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Regulating Charities in the 21st Century: An Institutional Choice Analysis

73 Pages Posted: 5 Oct 2009 Last revised: 16 Feb 2011

Lloyd Hitoshi Mayer

Notre Dame Law School

Brendan M. Wilson

Akin Gump Strauss Hauer & Feld, L.L.P.

Date Written: 2009

Abstract

For more than fifty years scholars, practitioners, and government officials have debated whether the federal government, the state governments, or the charitable sector itself can best ensure that charity leaders fulfill their fiduciary duties. The dramatic growth of this sector, recent highly publicized governance scandals, and a push in Congress and the IRS for more federal involvement in this area have now brought this issue to a head. This article lays a foundation for resolving the dispute by developing an institutional choice framework for considering and comparing the various available options. Applying that framework, the article concludes that the best regulators of charity governance would most likely be state-level government agencies that work with but have a limited degree of independence from the state attorneys general. The article also determines that the best way to ensure adoption of this institutional choice - and limit potential weaknesses - is for the federal government to provide dedicated funding for such agencies, which could be obtained through the already existing private foundation investment income tax.

Keywords: nonprofit corporation, governance, fiduciary duties, institutional choice, institutional design, tax-exempt organization, IRS

Suggested Citation

Mayer, Lloyd Hitoshi and Wilson, Brendan M., Regulating Charities in the 21st Century: An Institutional Choice Analysis (2009). Chicago-Kent Law Review, Vol. 85, No. 2, p. 479, 2010; Notre Dame Legal Studies Paper No. 09-41. Available at SSRN: https://ssrn.com/abstract=1481287

Lloyd Hitoshi Mayer (Contact Author)

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States
574-631-8057 (Phone)
574-631-4197 (Fax)

Brendan M. Wilson

Akin Gump Strauss Hauer & Feld, L.L.P. ( email )

United States

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