Sunday, September 22, 2013

Chodorow: Charity with Chinese Characteristics

Adam Chodorow (Arizona State) has posted Charity with Chinese Characteristics, UCLA Pacific Basin Law Journal (forthcoming).  Here is the abstract:

Over the past 30 years, scholars and activists have called on the Chinese government to ease the registration and oversight rules governing non-governmental organizations (NGOs) and to increase funding for such organizations by, among other things, broadening the charitable deduction. While China has made significant progress in this regard, the government continues to throw up roadblocks for NGOs, suggesting that it has not fully embraced this path.

This article considers the extent to which the justifications for a broad charitable deduction adduced in the West make sense in China. The goal is to develop a normative basis consistent with Chinese values and interests that Chinese authorities would find compelling and which might lead to additional efforts to develop China’s civil sector. This article also considers the extent to which China’s political and social culture may affect such efforts, concluding that, even if China were to adopt Western-style laws governing NGOs and provide for a broad charitable deduction, China’s culture would shape both how government officials implement the laws and how the Chinese people respond to them, leading to a system of charity, but one with Chinese characteristics.

Lloyd Mayer

September 22, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Cords: Charity Begins at Home?

Danshera Cords (Albany) has posted Charity Begins at Home? An Exploration of the Systemic Distortions Resulting from Post-Disaster Giving Incentives.  Here is the abstract:

Looking back to the turn of the twenty-first century, there have been many major disasters, both here and abroad. These disasters all require significant private charitable assistance to provide for victims immediate needs and also see the area through cleanup and recovery.

This article reviews a number of past efforts to encourage charitable giving through temporary tax provisions. While these are well-meaning efforts on Congress’ part, temporary provisions have some significant disadvantages. First, they treat different victims with similar harm differently. Second, they are not enacted following each major disaster. Third, both equity and efficiency would be improved if disaster relief contributions were addressed in a single permanent provision with fixed triggers and established thresholds for incentivizing charitable giving for disaster relief.

This article concludes that a permanent approach should be adopted to improve the aid available to disaster victims. This would also reduce political infighting at the time a disaster has occurred. Ex ante any Congressional district could be hit by a major disaster, everyone should support a permanent solution.

Lloyd Mayer

September 22, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Galle: Social Enterprise

Brian Galle (Boston College) has posted Social Enterprise: Who Needs It?, 54 Boston College Law Review (forthcoming 2013).  Here is the abstract:

State statutes authorizing firms to pursue mixtures of profitable and socially-beneficial goals have proliferated in the past five years. In this invited response essay, I argue that for one large class of charitable goals the so-called “social enterprise” firm is often privately wasteful. While the hybrid form is a bit more sensible for firms that combine profit with simple, easily monitored social benefits, existing laws fail to protect stakeholders against opportunistic conversion of the firm to pure profit-seeking. Given these failings, I suggest that social enterprise’s legislative popularity can best be traced to a race to the bottom among states competing to siphon away federal tax dollars for local businesses. Not all hybrid forms inevitably are failures, however. For example, the convertible debt instruments proposed by Brakman Reiser and Dean -- the inspiration for this response -- offer a promising route forward for “cold glow” firms wishing to promise to clean up some easily-measured but harmful business practices.

Lloyd Mayer

September 22, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Friday, August 23, 2013

Smith: Chevron's Conflict with the Administrative Procedures Act

Once I put away the blogging about the Van Hollen v. IRS case,  I started to tackle the pile of journals and magazines that the College of Law's circulation department dutifully sends me daily.  And what did I see on the cover of the Virginia Tax Review, Volume 32, No. 4 (Spring 2013): 

  • Chevron's Conflict with the Administrative Procedures Act by Patrick J. Smith, a partner with Ivins, Phillips & Barker in Washington D.C.

Given the apparent issue in the Van Hollen case, this seems very timely - it's in the "to read over the weekend pile."   Which weekend, of course, remains to be seen,  but that has nothing to do with the article!

