Nonprofit Law Prof Blog

Brennen, The Chilling Effect of SFFA v. UNC/Harvard on Race-Based Affirmation by Tax-Exempt Charities

David A. Brennen (Kentucky) has posted The Chilling Effect of SFFA v. UNC/Harvard on Race-Based Affirmation by Tax-Exempt Charities, Fla. Tax Rev. (forthcoming 2025). Here is the abstract:

In 2023, the Supreme Court decided in SFFA v. Harvard/UNC that colleges and universities are significantly restricted in their ability to engage in race-based affirmative action when making admissions decisions. Post-SFFA, many have wrongly suggested that the SFFA opinion means that race may never be considered in admissions decisions or in decisions–whether by colleges or others–concerning related matters like awarding scholarships or in employment.  This Article asserts that this expansive view of SFFA is inappropriate and leads to a chilling effect on affirmative action in higher education and related areas. However, instead of simply asserting that SFFA, when it applies, permits some considerations of race in admission, this Article goes further by arguing that the SFFA restrictions do not even apply to admissions decisions by some private colleges. For instance, private colleges like Harvard, as a recipient of federal financial assistance, must abide by SFFA because they are subject to Title VI, which is often equated to also being subject to the Equal Protection Clause. But what if Harvard, or any other private tax-exempt actor, decided to forego receiving federal financial assistance, which is a legal requirement before Title VI can apply? Could such private actor then lawfully engage in the type of race-based affirmation action that SFFA otherwise restricts? More directly, do the prohibitions of SFFA apply to private tax-exempt actors who do not accept any form of federal financial assistance? 

Part I of this Article examines the impact of SFFA on the ability of private and public actors–both colleges and non-colleges–to engage in race-based affirmative action when making admissions or admissions-adjacent decisions. Part II outlines the chilling effect that SFFA has had on affirmative action efforts in higher education and related areas, stemming primarily from, at best, a misunderstanding of the limits of the opinion or, at worst, an intentional recharacterization of it. Part III examines whether Section 501(c)(3) tax-exempt status itself could be viewed as a type of federal financial assistance for purposes of applying federal civil rights statutes that are premised on the private actor being a “recipient of federal financial assistance.” Part IV examines whether engaging in race-based affirmative action could be viewed as a violation of established public policy.  Finally, the Article concludes that, despite the limits imposed by SFFA on public colleges (and private ones that receive federal financial assistance) to engage in race-based affirmative action, colleges may continue to consider race in the admissions context to a limited extent. Further, the Article concludes that, even after SFFA, private tax-exempt charities that are not recipients of federal financial assistance are not subject to the restrictions of SFFA. Thus, these private charities may engage in race-based affirmative action when making admissions or admissions adjacent decisions–even if such engagement goes beyond the permitted use of race outlined in SFFA.

Lloyd Mayer

Brunson, Enumerating Environmental Exemptions in Section 501(c)(3)

Samuel D. Brunson (Loyola Chicago) has posted Enumerating Environmental Exemptions in Section 501(c)(3). Here is the abstract:

The United States has tens of thousands of environmental charities. These charities operate to “preserve, protect, and improve the environment.” Roughly half of the revenue of environmental charities directly from the public. These public donations depend, at least in part, on the organizations’ tax-exempt status, which allows donors to deduct their donations for tax purposes. Because donors take into account the after-tax cost of their donations, an environmental charity’s tax exemption increases the amount of donations it receives in comparison with a similar environmental organization that is not tax-exempt.

The tax-exempt status of environmental organizations is tenuous and contingent, though. The Internal Revenue Code lists seven tax-exempt purposes, none of which is environmental. Environmental organizations’ exemption arrives not through legislation but through administrative action—the IRS announced that environmental organizations fit under the exempt umbrella of “charitable" organizations, a pre-existing statutory category of qualifying tax-exempt organizations.

In addition, the value of the tax law is not limited to its substance: tax law also serves an expressive function. In its expressive function, it can encourage and discourage certain behaviors. It can (implicitly or explicitly) put the weight of government approbation behind certain organizations and classes of organizations.

Tax exemption may, in fact, be more powerfully expressive than much of tax law. While much of the tax law opaque—or even scary—to the general public, section 501(c)(3) is salient, and arguably hypersalient, to the public. Climate change has evolved into a critical and pressing issue.

