Abstract

http://ssrn.com/abstract=928976
 
 

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The Case for For-Profit Charities


Eric A. Posner


University of Chicago - Law School

Anup Malani


University of Chicago - Law School; University of Chicago Pritzker School of Medicine; Resources for the Future; National Bureau of Economic Research (NBER)

September 2006

University of Chicago Law & Economics, Olin Working Paper No. 304

Abstract:     
Nonprofit firms may not distribute profits to owners but instead must retain them or reinvest them. Nonprofits that are "charitable organizations" under Section 501(c)(3) of the tax code may receive donations from individuals who are allowed to deduct their donations from their income for tax purposes. We argue that the law should not link tax benefits to corporate form in this way. There may be good arguments for recognizing the nonprofit form and good arguments for providing tax subsidies to charities or donors to charities, but there is no good argument for making those tax subsidies available only to charities that adopt the nonprofit form. Consequently, the "for-profit charity" may well be a desirable institution. Currently, no such entity exists, but the reason is surely discriminatory tax treatment; the charitable activities of many commercial firms suggest that in the absence of discriminatory tax treatment for-profit charities would flourish. Current tax benefits for charitable nonprofits should be extended to for-profit charities, and to the charitable activities of for-profit commercial firms.

Number of Pages in PDF File: 26

Keywords: tax benefits, nonprofits

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Date posted: September 8, 2006  

Suggested Citation

Posner, Eric A. and Malani, Anup, The Case for For-Profit Charities (September 2006). University of Chicago Law & Economics, Olin Working Paper No. 304. Available at SSRN: http://ssrn.com/abstract=928976 or http://dx.doi.org/10.2139/ssrn.928976

Contact Information

Eric A. Posner (Contact Author)
University of Chicago - Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
773-702-0425 (Phone)
773-702-0730 (Fax)
HOME PAGE: http://www.law.uchicago.edu/faculty/posner-e/
Anup Malani
University of Chicago - Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
773-702-9602 (Phone)
773-702-0730 (Fax)
HOME PAGE: http://www.law.uchicago.edu/faculty/malani/
University of Chicago Pritzker School of Medicine
Chicago, IL 60637
United States
Resources for the Future
1616 P Street, NW
Washington, DC 20036
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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