 

EWW

 

 

August 23, 2013 in Federal – Judicial, In the News, Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Friday, August 2, 2013

The Profitability of Nonprofits

Oyvind Bohren (BI Norwegian Business School - Department of Financial Economics) and Morten G. Josefsen (Financial Supervisory Authority of Norway) have posted Stakeholder Rights and Economic Performance: The Profitability of Nonprofits to SSRN.  Here is the abstract:

This paper explores whether ownership matters in a fundamental sense by comparing the performance of stockholder-owned firms with the much less analyzed nonprofit firms. No stakeholder has residual cash flow rights in nonprofit firms, and the control rights are held by customers, employees, and community citizens. Accounting for differences in size and risk and comparing only firms in the same industry, we find that stockholder-owned firms do not outperform nonprofit firms. This result is consistent with the notion that the monitoring function of stockholders may be successfully replaced by other mechanisms. We find evidence that product market competition may play this role as a substitute monitoring mechanism.

NAM

August 2, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Brand Partnerships as Joint Ventures

Martha Reeves (no affiliation provided) has posted Brand Partnerships as Joint Ventures: A Comparison of Two Partnerships in the Small Non-Profit Arena to SSRN.  Here is the abstract:

Through a case study approach, this article explores how non-profits can effectively participate in joint ventures with larger, for-profit institutions. In addition to offering a new product or service, these partnerships should build the brands of both organizations. The similarity between for-profit business joint ventures and non-profit joint ventures is examined. The author compares two non-profit joint ventures – one successful and one unsuccessful – to demonstrate the importance of several aspects of joint ventures. Just as in business ventures, non-profits must carefully select their partners, have a clear understanding of roles and responsibilities, engage in open communication, and have a written charter of each partner's roles and responsibilities. Most importantly, non-profits must ensure that they are treated as equal partners and that their brand is reinforced in any communication to their stakeholders.

NAM

 

August 2, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 31, 2013

Tax or Penalty? The Assessable Payment under the Affordable Care Act

Riley Lovendale (Boston College, J.D. 2014 expected) posted Tax Versus Penalty, Round Two, Fight!  Intepreting the PPACA's Assessable Payment as a Tax for Federal Funding Costs Allowances to SSRN.  Here is the abstract:

The Patient Protection and Affordable Care Act (PPACA), significant health care reform enacted in 2010, imposes an “assessable payment” on certain employers that fail to offer affordable health insurance to their employees. The ambiguity of the exaction’s title poses a planning problem for some nonprofits receiving federal grant funds with restrictions imposed by the Office of Management and Budget’s Circular A-122. Circular A-122 permits these restricted grant funds to be used for “taxes,” but not for “penalties.” On June 28, 2012, the U.S. Supreme Court, held in National Federation of Independent Business v. Sebelius that the PPACA’s individual mandate’s “shared responsibility payment” could, for constitutional purposes, be interpreted as a tax. This Note argues that the PPACA’s assessable payment should be interpreted as a tax by applying the Supreme Court’s recent tax versus penalty analysis and analyzing the exaction’s characteristics and effect on employer behavior. This interpretation will provide organizations with predictability in planning and ensure that Congress does not escape political accountability for imposing taxes by using the ambiguous term “assessable payment.”

NAM

July 31, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Friday, July 19, 2013

Dent: Probing Corporate Governance Without Shareholders

Dent_georgeGeorge Dent (Case Western) has posted on SSRN Probing Corporate Governance Without Shareholders: A Cautionary Lesson From Non-Profit Organizations.  Here is the abstract:

For over 80 years, debate over corporate governance has centered on the balance of authority between the board and shareholders. One side in this debate advocates “shareholder primacy”, so that directors would actually be chosen by and accountable to the stockholders. The other side touts “director primacy” and keeping shareholders weak. This side claims that directors who are free of shareholder control would strive to maximize long-term firm value, and have the wisdom and independence to pursue this goal intelligently and conscientiously.

The boards of non-profit organizations (“NPOs”) are self-perpetuating: They are not answerable to shareholders because they have no shareholders. If director primacists are right, NPO boards should function as director primacists wish corporate boards would. The reality is quite the contrary. Commentators agree that NPO boards are generally worse than corporate boards. This brief article describes the functioning of NPO boards, discusses why they are so dysfunctional, and what lessons their example holds for corporate governance.