That organizations that work to reduce climate change can avoid taxes and receive tax-deductible donations is good. But if the government truly wants to both signal its support for efforts to preserve the environment and ensure that environmental organizations continue to qualify for tax exemption, it must amend section 501(c)(3) to expressly allow environmental organizations to qualify. Moreover, because organizations already qualify for exemption, it also offers the government a low-cost path toward disseminating its support for environmental priorities.

Lloyd Mayer

Colinvaux, Associational Rights Versus Nonprofit Transparency

Roger Colinvaux (Catholic) has posted Associational Rights Versus Nonprofit Transparency: Information Reporting in the Internet Age, 2025 Ill. L. Rev. (forthcoming). Here is the abtract:

For decades, the nation’s charitable and nonprofit organizations have been required to file an information return, known as the Form 990, with the Internal Revenue Service. Congress mandates that the return be made publicly available. Such information reporting, both to the IRS and to the public, is the cornerstone of the federal government’s approach to assuring that nonprofit organizations are legally compliant. The Supreme Court’s decision in Americans for Prosperity Foundation v. Bonta (APF), however, casts a shadow on the constitutionality of nonprofit reporting requirements. In APF, the Court held unconstitutional California’s effort to require charities to disclose their major donors, finding that compelled disclosure rules presumptively impose a burden on First Amendment associational rights, even for confidential disclosures to the government. The Court also said that compelled disclosure rules are subject to exacting scrutiny and narrow tailoring. The federal nonprofit reporting regime therefore, post-APF, must undergo exacting scrutiny for the first time and may fail under the First Amendment.

After the Introduction to the Article, Part II summarizes the development of the First Amendment compelled disclosure cases alongside Congress’s steady enactment of nonprofit disclosure rules and the Form 990, from 1941 to the present day. These two tracks of law, once parallel, now intersect, with APF posing a presumptive challenge to the constitutionality of Form 990 reporting. Part III discusses APF and critiques the Court’s new exacting scrutiny standard as unworkable in other contexts and of limited precedential value. Part IV applies APF’s exacting scrutiny to the hundreds of items of information on the Form 990, first on a confidential basis to the IRS and then on a public basis. The Part provides a new framework, consistent with APF, to assess the constitutionality of compelled disclosures rules based on their impact on expressive association. Using this framework, the Part reasons that most compelled information on the Form 990 relating to charitable nonprofits should survive a constitutional challenge, whether on a public or nonpublic basis, because of the government’s strong and vital interests in oversight and transparency, even information that is closely related to expressive association. As discussed in this Part, publicity and comprehensive information reporting are instrumental to any credible compliance for charitable nonprofits. Disclosures about noncharitable nonprofits (such as 501(c)(4) social welfare organizations), however, are constitutionally vulnerable given the breadth of the disclosure requirement and the comparatively weaker governmental interests in transparency and oversight for noncharitable nonprofits as a class. Governance-related disclosures are also vulnerable. The Article concludes that regardless of the ultimate verdict on the constitutionality of nonprofit compelled disclosure rules, Congress, the IRS, and nonprofit stakeholders should take up the challenge presented by APF and update information reporting for the Internet age in light of associational concerns while maintaining a strong commitment to transparency.

Lloyd Mayer

Galston, Hate Groups and the Charitable Tax Exemption

Miriam Galston (George Washington) has published Hate Groups and the Charitable Tax Exemption, 52 Hastings Const. L.Q. 161 (2025). From the introduction:

This article wrestles with the issues raised by tax-exempt hate groups by analyzing federal tax law, public policy both internal and external to tax law, and constitutional jurisprudence, particularly as it bears on freedom of speech and association and on viewpoint discrimination. These sources exhibit competing visions of the role that groups animated by unconventional, and even repugnant ideas play in civil society. The article concludes that, although the outcome is uncertain, these sources favor permitting the subset of hate groups operating like think tanks and other educational entities to have tax exemption as educational section 501(c)(3) organizations because of the First Amendment and the commitment to pluralism underlying the nonprofit sector. In addition, the practical difficulties of requiring the IRS to identify which organizations should be labeled hate groups when experts cannot agree on the scope of this classification reinforce the conclusion reached based upon legal doctrines and public policy constraints that favor allowing such groups to qualify as exempt.

