The Promises and Perils of Using Big Data to Regulate Nonprofits

53 Pages Posted: 12 Mar 2019

Date Written: March 11, 2019

Abstract

For the optimist, government use of “Big Data” involves the careful collection of information from numerous sources and expert analysis of those data to reveal previously undiscovered patterns and so revolutionize the regulation of criminal behavior, education, health care, and many other areas. For the pessimist, such use involves the haphazard seizure of information to generate massive databases that render privacy an illusion and result in arbitrary and discriminatory computer-generated decisions. The reality is of course more complicated, with government use of Big Data presenting on one hand the promises of greater efficiency, effectiveness, and transparency, and on the other hand the perils of inaccurate conclusions, invasion of privacy, unintended discrimination, increased government power, and violations of other legal limits on government action.

Until recently, these issues were theoretical for nonprofits in the United States given that the federal and state regulators overseeing them did not use a Big Data approach. But nonprofits can no longer ignore these issues, as the primary federal regulator is now emphasizing “data-driven” methods to guide its audit selection process, and state regulators are moving forward with plans to create a single, online portal to collect required filings. And both federal and state regulators are making or plan to make much of the data they collect available in machine-readable form to researchers, journalists, and other members of the public. The question now is therefore whether regulators, researchers, and nonprofits can learn from the Big Data experiences of other agencies and private actors so as to fully realize Big Data’s promises while avoiding the numerous perils it presents.

This Article explores the steps that nonprofit regulators have taken toward using Big Data techniques to enhance their ability to oversee the nonprofit sector. It then draws on the Big Data experiences of government regulators and private actors in other areas to identify the potential promises and perils of this approach to regulatory oversight of nonprofits. Finally, it recommends specific steps those regulators and others can take to ensure that the promises are achieved and the perils avoided.

Keywords: nonprofit, tax, IRS, big data

JEL Classification: K22, K34, L31

Suggested Citation

Mayer, Lloyd Hitoshi, The Promises and Perils of Using Big Data to Regulate Nonprofits (March 11, 2019). 94 Washington Law Review (2019, Forthcoming); Notre Dame Legal Studies Paper No. 1928. Available at SSRN: https://ssrn.com/abstract=3350677

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)

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