This week, Mirit Eyal (Alabama; Google Scholar) reviews a new work by Daniel J. Hemel (NYU; Google Scholar), Madisonian Nonprofit Law and Checks and Balances, 64 Harv. J. Leg. (forthcoming 2027):
The role of nonprofits in American democracy has become increasingly salient. As universities, charities, religious institutions, and advocacy groups face mounting political pressure, Hemel’s essay offers a timely and important intervention. Hemel’s essay addresses a fundamental question: namely, how do nonprofit organizations keep government power in check? Although nonprofits are often described as counterweights to the state, the mechanics of that checking function are rarely specified with precision. Hemel’s contribution is to explain how that counterweight operates. He argues that nonprofit organizations check and balance the state not only when they sue, lobby, or otherwise confront government as adversaries, but also when they supplement public services, become indispensable partners in public administration, and socialize citizens for democratic life.
The essay’s central move is to reframe nonprofit law through what Hemel calls a “Madisonian” lens. This does not mean that James Madison himself would have celebrated the modern nonprofit sector. Hemel uses “Madisonian” as a metaphor for institutional checks and balances. His core insight is that intersectoral checks between state, market, and nonprofit institutions can matter alongside the more familiar interbranch checks of constitutional law. That reframing is timely because the essay situates nonprofit law against the backdrop of renewed stress on traditional Madisonian institutions, powerful private firms’ acquiescence to executive pressure, and direct attacks on nonprofit institutions through funding freezes, grant terminations, and other measures.
Hemel begins with Dennis Young’s influential taxonomy of nonprofit-government relations. Nonprofits can be supplementary service providers, complementary partners, or adversaries in policy formulation and implementation. Much of the existing literature treats the adversarial mode as the obvious site of Madisonian checking. Hemel does not reject that view, but he shows that it is incomplete. When nonprofits supplement the service state, they expand the practical choices available to individuals and reduce the government’s ability to define the menu of social, medical, educational, and other services. Planned Parenthood’s provision of reproductive health care illustrates the point, that is, even when adversarial litigation fails, a nonprofit’s direct provision of services can operate as a meaningful check on state efforts to limit practical access to abortion.
The complementary mode appears, at first, to make nonprofits more dependent on the state. Hemel shows that complementarity can instead create leverage. His discussion of Catholic foster care agencies makes the point clearer. When religious nonprofits became embedded in state child welfare systems, their indispensability allowed them to shape state policy and secure exemptions from antidiscrimination mandates. The same dynamic appears in the example of Catholic hospital partnerships, where government dependence on nonprofit service providers gave religious organizations bargaining power over the content of publicly available services. The point is not that the resulting policy outcomes are necessarily attractive. It is that dependence can run both ways. Nonprofits may check the state not despite being inside the administrative apparatus, but because they are inside it.
Hemel’s most original intervention is its addition of a fourth mode of socialization. He connects the Madisonian literature on checks and balances with the Tocquevillian and neo-Tocquevillian literature on voluntary associations as schools of democracy. Nonprofits build bridging social capital across social divides, bonding social capital within communities of shared identity, and civic skills such as organizing meetings, speaking publicly, and participating in collective decision-making. Hemel argues that the literature has overlooked another democratic function, that is that nonprofits teach the “art of losing.”
Democracy requires not only citizens who can govern, but also citizens who can accept being governed by others. Nonprofit organizations create settings in which people who are powerful in politics or markets may find themselves subject to different hierarchies, norms, and decisional structures. Hemel calls this “table turning.” His examples from the Catholic Church, where elected officials such as Patrick Kennedy and Nancy Pelosi could not dictate religious outcomes despite their political and economic power, show how hierarchical nonprofit institutions may teach loss precisely because they are not internally democratic. This complicates easy assumptions about nonprofit governance. Participatory structures may be best for civic skill-building, but hierarchical structures may sometimes be especially effective at teaching democratic actors that not every institution bends to their will.
Part II turns from theory to doctrinal and policy implications. Hemel asks what a Madisonian nonprofit law would imply for tax subsidies, political activity restrictions, commercial activity limits, and state attorney general oversight. The answers are not simple. A Madisonian perspective may strengthen the case for government support of nonprofits because a better-resourced sector may better supplement public services, resist government overreach, and foster democratic socialization. Yet the same perspective also exposes costs. For example, subsidies may make nonprofits dependent on the state, amplify donor influence, and encourage professional management at the expense of volunteer governance.
Hemel’s discussion of the charitable contribution deduction shows the same tension. A Madisonian rationale may support subsidizing nonprofit activity through the tax system because tax subsidies are more durable than annual appropriations and may better protect adversarial nonprofits from political retaliation. But Madisonianism does less to justify the deduction’s upside-down structure, which gives larger benefits to higher-income taxpayers and risks magnifying the political voice of the wealthy. Hemel suggests that if the deduction is defended as a democracy-enhancing tool, a flat charitable credit available to all taxpayers may fit the Madisonian rationale more comfortably. Still, the essay resists one-dimensional reform prescriptions by recognizing that the current deduction’s political opacity may also contribute to its durability.
The same pattern appears in Hemel’s treatment of the Johnson Amendment. If nonprofits are sites of political socialization, a flat ban on candidate endorsements by section 501(c)(3) organizations may seem counterintuitive. Yet Hemel shows that the provision can be defended on Madisonian grounds because it helps organizations remain welcoming to members with diverse political views and can operate as a “Ulysses pact” for leaders who want to preserve nonpartisan space. The case for the Johnson Amendment therefore depends on the democratic value one prioritizes. In a period of low participation, mobilization might matter most. In a period of intense polarization, bridging may be more urgent.
