Charities and the Constitution: Evaluating the Role of Constitutional Principles in Determining the Scope of Tax Law's Public Policy Limitation for Charities

Abstract

Charities and the Constitution is a follow-up to The Power of The Treasury, 33 U.C. DAVIS L. REV. 389-447 (2000) and Tax Expenditures, Social Justice and Civil Rights, 2001 B.Y.U. L. REV. 167 (2001). Collectively, these three articles both highlight problems with tax law's public policy limitation and offer possible solutions to those problems. The public policy limitation provides that tax-exempt charities violating established public policy must lose their 501(c)(3) tax exemption. Charities and the Constitution examines a central problematic aspect of the public policy limitation - the lack of specific standards to be used by Service in determining whether a policy is sufficiently established for purposes of the limitation. The Service recently intimated that it will rely primarily on constitutional law doctrine as its standard to ascertain established public policy with respect to private charities. However, the Constitution generally concerns permissible activities by government, not private actors like charities. Thus, this Article asks: should constitutional limitations on government action necessarily limit the Service's ability to determine established public policy for private charities? This Article argues that the Service's primary reliance on constitutional law decisions is inappropriate for a variety of theoretical and practical reasons, not the least of which is that the Constitution was never intended to limit private activity without specific congressional authorization.

Keywords: nonprofit & philanthropy law