Читать книгу The Tax Law of Charitable Giving - Bruce Hopkins R., Bruce R. Hopkins, David Middlebrook - Страница 22
NOTES
Оглавление2 2 See Part Three.
5 5 Companion books by the author provide a summary of the law concerning tax-exempt organizations as such (Tax-Exempt Organizations), planning considerations for tax-exempt organizations (Planning Guide), IRS examinations of tax-exempt organizations (IRS Audits), and regulation of the charitable fundraising process (Fundraising). Governance of tax-exempt organizations is the subject of Hopkins & Gross, Nonprofit Governance: Law, Practices, & Trends (Hoboken, NJ: John Wiley & Sons, 2009). These bodies of law are reviewed in less technical detail in Hopkins, Starting and Managing a Nonprofit Organization: A Legal Guide, 7th edition (Hoboken, NJ: John Wiley & Sons, 2017). All of these areas of the law (and others) are also covered in the Bruce R. Hopkins' Nonprofit Law Library, an e-book published by John Wiley & Sons in 2013.
6 6 The term nonprofit organization is used throughout, rather than the term not-for-profit. The latter term is used, however, in the federal tax setting, to describe activities (rather than organizations) whose expenses do not qualify for the business expense deduction. Internal Revenue Code of 1986, as amended, section (IRC §) 183. Throughout this book, the Internal Revenue Code is cited as the “IRC.” The IRC constitutes Title 26 of the United States Code.
7 7 A discussion of these sectors appears in Ferris & Graddy, “Fading Distinctions among the Nonprofit, Government, and For-Profit Sectors,” in Hodgkinson, Lyman, & Associates, The Future of the Nonprofit Sector, ch. 8 (San Francisco: Jossey-Bass, 1989). An argument that the sector should be called the first sector is advanced in Young, “Beyond Tax Exemption: A Focus on Organizational Performance versus Legal Status,” in id. ch. 11.
8 8 See Tax-Exempt Organizations ch. 12.
9 9 The Supreme Court wrote that a “nonprofit entity is ordinarily understood to differ from a for-profit corporation principally because it ‘is barred from distributing its net earnings, if any, to individuals who exercise control over it, such as members, officers, directors, or trustees’” (Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 585 (1997), quoting from Hansmann, “The Role of Nonprofit Enterprise,” 89 Yale L.J. 835, 838 (1980)).
10 10 One commentator stated that charitable and other nonprofit organizations “are not restricted in the amount of profit they may make; restrictions apply only to what they may do with the profits.” Weisbrod, “The Complexities of Income Generation for Nonprofits,” in Hodgkinson et al., ch. 7.
11 11 Norwitz, “The Metaphysics of Time: A Radical Corporate Vision,” 46 Bus. Law. (no. 2) 377 (Feb. 1991).
12 12 The federal law of tax exemption for charitable organizations requires that each of these entities be organized and operated so that “no part of . . . [its] net earnings . . . inures to the benefit of any private shareholder or individual.” IRC § 501(c)(3).
13 13 IRC §§ 501(c)(9), (17), and (21) (employee benefit trusts), and IRC § 501(c)(7) (social clubs). See Tax-Exempt Organizations chs. 18, 15, respectively.
14 14 This broad definition carries with it the connotation of philanthropy. E.g., Van Til, “Defining Philanthropy,” in Van Til & Associates, Critical Issues in American Philanthropy, ch. 2 (San Francisco: Jossey-Bass, 1990). Also Payton, Philanthropy: Voluntary Action for the Public Good (New York: Macmillan, 1988); O'Connell, Philanthropy in Action (New York: The Foundation Center, 1987).
15 15 The complexity of the federal tax law is such that the charitable sector (using the term in its broadest sense) is also divided into two segments: charitable organizations that are considered private (private foundations) and charitable organizations that are considered public (all charitable organizations other than those that are considered private); these nonprivate charities are frequently referred to as public charities. See Tax-Exempt Organizations ch. 12.
16 16 McGovern, “The Exemption Provisions of Subchapter F,” 29 Tax Law. 523 (1976). Other overviews of the various tax exemption provisions are in Hansmann, “The Rationale for Exempting Nonprofit Organizations from Corporate Income Taxation,” 91 Yale L.J. 69 (1981); Bittker & Rahdert, “The Exemption of Nonprofit Organizations from Federal Income Taxation,” 85 Yale L.J. 299 (1976).
