Cass Brewer


There has been a growing controversy surrounding Etsy’s much-publicized B Corp status and Etsy’s recent move to save (“dodge”???) taxes by using an Irish subsidiary. Stories have appeared in Bloomberg Business, the WSJ, and even The Irish Times. The advocacy group, Americans for Tax Fairness, requested in an August 28, 2015, letter to B Lab that Etsy’s B Corp designation be made “contingent upon its elimination of the use of its subsidiary in Ireland to dodge taxes” (emphasis added). The pressure on Etsy apparently has been so strong that Chad Dickerson, Etsy’s CEO, felt the need to publish a blog post defending the company’s tax strategy.

Today, one of the country’s leading publications for tax professionals, Tax Analysts, reported on the controversy. (See Tax Notes Today, Sept. 2, 2015.) As a result of the Tax Analysts story, we may see the broader tax community begin to comment and, perhaps, become more familiar with B Corps. According to Tax Analysts and Americans for Tax Fairness, a few already have commented—apparently supporting the notion that Etsy’s tax strategy either is inconsistent with its B Corp status or is inconsistent with one of Etsy’s core values of being “a mindful, transparent, and humane business.” Specifically:

  • Professor Omri Marian (University of Florida): “Many people will tell you that Google shouldn’t do it. So if Google shouldn’t do it, a corporation that presents itself as supporting social sustainability definitely shouldn’t.” (Ars Technica, Aug. 13, 2015)
  • Professor Neil Buchanan (George Washington University): Regarding Etsy’s disclosure of the use of an Irish subsidiary in its June 30, 2015 SEC filing: “Translation: We figured out a technically legal way to cut our tax bill, and it doesn’t bother us that doing so reduces the ability of our government to fund programs that we otherwise claim to support. We’ll get back to you when we’ve figured out any other ‘operational efficiencies’ that we might exploit.” (Ars Technica, Aug. 13, 2015)

I respectfully disagree with Americans for Tax Fairness and the sentiments of my colleagues Professors Marian and Buchanan. B Corp status is determined by a company’s score on a 200 point scale. Although I am not intimately familiar with the B Corp scoring system, I understand that only two questions pertain to a company’s tax positions: one concerns whether a company has paid any tax fines or penalties and the other relates to tax-saving strategies (the subject of the Etsy controversy). I wouldn’t think that two unfavorable answers, much less one, should disqualify a company from B Corp status.

Moreover, B Corp status does not signify perfection. B Corp status does not even signify “beyond reproach.” B Corp status merely signifies that a company scored 80 out of 200 points on B Lab’s impact assessment scale. That’s it. If you like B Lab’s scale, then maybe you like B Corps. But, if you don’t like B Lab’s scale, then you may not like B Corps. I bet Walmart does not get 80 points on B Lab’s scale; however, Walmart’s failure to qualify as a certified B Corp should not automatically lead us to the conclusion that Walmart either is “bad” or is a tax “dodger.” (Although, Americans for Tax Fairness believes that Walmart is in fact a tax dodger.) I’m not ashamed to admit that I’ve shopped at Walmart many times.

Finally, as far as I am concerned, saving taxes in compliance with applicable law is admirable. If saving taxes means “dodging” taxes, then I suppose I’m just as guilty as Etsy. Every year when I file my tax return I look for every possible deduction I can take. In fact, those deductions always include charitable contributions to causes that I feel do “good” in this world. Am I “dodging” taxes when I take a big fat deduction for those charitable contributions? If so, that’s one tax “dodge” I don’t feel “bad” about.

Granted, many companies use elaborate tax-saving techniques that comply with the letter of the law but that violate the spirit of the law or that exploit loopholes. I do not like or condone those strategies any more than Americans for Tax Fairness or my above-quoted colleagues. AND, I agree that the government needs to be vigilant about monitoring, auditing, and punishing those companies that abuse the system.

On the other hand, consider this: If enough companies become B Corps or other well-behaving corporate citizens, perhaps our need for government programs and subsidies (and thus taxes) will diminish. Imagine that! (Yes, I’m sure I’ll get plenty of push back on that last assertion.)

In any event, let’s ease off on Etsy. Don’t let the perfect be the enemy of the good. Viewed from a wider perspective, the growing social enterprise movement, which includes B Corp and other “good company” certifications, is a positive development. Saving taxes is neither inherently bad nor good and, besides, it is really the government’s job to make that call. It is entirely legitimate for a social enterprise to employ tax-saving strategies, even with an Irish subsidiary.


