Sunday, December 30, 2012
New Jersey law mandates that only nonprofit groups can obtain contracts to run the Correction Department's halfway houses. Private companies are barred from the system. Experts praise the halfway-house model as a potentially important tool to help inmates make the return to society. The system in New Jersey once included many mom-and-pop outfits that ran neighborhood-based facilities. In recent years, however, the state has winnowed the number of operators, and two nonprofit groups -- The Kintock Group and Education and Health Centers of America -- now receive about 85 percent of the halfway-house budget.
However, the system in New Jersey is troubled. Earlier this year, The New York Times ran a series of articles in which it described escapes, violence, gang activity, drug use and other problems at New Jersey halfway houses. Today's Times is alleging that all is not well with the system. According to The Times, federal disclosure records reveal that Kintockpaid its founder, David D. Fawkner, about $7 million in salary and benefits over the past decade. The agency also paid Mr. Fawkner's daughter, brother-in-law and son-in-law more than $2.5 million during that period. The Times also alleges that:
The nonprofit agency hired the brother-in-law as a consultant even though he has no corrections experience and lives in California. And it employed the son-in-law to run a subsidiary unrelated to its mission: duplicating DVDs and other electronic media.
Meanwhile, the other nonprofit operator, Education and Health Centers of America, is reportedly a nonprofit arm of a for-profit entity, Community Education Centers, to which it funnels money.
The nonprofits are denying any wrong doing. The report is well-worth reading. After you have read it, come to your own conclusion on the state of the halfway-house system in the Garden State.
Saturday, December 29, 2012
Earlier this month, ProPublica announced that it had received a copy from the IRS of the Form 1024 (Application for Recognition of Exemption) for claimed 501(c)(4) Crossroads GPS in response to a public-records request. While ProPublica focused primarily on the apparent disconnect between the planned activities listed on the application and the actual activities of Crossroads GPS, it also acknowledged that the IRS released the application despite the fact it is still pending. While the IRS on discovering this apparent error warned ProPublica that publishing unauthorized returns or return information was a felony, ProPublica decided to proceed with its story after concluding that its actions were not covered by the relevant statute and also furthered strong First Amendment interests. The ProPublica story is part of a series on the activities of Crossroads GPS and other nonprofit organizations during the 2012 election, with the most recent story focusing on the role of such groups in the Montana U.S. Senate race.
While not yet reported publicly, I have reliable information that attorneys for several other, conservative nonprofit organizations with pending applications have been contacted by the IRS and informed that the IRS released those applications as well. If correct, their release indicates a serious breakdown in the IRS Exempt Organizations Division's procedures for keeping pending applications confidential. There is nothing at this point, however, to indicate that the release or releases here were anything but accidental, especially since the applications will be publicly disclosable if and when the applications are granted. This situation therefore appears to be different on that score from the earlier reported release of the always confidential Schedule B to the Form 990, involving the National Organization for Marriage.
UPDATE: ProPublica has now reported on the IRS applications of five other "conservative dark money groups", including providing links in the article to copies of the applications (with certain financial information redacted).
Bloomberg raised this question last month when it published an article titled Tax-Exempt Firm Gets $600 Million Profit Flying First Class. The firm at issue is the Code section 501(c)(6) American Bureau of Shipping, which inspects ships and sets maritime standards around the world. The cited profits are over a seven-year period (2004 to 2010), during which time the organization's chief executive officer also received compensation totalling $21.7 million. According to Bloomberg, the firm is not alone - the article also cited such well-known groups as the National Football League and the National Hockey League as well as more obscure but highly profitable organizations such as the U.S. Polo Association, which collects royalties on annual retail sales of $1 billion. It also contrasted the US tax treatment of such entities with that of European authorities, who tax the European affiliate of the American Bureau of Shipping. Yet nothing in the article indicates that these organizations are not in compliance with the existing provisions and requirements of section 501(c)(6). Which raises the question - is it time to revisit the rules for non-charitable, tax-exempt organizations?
Hat tip: EO Tax Journal.
Steven H. Sholk has released the most recent update of his A Guide to Election Year Activities of Section 501(c)(3) Organizations. Weighing in at 271 pages, it provides a comprehensive overview of this complicated and fact-sensitive area.
Hat tip: Tax Prof Blog.
