A Dubious Distinction: Rethinking Tax Treatment of Private Foundations and Public Charities

Abstract:     
In this article, Marsh outlines the differences between private foundations and public charities (including community foundations) and the starkly different manner in which the Internal Revenue Service addresses them. She argues that the private/public distinction, a more or less accurate proxy for donor control in 1969 (when the current regulations were drafted), is anachronistic and ill equipped to deal with the rising importance of community foundations and for-profit charitable funds. A new paradigm is necessary to address new entities, especially donor-advised funds and supporting organizations. Finally, she argues that Congress should discard the dubious distinction between private foundations and public charities and replace it with a paradigm based on donor control.

Number of Pages in PDF File: 50

Keywords: philanthropy, public charity, private foundation, tax, community foundation

JEL Classification: K34

Accepted Paper Series