Chicago Dean Saul Levmore has an interesting post on the Chicago Faculty Blog: Subsidizing Good Works (by Students):
The rebuilding of New Orleans is one of several activities that have attracted the energy and generosity of students across the country, and here at Chicago. Let’s … ask whether law schools (say ours) ought to subsidize a group of students who organize to travel there on spring break and do work under the auspices of Habitat for Humanity. I think we should be very proud of these students, and it is hard to imagine a teacher preferring any other spring break activity for students. But I find myself resisting the practice of some other schools that quickly give money to the cause….
[I]t is hard to see why a 501(c)(3) organization should ask donors for money only to turn around and give some of it (essentially) to another well-known organization. Our donors and tuition-payers are intelligent people who can allocate on their own, and who may for example be opposed to the rebuilding of New Orleans. They may prefer to give charitably to relocated residents from that city who are struggling to make new lives on higher ground. Why should we make this philanthropic decision for them?
In contrast, when we spend on a clinical program for indigent clients, we are engaging directly in the education of our students, and also can be said to expend resources where we have much more information than do individual donors….
It is interesting that tax law more or less tracks some of these thoughts – though few institutions seem to notice tax law at all. I am likely to be wrong about this, but thus far I see no reason why any funds we disburse to our admirable student-travelers would not be taxable to them! I can see that a school-organized trip might be provided to students with no tax consequences, if it is plainly a part of their education. Not so, I would think, for one that earns no credit and is not a regular part of the curriculum. A disbursement of cash to students seems especially taxable (and thus an inefficient way of giving and encouraging good works) unless it fits a specific exclusion, as do most scholarships awarded in the normal course of admissions and financial aid. There are a few law schools that presently give money outright to students who engage in good works (and indeed one reason to give is not to seem miserly and uncharitable by comparison), but I think this should be accompanied by some tax research, a note to the students that this may be taxable income, and perhaps some reporting of the disbursement to the IRS.
Habitat for Humanity could of course receive money (as a 501(c)(3) organization) and it could then, as part of its mission, turn around and pay for dormitory rooms and other spring-break expenses, in which case the students would be relieved of these costs. My tentative conclusion is that, with few exceptions, educational institutions should try to stick to the business of providing education, and of doing what they (certainly we!) do best. I might say the same about Habitat; I would be surprised if it thought it correct for it to give stipends to a subset of volunteers or employees who chose to come to the University of Chicago Law School.