LHM

July 19, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Nonprofit and Voluntary Sector Quarterly June 2013 Issue

NVSQThe Nonprofit and Voluntary Sectory Quarterly has published its June 2013 issue.  Here is the table of contents:

From the Editors' Desk

  • Femida Handy, Jeffrey L. Brudney, and Lucas C.P.M. Meijs, From the Editors' Desk
Symposium: Faith-Based Organizations in Context, Edited by Jo Anne Schneider
  • Jo Anne Schneider, Introduction to the Symposium: Faith-Based Organizations in Context
  • Wolfgang Bielefeld and William Suhs Cleveland, Defining Faith-Based Organizations and Understanding Them Through Research
  • Wolfgang Bielefeld and William Suhs Cleveland, Faith-Based Organizations as Service Providers and Their Relationship to Government
  • İpek Göçmen, The Role of Faith-Based Organizations in Social Welfare Systems: A comparison of France, Germany, Sweden, and the United Kingdom
  • Jo Anne Schneider, Comparing Stewardship Across Faith-Based Organizations
  • Patricia A. Wittberg, Faith-Based Umbrella Organizations: Implications for Religious Identity
  • Jill Witmer Sinha, Unintended Consequence of the Faith-Based Initiative: Organizational Practices and Religious Identity Within Faith-Based Human Service Organizations

Article

  • Khaldoun AbouAssi, Hands in the Pockets of Mercurial Donors: NGO Response to Shifting Funding Priorities

Research Note

  • Joanne G. Carman and Rebecca Nesbit, Founding New Nonprofit Organizations: Syndrome or Symptom?

Book Reviews

  • David C. Hammack, Book Review: Civic Engagement in Postwar Japan: The Revival of a Defeated Society, by R. Kage
  • Marne Bariso, Book Review: The Volunteer Management Handbook: Leadership Strategies for Success, by T.D. Connors
  • Wesley E. Lindahl, Book Review: The Science of Giving: Experimental Approaches to the Study of Charity, by D.M. Oppenheimer and C.Y. Olivola

LHM

July 19, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Plerhoples: Is Chick-Fil-A a Social Enterprise?

Alicia-Plerhoples3Alicia Plerhoples (Georgetown) has posted Is Chick-Fil-A a Social Enterprise?: The Place of Conservative Values within Social Enterprise Legislation on SSRN.  Here is the abstract:

This article examines whether recent social enterprise legislation (i.e., the benefit corporation and its various iterations) accommodates companies that have ideologically conservative social missions in addition to internal governance structures and operations that embrace corporate sustainability principles. The article examines whether the benefit corporation and the social and environmental standards employed to measure “general and specific public benefits” are ideologically neutral, and explores what normative values are incorporated into social enterprise legislation. This examination will be conducted through inquiring into whether Chick-fil-A, the popular U.S. fast food restaurant that donates to conservative causes and nonprofit organizations, and also embraces environmentalism and fair employment standards in its internal governance structure, could re-incorporate as a benefit corporation. The author argues that while the corporate legal form might be ideologically neutral, measurements of social and environmental benefits play a critical role in determining what constitutes sustainability and the public benefit produced. These measurements often incorporate ideologically liberal values and exclude conservative values.

LHM

July 19, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Ji: Burning Man

Yuan JiYuan Ji (Wilson Sonsini) has posted Burning Man: A Case Study of Altruism Thriving in a For-profit Organizational Form and the Rationales for LLC-to-Nonprofit Conversion, 9 Hastings Business Law Journal 449 (2013).  Here is the abstract:

Burning Man is a temporary city of over 50,000 citizens that exists for one week every year in Nevada’s Black Rock Desert. Burning Man is perhaps best known in popular culture for its celebration of interactive art, experimental community building, gift economy, and ritual burning of a large wooden structure in the shape of a man. The case study of Burning Man is used to illustrate that an altruistic organization, one that is ideologically committed to the provision of public goods and not driven by profit, can nevertheless thrive in a for-profit legal form while staying true to its mission. Depending on organization-specific conditions, the nonprofit form can be, but does not necessarily have to be, the best structure for the provision of altruism and public goods (or quasi-public goods). As an organization evolves and becomes more complex overtime, however, the organization form that best serves its mission can change as well. Still, the nonprofit form alone neither guarantees altruistic commitment nor is immune from abusive practices within the management or board of directors. This Article discusses the theories on nonprofit formation that make persuasive rationales for Burning Man’s conversion to a nonprofit structure; it also makes specific recommendations for better organizational accountability and transparency in the Project’s current and future operations.

