Blog Post # 2
Hello, here is my blog post for Tuesday January 18th.
In class last week we reviewed the nonprofit taxonomy, how they are organized, and the federal laws the IRS uses in governing them. One point of interest that immediately jumped out was how non-profits are organized. It’s interesting to see how the board of directors provides oversight, yet how difficult it is to get rid of them. Additionally, I was surprised to hear professor Choquette say that many charities would donate only 60% of their proceeds directly to their cause. At first this didn’t seem like much -- where did the money end up getting caught up? When the professor put it into perspective however, it made a lot more sense. It’s actually remarkable how a company can manage to pay all of its staffing fees, which must be considerably less than in a for-profit company, and manage to give away more than half of its revenue.
On Tuesday Professor Choquette went into the types of IRS 501(c) laws. I found one particularly interesting. In order to receive tax-exempt status the organization may not intervene “substantially” in political campaigns or attempt to introduce legislation. In order for a non-profit to serve some political function it must be registered as a 501(c)(4), which however, revokes its ability to deduct taxed contributions. The ability of 501(c)(4)’s can be powerful particularly in light of the most recent Supreme Court decision regarding them. In Citizen’s United v. FEC, a non-profit 501(c)(4), Citizen’s United attempted to air an electioneering campaign against Hillary Clinton in the 2008 democratic primaries. The broadcast was originally seen as conflicting against the McCain-Feingold Reform Act which restricted electioneering communications 30 days before primaries. The case was subsequently struck down and the airing was cancelled. However, the Supreme Court’s 2010 decision saw money as first amendment free speech and thus put no limitation on the amount of corporate (profit or 501(c)(4) non-profit) money. The view of the court is that there is no quid pro quo between indirect campaign expenditures and a candidate, and therefore one cannot limit speech (money). In my opinion the real danger of the case is the unlimited power it now gives corporations to campaign in an obviously quid pro quo relationship with the candidates, these dangers can also be real for non-profit 501(c)(4)’s. The case changes the ability of 501(c)(4)’s to act in a more political fashion.
One thing professor Choquette said in class particularly surprised me. He said that Lane County and Oregon are actually below the national average in non-profits per people. I thought that either one was pretty non-profit heavy. I think that one of the reasons could be that Oregon and Lane County probably have fewer churches than the rest of the country, but even so it was surprising.
The readings this week were fairly interesting. The one titled Charitable Deduction under Scrutiny was very relevant to the debates we’ve had in class. While trimming the charitable deduction tax write-off can be important for improving the federal debt, I found most of the arguments not compelling. I feel that non-profits need to be relevant, particularly in recessions. There was one part of it, however, that I had to agree with. One of the deficit-reduction plans was to eliminate the way the tax reductions are structured. The current system allows for taxpayers to write-off their donations in the same way as their tax rate. Therefore, the wealthiest tax payers get the biggest write-offs. Instead of a regressive tax rate, the donation incentive should be progressive so as to give the poorest households more incentive to donate. I thought the chapter on religion in the O’Neill book was decent, but not very insightful. One point of interest was the recent trend of secularism in America and how that will affect the separation of church and state dynamics if at all. I thought that this growing trend will be particularly relevant in the future but not yet in America, which is one of the more religious developed countries (O’Neill).
Will, I enjoyed reading your blog a lot. I like that you don't try to praise everything you read or stay neutral in your analysis and that you're honest(Chapter 3 was not "insightful"). I was surprised too when Prof. Choquette said the number of Lane County nonprofits per capita was actually below the national average. It's interesting that you correlate this statistic with the number of churches in the area though. In fact, Oregon has the least number of churches per capita and Portland has the highest number of atheists per capita in the United States. Perhaps the lack of religious affiliation in Oregon and the number of nonprofits is related. In response to corporate financing in campaigns, one argument is that corporations are people too and they have the same constiutional rights as individual citizens. You might find this article on the 1990 case of "Austin v. Michigan Chamber of Commerce" interesting. It talks about the Court possibly overruling the decision that prohibits rights for corporations in terms of speech and financial contributions.
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In response to your interpretation of “Charitable Deduction Under Scrutiny”, I fully agree on your assertion of the need for expanded non-profit aid during times of recession. The entire argument around tax-exemption for any nonprofit is the importance to society for a network of aid that can work outside of the bureaucracy that government welfare works under. If this sort of bureaucratic structure worked to meet the needs of the American people than the Third Sector would be obsolete, but as it stands the Nonprofit Sector fills a vital niche of focused care onto our communities. I am curious of how your proposed adoption of a progressive tax rate would work out; I personally am quite unfamiliar with the way the tax structure in America works. I wonder how that structure would affect the efficiency of the aid. Since it is the poorer houses that are requiring the relief of the nonprofits in the first place, would the pool of available money reduce?
ReplyDeleteI agree that Nonprofit Nation is not the most compelling read. It focuses on facts and figures rather than asking questions or provoking much thought, but I guess that is what the blogs are for. Also, I find myself not being able to form concrete opinions on the plans for debt reduction, mainly because I do not know much about taxes or business (I should probably take a business or economics class), so your mention of them makes it much easier for me to understand. Thank you for that!
ReplyDeleteWith the link between Lane County have less nonprofits and also less churches/religious affiliation, the recent trend in America toward secularism appears as though it will affect the nation's amount of nonprofits. Or, who knows, maybe atheists will start feeling more compelled to live up to the philanthropy demonstrated by religious organizations. SInce the United States is the most religious of the developed nations, I wonder what the relationship between religion and philanthropy is in other, less religious nations.
I agree that chapter 3 of Nonprofit nation was not very insightful regarding religious organizations. Nonprofit nation barely touched on the issues surrounding religious organizations, this at it is a complex topic, and highly controversial. It seems that religious organizations are hard to regulate, this as they use first amendment protections that outline a separation of church and state. I like the fact that you mentioned Citizens United v. U.S., it shows how constitution interpretation has progressed, and how it has involved money. It seems that it would be difficult to tell religious organizations what they can and cannot do, they serve vital roles, and are intertwined with just about every institutional force in the United States. It seems that by subjecting one area to regulation it would open a whole new can of worms and burden our court system for quite sometime.
ReplyDeleteTouching on the structure of Nonprofits, I also thought it was interesting how each was organized with a board of directors then having an executive director underneath. I was surprised at how strict requirements were surrounding structuring. The statistic that only 60% of the money donated goes to the actual cause was put in better perspective for me understanding what it takes to run one of these organizations.
I agree that restructuring could go into tax write-offs. Perhaps, rather than thinking in regressive and progressive terms, the overall relevancy of an organization could be taken into consideration. It seems that the broad requirements for 501(c)3 organizations could become more strict. However, one concern I had in this was that by making requirements more strict, it could reduce the amount of overall donations. Non-profits and the government serve duel roles, and taxing the non-profit sector in the wrong way could perhaps create an even bigger deficit. Reforming the tax system surrounding this sector seems important but at the same time extremely difficult, it is likely that political constraints would arise.
I find the structure of how nonprofits are organized very interesting too. Also found that only 60% of proceeds go to charity causes and the others management stuff, interesting and I wish a higher percent would go to causes. I like how you gave a court case example in describing how nonprofit organizations try to support political candidates. I agree with your opinion that corporations have lots of power now since the Supreme Court case, decided that money is free speech and how companies can give as much as they want to candidates. I was not that surprised about the national average in nonprofits per people because I think Oregon as a whole isn't as big as other states. I agree that the wealthy get too many tax write offs and there should be a system that limits them. Wealthy tax payers are using money to pay less taxes and the poor should be the ones paying less.
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