Lloyd Mayer

Libby, Theories of University Endowment Taxation

Lauren Libby, (Yale Ph.D. in Law candidate) ahs posted Theories of University Endowment Taxation, 103 Wash. U. L. Rev. (forthcoming). Here is the abstract:

University endowment taxation is now one of the most significant issues in U.S. federal tax policy, and it only promises to grow in prominence over the next four years. Yet while growing criticism of university wealth has precipitated a wave of proposed tax legislation, policymakers and scholars have largely avoided engaging with the deeper political questions that lurk behind this new trend in federal tax policy. Instead, discussions about I.R.C. § 4968—the Code’s current “endowment tax”—are either dominated by antagonistic rhetoric or concerns about administrative feasibility, revenue generation, and the potential for tax-avoidance. And although President Donald Trump and Vice President JD Vance seem eager to make the endowment tax a central part of their executive agenda, no one has meaningfully or systematically assessed the normative issues at the heart of § 4968 and proposals for its reform.

This Article provides the first conceptual framework for addressing the fundamental political questions implicated in the endowment tax debate. Calls for and against taxing university endowments directly challenge the political status of private American universities. They reflect a growing desire to redefine these institutions’ obligations to the public and their relationship with the state. And unfortunately, the prevailing discourse on the Code’s current endowment tax has obscured these broader ideological stakes. This Article aims to correct for this oversight by identifying the core political concepts that structure and influence the network of federal tax laws responsible for recognizing and governing private universities and their financial practices. Drawing on scholarship on political theory and corporate governance, this Article constructs a framework for evaluating and comparing the most recently introduced proposals for reforming the federal endowment tax, and in turn assesses how different approaches to endowment taxation reflect and reinforce competing visions of the university’s role in American society.

By reframing discussions about endowment taxation in terms of first principles, this Article suggests new ways of thinking about some of the most recent and popular endowment tax reforms. Importantly, it cautions against proposals for expanding the scope of § 4968, arguing that the political ideals that typically motivate such amendments are easily manipulated to serve undesirable social ends.. At the same time, this Article urges those in favor of repealing the endowment tax to clearly articulate their ideal vision of society and the university’s role within it. It also challenges universities and their allies to reconsider whether repealing § 4968 truly advances their political objectives. Finally, the Article argues that a more radical reform strategy may be necessary to secure a resolution to the endowment tax debate that is both legitimate and broadly accepted by the American public.

Lloyd Mayer

Silber, Law Reform and the Politicization of Charity

Norman I. Silber (Hofstra) has posted Law Reform and the Politicization of Charity. Here is the abstract:

It is conventional to believe that neutrally framed statutes emerging from bipartisan adoption processes do not produce partisan political results. This springs from our inclination to focus on the language and legislative history of the statutes themselves, in isolation from the larger context of their development. The reality is sometimes different: the process of creating a piece of legislation will affect participants differently, and they take away divergent perspectives about what the new statutory scheme allows. This is what happened during the overhaul of the Tax Reform Act of 1969 (TRA69), the statute that governs, among other things, the ability of foundations to engage in political activity. Purporting to tamp down on political influence by tax-subsidized foundations and charitable organizations, TRA69 did the opposite-it opened the door wider to interference.

Lloyd Mayer

Ward, Grasse & Lecy, Examining the Association Between State Lobbying Regulations and Nonprofit Lobbying Expenditures

Kevin D. Ward (Seattle), Nathan Grasse (Carleton), and Jesse Lecy (Arizona State)  have published Examining the Association Between State Lobbying Regulations and Nonprofit Lobbying Expenditures, Nonprofit & Voluntary Sector Quarterly (2025). Here is the abstract:

Newly released data on 501(c)(3) nonprofit organizations’ lobbying expenditures shows that these organizations have increasingly engaged in lobbying over the past several decades. However, over roughly the same period, states have adopted increasingly stringent lobbying regulations. While often promoted as a way to curb the influence of private interests in public policy, lobbying regulations apply equally to for-profit firms and nonprofit organizations. This article employs two measures of state-level lobbying stringency to examine how traditional direct legislative and grassroots lobbying vary in different regulatory environments. We find that nonprofits reduce expenditures on direct lobbying and increase those on indirect or grassroots lobbying in more stringent regulatory environments. These findings are important because nonprofit organizations typically advocate on behalf of their constituencies, and state regulations appear to influence their lobbying activity.