LHM

July 19, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Hackney: What We Talk About When We Talk About Exemption

Philip HackneyPhilip Hackney (LSU) has posted What We Talk About When We Talk About Exemption, 33 Virginia Tax Review (forthcoming).  Here is the abstract:

Under the Internal Revenue Code, certain nonprofit organizations are granted exemption from federal income tax (“tax-exemption”). Most tax-exemption rationales assume tax-exemption is a subsidy for organizations such as charities that provide some underprovided good or service. These theories assume there should be a tax on the income of nonprofit organizations but provide no justification for this assumption. This article contributes to the literature by examining the corporate income tax rationales as a proxy for why we might tax nonprofit organizations. The primary two theories hold that the corporate tax is imposed to: (1) tax shareholders (“shareholder theory”), and (2) regulate corporate manager control over large sources of wealth (“regulatory theory”). The shareholder theory supports the basic tax-exemption organizational structure preventing the distribution of earnings to private shareholders. However, the shareholder theory does not support tax-exemption for mutual benefit organizations such as business leagues because their members are arguably the equivalent of shareholders. The regulatory theory highlights that exempting an organization from income tax removes a regulatory regime. As a result of tax-exemption, organizations become subject to another regulatory regime with some federal oversight of political activity and self-dealing transactions. This article makes some tentative steps towards determining when that substitution of a regulatory regime might be appropriate. The article concludes the regulatory regime imposed on charitable organizations is sufficient to substitute for the regulatory role of the corporate income tax, but concludes that the regulatory regime for mutual benefits is lacking. This article submits it is time to revamp our tax-exempt structure for mutual benefit tax-exempt organizations.

LHM

July 19, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Filistrucchi & Prufer: Nonprofits are Not Alike

Jens Prufer Lapo FilistrucchiLapo Filistrucchi and Jens Prufer (both Tiburg Unviersity School of Economics and Management) have posted on SSRN Nonprofits are Not Alike: The Role of Catholic and Protestant Affiliation.  Here is the abstract:

There are no generally accepted results regarding the objectives, decisions, and economic outcomes of nonprofit organizations, as compared to forprodit or public firms. We posit that this inconclusiveness is due to a too broad definition of nonprofits and that different types of nonprofits exist. This conjecture is investigated by constructing a model in which nonprofits differ by religious affiliation and testing the resulting hypotheses on the observed behavior of German nonprofit hospitals. We find that Catholic and Protestant nonprofits adopt significantly different strategies in the market. This confirms our conjecture and the importance of religion for economic outcomes.

LHM

 

July 19, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Cowan: Assignment of Income at the Ivory Tower

Mark CowanMark Cowan (Boise State College of Business and Economics) has posted on SSRN Assignment of Income at the Ivory Tower: Relaxing the Tax Treatment of Services Donated to Charities by their Employees, Journal of College and University Law (forthcoming).  Here is the abstract:

When a faculty member donates time to a college or university by, for example, teaching a summer course for no compensation, the federal income tax treatment of the donation can take one of two forms. One possibility is that the donation will have no tax consequences. The faculty member realizes no income from the donation and gets no charitable deduction. A second possibility is that the faculty member will be required to recognize taxable income equal to the value of the services provided and then may (subject to certain limits) be allowed a charitable contribution deduction. In many cases, the income and deduction do not fully offset, resulting in negative tax consequences for the faculty member. This second possibility occurs when the faculty member directs where the funds saved by the donation are used within the institution. Since faculty members normally would prefer to control the specific use of the saved funds, many donations would result in negative tax consequences sufficient to stifle the donation in the first place. This Article argues that the tax law should be clarified and relaxed to allow faculty members (and other employees of charitable organizations) to donate time to their employer institutions on a tax-free basis in more situations than is currently the case. Alternatively, the Article suggests ways for charities to encourage donations of time by employees, even in the absence of a favorable law change.

LHM

July 19, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Thursday, July 18, 2013

Colinvaux: Charitable Contributions of Property

Roger ColinvauxRoger Colinvaux (Catholic University) has posted Charitable Contributions of Property: A Broken System Reimagined, 50 Harvard Journal on Legislation (forthcoming 2013).  Here is the abstract:

On average, nearly $46 billion of property is given to charitable organizations each year, about twenty-five percent of the total charitable deduction. This makes the charitable contribution deduction for property a tax expenditure within a tax expenditure, yet it is rarely analyzed as such. It emerged as part of a noble effort to encourage contributions to worthy organizations. But the deduction for property has never worked well. The general rule allowing a deduction based on the fair market value of the property may have some intuitive appeal, but its implementation has yielded numerous exceptions and immense complexity. The Article argues that the extensive historical effort to allow a deduction for property contributions is a failure. Given the substantial direct and indirect costs involved, the uncertain benefit to the donee from property contributions, and the absence of any affirmative policy to favor property contributions as such, it is time to reverse the general rule and not allow a charitable deduction for property contributions. Reversing the general rule would provide many benefits — increased revenue, improved tax administration, fewer abusive transactions, a simpler and more equitable tax code, and a preference for cash. Exceptions to the general rule of disallowance may be warranted, but any exception should be analyzed and fashioned according to whether it provides a measurable benefit to the donee. By following a measurable benefit to the donee standard, emphasis will be placed on providing a tax benefit that is administrable and that is based on the goal — donee benefit. Any resulting complexity should be viewed as a cost of the incentive, and weighed accordingly in deciding whether it should be provided.

LHM

July 18, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Colombo: Law Schools Running Their Own Law Firms

John ColomboJohn Colombo (Illinois) has posted The Federal Tax Exemption Aspects of Law Schools Running Their Own Law Firms.  Here is the abstract:

A current hot topic in legal education is the law-school-sponsored law firm. Bradley T. Borden and Robert J. Rhee introduced the idea in a short article published in the South Carolina Law Review and the concept was soon picked up by articles in the National Law Journal, the ABA Journal and others. The purpose of this essay is to explore the federal tax-exemption and UBIT questions raised by the law-school-sponsored law firm. I conclude that a law firm operated as a single-member LLC with the sponsoring law school as the single member offers the best protection for the law school's underlying exempt status, and also should avoid issues with the UBIT.

LHM

July 18, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 12, 2013

Miller Publishes "Fixing 501(c)(4): Recalibrating the Tax Subsidy for Lobbying and Political Activity"

David S. Miller (Cadwalader, Wickersham & Taft, New York) has published Fixing 501(c)(4): Recalibrating the Tax Subsidy for Lobbying and Political Activity.  The abstract follows:

While the surge in 501(c)(4)s that led to the current IRS scandal is widely attributable to Citizens United, it was a very deliberate IRS action – the decision to exempt donations to 501(c)(4)s from gift tax – that was equally responsible for the unprecedented spending by 501(c)(4)s in the 2012 election.

This paper describes the history of the gift tax as applied to donations to 501(c)(4)s, discusses the policy implications, and then proposes a legislative solution. 

First, under a "disclosure or tax" rule, donations to a tax-exempt organization that engages in any substantial amount of lobbying or campaigning would be exempt from gift tax only if the organization discloses the name of the donor in accordance with the rules in section 527.  

Second, any organization that engages in any substantial amount of lobbying or campaigning would be taxable on all its investment income.  

And finally, appreciated property donated to any organization that engages in a substantial amount of lobbying or campaigning would be treated as sold. 

The effect of these provisions would be an extension of the section 527 rules to organizations that substantially lobby or campaign, except that (i) any organization that substantially lobbies or campaigns would be subject to tax on all of its investment income (and not only the lesser of investment income and the amount spent on campaigning, as is the case today under section 527(f)), and (ii) the organization could keep the name of a donor anonymous if the donor were willing to be subject to gift tax.

VEJ

June 12, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Sunday, June 2, 2013

Mayer & Ganahl: Taxing Social Enterprise

Joseph Ganahl and I have posted Taxing Social Enterprise, 66 Stanford Law Review (forthcoming 2014).  Here is the abstract:

The fairly strict divide in the United States between for-profit and nonprofit forms presents a quandary for many entrepreneurs who want to combine doing good with doing well. On the one hand, for-profits offer great flexibility and access to capital and so attract entrepreneurs who would like to take advantage of the ability of for-profits to scale up rapidly to meet growing demand. At the same time, however, for-profit forms also limit entrepreneurs’ ability to engage in philanthropy, due to the fiduciary duties managers owe to the equity holders. On the other hand, nonprofits offer their founders the freedom to prioritize public benefit but limit both their access to capital, in large part due to the bar on equity financing for a nonprofit, and their flexibility in addressing changing societal needs as a result of constraints in the law designed to deter nonprofits from straying into activities unrelated to their narrow primary mission. Hybrids — low-profit limited liability companies, benefit corporations, and other related forms — have been touted as the “both-and” solution to this problem by marrying the capital and innovation that results from the ability to generate a profit for investors with the public benefit goals that characterize most nonprofits.