17 17 H. Rep. No. 72, 78th Cong., 1st Sess. 17 (1928).
18 18 Lapin, “The Golden Hills and Meadows of the Tax-Exempt Cemetery,” 44 Taxes 744 (1966).
19 19 “Comment,” 27 Iowa L. Rev. 128, 151–155 (1941).
20 20 H. Rep. No. 704, 73d Cong., 2d Sess. 21–25 (1934).
21 21 These are the charitable, educational, religious, scientific, and like organizations referenced in IRC § 501(c)(3).
22 22 See Tax-Exempt Organizations § 1.3.
23 23 In 1894, Congress imposed a tax on corporate income. This was the first time Congress was required to define the appropriate subjects of tax exemption (inasmuch as prior tax schemes specified the entities subject to taxation). The Tariff Act of 1894 provided exemption for nonprofit charitable, religious, and educational organizations; fraternal beneficiary societies; certain mutual savings banks; and certain mutual insurance companies. The 1894 legislation succumbed to a constitutional law challenge (Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), overruled on other grounds sub nom. South Carolina v. Baker, 485 U.S. 505 (1988)). The Sixteenth Amendment was subsequently ratified, and the Revenue Act of 1913 was enacted. In general, Pollack, “Origins of the Modern Income Tax, 1894–1913,” 66 Tax Law. (no. 2) (Winter 2013).
24 24 McGovern, “The Exemption Provisions of Subchapter F,” 29 Tax Law. 523, 524 (1976).
25 25 Income Tax Regulations (Reg.) § 1.501(c)(3)-1(d)(2).
26 26 Statute of Charitable Uses, 43 Eliz., c.4.
27 27 Cobb, The Rise of Religious Liberty in America, 482–528 (1902).
28 28 Torpey, Judicial Doctrines of Religious Rights in America, 171 (1948).
29 29 Trinidad v. Sagrada Orden de Predicadores de la Provincia del Santisimo Rosario de Filipinas, 263 U.S. 578, 581 (1924).
30 30 Walz v. Tax Commission, 397 U.S. 664, 673 (1970).
31 31 Portland Golf Club v. Commissioner, 497 U.S. 154, 161 (1990).
32 32 Duffy v. Birmingham, 190 F.2d 738, 740 (8th Cir. 1951).
33 33 Id.
34 34 St. Louis Union Trust Co. v. United States, 374 F.2d 427, 432 (8th Cir. 1967).
35 35 McGlotten v. Connally, 338 F. Supp. 448, 456 (D.D.C. 1972).
36 36 Green v. Connally, 330 F. Supp. 1150, 1162 (D.D.C. 1971), aff'd sub nom. Coit v. Green, 404 U.S. 997 (1971).
37 37 7 Id., 330 F. Supp. at 1162. In a situation where a partnership intended to make $4.75 million in charitable contributions but the gifts were, due to a clerical error, made by means of a business corporation's checks and the matter was corrected, a court refused to uphold the IRS's disallowance of the deduction, declaring that “[t]o disallow a charitable deduction simply because of a clerical error goes against the liberal policy of encouraging charitable giving” (Green v. United States, 2016 WL 552964 (W.D. Okla. 2016)). Likewise, Green v. United States, 2015 WL 1482508 (W.D. Okla. 2015), rev'd on other ground, 880 F.3d 519 (10th Cir. 2017).
38 38 H. Rep. No. 1860, 75th Cong., 3d Sess. 19 (1939).
39 39 Department of the Treasury, Proposals for Tax Change, Apr. 30, 1973.
40 40 Report of the Commission on Private Philanthropy and Public Needs: Giving in America—Toward a Stronger Voluntary Sector at 9–10 (1975).
41 41 Friendly, “The Dartmouth College Case and the Public-Private Penumbra,” 12 Tex. Q. (2d Supp.) 141, 171 (1969). Two other prominent sources are Rabin, “Charitable Trusts and Charitable Deductions,” 41 N.Y.U. L. Rev. 912 (1966); Saks, “The Role of Philanthropy: An Institutional View,” 46 Va. L. Rev. 516 (1960).
42 42 Fink, “Taxation and Philanthropy—A 1976 Perspective,” 3 J. Coll. & Univ. L. 1, 6–7 (1975).
43 43 Gardner, “Bureaucracy vs. The Private Sector,” 212 Current 17–18 (May 1979).
44 44 Id. at 17.