Friday, December 28, 2012
Alison Dunn (Newcastle) has posted Using the Wrong Policy Tools: Education, Charity, and Public Benefit, 39 J. L. & Soc'y 491 on SSRN. Here is the abstract:
A recent decision on the application of public benefit under the Charities Act 2006 sidestepped the political debate surrounding the charitable status of independent fee‐charging schools. The broader political context nevertheless underscores the legislative reforms, and this article questions whether the new statutory public benefit requirement has utility as a welfare policy tool in the field of education. It examines the public benefit requirement in charity law against the backdrop of government policy towards education and the broader political agenda for a mixed economy of welfare provision, and argues that the difficulties Labour faced in developing its education policies were replicated in the application of the post‐Act public benefit requirement to fee‐charging schools. As a result, achieving broader policy goals for widening educational opportunity through public benefit was almost impossible given the regulatory framework and the principles upon which charity law is founded.
The nonprofit starvation cycle is a debilitating trend of under-investment in organizational infrastructure that is fed by potentially misleading financial reporting and donor expectations of increasingly low overhead expenses. Since its original reporting in 2008, the phenomenon has been referenced several times, but seldom explored empirically; this study utilizes twenty-five years of nonprofit data to examine the existence, duration, and mechanics behind the nonprofit starvation cycle. Our results show a definite downward trend in overhead costs, reflecting a deep cut in administrative expenses partially offset by an increasing in fundraising expenses. The organization’s size is instrumental to its behavior, with a sharp rise in overhead occurring when revenues equal $100 thousand, but diminishing at $550 thousand. Finally, the brunt of the cuts have fallen on non-executive staff wages and professional fees, which heighten the concern of ill effects from a fixation on overhead cost reduction.
Over the past few years, jurisdictions across the country have enacted specialized organizational forms to house social enterprises. Social enterprises are entities dedicated to a blended mission of earning profits for owners and promoting social good. They are neither typical businesses, concentrated on the bottom line of profit, nor traditional charities, geared toward achieving some mission of good for society. Their founders instead see value in blending both goals. This article examines the latest specialized form to take shape: the flexible purpose corporation (FPC). After explaining the genesis of FPC enabling legislation, the article critiques its major provisions and compares them with relevant aspects of other specialized forms for social enterprise.
Ann Taylor Schwing has posted Perpetuity is Forever, Almost Always: Why it is Wrong to Promote Amendment and Termination of Perpetual Conservation Easements, 37 Harv. Env. L. Rev. (forthcoming), on SSRN. Here is the abstract:
This article is a response to Jessica Jay's, When Perpetual Is Not Forever: The Challenge of Changing Conditions, Amendment and Termination of Conservation Easements, 36 Harv. Envtl. L. Rev. 1 (2012). When Perpetual Is Not Forever suggests that government entities and land trusts accepting conservation easement donations are free to ignore both federal tax law requirements and the rules that govern administration of charities and the charitable gifts they solicit and accept when amending and terminating perpetual conservation easements. This article explains that, when a conservation easement donor makes a charitable gift of a conservation easement and elects to seek a federal income tax deduction, both the property owner and easement holder become subject to federal law governing the creation, monitoring, amendment, and extinguishment of the easement, as well as state laws that protect charitable gifts on behalf of the public. Accordingly, contrary to the representations made in When Perpetual Is Not Forever, neither property owners nor holders can elect to amend or terminate such perpetual easements pursuant to procedures that are inconsistent with such laws.
Brett Bloom has published a student comment titled The Rise of the Virtual Church: Is It Really a Church Under I.R.C. Section 170(b)(1)(A)(I)?, 6 Liberty U. L. Rev. 495 (available through Westlaw). Here is a summary of the article from its introduction:
This Note begins with a background discussion of tax exemption for religious organizations, including historical and constitutional concerns, along with a brief discussion of the rationale for tax-exempt organizations. This Note then discusses the distinctions between religious organizations and churches. Next, this Note presents the problem with the Service's and courts' application of their respective tests with respect to the Foundation of Human Understanding. Finally, this Note proposes (1) that the Service and courts abandon their respective tests for determining church status; and (2) that the United States Department of Treasury (the “Treasury”) provide guidance to the meaning of church through Treasury regulations.
