McMillan, Noncharitable Nonprofit Organizations and Tax Policy

Lori A. McMillan (Washburn) has published Noncharitable Nonprofit Organizations and Tax Policy: Working Toward a Public Benefit Theory in the Washburn Law Journal. Here is the introduction (without footnotes):

Noncharitable nonprofit organizations' in Canada enjoy virtually complete exemption from income taxation for almost all sources and types of income. Such an organization is exempt, regardless of whether its income is from an active or passive business, property, donations, or government funding. The organizational form likewise does not matter; a "club, society, or association" can avail itself of the provision, and the judicial interpretations of this phrase have recognized corporations as a type of association, such that there is almost no conceivable entity form that would be unable to take advantage of this provision. The problem is that there has been no assessment of this provision to ensure that it achieves certain goals, or provides a benefit to society that would justify its existence from either an economics or policy perspective. This provision must be examined against the backdrop of the costs to the government in having it, contrasted against the costs to society of not having it. This article will explore what the purpose of this exemption is, to enable a determination of whether it achieves its goal, and if not, what changes need to be made to reach its goal. Public support through tax exemption for the nonprofit sector as a whole, and the noncharitable subsector as a part, is not challenged per se in this article, but rather if support is to be given (as assumed), then the question arises if it is being done appropriately.

Lloyd Mayer