August 23, 2012
Red States, Blue States
The Chronicle of Philanthropy released a study on Monday showing that "red states" give more to charity than "blue states." Using data from 2008 tax returns, the authors compared charitable contributions to "discretionary income," which they define as income left over after paying for food, clothing, health care, child care, housing, taxes, and other necessities.
The study identified several patterns that seem to have caught the eye of the media, but that probably won't surprise those already familiar with charitable giving patterns. The first is that the states whose residents gave the highest percentage of their discretionary income to charity all voted for McCain in 2008, while those whose residents gave the lowest percentage voted for Obama. Another finding is that households earning $50,000 to $75,000 a year give a higher percentage (7.6% of discretionary income) than other individuals. One finding I hadn't seen before but that shouldn't really surprise us is that wealthy individuals who live in economically diverse neighborhoods give a higher percentage of their income than wealthy individuals who live amongst themselves.
The study also suggests that religious motivations play a large role in incentivizing charitable giving, noting that two of the nine most generous states (Utah and Idaho) have large Mormon populations and that the other top givers are in the Bible Belt. To its credit, the study examined whether the results change when religious giving is ignored, and finds that they do. New York rises from 18th to 2nd in generosity, for example, and Pennsylvania from 40th to 4th. However, the study doesn't seem to break down the percentage given to groups that assist the poor, in contrast to organizations like museums and private schools and universities. And as I've argued in my scholarship, knowing who is giving to what is necessary for a full understanding of charitable giving patterns and policy.
Miranda Perry Fleischer
August 21, 2012
Is California the Next to Tackle Nonprofit Hospitals
A tidbit from Fitch Ratings via Reuters:
Fitch views the increased scrutiny of the tax-exempt status of
California's nonprofit hospitals with concern given the added financial pressure
it could present if the tax-exempt status was revoked. The California Senate
Select Committee on Charity Care and Nonprofit Hospitals began hearing arguments
last week considering whether hospitals provide sufficient charity and community
benefit to justify their tax-exempt status. A state audit published in early
August showed that there is no defined amount of community benefits required
from nonprofit hospitals, and the amounts they provide vary widely.
See also this report issued by the Califonia Nurses Association. So will California be the next state to tackle tax exemption for nonprofit hospitals? If so, I hope they do a better job than Illinois . . .
August 20, 2012
Churches, Money and Tax Exemption
An article posted in today's Chicago Tribune digital edition (free subscription required), which appears to have originally come from the Economist, is a very interesting look at the finances and financial management of the Catholic Church in America. Using data from bankruptcy filings by dioceses that faced large damage awards over sexual abuse, the article paints a picture of financial mismanagement, if not skulduggery. One paragraph sort of sums it up:
The picture that emerges is not flattering. The church’s finances look poorly co-ordinated considering (or perhaps because of) their complexity. The management of money is often sloppy. And some parts of the church have indulged in ungainly financial contortions in some cases--it is alleged--both to divert funds away from uses intended by donors and to frustrate creditors with legitimate claims, including its own nuns and priests. The dioceses that have filed for bankruptcy may not be typical of the church as a whole. But given the overall lack of openness there is no way of knowing to what extent they are outliers.
The last sentence is, I think, particularly important. Churches do not have to file a Form 990 or an application for exemption on Form 1023. We know virtually nothing about how they manage their money, yet we grant tax exemption virtually automatically to any entity calling itself a church.
Others have questioned whether churches should receive tax exemption at all (I happen to be in the camp that says "no," provided they get an unlimited deduction for what I would classify as charitable expenditures, which would not include building expenses/maintenance/pastor and staff salaries, etc. - but I realize this is an issue on which reasonable people can and should disagree). But I view this story as less about the merits of exemption than the merits of financial disclosure by exempt charities. Churches need to file a 990 like everyone else. We need disinfecting sunlight on their financial operations, particularly when folks starting hiding behind God as the rationale for their actions, many of which end up being very un-god-like. And for those of you who might claim that subjecting churches to information filing on a 990 is a violation of the free exercise clause . . . well, I'd like to see that case litigated.