One of my students, Brittany Brantley, has published Beyond Politics in the Pulpit: When Pastors Use Social Networks to Preach Politics, 38 J. Legis. 275 (available through Westlaw). Here is a summary of the article from it's introduction:
Part II of this note will provide an overview of the history of the political campaign prohibition. Part III will explain how churches have attempted to be completely exempt from the prohibition. Part IV will discuss the acts of Individuals of a section 501(c)(3) organization in their individual capacities. Part V will discuss how the development of the Internet has broadened the scope of the prohibition. It will also discuss how pastors use their websites and social media pages. Finally, Part VI will suggest some steps that the Internal Revenue Service and the Federal Election Commission can take to ensure that section 501(c)(3) organizations are aware of what constitutes a violation on social media pages.
- Femida Handy, Jeffrey L. Brudney,and Lucas C.P.M. Meijs, From the Editor's Desk
- James E. Austin and Maria May Seitanidi, Collaborative Value Creation: A Review of Partnering Between Nonprofits and Businesses. Part 2: Partnership Processes and Outcomes
- Amanda Moore McBride, Benjamin J. Lough, and Margaret Sherrard Sherraden, International Service and the Perceived Impacts on Volunteers
- Graham Dover and Thomas B. Lawrence, The Role of Power in Nonprofit Innovation
- Weiwei Lin and Gregg G. Van Ryzin, Web and Mail Surveys: An Experimental Comparison of Methods for Nonprofit Research
- Beth Gazley, Laura Littlepage, and Teresa A. Bennett, What About the Host Agency? Nonprofit Perspectives on Community-Based Student Learning and Volunteering
- Gregory D. Saxton, Jenn-Shyong Kuo, and Yi-Cheng Ho, The Determinants of Voluntary Financial Disclosure by Nonprofit Organizations
- Tim Vantilborgh, Jemima Bidee, Roland Pepermans, Jurgen Willems, Gert Huybrechts, and Marc Jegers, Volunteers’ Psychological Contracts: Extending Traditional Views
- Teck-Yong Eng, Chih-Yao Gordon Liu, and Yasmin Kaur Sekhon, The Role of Relationally Embedded Network Ties in Resource Acquisition of British Nonprofit Organizations
- Chris Cornforth, Nonprofit Governance Research: Limitations of the Focus on Boards and Suggestions for New Directions
- Chi-kan Richard Hung and Paul Ong, Sustainability of Asian-American Nonprofit Organizations in U.S. Metropolitan Areas
- Rebecca Nesbit, The Influence of Major Life Cycle Events on Volunteering
- Hans Peter Schmitz, Paloma Raggo, and Tosca Bruno-van Vijfeijken, Accountability of Transnational NGOs: Aspirations vs. Practice
- Simona Haivas, Joeri Hofmans, and Roland Pepermans, Self-Determination Theory as a Framework for Exploring the Impact of the Organizational Context on Volunteer Motivation: A Study of Romanian Volunteers
- Eric Bidet, Overcoming Labor Market Problems and Providing Social Services: Government and Civil Society Collaboration in South Korea
- Michael R. Sosin, Social Expectations, Constraints, and Their Effect on Nonprofit Strategies
- Christian Hopp, For Better or for Worse?—Nonprofit Experience and the Performance of Nascent Entrepreneurs
- Micheal L. Shier, Book Review: Handbook of Practical Program Evaluation
- Patsy Kraeger, Book Review: Advocacy Organizations and Collective Action
- Liz Fisher, Book Review: The Nature of the Nonprofit Sector and Understanding Nonprofit Organizations: Governance, Leadership, and Management
- Daniel Tinkelman, Book Review: Nonprofit Financial Management: A Practical Guide
- Eleanor W. Sacks, Book Review: Philanthropy in America: A History
- Barbara Levine, Book Review: High Ideals and Noble Intentions: Voluntary Sector-Government Relations in Canada
Thursday, December 27, 2012
The Treasury Department has released final and temporary regulations regarding the requirements to quality as a Type III ("operated in connection with") supporting organization. Changes from the proposed regulations include (1) adding back in the defined term "publicly supported organization," (2) clarifying which Form 990 such a supporting organization must provide to its supported organizations, (3) clarifying certain aspects of the requirements for being considered "functionally integrated," and, most significantly, (4) modifying the payout requirement for non-functionally integrated Type III supporting organizations to now require an annual distribution equal to the greater of 85% of adjusted net income or 3.5% of the fair market value of the supporting organization's non-exempt-use assets. The Treasury also stated it is still considering certain further changes, including providing a definition of "control" for purposes of the provision prohibiting the acceptance of gifts or contributions from a person who controls the governing body of a supporting organization, providing additional examples of how Type III supporting organizations can satisfy the responsiveness test, and whether program-related investments may count toward the payout requirement for non-functionally integrated Type III supporting organizations.