Hemel also extends the Madisonian frame beyond the government-nonprofit relationship to the relationship between nonprofits and for-profit firms. Nonprofits can supplement markets by producing goods and services that profit-seeking firms may undersupply, such as public-interest journalism and impact litigation. They can check for-profit firms through complementary relationships, as in the Yale and Bristol-Myers Squibb example involving the pricing of stavudine in sub-Saharan Africa. They can also act as adversaries, as the Sierra Club did in the Mineral King litigation and as the NAACP has done in challenging x.AI’s Colossus Gas Plant. This analysis makes the commerciality doctrine more complex than it first appears. Maintaining separation between nonprofit and for-profit activity may preserve nonprofits’ ability to check corporate power, but allowing commercial activity and joint ventures may reduce nonprofit dependence on government funding and thereby strengthen their ability to check the state.
Finally, Hemel’s treatment of state attorney general oversight captures the essay’s recurring theme that Madisonian nonprofit law is a law of tradeoffs. State AG enforcement can deter abuse of the nonprofit form and reassure donors that assets will not be diverted from mission. At the same time, politically motivated state investigations can chill nonprofit advocacy and service provision. Hemel’s proposed turn toward the internal affairs doctrine responds to that problem. It allows nonprofits to be regulated primarily by their state of incorporation to preserve oversight while reducing the ability of ideologically hostile state officials to target out-of-state organizations.
The essay’s greatest strength is its refusal to reduce nonprofit law to a single democratic function. Hemel shows that nonprofits are simultaneously service providers, contractors, litigants, lobbyists, civic educators, market counterweights, and institutional training grounds for both winning and losing. That plurality explains why nonprofit law often resists clean answers. Rules that strengthen one Madisonian function may weaken another. Subsidies may empower adversarial organizations while crowding out volunteer governance. Political restrictions may inhibit mobilization while preserving bridging institutions. Commercial limits may distinguish nonprofits from markets while increasing reliance on the state. State oversight may build donor confidence while creating risks of partisan enforcement.
If there is an area where the essay could push further, it is in operationalizing its Madisonian framework for lawmakers and regulators. Hemel identifies the relevant tradeoffs, but future work might develop more concrete decision rules for when one Madisonian value should take priority over another. For example, the analysis could be extended into a typology distinguishing organizations whose principal democratic function is service supplementation from those whose principal function is civic socialization, political advocacy, or market counterbalancing. Such a typology could help determine when tax subsidies, political-activity rules, commerciality limits, or oversight regimes should vary across institutional forms.
Even without that next step, Hemel’s essay makes a major contribution. It gives nonprofit law a democratic theory equal to the sector’s institutional importance. More importantly, it shows that constitutional checks and nonprofit checks are mutually dependent. Nonprofits need legislative support and judicial protection, but legislatures and courts also depend on democratic norms that nonprofits help cultivate. In Hemel’s account, the nonprofit sector is not merely a beneficiary of Madisonian constitutionalism. It is one of the social institutions that makes Madisonian constitutionalism possible.
Here is the rest of this week’s SSRN tax roundup:
Işın Acun (Tilburg), Johannes Kasinger (Tilburg) & Nadia Abou Nabout (Tilburg), Who Bears the Burden of Digital Services Taxes? (June 2026)
Jurijus Aleksiejevas (Independent), The Value Transfer Tax (VTT): An Architecturally Enforced Single-Rate Tax System (June 2026
Joseph Bankman (Stanford), Jacob Goldin (Chicago), Adam Kern (USD), Ana Vasilj (Chicago),Buy or D.I.Y.: Home Production and the Income Tax, 127 Colum. L. Rev. ___ (2027).
Bridget J. Crawford (Pace), Taxable but Not Protected: Gendered Labor and the Limits of Work Law, 61 U. of Rich. L. Rev. Online (2026)
Stephen Daly (King’s College London), Trustworthy AI and HMRC, 2 Brit. Tax Rev. 161 (2026)
Helen Fielder (Independent), Bitcoin, Property or Money? Reframing the Debate before the High Court (June 2026)
Lucas Gribinski (UCLA), Autonomous AI and PEs, 122 Tax Notes Int’l 1035 (2026)
Jingjing (Jing) Huang (Virginia Tech), Lijun (Gillian) Lei (UNC), & Devan Mescall (U. of Saskatchewan), & Jeffrey Pittman (Memorial U.), Intellectual Property Law Firm Networks and Tax Haven Secrecy: Evidence from Exchange of Information on Request Agreements (June 2026)
Ismet Ismatullah (Indonesia), Risma Nurmilah (Indonesia), Venita Sofiani (Indonesia), Reni Anggriani (Indonesia) & Rinaldi (Indonesia), The Impact of Green Tax Awareness on Sustainable Consumption Behavior Among Gen Z: A Study on the Fast Fashion Industry (June 2026)
Jeffery M. Kadet (U. of Washington), Notice 2026-23, 2026-2027 Priority Guidance Plan Submission (June 2026)
Minsuk Kim (Korea), Tax Enforcement Capacity and Uncertain Tax Positions (June 2026)
Charles Edward Andrew Lincoln IV (U. of Groningen), Who Taxes Your Salary When You Work From Home? International Tax Treaties and Cross-Border Telework, 37 Asian Bus. Lawyer (2026).
Goldburn Maynard Jr. (Connecticut), Black Women and the Retirement Account Bait and Switch (June 2026)
Pasquale Pistone (IBFD), João Félix Pinto Nogueira (IBFD), Fabiola Annacondia (IBFD), Craig West (IBFD), Alessandro Turina (IBFD), Pedro Schoueri (IBFD), Ivan Lazarov (IBFD), Sergio Messina (IBFD) & Sam van der Vlugt (IBFD), Fundamentals of Indirect Taxation (June 2026)