45 45 Id. at 18.
46 46 Henle, “The Survival of Not-for-Profit, Private Institutions,” America, Oct. 23, 1976, at 252.
47 47 O'Connell, America's Voluntary Spirit (New York: The Foundation Center, 1983).
48 48 Id. at xi.
49 49 Id. at xv.
50 50 Id. at 81.
51 51 Id. at 131.
52 52 Id. at 162.
53 53 Id. at 256.
54 54 Id. at 278.
55 55 Id. at 356.
56 56 Id. at 368.
57 57 Id. at 371.
58 58 Id. at 408.
59 59 The congressional budget and tax committees and the Department of the Treasury measure the economic value (revenue “losses”) of various tax preferences, such as tax deductions, credits, and exclusions (termed tax expenditures). The federal income tax charitable contribution deduction tends to be the sixth- or seventh-largest tax expenditure.
60 60 In general, Pappas, “The Independent Sector and the Tax Law: Defining Charity in an Ideal Democracy,” 64 S. Cal. L. Rev. 461 (Jan. 1991).There is another rationale for tax exemption, known as the inherent tax rationale. See Tax-Exempt Organizations § 1.5. The essence of this rationale is that the receipt of what otherwise might be deemed income by a tax-exempt organization is not a taxable event, in that the organization is merely a convenience or means to an end, a vehicle whereby those participating in the enterprise may receive and expend money collectively in much the same way as they would if the money were expended by them individually. Although this rationale is not followed in the charitable organizations setting, it chiefly underlies the tax exemption for organizations such as social clubs, homeowners' associations, and political organizations.
61 61 See Tax-Exempt Organizations ch. 14.
62 62 Id. § 16.1.
63 63 U.S. Department of the Treasury, Report to the Congress on Fraternal Benefit Societies, Jan. 15, 1993.
64 64 See supra note 60.
65 65 See text accompanied by infra notes 76–79.
66 66 See Tax-Exempt Organizations § 19.11(a).
67 67 Id. § 24.10, text accompanied by note 947.
68 68 Id. § 19.14.
69 69 Id. § 11.5.
70 70 Id. § 11.4.
71 71 Id. § 11.6.
72 72 Id. § 8.8.
73 73 Id. § 11.3.
74 74 Id. § 19.17.
75 75 Hansmann, “The Role of Nonprofit Enterprise,” 89 Yale L.J. 835, 896 (1980).
76 76 Id. at 844.
77 77 Id. at 847.
78 78 Id. at 845.
79 79 Id. at 843.
80 80 Pierce v. Society of Sisters, 268 U.S. 510 (1925); Meyer v. Nebraska, 262 U.S. 390 (1923).
81 81 Zablocki v. Redhail, 434 U.S. 374 (1978); Quilloin v. Walcott, 434 U.S. 246 (1978); Smith v. Organization of Foster Families, 431 U.S. 816 (1977); Carey v. Population Serv. Int'l., 431 U.S. 678 (1977); Moore v. East Cleveland, 431 U.S. 494 (1977); Cleveland Bd. of Educ. v. LaFleur, 414 U.S. 632 (1974); Wisconsin v. Yoder, 406 U.S. 205 (1973); Stanley v. Illinois, 405 U.S. 645 (1972); Stanley v. Georgia, 394 U.S. 557 (1969); Griswold v. Connecticut, 381 U.S. 479 (1965); Olmstead v. United States, 277 U.S. 438 (1928).
82 82 Runyon v. McCrary, 427 U.S. 160 (1976).
83 83 Roberts v. United States Jaycees, 468 U.S. 609 (1984).
84 84 Rent Control Coalition for Fair Housing. v. Berkeley, 454 U.S. 290 (1981).
85 85 Boy Scouts of America et al. v. Dale, 530 U.S. 640 (2000); NAACP v. Claiborne Hardware Co., 458 U.S. 886 (1982); Larson v. Valente, 456 U.S. 228 (1982); In re Primus, 436 U.S. 412 (1978).
86 86 Brown v. Socialist Workers '74 Campaign Committee, 459 U.S. 87 (1982); Democratic Party v. Wisconsin, 450 U.S. 107 (1981); Buckley v. Valeo, 424 U.S. 1 (1976); Cousins v. Wigoda, 419 U.S. 477 (1975); American Party v. White, 415 U.S. 767 (1974); NAACP v. Button, 371 U.S. 415 (1963); Shelton v. Tucker, 364 U.S. 486 (1960); NAACP v. Alabama, 347 U.S. 449 (1958).