Last month Treasury released the Priority Guidance Plan for this fiscal year. Listed items for tax-exempt organizations are:
1. Revenue Procedures updating grantor and contributor reliance criteria under §§170 and 509.
2. Revenue Procedure to update Revenue Procedure 2011-33 for EO Select Check.
3. Regulations under §501(r) on requirement for community health needs assessments by charitable hospitals as added by §9007 of the ACA.
4. Final regulations under §§501(r) and 6033 on additional requirements for charitable hospitals as added by §9007 of the ACA. Proposed regulations were published on June 26, 2012.
5. Final regulations under §§509 and 4943 regarding the new requirements for supporting organizations (SOs) as added by §1241 of the Pension Protection Act of 2006. Proposed regulations were published on September 24, 2009.
6. Additional guidance on §509(a)(3) supporting organizations (SOs).
7. Additional guidance under §§4942 and 4945 regarding reliance standards for making equivalency determinations. PUBLISHED 09/24/12 in FR as REG-134974-12 (NPRM).
8. Final regulations under §4944 on program-related investments. Proposed regulations were published on April 19, 2012.
9. Regulations regarding the new excise taxes on donor advised funds and fund management under §4966 as added by §1231 of the Pension Protection Act of 2006.
10. Regulations under §6033 on group returns.
11. Revenue Procedure under §6033 to update and consolidate all non-regulatory exceptions from filing.
12. Final regulations under §6104(c). Proposed regulations were published on March 15, 2011.
13. Final regulations under §7611 relating to church tax inquiries and examinations. Proposed regulations were published on August 5, 2009.
Additional items that may be of interest to tax-exempt organizations include:
- Final regulations under §170 regarding charitable contributions. Proposed regulations were published on August 7, 2008.
- Notice under §170 regarding charitable contributions to disregarded entities. PUBLISHED 08/27/12 in IRB 2012-35 as NOT. 2012-52 (RELEASED 07/31/12).
- Guidance concerning adjustments to sample charitable remainder trust forms under § 664.
- Regulations under §1014 regarding uniform basis of charitable remainder trusts.
Wednesday, December 26, 2012
Catching up on some of the year's news and scholarship, I will start on the international front with a story from Australia. In 2012, Australia created the Australian Charites and Not-for-profits Commission and earlier this month the Commission opened its doors. Here is the Commission's description of its role:
Who we are
The Australian Charities and Not-for-profits Commission (ACNC) is the independent national regulator of charities. The ACNC has been set up to achieve the following objects:
- maintain, protect and enhance public trust and confidence in the sector through increased accountability and transparency
- support and sustain a robust, vibrant, independent and innovative not-for-profit sector
- promote the reduction of unnecessary regulatory obligations on the sector.
What we do
To achieve our objects, the ACNC:
- registers organisations as charities
- helps charities understand and meet their obligations through information, guidance, advice and other support
- maintains a free and searchable public register so that anyone can look up information about registered charities
- is working with state and territory governments (as well as individual federal, state and territory government agencies) to develop a 'report-once, use-often' reporting framework for charities.
The ACNC is established under section 105-5 of the ACNC Act. Our objects and functions are in section 105-15 of this Act.
ACNC is led by Commissioner Susan Pascoe AM, Assistant Commissioners David Locke and Murray Baird, and a strong leadership team. The ACNC Commissioner's position is established by section 110-5 of the ACNC Act.
Our relationship with other government agencies
The Australian Taxation Office (ATO) remains responsible for deciding eligibility for charity tax concessions and other Commonwealth exemptions and benefits.
There are also many other government agencies that regulate charities and other not-for-profits. For example, government agencies may provide grants and other funding. They may also regulate particular services provided by charities, such as aged care or education.
Thursday, December 20, 2012
Edward Zelinsky (Cardozo) had an interesting blog post yesterday about the estate tax charitable deduction. Specifically, Zelinsky believes that the commitment of Warren Buffett and other high-wealth individuals to strengthening the estate tax is at odds with their commitment to philanthropy. Zelinsky argues that:
It is perfectly plausible to call for estate taxation only for those who don’t distribute their wealth to philanthropy. It is, however, hard to reconcile that position with Responsible Wealth’s advocacy of strong estate taxation. Mr. Gates, Sr., for example, declared that “it would be shameful to leave potential revenue on the table from those most able to pay.” However, that is precisely what happens when large estates go to charity, namely, estate tax revenue which would otherwise flow to the federal government is instead diverted to charity. Such charity may be worthwhile but it does nothing to reduce the federal deficit.