I recently posted yet another U.S. hybrids map (with hyperlinks!) to reflect the fact that Minnesota should be viewed as a benefit and social purpose corporation state even though its approach to the two forms is slightly different than California’s and Florida’s. Since that time, James Woulfe at Connecticut’s Social Enterprise Trust points out that Rhode Island has both a benefit corporation statute and a low-profit limited liability company statute. Rhode Island thus should be green on my U.S. hybrids map, not gold. Accordingly, I post another corrected version of the map below along with the interactive version here. I am grateful for the watchful eyes of readers of this blog to ensure that my U.S. hybrids map is both up-to-date and correct. Keep those questions, comments, and corrections coming!


On February 17, 2015, I posted an updated map of social enterprise legislation across the U.S. A few readers, however, took issue with my characterization of Minnesota as an ordinary benefit corporation state (light blue) instead of being a benefit and social purpose corporation state (purple) like California and Florida. Mind you, this had nothing to do with the Minnesota Vikings’ team colors, but rather had to do with the substance of the Minnesota benefit corporation statute. Let me explain.

In The Beginning . . .

Most of the early adopters of benefit corporation statutes followed the B Lab model legislation. The B Lab model statute required a “general public benefit” for hybrid corporations. On the other hand, one early adopting state, California, took a different approach to hybrid corporation legislation. California authorized “social purpose corporations” (previously called “flexible purpose corporations”) at the same time it passed benefit corporation legislation. [Footnote: Since that time, Washington and Florida also have authorized social purpose corporations. Washington has a social purpose corporation (“SPC”) statute but no benefit corporation statute, while Florida, like California, has a social purpose corporation statute and a separate benefit corporation statute.]

Distinct from a benefit corporation, a social purpose corporation pursues a chosen social or environmental mission without necessarily providing a “general public benefit.” Example: A social purpose corporation could produce electricity-generating windmills to preserve the environment, but nevertheless pay its employees substandard wages. Theoretically, a benefit corporation cannot save the environment at the expense of its employees. It must do both and more to fulfill its “general public benefit” mandate.

This “do everything well” approach has led many to argue that the B Lab benefit corporation model is fundamentally flawed. The B Lab model arguably is flawed, Haskell Murray and other commentators have written, because no person can serve two (much less more than two) masters simultaneously. Thus, a better model was needed.

Colorado and Delaware Modification

Next, along came Colorado and Delaware, which passed statutes blending the benefit corporation and social purpose corporation concepts. In particular, Colorado and Delaware created the “public benefit corporation” (“PBC”). PBCs are designed to further a general public benefit while pursuing a specific benefit purpose. Example: Our electricity-generating windmill company primarily will preserve the environment, but it will do so only after weighing the benefit of its primary activity against any countervailing social ills created thereby (such as paying substandard wages).

Clever lawyers, though, found an end run around the Colorado and Delaware approach. To wit, a number of public benefit corporations chartered in Delaware chose a specific benefit purpose of pursuing a general public benefit.  Oy vey!

Minnesota GBCs & SBCs

In response, Minnesota’s new hybrid corporation statute adopts an approach similar to that of California and Florida, but does so in a single hybrid corporation statute. Under the “Minnesota Public Benefit Corporation Act,” a hybrid corporation may choose to be either a general benefit corporation (“GBC”) or a specific benefit corporation (“SBC”). A GBC must pursue a general public benefit—please everybody—while an SBC need only pursue a single social or environmental purpose—not please everybody. Florida’s approach is very similar to Minnesota’s, but Florida follows the California model by authorizing benefit corporations and social purpose corporations in completely separate statutes. Moreover, unlike Minnesota and its “GBC” and “SBC” labels, neither Florida nor California requires a unique identifier for benefit corporations or social purpose corporations.

Of course, this brief explanation of the light blue (general and specific public benefit) versus purple (general or specific public benefit) debate necessarily omits many subtleties and nuances of the various U.S. hybrid entity statutes. Put differently, any map that I create will be more like an SBC than a GBC: the map will not please everyone. [Footnote: For the subtleties and nuances of benefit corporations, I highland recommend Haskell Murray’s chart posted to SSRN.]

New Hybrid Entity Map With State-by-State Hyperlinks

Nevertheless, being an incurable perfectionist, I have revised my hybrid entity map yet again in response to reader concerns. Moreover, in the new and improved map below, Minnesota is purple, reflecting the fact that Minnesota, like California and Florida, allows its hybrid corporations to serve either a general public benefit or a specific social or environmental benefit.