87 87 Roberts v. United States Jaycees, 468 U.S. 609 (1984).
88 88 Id. at 622–629.
89 89 Id. at 625. In general, see Tax-Exempt Organizations § 1.7; Hopkins, Tax-Exempt Organizations and Constitutional Law: Nonprofit Law as Shaped by the U.S. Supreme Court (Hoboken, NJ: John Wiley & Sons, 2012) § 1.9.
90 90 “The rapid growth of the nonprofit sector in the last half century has led to greatly increased attention from the media, scholars, the government, and the public.” O'Neill, Nonprofit Nation: A New Look at the Third America 34 (San Francisco: Jossey-Bass, 2002) (Nonprofit Nation).
91 91 Report of the Commission on Private Philanthropy and Public Needs: Giving in America—Toward a Stronger Voluntary Sector (1975).
92 92 See text accompanied by infra note 126.
93 93 The most recent version of this almanac is Wing, Pollak, & Blackwood, The Nonprofit Almanac 2008 (Washington, DC: The Urban Institute Press) (Nonprofit Almanac).
94 94 Nonprofit Nation.
95 95 These annual publications of this organization are titled Giving USA.
96 96 The IRS publishes various editions of the Statistics of Income Bulletins.
97 97 E.g., Yearbook of American and Canadian Churches (National Council of the Churches of Christ in the United States of America, various editions); Foundation Giving: Yearbook of Facts and Figures on Private, Corporate and Community Foundations (The Foundation Center, various editions); Foundation Management Report (Council on Foundations, various editions). The American Hospital Association publishes statistics concerning hospitals; the National Center for Education Statistics publishes data on independent colleges and universities; and the American Society of Association Executives publishes information concerning the nation's trade, business, and professional associations. There are several other analyses of this nature.
98 98 Indeed, there is little uniformity as to this term. See text accompanied by supra note 7.
99 99 That is, organizations that are tax-exempt pursuant to IRC § 501(a) because they are described in IRC § 501(c)(3) (see Tax-Exempt Organizations pt. 3).
100 100 That is, organizations that are tax-exempt pursuant to IRC § 501(a) because they are described in IRC § 501(c)(4) (see Tax-Exempt Organizations ch. 13). This definition of the independent sector is in the 2002 edition of the Nonprofit Almanac at 7–8. Today, the Nonprofit Almanac does not attempt a definition of the sector but instead surveys the “nonprofit landscape” (Nonprofit Almanac at 3–5).
101 101 Nonprofit Almanac (2002) at 3.
102 102 Nonprofit Nation at 8.
103 103 Id. at 1.
104 104 That is, organizations that are tax-exempt pursuant to IRC § 501(c).
105 105 Tax-Exempt Organizations ch. 13.
109 109 Id. § 19.4(a).
110 110 Id. § 19.11(a).
111 111 Id. § 19.6.
112 112 IRS 2019 Data Book (issued on June 29, 2020).
113 113 Nonprofit Nation at 8. The point was articulated more forcefully in the fifth edition (1996) of the Nonprofit Almanac, where it was stated that “[c]ounting the number of institutions in the independent sector is a challenge” (Nonprofit Almanac at 25). Even with a complete and accurate tally, difficulties continue: “Trying to understand the various exempt organizations provisions of the Internal Revenue Code is as difficult as capturing a drop of mercury under your thumb” (Weingarten v. Commissioner, 86 T.C. 669, 675 (1986), rev'd (on other grounds), 825 F.2d 1027 (6th Cir. 1987).
114 114 Nonprofit Almanac at 139. The term church includes analogous religious congregations, such as temples and mosques. See Tax-Exempt Organizations § 10.3.
115 115 See Tax-Exempt Organizations § 28.2(b)(i).
116 116 See Tax-Exempt Organizations § 26.11.
117 117 These are organizations that normally do not generate more than $5,000 in revenue. See Tax-Exempt Organizations § 28.2(b)(ii).
118 118 See Tax-Exempt Organizations § 28.3.
119 119 Nonprofit Nation at 9.
120 120 Id. at 10.
121 121 Id. at 115.
122 122 Id.
123 123 Id. at 18, 27.
124 124 Id. at 115. Fees for services and goods were estimated to be 70.3 percent of the total; contributions and nongovernment grants were said to be 12.3 percent of the total (id. at 143–144).