Zelinsky then proposes a few limits on the estate tax charitable deduction. A first alternative would be to allow decedents to deduct only 70% of what they donate to charity. A billionaire who leaves a $1,000,000,0000 estate to charity would only be allowed to deduct $700,000,000, leaving him with a taxable estate of $300,000,000.
A second alternative he proposes would allow the first $10,000,000 of charitable bequests to be fully deductible, followed by a phase-out. For example, he suggests that the next $50,000,000 worth of charitable bequests would be 90% deductible, and any remaining gifts only 70% deductible.
Because the unlimited nature of the estate tax deduction (in contrast to the various limits on the income tax deduction) has long puzzled me, I find it refreshing that Zelinsky is bringing up the estate tax charitable deduction. However, because the goal of the estate tax is to do more than simply raise revenue, I think limits on its charitable deduction can't be analyzed in terms of dollar limits and revenue alone. A better solution would be to consider the additional social goals of the estate tax and craft limits on the estate tax charitable deduction that reflect those goals.
Hat tip: Tax Prof Blog
Miranda Perry Fleischer
Wednesday, December 19, 2012
Monday's Wall Street Journal debate on the charitable deduction offered conflicting views on the extent to which tax incentives impact giving. On one hand, as Diana Aviv of the Independent Sector noted, a number of studies predict that limiting or the ending the income tax deduction will dampen charitable giving. On the other hand, as Dan Mitchell of the Cato Institue mentioned, tax benefits for giving have changed drastically over the years but giving remains relatively constant at about 2% of GDP. Unfortunately, I find it hard to form an opinion about the various proposals to limit the deduction that are floating around for two reasons.
First, we just don't know enough about the interaction of various motives for giving and which motives will "win" if the tax benefits for giving are decreased. Let's start with what we do know. It is well-established that donors of different income groups support different types of charities. Upper-income folks tend to focus on higher eduction, health organizations, and the arts. Albeit to a lesser extent, however, they also support social service organizations and religious groups (which often offer social services). Most studies also predict that limits on the deduction will impact giving by the well-off more than the less well-off. Lastly, a study from this summer suggests that giving to certain groups ("arts and culture, private education, environmental protection, animals welfare, human services, philanthropy, and private foundations") is more elastic than giving to other groups (hat tip Grace Lee). What I would like to see, however, is someone put this all together to see if we can learn anything about the elasticity of high income donors to various organizations. If giving by a given income group falls, what does that really mean? Who does that really impact? Will they cut their giving equally across the board, perhaps continuing to support the same groups as before but cutting the dollar amount each group receives by a set percentage? Or will they react differently to different donees? For example, will well-off donors keep giving to the opera because of the social status but cut donations to the Salvation Army? Or will altruism win out, and they keep donating to the Salvation Army but decrease gifts to the opera? A better sense of which charities would be impacted -- were giving to indeed drop -- would help me assess these proposals. The IU Center on Philanthropy's studies of high-net worth individuals and their motivations is a good start, but we need more specific data about how such individuals might react.
Second, most of the discussions I've seen focus on the basic aspects of the income tax charitable deduction in isolation. But as we know, a host of other tax changes are also being discussed. How might these other changes influence giving, if at all? For example, if the capital gains rate goes up, will that encourage more gifts of appreciated property? Some Florida charities think so. If so, will that counteract any potential drop from some of the proposed changes to the basic structure of the deduction? The estate tax is also in the mix, too. Although it's currently scheduled to revert to a $1 million exemption and a top rate of 55% (from its current $5 million exemption and top rate of 35%), most don't think that will happen. Lately, however, there's been a renewed push by some not to simply extend the status quo but to strike a middle ground, perhaps with a $3.5 million or even $2 million exemption level. Would a tougher estate tax, relative to today, mitigate changes to the income tax charitable deduction by encouraging donors to shift their gifts to their death?
If these studies exist and I can't find them, please correct me. And if they don't exist yet, I suppose this is a plea to the economists for help!