Lloyd Mayer

Wilson, The Hidden Cost of State Income Tax Repeal

Elaine Waterhouse Wilson (West Virginia) has published The Hidden Cost of State Income Tax Repeal: A Case Study of the West Virginia Neighborhood Investment Program Credit, 127 W.Va. L. Rev. 303 (2025). Here is the abstract:

In March 2023, West Virginia significantly cut its personal income tax rates and paved a path toward the full repeal of the personal income tax. This repeal would directly impact West Virginia’s nonprofit sector and reduce charitable giving because it would render West Virginia’s Neighborhood Investment Program (“NIP”) tax credit ineffective. NIP tax credits have been the primary charitable tax incentive in the state’s income tax code and have been widely supported by nonprofits. This Article argues that if the NIP credit program incentivizes charitable giving, then state income tax repeal comes with a hidden cost—the cost of lost revenues to private charities increasingly tasked with providing vital social services.

Following the introduction in Part I, Part II looks at West Virginia’s state personal income tax repeal and similar repeal proposals under consideration in other states. Part III reviews state level charitable giving incentives and their interplay with the Federal charitable deduction, using the NIP credit in West Virginia as a case study. Part IV introduces Professor Paul McDaniel’s federal charitable matching grant proposal, first introduced in 1972, which was developed in response to changes in the federal charitable income tax deduction and a growing concern about the role of tax expenditures. The Article proposes that Professor McDaniel’s federal matching grant program could be adapted by those states that have repealed (or are considering repealing) their personal income tax but still wish to incentivize charitable giving on the state level. Part V specifically demonstrates how Professor McDaniel’s grant program overlaps considerably with the structure of West Virginia’s NIP tax credit and could be easily amended to replace the credit in the event of full personal income tax repeal. The Article concludes by urging West Virginia to be a leader among the states considering income tax repeal by demonstrating the manner in which a matching grants program could replace charitable tax incentives.

Lloyd Mayer

Mayer, Trump's Threat to Nonprofits

I recently had the opportunity to write a short essay for the European Verfassungsblog On Matters Constitutional website. It is titled Trump's Threat to Nonprofits: How the Government is Using Tax Law to Pressure Nonprofits and How Nonprofits Can Respond. Here is the opening paragraph:

The administration of President Trump is threatening nonprofits with the loss of tax-exempt status in an attempt to force them to conform their activities to policies favored by that administration. The threats are based on shaky legal grounds, and nonprofits have both constitutional and statutory bases for countering them. Nevertheless, these threats are significant, especially when combined with the administration’s efforts to cut government funding for many programs operated by nonprofits. And at the same time, the U.S. Congress is considering reducing the benefits of tax-exempt status in many ways, primarily to help pay for tax cuts benefitting individuals and corporations.

Lloyd Mayer

Aprill, Revoking Tax-Exemption for Pursuit of DEI

Ellen P. Aprill (Loyola L.A.) has posted Revoking Tax-Exemption for Pursuit of DEI. Here is the sbstract:

These have been hard times for section 501(c)(3) organizations that believe in DEI. President Trump, unhappy with Harvard’s University’s refusal to agree to a long and detailed list of demands has threatened to remove its tax exemption. The American Alliance for Equal Rights filed a complaint with the IRS asserting that the Gates Foundation did not qualify for section 501(c)(3) exempt status because it awarded its scholarships only to students from minority groups.

After explaining the process for revoking exempt status, this piece describes the two most likely bases for the IRS to revoke the exemption of a section 501(c)(3) that advances DEI – loss of exemption for violation of fundamental public policy, and loss of exemption because of substantial illegal purposes. It then considers legislation that would permit the Secretary of the Treasury to suspend the exemption of organizations designated as supporting terrorism. It separately evaluates any IRS move to revoke Harvard’s tax exemption, including statutory prohibitions on executive branch interference, and the consequences of revocation.

The paper advises that tax-exempt organizations have solid bases on which to answer attempted revocation. They have a number of ways to respond to any attempts at revocation. They can make changes, large and small, to current operations. They can go to court. But they, along with their advisers, need to consider now the choices they will make and the actions they will take. The article concludes with Justice Powell’s observation in his Bob Jones concurrence: “the provision of tax exemptions to nonprofit groups is one indispensable means of limiting the influence of governmental orthodoxy on important areas of community life.” This statement stands as an important reminder for both charities and the current administration.

