Law Commons^™

Keep Charitable Oversight In The Irs, Philip Hackney

Articles

Critics are increasingly calling for Congress to remove charity regulation from the IRS. The critics are wrong. Congress should maintain charity regulation in the IRS. What is at stake is balancing power between the state, charity as civil society, and the economic order. In a well-balanced democracy, civil society maintains its independence from the state and the economic order. Removing charitable jurisdiction from the IRS would blind the IRS to dollars placed in the charitable sector increasing tax and political shelters and wealthy dominance of charities as civil society. A new agency without understanding of, or jurisdiction over, tax cannot …

Basis And Bargain Sales: Income Tax And Other Concerns, Bridget J. Crawford, Jonathan G. Blattmachr

Elisabeth Haub School of Law Faculty Publications

In this article, the authors explain the income tax consequences of the sale during lifetime and at death of property for less than fair market value. The authors focus in particular on the tax consequences of a bargain sale by a transferor who wishes to confer some financial benefit on a family member, but leave the rest of her estate to charity. Generally speaking, death-time bargain sales may be preferable to similar transactions during lifetime, if the assets have a low basis pre-death, because of the step up in income tax basis under section 1014. The authors also discuss in …

The 1969 Tax Reform Act And Charities: Fifty Years Later, Philip Hackney

Articles

Fifty years ago, Congress enacted the Tax Reform Act of 1969 to regulate charitable activity of the rich. Congress constricted the influence of the wealthy on private foundations and hindered the abuse of dollars put into charitable solution through income tax rules. Concerned that the likes of the Mellons, the Rockefellers, and the Fords were putting substantial wealth into foundations for huge tax breaks while continuing to control those funds for their own private ends, Congress revamped the tax rules to force charitable foundations created and controlled by the wealthy to pay out charitable dollars annually and avoid self-dealing. Today, …

The Natural Property Rights Straitjacket: The Takings Clause, Taxation, And Excessive Rigidity, Eric Kades

Faculty Publications

Natural property rights theories have become the primary lens through which conservative jurists and scholars view the Constitution’s main property rights provision, the Takings Clause. One of their most striking arguments is that progressive income taxation — applying higher tax rates to higher incomes — is an unconstitutional taking of wealthy taxpayers’ property. This has become part and parcel of well-established battle lines between conservative property rights advocates and their liberal counterparts. What has gone unnoticed is that the very same argument deployed against progressive taxation also deems regressive taxation — applying lower tax rates to higher incomes — an …

Charitable Subsidies And Nonprofit Governance: Comparing The Charitable Deduction With The Exemption For Endowment Income, David M. Schizer

Faculty Scholarship

Charitable subsidies are supposed to encourage positive externalities from charity. In principle, the government can pursue this goal by evaluating specific charitable initiatives and deciding how much each should receive. Although the government sometimes makes this sort of fine-grained judgment, this Article focuses on two income tax rules that leave the government essentially no discretion about which charities to fund: the deduction for donations to charity ("the deduction") and the exemption of a charity's investment income ("the exemption"). With each subsidy, federal dollars flow automatically as long as charities satisfy very general criteria.

As a result, these subsidies are especially …

Rejecting Charity: Why The Irs Denies Tax Exemption To 501(C)(3) Applicants, Terri Lynn Helge

Faculty Scholarship

New charitable organizations generally must file an application for exemption (Form 1023) and await approval from the Internal Revenue Service. Unfortunately, the criteria the Internal Revenue Service uses to evaluate applications has not always been transparent. If an application is approved, the Internal Revenue Service determination letter and the application for exemption are required to be made publicly available and can be requested from the Internal Revenue Service or the organization itself. Prior to 2004, in the case of denials, neither the application nor the Internal Revenue Service’s correspondence setting forth its rationale for the denial were made publicly available. …

Solving Charity Failures, Brian L. Frye

Law Faculty Scholarly Articles

“Crowdfunding” is a way of using the Internet to raise money by asking the public to contribute to a project. In the past, asking a large number of people to contribute small amounts of money to a project was expensive and inefficient for most organizations and individuals. By greatly reducing transaction costs, crowdfunding enables anyone to inexpensively and efficiently seek small contributions to a project. While crowdfunding is a new model of fundraising, it has already transformed funding for the arts. For example, the crowdfunding platform Kickstarter distributed more than forty million dollars to the creators of almost seventy-five hundred …

The Role Of Charity In A Federal System, Brian Galle

Georgetown Law Faculty Publications and Other Works

This Article critiques the prevailing justification for subsidies for the charitable sector, and suggests a new alternative. According to contemporary accounts, charity corrects the failure of the private market to provide public goods, and further corrects the failure of government to provide goods other than those demanded by the median voter.

