Table of Contents

How Do Nonprofit Firms Respond to Tax Policy?

Brian D. Galle, Boston College Law School

Good News, Bad News, and Social Image: The Market for Charitable Giving

Luigi Butera, George Mason University - Interdisciplinary Center for Economic Science (ICES)
Jeffrey Ryan Horn, George Mason University

Hybrid Organizations in the Arts: A Cautionary View

Michael J. Rushton, Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Fraud on the Faithful? The Charitable Intentions of Members of Religious Congregations and the Peculiar Body of Law Governing Religious Property in the United States

Valerie J. Munson, Southern Illinois University at Carbondale - School of Law


"How Do Nonprofit Firms Respond to Tax Policy?" Free Download
Boston College Law School Legal Studies Research Paper No. 320

BRIAN D. GALLE, Boston College Law School

We investigate the effects of variations in the value of the charitable contribution deduction on nonprofit firm behavior, including exploring for the first time the effects of the tax-price of giving on fundraising and returns to fundraising. We find that a one-percent increase in tax subsidies drives a 1.7-percent increase in fundraising, and decreases average returns to fundraising by two percent. We also find that tax subsidies deliver less than a dollar of value, net of fundraising, for each dollar foregone by the government, and that program-related expenditures are largely unresponsive to subsidies, at least in the short run. We argue that these results may imply that the charitable contribution deduction is less effective than prior research has suggested. For example, we argue our results are consistent with the hypothesis that subsidies trigger a destructive arms’ race for donor funds. The modest elasticity of real charitable output to tax price implies that tax subsidies may simply crowd out other revenue sources, such that the efficacy of the subsidy depends on the relative efficiency of these alternative sources.

"Good News, Bad News, and Social Image: The Market for Charitable Giving" Free Download
George Mason University Interdisciplinary Center for Economic Science (ICES) Working Paper

LUIGI BUTERA, George Mason University - Interdisciplinary Center for Economic Science (ICES)
JEFFREY RYAN HORN, George Mason University

Financial efficiency represents a desirable quality in charitable organizations. Yet, different theories of intrinsic and extrinsic preferences for charitable giving offer opposite predictions about donors’ reaction to this information. On one hand, learning that one’s charity is better than expected directly increases the marginal impact of giving, making donations non-decreasing in the quality of news. This behavior is consistent with warm-glow theory. On the other hand, higher efficiency has an indirect negative effect on giving, since now less money is needed to produce one unit of effective charitable good. Most notably, theories of pure altruism and guilt aversion predict this behavior. A similar tension arises for prestige motivated donors whenever information provides extrinsic incentives to give (e.g. information has a social signaling value). We model this simple framework and test it using a laboratory experiment. We show that when information about efficiency is private, giving is always non-decreasing in the quality of news. However, when the efficiency of donor’ charities is public information, this relationship breaks down: 34% of donors who respond to new information do so by reducing their giving when charities are better-than expected, and increasing it when are worse. We show that this result is driven by image-motivated donors, who treat the size of their gift and the efficiency of their chosen charities as substitutes in terms of social image payoffs.

"Hybrid Organizations in the Arts: A Cautionary View" Free Download
Indiana University, Bloomington School of Public & Environmental Affairs Research Paper No. 2441716

MICHAEL J. RUSHTON, Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Traditionally, the choice of organizational form facing an arts entrepreneur has been between starting a commercial enterprise or a nonprofit. Recently, state governments across the United States have passed authorizing legislation for various forms of hybrid organizations that combine elements of the commercial and nonprofit. This paper presents an overview of the evolution of hybrid organizations, and the associated policy and governance questions that arise. It concludes that hybrids, at least in their current state, do not present a model likely to be widely adopted in the arts.

"Fraud on the Faithful? The Charitable Intentions of Members of Religious Congregations and the Peculiar Body of Law Governing Religious Property in the United States" Free Download
Rutgers Law Journal Vol. 44, No. 3, 2014

VALERIE J. MUNSON, Southern Illinois University at Carbondale - School of Law

This article examines American church property law, past and present, and discusses its inconsistencies and ambiguities. It then suggests how state governments could play an important role in clarifying this area of the law and protecting the intentions and expectations of local church donors who may well be unaware that a general church organization (denomination) is the ultimate beneficiary of their donations. The article is unique in that it is written with a perspective that takes into account the real world contexts of church property disputes, in history and today. (The author was aided in this regard by historic Supreme Court documents that became available to scholars just this spring through a recent digitalization project.)