Lloyd Mayer

Bailey & Webb, Tax-Exempt Organizations See Substantial Increase in Automatic Revocations Due to Covid-19

William A. Bailey and Brian D. Webb have published Tax-Exempt Organizations See Substantial Increase in Automatic Revocations Due to Covid-19: IRS Missed Opportunities to Support Tax-Exempt Organization in the ATA Journal of Legal Tax Research. Here is the abstract:

IRC §6033(j), passed in 2006, requires the automatic revocation of tax-exempt organizations that fail to file annual information returns or notices for three consecutive years. Upon reviewing the relevant legal and commentary sources, this paper argues that the statute did not anticipate the impact of COVID-19 on small tax-exempt organizations’ ability to file; as such, the statute caused significant hardship to many tax-exempt organizations whose filing ability was interrupted by COVID-19. The paper further argues that the IRS could have done more to help tax-exempt organizations but instead compounded the revocation problem by inexplicably excusing itself from a statutory requirement to warn tax-exempt organizations that were about to lose their tax-exempt status. The paper recommends solutions to these problems, including postponing the statute’s effect during the COVID-19 years, and a reversal of the IRS position regarding providing notice of imminent automatic revocation

Lloyd Mayer

Branch, Union Exemption: Nonprofit Work and the Boundaries of the Commercial Economy, 1951–1976

John Miles Branch has published Union Exemption: Nonprofit Work and the Boundaries of the Commercial Economy, 1951–1976 online with Cambridge University Press. Here is the abstract:

From 1951 to 1976, the United States National Labor Relations Board enforced a policy of union exemption, analogous to tax exemption, which categorically dismissed union petitions from workplaces deemed to have a charitable purpose. Controversies over the nonprofit sector’s place in American society during the twentieth century are well-known, but most historical analysis of this topic focuses on its political influence. Union exemption and its reversal demonstrate that the nonprofit sector’s economic status was contested too: employees, executives, and policy makers wrestled with the relationship of institutions that carried out the work of social reproduction to the structures of the postwar economy. Union exemption rested on an assumption that nonprofits and the work they did were naturally sequestered from commercial life. Its reversal signified a shift, driven by mobilizations of nonprofit employees and elite philanthropists alike, to a view of nonprofits as a “third sector” inextricably embedded in commercial life.

Lloyd Mayer

Jones, Public Benefit and Private Profit

Darryll Keith Jones (Florida A&M University) has posted Public Benefit and Private Profit. Here is the abstract:

OpenAI, Inc. has finally confirmed that it will sell the technology transfer side of its tax-exempt operations to a public benefit corporation. It will retain the research and development side and continue as a tax-exempt scientific research organization with a stake in the PBC. Although OpenAI describes the new structure as an “evolution,” it is more likely a failure of the fantasy that altruism and profit-taking can coexist in an exempt charity. The fantasy is implicit in Revenue Ruling 98-15, the landmark memorandum allowing exempt organizations to enter partnerships with for-profit organizations so long as altruism is the partnership’s raison d’etre. Now is a good time to consider the age-old question whether altruism and profit-making can ever really coexist. If coexistence is possible, it should have happened in OpenAI’s joint venture with Microsoft because altruists and investors sacrificed hardly anything. In the early start-up stage, public benefit and private investment were mutually dependent rather than mutually exclusive.

Nevertheless, CEO Sam Altman expressed regret about ever even organizing as a tax-exempt organization. OpenAI’s board has stated that there is insufficient donative or investor capital to continue research, development and technology transfer via a joint venture operated for public benefit. That seems especially surprising because there was no real limit on ROI, unless one thinks 10,000% commonplace. Investors in OpenAI’s joint venture were entitled to that much as an unreachable maximum and yet they forced OpenAI to shed its exempt status. Why wouldn’t investors tolerate altruism over private profit even in the absence of any real limit on ROI?

This essay speculates that at some point investors will not even tolerate a theoretical limit on profit-taking. Investor and altruist motivations are most synonymous during start-up. Altruists want something safe and beneficial; investors want profit but understand that their product must first be safe and beneficial to generate profit. The two groups can easily co-exist in one entity during start-up. But at some point, investors will no longer tolerate altruists. They will object to even theoretical limitations on profit-taking. That conclusion suggests that tax exemption for nonprofit-joint ventures is tolerable during start-up, but intolerable thereafter.