More importantly, perhaps, this new map contains hyperlinks to each state’s underlying hybrid entity legislation. I also have included a link to another resource: the Bloomberg BNA portfolio about social enterprise that Elizabeth Minnigh, Rob Wexler, and I co-authored. In this manner, any reader who does not agree with my color-coded map is only a mouse click away from conducting his or her own investigation. [Click on the following link to access a copy of the map below containing state-by-state hyperlinks to the underlying statutes: Social Enterprise Hybrids Map Mar 2015]


David Brooks—the highly-regarded, conservative columnist for the New York Times—recently wrote an opinion piece entitled “How to Leave a Mark.” Mr. Brooks’ commentary was about social enterprise (which he labeled “social capitalism”), impact investing, and (perhaps surprising?) career advice. As regular readers of this blog undoubtedly know, impact investing means investing for both a financial return and a positive social or environmental impact.

Mr. Brooks previously has written about social enterprise, and with respect to impact investing, Mr. Brooks summarized his views as follows:

Impact investing is not going to replace government or be a panacea, but it’s one of a number of new tools to address social problems. If you want to leave a mark on the world but are unsure of how to do it, I’d say take a look. If you’re a high-net-worth individual (a rich person), ask your adviser to get you involved. If you’re young and searching, get some finance and operational skills and then find a way to get involved in a socially useful investment proposition. If you’ve got a business mind, there are huge opportunities to build the infrastructure (creating measuring systems, connecting investors with deals).

Someday government will get unstuck, with new programs to address this new era. But there’s no prospect of that happening soon. Right now social capitalism is a more creative and dynamic place to spend a life.

I generally agree with Mr. Brooks, of course, but I also believe that in order for impact investing to flourish, more changes in the U.S. legal landscape must occur. Significant changes are taking place with respect to U.S. business law. More and more states are experimenting with new legal forms for conducting social enterprise. Nonetheless, other changes in U.S. law are necessary to facilitate impact investing as “one of a number of new tools to address social problems.”

In a subsequent post, I will outline some of the changes in U.S. fiduciary and tax law that I believe must occur before impact investing can fulfill its promise as predicted by Mr. Brooks.


As of today, February 17, 2015, I count 36 states with some form of social enterprise legislation on the books. Four states came online with benefit corporation statutes as of January 1, 2015, and California changed the name of its “flexible purpose corporation” variant to “social purpose corporation” like Florida, Texas (quasi-social purpose statute), and Washington. Otherwise, I do not believe that much has changed with respect to U.S. social enterprise legislation since my last posting of the map below in August of 2014. Please let me know, however, if you have corrections and/or clarifications to this summary or this map.

Nine New Law Review Articles on Social Enterprise

Nonprofit Law Blog reports: “The scholarly discussion of social enterprise and hybrid legal entities shows no signs of abating.” Featured here is a listing of nine new law review articles all about social enterprise. Check it out!


For those keeping count: Currently, twenty-two states plus D.C. authorize benefit corporations. Four more benefit corporation states are scheduled to come online by January 1, 2015. In addition, four states authorize flexible/social purpose corporations, and eight states authorize low-profit limited liability companies. Thus, since January 1, 2014, the number of benefit corporation states has increased by seven while the number of flexible/social purpose corporation states has increased by one. There has been no increase in low-profit limited liability company states. In the aggregate, the US now has 31 states with some form of social enterprise legislation on the books. (But for North Carolina’s 2014 repeal of L3C legislation, there would be 32 states with social enterprise legislation on the books.)

For ease of reference, I have listed below each state that has passed social enterprise legislation thus far this year, and in each case I have included a hyperlink to brief but helpful commentary. Moreover, I highlight below certain unique aspects of each state’s new law. [Professor Haskell Murray’s chart provides much more detail in this regard as does a legislative status map and chart prepared by Smith Moore Leatherwood.]


As previously reported on SocEntLaw, Connecticut’s benefit corporation legislation contains a unique “legacy-preservation provision” that is similar to the “asset lock” required for UK community interest companies. Invoking Connecticut’s legacy-preservation provision theoretically assures that a Connecticut benefit corporation’s assets are forever dedicated to charitable purposes or to other benefit corporations with similar “legacy-preservation provisions.” Connecticut’s benefit corporation statute is not effective until October 1, 2014.


Florida adopted both benefit corporation and a social purpose corporation statutes effective July 1, 2014. Thus, Florida becomes the fourth state with a flexible/social purpose corporation statute.


Minnesota joins Delaware and Colorado as one of the states that requires a special designation in the name of a general benefit corporation or a specific benefit corporation. Minnesota’s special designations are as follows: “GBC” or “SBC.” So, along with Delaware and Colorado “PBCs,” we now will have “GBCs,” “SBCs,” and “PBCs” in the social enterprise world. Minnesota’s statute becomes effective January 1, 2015.