However, the claim that government can meet the needs only of a single “median voter” neglects both federalism and public choice theory. Citizens dissatisfied with the services of one government can move to or even create another. Alternatively, they may use the threat of exit to lobby for local …

Charity In The 21st Century: Trending Toward Decay, Roger Colinvaux

Scholarly Articles

The Article argues that the federal tax law framework relating to charitable organizations is decaying. Through an overview of the historical development of the law relating to charity in the 20th century, the Article shows that the statutory law has passively accommodated significant growth of the charitable sector without demanding any rigor of the sector in the form of positive requirements or quantitative measures. This has led to growth without meaningful oversight – a recipe for problems. The Article then provides an overview of many of the scandals that engulfed the sector during the early 21st century and shows that …

The Taxation Of Cause-Related Marketing, Terri Lynn Helge

Faculty Scholarship

With the economy in turmoil, charitable organizations are looking to nontraditional sources of financing to supplement contributions and fee-based revenues. One potentially lucrative source of revenue stems from cause-related marketing. Cause-related marketing is the public association of a for-profit company with a charitable organization to promote the company’s product or service in order to raise money for the charitable organization. Introduced almost twenty-five years ago, cause-related marketing has now become a $1 billion a year industry. Cause-related marketing has evolved beyond mere use of a charitable organization’s name to an apparent union for the purpose of promoting products that carry …

The Lds Church, Proposition Eight, And The Federal Law Of Charities, Brian Galle

Georgetown Law Faculty Publications and Other Works

This brief Commentary considers the merits of the argument that the Mormon Church's support for Proposition Eight violated federal tax law. I take as given the facts reported by the New York Times and other major news outlets. Although the facts are not really in dispute, much of the underlying law is. There are few clear guidelines governing lobbying by charities. In the end it is impossible to say with certainty whether the Church's conduct will have any tax-law repercussions. My conclusion that there is uncertainty, though, stands in contrast with existing claims that the expenditures of the LDS Church …

Third-Party Profit-Taking In Tax Exemption Jurisprudence, Darryll K. Jones

Journal Publications

Nothing is free, not even charity. In almost every case, a tax-exempt nonprofit organization must transact with profit-seekers to achieve the charitable goal for which the organization has been granted tax exemption. The organization will have to fund somebody's accession to wealth. It may be, for example, that a particular nonprofit organization need only hire one or two employees to deliver meals to elderly beneficiaries. Even in that circumstance, an organization must normally pay market rates for the labor necessary to achieve its charitable goal. Employees will profit; the law presumes as much, and we would be hard pressed to …

Tax Expenditures As Foreign Aid, David E. Pozen

Faculty Scholarship

Few issues in global politics are as contentious as foreign aid – how much rich countries should give, in what ways, to whom. For years, it has been a commonplace that U.S. policies are stingy. The Organization for Economic Cooperation and Development (OECD) routinely ranks the United States far behind its industrialized peers in official development assistance (ODA), measured as a percentage of gross national income (GNI). An endless parade of critics has implored the government to do more; some suggest that the Bush Administration's support for the Monterrey Consensus, which sets a goal of increasing assistance to 0.7% of …

Grasping Smoke: Enforcing The Ban On Political Activity By Charities, Lloyd Histoshi Mayer

Journal Articles

The rule that charities are not allowed to intervene in political campaigns has now been in place for over fifty years. Despite uncertainty about the exact reasons for Congress' enactment of it, skepticism by some about its validity for both constitutional and public policy reasons, and continued confusion about its exact parameters, this rule has survived virtually unchanged for all of those years. Yet while overall noncompliance with the income tax laws has drawn significant scholarly attention, few scholars have focused on violations of this prohibition and the IRS' attempts to enforce it.