125 125 Id. at 121.
126 126 These data are from Giving USA 2020, published by the Giving USA Foundation, and researched and written by the Center on Philanthropy at Indiana University.
127 127 IRS, “Individual Noncash Charitable Contributions, Tax Year 2016,” Statistics of Income Bulletin (Pub. 5337 (rev. May, 2019).
128 128 See § 22.7(a).
129 129 Nonprofit Nation at 12.
130 130 Report of the Commission on Private Philanthropy and Public Needs: Giving in America—Toward a Stronger Voluntary Sector at 34–48 (1975).
131 131 Lindsey, “The Charitable Contribution Deduction: A Historical Review and a Look to the Future,” 81 Neb. L. Rev. (no. 3) 1056, 1057 (2002). This point is substantially overstated in Duquette, “Founders' Fortunes and Philanthropy: A History of the U.S. Charitable-Contribution Deduction,” 93 Business History Rev. 553 (Autumn 2019), where it is written that the “workings of the [charitable] deduction have changed little since its creation in 1917” (id.). Also Taggart, “The Charitable Deduction,” 26 Tax L. Rev. 63 (1970).
132 132 Cf.: “Direct changes to the contribution deduction since its enactment have been few and relatively modest” (Duquette, supra note 131, at 559).
133 133 “There are a wide variety of organizations to which a taxpayer can donate money or property and receive a charitable contribution deduction” (Lindsey, supra note 131, at 1057).
134 134 Pub. L. No. 65-50.
135 135 Congressional Research Service, “The Charitable Deduction for Individuals: A Brief Legislative History (R46178) 4 (Jan. 14, 2020). “The Congress added a deduction for gifts to charitable organizations to the bill implementing these high rates, not to encourage the wealthy to give their fortune away (which the most influential and richest men were already doing) but to not discourage their continued giving in light of a larger tax bill” (Duquette, supra note 131, at 558).
136 136 Joint Committee on Taxation, Present Law and Background Relating to the Federal Tax Treatment of Charitable Contributions (JCX-55-11) 4 (Oct. 14, 2011).
137 137 Congressional Research Service, supra note 135, at 5.
138 138 Pub. L. No. 78-315.
139 139 Pub. L. No. 82-465.
140 140 Pub. L. No. 83-591.
141 141 This was the “first time that Congress encouraged certain charitable giving by granting more generous deductions for donations given to certain charitable organizations than to others” (Lindsey, supra note 131, at 1063).
142 142 Pub. L. No. 88-272.
143 143 Pub. L. No. 91-172.
144 144 Pub. L. No. 97-34.
145 145 Senate Committee on Finance, Statement of Donald C. Lubick, Assistant Secretary for Tax Policy, U.S. Treasury Department, Hearings Before the Subcommittee on Taxation and Debt Management Generally of the Committee on Finance on S. 219, 96th Cong., 2nd Sess. 51 (Jan. 30, 1980)).
146 146 Id. at 68.
147 147 Joint Committee on Taxation, General Explanation of the Economic Recovery Act of 1981 (JCS-71-81) 49 (Dec. 29, 1981).
148 148 Pub. L. No. 98-369.
149 149 Pub. L. No. 100-647.
150 150 Pub. L. No. 103-66.
151 151 Pub. L. No. 104-188.
152 152 Pub. L. No. 105-277.
153 153 Pub. L. No. 109-135.
154 154 Pub. L. No. 115-97.
155 155 The U.S. Tax Court, in 2020, observed that, “[i]n the past 34 years Congress has amended section 170 more than 30 times” (Oakbrook Land Holdings, LLC v. Commissioner, T.C. Memo. 2020–54 (2020)). Footnote 5 in that opinion contains the public law citations for each of these amendments.
156 156 Lindsey, supra note 131, at 1059.
157 157 This report, published in mid-2019, was researched and written by the Indiana University Lilly Family School of Philanthropy. It was funded by the Charles Stewart Mott Foundation and the Fidelity Charitable Trustees' Initiative.
158 158 Joint Economic Committee (Republicans), “Reforming the Charitable Deduction,” as part of its Social Capital Project (Report no. 2 (Nov. 2019)).
159 159 Id. at 14.
160 160 Id.
161 161 Id.
162 162 Lindsey, supra note 131, at 1092.
163 163 Duquette, supra note 131, at 577.