Since the first hybrid enabling law was passed in Vermont in 2008, the number of states offering hybrid forms has grown steadily, as has the number of entrepreneurs choosing statutory hybrids as a middle road between the for-profit and the nonprofit. Plaudits for and criticism of the hybrid form have also proliferated. Proponents have lauded their ability to facilitate socially conscious enterprise. Detractors have questioned the viability of the hybrid form and have suggested that they create more fiduciary conflicts than they resolve. To date, however, there has been no serious scholarly publication addressing the appropriate tax treatment of hybrid entities even though some supporters of hybrids have asserted that these forms deserve beneficial tax treatment. In this Article, we intend to close that gap by thoroughly examining the arguments for tax preference and the likely consequences that would flow from offering such preference.

We accept the fact that hybrid forms have gained a firm foothold in the legal landscape and expect that they will increase in prominence and influence. We contend, however, that offering nonprofit-like tax benefits to hybrid entities will likely have a deleterious effect, not only on the charitable sector and the public fisc, but possibly even on hybrids themselves. The Article concludes with some proposals for possible modifications to existing tax laws that would acknowledge hybrids’ virtues while not exacerbating their potential weaknesses.

LHM

June 2, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Faulhaber: Charitable Giving, Tax Expenditures, and the Fiscal Future of the European Union

Lilian V. Faulhaber (Boston University) has posted Charitable Giving, Tax Expenditures, and the Fiscal Future of the European Union.  Here is the abstract:

This paper focuses on several cases decided by the Court of Justice of the European Union in recent years. In these cases, the CJEU struck down geographic limitations on tax expenditures for charitable giving, thereby leaving Member States with a choice. Member States that chose not to eliminate their tax expenditures entirely would have to extend them to beneficiaries across the European Union. Those that did not want to extend these benefits to the rest of the European Union, however, would have to eliminate their tax expenditures and perhaps replace them with direct subsidies.

The Court has thus effectively forced Member States into either subsidizing each other’s charitable sectors or no longer using their tax systems to encourage charitable giving. This paper shows that most Member States have chosen the first option, meaning that they are engaged in a web of horizontal subsidization. In the absence of any supranational taxing authority in the European Union, this horizontal subsidization represents a new model of fiscal federalism, where taxing and spending decisions are spread between Member States, rather than assigned vertically to a centralized government. This new model could arguably allow the Member States to retain the benefits of both centralization and decentralization, with Member States now paying for benefit spillovers yet still retaining the competition and representation of political preferences generally associated with decentralized systems.

However, horizontal subsidization should raise significant concerns because of the way that the Court reached its decisions in cases considering tax expenditures. In order to arrive at horizontal subsidization, the Court ignored both the economic equivalence of tax expenditures and direct expenditures and the fundamental regulatory and cultural differences between Member State charitable sectors. By prioritizing formalism over functionalism and overlooking the remaining differences between Member States, the Court distorted Member State policy choices, favored certain types of charitable organizations, and created incentives for Member States to increase barriers to entry to their charitable sectors. This paper suggests that the CJEU’s tax expenditure jurisprudence is thus more likely to be a cautionary tale than a model for future integration.

LHM

June 2, 2013 in International, Publications – Articles | Permalink | Comments (0) | TrackBack (0)

Colinvaux: Rationale and Changing the Charitable Deduction

ColinvauxRoger Colinvaux (Catholic) has posted Rationale and Changing the Charitable Deduction, 138 Tax Notes 1453 (2013).  Here is the abstract:

There are two principal rationales for the charitable deduction. Depending upon choice of rationale, some tax reform changes are suggested and others are not. A base measurement rationale suggests eliminating the deduction for unrealized appreciation, keeping the benefit as a deduction and not a credit, not adopting caps or a nonitemizer deduction, and protecting the tax base by narrowing the class of organizations eligible to receive deductible contributions. A subsidy rationale, depending upon which strand is emphasized, might favor a more equitable tax benefit in the form of a credit or through caps or a nonitemizer deduction, and could lead to preferring some organizations over others. Both rationales are consistent with placing a floor under the deduction, and narrowing its scope. Present law presents a confusing mix of policies and priorities. Tax reform presents an opportunity to reconsider the role of the charitable deduction in the tax system and to act accordingly.

LHM

June 2, 2013 in Publications – Articles | Permalink | Comments (0) | TrackBack (0)