The Woke Boogeyman: Naming Rights and Ben Crump
When I first read about this story over on the TaxProf Blog, I thought it was too stupid to even blog about. But then, TaxProf is not above exploiting culture wars for readership I’ll say that much. Case in point. Some students at the Law School formerly known as The St. Thomas University College of Law are reportedly considering a breach of contract suit against the Law School for changing its name to The Benjamin L. Crump School of Law. The name change netted the Law School $10 million dollars, from Crump, Will “Keep my Wife’s Name Outcho F$&k!n Mouth” Smith, and TD Jakes, whose ministry is not immune to accusations of wokeness. There is nothing taxable enough that TaxProf thought it should discuss taxes in connection with this story. But there is indeed an important tax issue lurking, as I explain below. For now, the sadder irony is the legal theory the Law Students reportedly assert — breach of contract — kinda makes it look like they didn’t pay much attention in law school:
The Floridian has learned that a couple or more current students attending the college, and are within a year or so of graduating with a Juris Doctorate degree, are fuming mad and considering legal action against the school for renaming the law school after Crump. For fear of causing retribution by school officials, we will not disclose any information about the student (s). According to one source, he or she applied and was accepted to the St. Thomas University College of Law, but would not have done so if they or knew it would be renamed after the controversial attorney. The student (s) said that it’s not what they signed up for, and are worried that Crump’s name on their diploma will dissuade potential employers from hiring them because of the racial controversy he brings with him. Crump donated $1 million to have the school named after himself. In addition to paying to get the school named after him, Crump also received $10 million from Actor Will Smith and others. The same source said that he or she does not subscribe to Crump’s “woke” and “racially-driven agenda,” and is adamantly considering filing a legal action against the school,” adding that by changing its name, the university may have pulled a bait-and-switch with students who signed up for the originally-named St. Thomas University College of Law graduate program.
Ah yes, the Woke boogeyman. Still making idiots look idiotic. Ok, so the students entered into a contract to learn the law from an institution called St. Thomas, and the institution changed its name to Benjamin L. Crump before it finished performing its side of the contract. I can hear summary judgment coming around the bend.
THE TAX STUFF
I really hate to do this but I can’t help talking about my friend Ben’s new law school and thereby educating the students at least enough so that they exemplify the saying, “a little knowledge is dangerous.” Reuters reports that:
At least 45 ABA-accredited law schools are named for a person—a mix of historical figures and practicing lawyers. Just two are named for women: Arizona State University Sandra Day O’Connor College of Law and Pace University Elisabeth Haub School of Law. When law schools rename for a living person, it is often accompanied by a sizable donation from the new namesake. For example, Pepperdine University’s law school became the Rick J. Caruso School of Law in 2019 after the attorney and real estate magnate donated $50 million.
So here it is. When a charity lends its endorsement or other halo effect to a living donor, as when the donor buys naming rights, it is generating a private benefit to the person buying (with donations, but the economic effect is identical) the naming rights. There is not so much private benefit to the namesake when the namesake is no longer with us, as when George Mason renamed itself to ASS Law after the late Justice Antonin Scalia. But when the namesake is still alive, well the law school stands as a living monument to that live person, everyday conveying a valuable, if not implicit, endorsement of that living person. Just think if law schools and other charities could sell their naming rights to any high bidder.
In fact, it is entirely permissible to do just that, or at least the practice of selling naming rights has not often been challenged. Corporations make big donations for naming rights all the time. In effect, a charity that names itself after a benefactor is selling forever advertising, its altruistic brand is forever associated with the charity’s halo. Here is how Linda explained it 8 years ago when David Geffen donated $100 million to the NY Philharmonic, and in return the Philharmonic renamed its concert venue to Geffen Hall:
So how come a donor’s name on a building, which is far more valuable than a seat at a gala, isn’t treated as a major return benefit to the donor? One reason is that acknowledgments are not sold in a marketplace but are always part of a charitable gift, so it is difficult to figure out what they’re worth. Ignoring them is administratively simpler. But in the case of soon-to-be Geffen Hall, we happen to know that the value of the naming right is $15 million because that’s how much the family of Avery Fisher was paid last year to relinquish the name on Avery Fisher Hall. We can therefore value Mr. Geffen’s gift at $85 million and treat him as purchasing something worth $15 million for himself.
Linda explains the benefits and tax problems arising from charitable naming rights in an expertly written article entitled “Competitive Philanthropy: Charitable Name Rights, Inequality, and Social Norms.” Here is an excerpt:
Despite all these benefits, naming rights impose hidden costs on charities. While they are initially a low-cost benefit that charities can give donors, they become more costly for charities over time. There is a balance to be struck between maximizing the value received by donors and maximizing the power of charities to use naming rights to their advantage. While donors care about memorializing themselves (forever) after death, that desire is a noncharitable interest that must be evaluated with attention to the long-term burden that perpetual naming rights impose. The law of naming rights offers bad incentives and socially detrimental norms. It encourages restrictions that reduce the value of gifts and impose long-term burdens on charities. Additionally, it encourages increasing contractualization of charitable gifts, undermining generosity. It fosters a competitive race to the bottom among charities, who are competing with each other to lure donors. Finally, it fails to honor or incentivize the Allen Room story of competitive philanthropy because relinquishing a name has no legal consequence.
The rest of Linda’s article really lays out all the considerations and I would not do it justice to summarize it here. Those students who haven’t learned enough not to fear being woke should read the whole thing several times.
darryll jones