The Nebraska benefit corporation statute follows very closely the B-Lab model legislation and took effect on April 2, 2014.

New Hampshire

A New Hampshire benefit corporation may be administratively dissolved if it neglects to file is required annual benefit report. The New Hampshire statute becomes effective January 1, 2015.


Utah’s benefit corporation statute also follows closely the B-Lab model legislation and is effective immediately. Moreover, the Utah Department of Commerce has created a very user-friendly guide to forming benefit corporations in Utah.

West Virginia

Effective July 1, 2014, West Virginia’s benefit corporation statute generally follows the B-Lab model legislation, but among other things relaxes the “independence” tests for adopting third-party standards and does not require the annual benefit report to disclose director compensation.


Finally, I have updated and posted to SSRN my social enterprise entity comparison chart listing all states with any form of social enterprise legislation (including citations to the relevant statutes).

Stay tuned: It will be interesting to see where the US stands as of the end of 2014 with regard to social enterprise legislation.


A real life battle over shareholder versus stakeholder primacy is playing out in New England. Market Basket, a family-owned supermarket chain with 71 stores and $4.6 billion in sales, reportedly is at the center of a “bet the company” dispute between management and shareholders. The dispute is particularly interesting for followers of social enterprise because it is being framed as a battle between the “shareholder model” and the “stakeholder model” of the corporation. I suspect that we will be learning much more about Market Basket in the coming days, but for now you can view NPR News Hour’s coverage here.


I am pleased to announce the publication of a new Bloomberg BNA Tax Management Portfolio: Social Enterprise by Non-Profits and Hybrid Organizations, No. 489-1st. Attorneys Elizabeth Minnigh and Robert Wexler joined me in writing this new Portfolio that we hope will become a valued resource for academics, practitioners, and students researching social enterprise law. The Portfolio addresses the legal and tax aspects of social enterprise as conducted by tax-exempt organizations and by hybrid for-profit legal forms.

A more detailed summary of the Portfolio (taken from Bloomberg BNA’s description) follows:

“This Portfolio begins with a look at traditional social entrepreneurship by tax-exempt organizations. It considers the overall tests for tax-exemption and then focuses on specific operational activities, including job training, microfinance, low-income housing, technical assistance, the sale of products to the poor, and publishing, to evaluate when those activities can be conducted within a tax-exempt organization. The Portfolio reviews other key issues that affect tax-exempt social enterprises, including the unrelated business income tax rules, the joint venture rules, and the use of for-profit subsidiaries of exempt organizations.

This Portfolio then examines the federal income tax and state law issues affecting investments in, or grants to, for-profit entities by tax-exempt organizations. Types of investments discussed include socially responsible investments (SRIs), mission-related investments (MRIs), and program related investments (PRIs). This Portfolio also examines expenditure responsibility grants to for-profit entities.

Finally, this Portfolio looks at the emergence of hybrid organizations in the United States, which are single for-profit legal entities that simultaneously serve a traditional business purpose and a social or charitable purpose. Specifically, within the past five years, twenty-five states and the District of Columbia have enacted statutes authorizing distinct types of legal entities that cater to social enterprise. The two primary types of such hybrid organizations are the benefit corporation and the low-profit limited liability company (“L3C”). Both types of such hybrid organizations, as well as certain other variants, are discussed in detail in the final portion of this Portfolio.”

Kauffman Foundation Announces Renovated and Expanded EshipLaw Website

Long a supporter of entrepreneurship, the Ewing Marion Kauffman Foundation has announced the renovation and expansion of its Entrepreneurship Law (“EshipLaw”) website. The improved website “includes a collection of resources on intersections of law with entrepreneurship and entrepreneurship education that can be relevant in several settings, whether you are an entrepreneurship educator, a student, an inventor, a business owner, or a lawyer or other advisor to entrepreneurs.”

The renovated and expanded EshipLaw website also hosts a brand new section focused solely on social enterprise law. This new section contains unique information and materials that law professors and other educators will find useful in connection with teaching social enterprise law in their classrooms and clinics. Check out the new social enterprise section of the EshipLaw website here.

Thanks to the Ewing Marion Kauffman Foundation for providing this terrific resource.

PS: Please forgive the shameless self-promotion, but yours truly is one of the new editors of the EshipLaw website. Suggestions for improvements to the website as well as contributions of new materials are welcome. Furthermore, in connection with the renovation and expansion, EshipLaw has published my essay entitled, “Gift Horses, Choosy Beggars, and Other Reflections on the Role and Utility of Social Enterprise Law.” I hope that you will find my essay an informative and entertaining read.