The Marketing of Philanthropy and the Charitable Contributions Deduction

Abstract

This article takes a fresh look at the rationale and doctrinal tests for the charitable contributions deduction under Section 170 of the Internal Revenue Code, specifically in the context of certain kinds of named or gifts subject to schedules (e.g., University chairs; commemorative bricks). The article concludes that the best explanation for the deduction is an auxiliary funding device for tax-exempt charities, and that as a result, the doctrinal tests for deductibility should be tied closely to and advance the core rationales for tax exemption. Under the community benefit theory of exemption, deductions for commermorative-type gifts subject to schedules should be allowed, since presumably these gifts advance the mission of the exempt organization and run little or no risk of tax-base impairment or unfair competition, while under economic theories of exemption, these gifts should not be deductible, because the fee schedule structure of the gift is designed to overcome free riding, which is the basic economic rationale for government subsidization of exempt organizations.