This Article focuses on the elusive issue …

Hidden Foreign Aid, David Pozen

Faculty Scholarship

Few issues in global politics are as contentious as foreign aid – how much rich countries should give, in what ways, to whom. For years, it has been a commonplace that U.S. policies are stingy. The Organization for Economic Cooperation and Development (OECD) routinely ranks the United States far behind its industrialized peers in official development assistance (ODA), measured as a percentage of gross national income (GNI). An endless parade of critics has implored the government to do more; some suggest that the Bush Administration's support for the Monterrey Consensus, which sets a goal of increasing assistance to 0.7% of …

Remapping The Charitable Deduction, David Pozen

Faculty Scholarship

If charity begins at home, scholarship on the charitable deduction has stayed at home. In the vast legal literature, few authors have engaged the distinction between charitable contributions that are meant to be used within the United States and charitable contributions that are meant to be used abroad. Yet these two types of contributions are treated very differently in the Code and raise very different policy issues. As Americans' giving patterns and the U.S. nonprofit sector grow increasingly international, the distinction will only become more salient.

This Article offers the first exploration of how theories of the charitable deduction apply …

Charity, Publicity, And The Donation Registry, Brian Broughman, Robert Cooter

Articles by Maurer Faculty

Many Americans donate little or nothing to charity, but according to Robert Cooter and Brian Broughman, our social environment is the cause, not human nature. They propose a small policy change to increase transparency and elicit generosity inspired by experimental evidence about the nature of giving.

Charities And The Constitution: Evaluating The Role Of Constitutional Principles In Determining The Scope Of Tax Law's Public Policy Limitation For Charities, David A. Brennen

Law Faculty Scholarly Articles

This Article expands the discussion of whether tax-exempt charities, for constitutional law purposes, should be treated as government actors, as private actors or as something in between. While government actors are subject to constitutional law restrictions concerning discrimination and free speech, private non-government actors are not generally subject to these same restrictions. Although tax-exempt charities are often thought of as sovereigns and, thus, government-like, the fact remains that charities are private entities created to serve public purposes. As private entities, charities - like all other private entities - are not necessarily bound by constitutional law principles. Still, the many “public” …

When Charity Aids Tax Shelters, Darryll K. Jones

Journal Publications

How to deal with societal vice is always an interesting question. The body politic must first achieve a level of maturity that allows it to formulate a consensus regarding precisely what constitutes "vice." By its nature, vice is an activity to which some ascribe no harm and others view as inherently harmful. Achieving consensus is therefore no easy task, and then, recognizing that supply would not exist but for demand, and vice-versa, the body politic must determine whether enforcement resources are best directed towards consumers, towards producers, or equally towards both. Here, questions of fairness and efficiency arise. Is it …

Tax Expenditures, Social Justice And Civil Rights: Expanding The Scope Of Civil Rights Laws To Apply To Tax-Exempt Charities, David A. Brennen

Law Faculty Scholarly Articles

In recent years, courts have decided a number of cases in which private organizations discriminated against people based solely on their race, gender, sexual orientation, or other immutable traits. For example, in 2000, the Boy Scouts of America revoked a New Jersey man's membership in the Boy Scouts because he was gay. New Jersey's supreme court held that the Boy Scouts' action violated New Jersey's anti-discrimination law. Notwithstanding the state court's holding, the United States Supreme Court concluded that the First Amendment prevented any court from forcing the Boy Scouts to keep a gay man as a member of its …

The Proposed Corporate Sponsorship Regulations: Is The Treasury Department "Sleeping With The Enemy"?, David A. Brennen

Law Faculty Scholarly Articles

In 1993, the Treasury Department (the Treasury) issued a proposed regulation outlining when money received by a charity from a corporate sponsor would be subject to federal income tax. In defining the phrase "trade or business," the proposed regulation addresses the extent to which sponsorship payments to charities will be treated by the Treasury as having been made in return for advertising on behalf of the sponsor, thus subjecting the payment to income tax. In the proposed regulation, the Treasury concludes that a charity's use of a corporate sponsor's name in the title of a charitable event is a mere …