Wednesday, June 30, 2004

David Brennen (Mercer) presented A Normative Rationale for Tax Exemptions for Charities at the Critical Tax Conference at Rutgers-Newark. Here is part of the Introduction:

What is the normative rationale for the federal income tax exemption for nonprofit charitable corporations? Even though this federal statutory exemption dates back to 1894, Congress has provided very little explanation for why it exists. Over the years, many scholars have pondered this normative question. However, the quest for an explanation of the charitable tax exemption has centered almost exclusively on economic efficiency. Thus, the charitable tax exemption is typically justified as an economically efficient means of providing certain goods and services to the public…. But no matter how appealing efficiency might sound, one must not lose sight of the fact that taxation, and more particularly tax law, is about much more than economic efficiency. Tax law is about broader conceptions of justice, fairness, and other aspects of a democratic society that extend beyond economic principles…. This Article explains the charitable tax exemption, in value and market terms, to demonstrate that the principal normative justification for the charitable tax exemption is embedded in the value of diversity – what this Article calls “contextual diversity.”