Miranda Perry Fleischer
Tuesday, December 18, 2012
Also in Monday's Wall Street Journal was an article on giving to colleges, more specifically, four rules to increase a gift's impact. Although the article's fourth tip concerned the various tax advantages of different forms of giving (such as donating appreciated stock or leaving a bequest), it was refreshing that tax planning was not the article's main focus. Instead, the first three tips offered more practical advice about having an impact on the college itself. The first tip, for example, concerned donor restrictions on gifts. The article noted that while colleges prefer unrestricted gifts, many donors want the extra gratification that comes from funding a project they especially care about. To strike this balance, the article emphasized the need for donors who desire restrictions to make sure any restrictions are flexible enough so that the gift doesn't sit unused -- a point I imagine many donors don't consider early enough. The second tip encouraged donors to consider giving property that could actually be used by the school, such as scientific equipment or musical instruments. These were nice examples, as I imagine many donors just think in terms of cash and stock. What I especially liked, however, was the article's third tip -- encouraging gifts to schools other than one's alma mater. While it's natural to want to give back to one's alma mater, one's charitable dollars can often have a greater impact elsewhere, especially if one went to an already well-endowed school.
Miranda Perry Fleischer
Monday, December 17, 2012
Today's Wall Street Journal features an interesting debate on ending the income tax charitable deduction between Dan Mitchell of the Cato Institute (end it) and Diana Aviv of the Independent Sector (keep it). Although the arguments won't surprise readers already familiar with the scholarly literature on the subject, the two pieces do a fairly nice job laying out the arguments for a lay audience. That said, each commenter makes a couple points that I'd like to see fleshed out a bit.
Aviv leads her defense of the deduction by noting that "limiting it -- or worse curtailing it -- would rob funds from nonprofits at a time when charities are already struggling to meet increased demand for programs and services." She argues that the tax deduction does indeed incentivize giving that would not otherwise take place, pointing to the high percentage of gifts made at the end of December and to the large number of itemizers who take a charitable deduction. (To me, however, these statistics beg the question whether these individuals are being incentivized by the deduction or simply taking advantage of a tax benefit for making gifts they would make without the deduction). In her defense, she doesn't rely on these numbers alone; she also cites the 2010 IUPUI study where high net-worth individuals themselves said they would cut back on giving if the tax incentive were decreased.
Aviv also criticizes Obama's proposal to limit the value of the deduction to 28%, correctly noting that some experts predict a decline in giving from that proposal. She further notes -- correctly, in my mind -- that we should judge the impact of limiting the charitable deduction by the impact on charities more than on the donor. What she doesn't do, however, is try to distinguish which charities will be hurt the most. In my view, for example, a large impact on a soup kitchen should be judged differently than a large impact on the ballet. Lastly, Aviv argues that the charitable deduction is worthwhile because it encourages other-serving behavior instead of self-consumption (in contrast to, for example, the mortgage interest deduction). Again, this is partly true -- a donation to a soup kitchen is other-serving -- and partly not true -- a donation to have a building named after you on your alma mater's campus or a donation to your child's private school are both pretty self-serving.
Mitchell's main argument is that the best way to help charities is to have a strong economy. He notes, for example, that the tax rewards for charitable giving have fluctuated drastically over the years but that giving stays relatively constant at about 2% of GDP. Mitchell also criticizes the deduction for mainly benefiting those with incomes over $100,000. (To me, this alone isn't doesn't help evaluate the fairness of the deduction. If poor people are kept from going hungry or homeless because of the deduction, then the fact the well-off get a tax break may be worth it. But if the well-off get a tax break and it has no affect on the plight of the poor, that's a different story).
Mitchell then focuses on the other incentives for charitable giving, arguing that cultural pressure, perks like naming opportunities, and altruism would motivate the same level of giving. He also takes issue with the surveys where donors state that their giving will drop, noting that year in, year out, giving stays about the same. I tend to agree with these arguments, but then I part ways somewhat with Mitchell toward the end of his piece. He argues that because a dollar gift only costs the donor 65 cents, donors become lazy and don't monitor charities to make sure their funds are used wisely. While the extent to which donors pay attention to how their dollars are spent varies among donors, I haven't seen any evidence that non-itemizers are more careful with their giving dollars than itemizers in this respect, or that those in lower brackets are more careful than those in higher brackets. He also criticizes charities for being inefficient and for having overly high marketing expenses. While some charities certainly are inefficient, that seems to be more a product of the non-distribution constraint than the charitable deduction, and I doubt that charities that spend too much on marketing now would spend less if giving became more expensive.
More thoughts on this particular debate tomorrow.
Miranda Perry Fleischer