what is the definition of charity, and who decides … is the definition of charity, and who decides...
Post on 11-Jun-2018
216 Views
Preview:
TRANSCRIPT
What Is the Definition of Charity,and Who Decides How to Define It?
www.morganlewis.com1
April 15, 2013
Alexander Reid
202.739.5941
areid@morganlewis.com
1. Charity Is Civil Society
Every Charity Begins with a Gift
Through Gifts We Create, Fund, and Operate theOrganizations of American Civil Society
Civil Society Is One of theFoundations of American Civilization
FamilyBusiness SocietyGovernmentCivil
It Is About Self Reliance
It Is About Variety
It Is About Public Benefit
We all benefit from civil society.
• Educational organizations providebusinesses with an educated work force anddemocracy with an educated electorate.
• Religious, ethnic, and cultural organizations• Religious, ethnic, and cultural organizationsknit together communities with a commonidentity
• Charitable organizations help all of us whendisaster strikes
• Volunteer organizations give us a sense ofpurpose
It Is About Democracy
Civil Society Does Not Require Sovereign Permission
A Delicate Balance
Civic
Democracy
Government
Civil Society
CivicEngagement
Government
?
Subsidy or Neutrality?
2. The State and Civil Society
The Charitable Deduction RemovesCharitable Gifts from the Tax Base
The Charitable Tax Exemption Removes IncomeRelated to Charitable Purposes From the Tax Base
The Tax Law Forms a Boundary Between theState and Civil Society
Which Allows the Government to Tax…
77.00%
63.00%
94.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
WWI
New deal
WWII
Historic USIncome Tax Rates
24.00%28.00%
39.60%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
19
13
19
17
19
21
19
25
19
29
19
33
19
37
19
41
19
45
19
49
19
53
19
57
19
61
19
65
19
69
19
73
19
77
19
81
19
85
19
89
19
93
19
97
20
01
20
05
20
09
20
13
Great DepressionTax Reform
…Without Consuming Civil Society
It Enables Civil Society to Fund Itself,Which Prevents Government Control
It Restricts the Fiscal RelationshipBetween Church and State
3. Why Our Discourse About theCharitable Deduction Needs a Paradigm Shift
As Specialists We Think About theCharitable Deduction Too Narrowly
The Tax Lawyer
It lowers the after-tax cost of giving!
The Economist
It creates an incentive to give!
It Is Time For a New Paradigm: Neutrality
“Incentive” and “Subsidy”Are Inadequate to the Task
(1) Government may restrict howgovernment funds are used
Subsidy Is Inconsistent with Freedom
+(2) The recipient of a subsidy uses
government funds+ government funds
= Then the government may restrict
the activities of civil society
+(3) If the charitable deduction is a
subsidy of civil society…
Just as a gift to charity is not a gift tothe government that it may control
Dartmouth College v. Woodward, 17 U.S. 519 (1819)
…a gift to charity is not a gift fromthe government that it may control
The Subsidy Paradigm Makes Charitable Gifts a Trojan Horse
The Government Is Under No Obligationto Continue a Subsidy
4. Who Defines Charity?
Civil Society Is Self-Defining
Americans Are Free to Identify and Pursue NewPublic Benefit Activities
• Addressing new social problems like the digital divide• Combating new diseases like HIV or autism• Practicing new religions like Christian Science or• Practicing new religions like Christian Science or
Jehovah's Witnesses
Or Cease Activities That AreObsolete, Unhelpful or Unfashionable
• Sanitoriums for tuberculosis patients no longer needed• Hook worm has been eradicated• Phrenology and social Darwinism are debunked
Economics Defines Public Benefit,Not Government
Change in Net WorthConsumptionEconomicIncome
Payments for Public Benefit Are Not Income
Consumption Is a Measure of Private Benefit
Tax Law Requires Public Benefit andScreens Out Private Benefit
(1) Is organized and operated for a public benefit
(2) Serves a broad and indeterminate class ofbeneficiaries
(3) Does not distribute profits
To qualify, a 501(c)(3)…
(3) Does not distribute profits
(4) Does not engage in excessive lobbying or politicalcampaign intervention
(5) Does not violate public policy
…and it must avoid self-dealing or excessbenefit transactions
Donors Also Must Provide Public BenefitWithout Excessive Private Benefit
To qualify, under 170 a contribution must be…
(1) Received by a domestic charitableorganization
(2) Used for a public benefit purpose(2) Used for a public benefit purpose
(3) Reduced by the value of any goods orservices the donor receives in exchange
(4) Properly substantiated
A Self-Defining Civil SocietyDoes Not Harm the Fisc
Therefore, the Government Should RemainNeutral Toward Civil Society
Summary
• Charity Is Civil Society
• Civil Society Is Fundamental to AmericanCivilization
• Civil Society Creates Public Benefits
• Civil Society Does Not Harm the Fisc
• Civil Society Is Self-Defining and theGovernment Should Remain NeutralToward It.
top related