Lloyd Mayer

Ryan, Marsicano, Bernhardt & Martin: Gaming the Endowment Tax

Christopher J. Ryan, Jr. (Indiana University), Christopher R. Marsicano (Davidson College), Ann F. Bernhardt (Texas A&M University Ph.D. Candidate), and Rylie C. Martin (College Crisis Initiative) have published Gaming the Endowment Tax in the Florida Tax Review. Here is the abstract:

The 2017 law known as the Tax Cuts and Jobs Act (TCJA) enacted a tax on private, non-profit college and university endowments for the first time. Institutions with at least 500 tuition-paying students and endowments of $500,000 or greater per student now have to pay a 1.4% tax on their endowments. But like all taxpayers, colleges and universities may be tax averse or seek reductions in their tax burdens. That is, colleges and universities may try to avoid the tax through taking action to ensure they do not meet the threshold. Such actions include increasing the size of their student bodies, increasing student aid to ensure a small number of tuition-paying students, and spending down their endowments. Colleges may also attempt to offset taxed revenue by increasing other revenue streams. Examples of such behavior include increasing revenue from auxiliary services, admitting more “ full-pay” students who do not need financial aid, reducing financial aid for tuition-paying students (perhaps even while increasing the number of students who receive enough aid to become non-tuition paying), and admitting fewer low-income students. All of this would be economically rational behavior, but it could produce negative effects for higher-education stakeholder groups, such as students and their families.

In this Article, we assess the ramifications of the TCJA’s endowment tax for college and university revenue-seeking behavior. We use a national-level dataset and a quasi-experimental statistical model known as the “Synthetic Control Method,” which is underutilized in legal research, to examine institutional behaviors in the wake of the TCJA’s passage. We find that individual institutions—such as Northwestern University, Duke University and Vassar College, among others—may have changed their admissions, enrollment and revenue-generating behaviors to reduce their overall tax burden, offset losses in revenue or avoid the tax. We suspect that this is evidence of firm behavior to game the endowment tax imposed by the TCJA.

Lloyd Mayer

Saulnier, Note, A Higher Power in Higher Education: An Exploration of Endowment Taxes, the Establishment Clause, and College Affordability

Emily Saulnier (Boston College J.D. candidate) has published A Higher Power in Higher Education: An Exploration of Endowment Taxes, the Establishment Clause, and College Affordability in the Boston College Law Review. Here is the abstract:

Institutions of higher education in the United States have enjoyed a broad tax exemption for hundreds of years. In 2017, however, Congress imposed an excise tax on certain colleges’ and universities’ endowment revenue as part of the Tax Cuts and Jobs Act (Act). The endowment excise tax is not scheduled to sunset in 2025 alongside other provisions of the Act, but members of Congress have begun to revisit the issue of whether and how to tax the nation’s educational institutions. This Note examines two endowment tax proposals’ attempts to exempt religious colleges and universities from heightened endowment excise taxes. It argues that although taxing college and university endowments is a possible legislative tool for making higher education more affordable for more Americans, exempting religious schools from such taxes both runs counter to this goal and violates the Establishment Clause of the U.S. Constitution. If Congress chooses to expand college and university taxation, it should do so in a way that effectively addresses the college affordability crisis and treats religious and secular institutions alike.

Lloyd Mayer

Sidel, Steering a Restrictive Course: Rebooting China's Charity Law

Mark Sidel (University of Wisconsin) has posted Steering a Restrictive Course: Rebooting China's Charity Law, to be published in the Nonprofit Policy Forum. Here is the abstract:

When it comes to regulating nonprofits and civil society, China is steering a careful and conservative course in the Xi Jinping era, with a laser-like focus on control over civil society. This policy is illustrated clearly in the long-awaited 2023 amendments to the main law that governs the Chinese nonprofit sector, the Charity Law originally enacted in 2016. This article analyzes the key amendments to the Charity Law in 2023, with a focus on implications for charity regulation and management in China.

