education.”

Another higher education affirmative action case

was propelled on November 9, when a trial commenced

in federal district court in North Carolina (Students for

Fair Admissions v. University of North Carolina). Accord-

ing to an account in the November 10 New York Times,

the lawyer for the plaintiff asserted that the university

“considered race in a heavy-handed, formulaic way that

had given a large boost to Black, Hispanic and Native

American students, while discriminating against white

and Asian-American applicants.” The university’s lawyer

was said to counter that “admissions was [sic] highly

individualized, as required by Supreme Court precedent,

and that the judgment of admissions officers was at the

core of the process.” Because this plaintiff is a private

party, this case will proceed despite the change in presi-

dential administrations. [6.2(e)] ◆

OTHER DEVELOPMENTS

◆The trial in the Fidelity Charitable Gift Fund case

occurred on October 19–28. The essence of this case is

discussed in the May 2020 issue. Additional briefs were

submitted around November 18, with closing arguments

held on December 4. A summary of the trial proceedings

is included in the October 29 issue of Bloomberg Law’s

Daily Tax Report. [11.8(b)]

◆On November 9, a petition was filed with the US

Supreme Court seeking a finding that the federal tax law

provision denying the business expense deduction (IRC

§ 162) to medical marijuana dispensaries in connection

with their cannabis-sales activity (IRC § 280E) violates

the US Constitution’s Sixteenth Amendment by taxing

more than constitutional income, and that a state’s

legal sales of cannabis does not violate the Controlled

Substances Act by reason of application of the Constitu-

tion’s Supremacy Clause (Standing Akimbo, LLC v. United

States). This law concerns whether an organization is

operating more than one trade or business (see the

opinions summarized in the February 2019 issue), with

implications impacting the bucketing rule. [25.5]

◆The Treasury Department and the IRS intend to issue

proposed regulations to clarify that state and local

income taxes imposed on and paid by a partnership or S

corporation on its income are allowed as a deduction by

the entity in computing its non-separately taxed income

or loss for the year involved (Notice 2020-75). That is,

the SALT deduction limitation (see, e.g., the September

2019 issue) does not apply to the partners and share-

holders who itemize deductions. [3.1]

◆The New York Times reported on November 16 that

more than 82,000 individuals have filed sex-abuse claims

against the Boy Scouts of America, “describing a dec-

ades-long accumulation of assaults at the hands of scout

leaders across the country.” These claims are said to have

“far eclipsed” the number of abuse accusations filed in

Catholic Church cases. The claims are being lodged in a

bankruptcy court in Delaware.

◆The IRS set November 19 as the publication date for

the final regulations concerning qualified ABLE programs

(summarized in the December 2020 issue). [19.20] ◆

Each article in the newsletter on a tax-exempt organizations law topic ends with a citation to the appropriate chapter(s) or

subchapter(s) in Hopkins, The Law of Tax-Exempt Organizations, Twelfth Edition (Wiley, 2019, 2020 supplement). This is done to

provide ready access to additional and background information concerning these articles. For example, underlying information

concerning the first article in this issue is available in Chapter 2 § 3 of the book; thus, the citation is referenced as [2.3]. Likewise,

each article in the newsletter on a charitable giving law topic ends with a citation to the appropriate chapter(s) or subchapter(s) in

Hopkins, The Tax Law of Charitable Giving, Fifth Edition (Wiley, 2014, 2020 cumulative supplement). For example, underlying infor-

mation concerning the second article in this issue is available in Chapter 9 § 7 of the book; thus, the citation is referenced as [9.7].

This newsletter is a stand-alone publication. An inventory of articles in the newsletter since its inception in 1983, and a subject

matter index, as well as an index of the court opinions, IRS revenue rulings and procedures, IRS technical advice memoranda, and

IRS private letter rulings discussed in the newsletter, are available at www.brucerhopkinslaw.com. For those who have the books,

the newsletter also provides monthly updates. Both books are annually supplemented. Questions concerning nonprofit law devel-

opments in general may be sent to brucerhopkins@brucerhopkinslaw.com. Also, a comprehensive summary of nonprofit law is

available in the Bruce R. Hopkins Nonprofit Law Library, an e-book published by Wiley. Other law resources are referenced at www.

brucerhopkinsbooks.com. Follow BRHopkins_NPLaw on Twitter.

The newsletter has a dedicated website. Please visit wileyonlinelibrary.com/journal/npc.

Quote of the Month: “I think it’s hard for you to argue

that Congress intended the entire act to fall if the man-

date were struck down when the same Congress that

lowered the penalty to zero did not even try to repeal the

rest of the act.” This from Chief Justice John Roberts dur-

ing arguments in the Affordable Care Act case (see p. 7).