The article begins by placing the reader in the midst of a church property dispute as seen through the eyes of Sandra and John Cook, fictional characters whose experiences accurately reflect those of the author’s former clients. It then proceeds in three parts.

The first part is an overview of church property rights under American law and begins with a short discussion of the religious context in which this country was founded, the legal existence and power given religious organizations in the post-revolutionary period, and early concerns about the need to limit the power of church authorities over non-spiritual matters like possession and control of church property. It then discusses the three very different approaches used to resolve church property disputes by different states, at different times. The first is the “departure from doctrine? rule first announced in the Scottish case, Craigdaillie v. Aikman in 1813. That approach turns on a determination of which faction in a church property dispute most closely follows the religious tenets that existed at the time a local church was founded. The second approach is the “deference? approach which was first articulated by the Supreme Court in 1871 in Watson v. Jones, a case arising out of the civil war. Using that approach, if a court determines that a local church belonged to a general church organization having its own authoritative structure and means of deciding disputes, the court must defer to the decision of the highest judicatory of the general church organization as to which party is entitled to possession and control of church property. The third, and now most prevalent, approach is the “neutral principles? approach endorsed by the Supreme Court in 1979 in the case of Jones v. Wolf. Under that approach, a court may decide a church property dispute if it can do so without deciding any religious issue. That is, it can decide the dispute if it can do so by simply applying neutral principles of state property, contract, and trust law. The first part of the article concludes with a summary of how the state courts have applied the neutral principles approach in recent years, which has continued the ambiguity and inconsistency in this area of the law.

The second part of the article discusses the context in which individuals today decide to donate money to local churches. It looks at what historic case law provides by way of context as well as at current data on church affiliation practices in the United States.

The third, and final, part of the article suggests three ways in which state governments can assume a role in clarifying the area of church property law, a role they have been urged to assume by the Supreme Court for over forty years. The suggested state government actions would also protect the intentions and expectations of potential donors to local churches in a manner consistent with current public policy favoring financial transparency, especially full disclosure in charitable fundraising. One possible action is the amending of state charitable solicitation or church incorporation laws to require specific disclosure of any beneficial interest a general church organization holds in local church property. A second is through vigorous enforcement of existing state anti-fraud laws. A third is through vigorous enforcement of the public policy requirement for continued tax exemption.

The article concludes by bringing the discussion of church property law back to real people, like Sandra and John Cook, who are deeply affected by church property disputes, and suggesting that now is the time for state governments to step up and assume the role envisioned for them by the Supreme Court by acting to protect the intentions and expectations of those who give of their time and money to support local churches.


About this eJournal

This eJournal distributes working and accepted paper abstracts in the fields of nonprofit law and policy, philanthropy law and policy and related areas of scholarship. Thus, drafts and articles that concern nonprofit corporations, charities, charitable corporations, charitable organizations, charitable donations, charitable foundations, charitable fundraising, charitable solicitation, charitable trusts, philanthropy, private foundations, nongovernmental organizations, tax-exempt organizations, tax-exempt corporations, private clubs, membership clubs and similar topics are appropriate for this journal.


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Advisory Board

Nonprofit & Philanthropy Law eJournal

John E. Anderson Professor of Tax Law, Associate Dean for Academic Programs, Loyola Law School Los Angeles

Professor of Law, Chicago-Kent College of Law

Albert E. Jenner, Jr. Professor of Law, University of Illinois College of Law

University Professor of Philanthropy and the Law, Director - National Center on Philanthropy and the Law, New York University School of Law

Professor of Law, Stetson University College of Law

Professor of Law and Sociology, Vanderbilt University - Law School

Professor of Law Emeritus, University of California, Hastings College of the Law

Professor of Law, University of Florida - Fredric G. Levin College of Law