Lloyd mayer

Walker, Reassessing Corporate Philanthropy from a Tax Perspective

David I. Walker (Boston University) has published Reassessing Corporate Philanthropy from a Tax Perspective in the Florida Tax Review. Here is the abstract:

U.S. corporations make and deduct charitable contributions in excess of $20 billion annually. This Article reassesses corporate philanthropy from a tax perspective, asking first whether the federal tax subsidy for corporate philanthropy is greater than the subsidy for the alternative stakeholder philanthropy, as some commentators have previously found. The answer: it depends. The relative degree of subsidy depends on corporate and individual tax rates, obviously, but also on the incidence of corporate philanthropy, i.e., who bears the cost, which is generally unclear, as well as other details, such as whether individual stakeholders itemize deductions. At current tax rates, however, any outsized subsidies for corporate philanthropy result to a large degree from the constriction in itemizing that followed from the 2017 Tax Cuts and Jobs Act). And many would view the effective restoration of individual deductions for charitable contributions as a positive feature of corporate philanthropy rather than as a bug. Moreover, from a policy perspective, corporate philanthropy provides numerous advantages over individual philanthropy that have not been discussed or emphasized in the literature. Corporate philanthropy mitigates the inequitable “upside-down” effect of the individual deduction for philanthropy that disproportionately favors charities supported by high-income taxpayers and may mitigate the windfall arising from stakeholder contributions of appreciated securities. Corporate philanthropy also is highly responsive to tax incentives, often provides utility to multiple stakeholders, and even transfers a portion of the cost of U.S. philanthropy to non-U.S. stakeholders. There is, in short, much to like about corporate philanthropy from a tax (and non-tax) policy perspective.

Lloyd Mayer

Cage & Guillot, Is Charitable Giving Political? Evidence from Wealth and Income Tax Returns

I just read (and partly skimmed--it's really long!) a recent paper by Julia Cage (Sciences Po Paris Department of Economics; Centre for Economic Policy Research (CEPR)) and Malka Guillot (University of Liège), Is Charitable Giving Political? Evidence from Wealth and Income Tax Returns, CESifo Working Paper No. 11731. The paper looks at a change in law in France that made charitable giving more expensive and determines that, at least in France, political donations are a substitute for charitable donations (that is, when the cost of charitable donations goes up, some donors switch to political giving). A fascinating paper. The abstract is here:

Is charitable giving politically motivated? This article uses exhaustive administrative household panel data and a natural experiment to investigate the giving behavior of wealthy households and quantify their preferences for charitable and political donations. Our dataset includes all the households filing their income tax and/or wealth tax returns in France between 2006 and 2021. Both charitable and political donations benefit from a 66% income tax credit, but only the charitable ones are eligible for the 75% wealth tax credit. We exploit the 2017 wealth tax reform – a change in the taxable base that led to a drop of two thirds in the number of liable households and, as a result, an increase in the price of charitable giving – and show that charitable and political donations are substitute. According to our estimates, a ten-percent increase in the price of charitable giving leads to a 0:18 p.p. increase in the propensity to make a political donation, and to a large rise (corresponding to 3% of the mean) in the amount given conditional on giving. Next, using city-level information, we show that the increase in the price of charitable giving mostly benefits pro-business political parties. Finally, we document that the drop in charitable donations is mostly driven by politically involved nonprofit organizations, pointing toward political motivations behind charitable giving.

Samuel D. Brunson 

Aprill, Lesson from the DOGE-United States Institute of Peace Showdown

Ellen Aprill (Loyola L.A. & UCLA) has a helpful HistPhil post titled “A Very Complicated Entity”: Lesson from the DOGE-United States Institute of Peace Showdown. Here is the Editors' Note:

Ellen Aprill explains why the hybrid nature of the United States Institute of Peace (USIP), both a government and nonprofit entity, was at the heart of the standoff between Department of Government Efficiency (DOGE) and USIP officials earlier this week.

Lloyd Mayer

Branch, Understanding the New Right’s Antipathy toward Civil Society

John Miles Branch (Northwestern University) has an interesting HistPhil post titled Rothbard vs. Cornuelle: Understanding the New Right’s Antipathy toward Civil Society. Here is the Editors' Note:

John Miles Branch explores the feud between two prominent mid-century libertarian thinkers, Murray Rothbard and Richard Cornuelle, as a way of understanding the contemporary right’s growing antipathy toward nonprofits writ large.

Lloyd Mayer